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[2012] FCA 610
Federal Court of Australia
2012-06-13
Bromberg J
Original judgment source is linked above.
REASONS FOR JUDGMENT 1 On 27 March 2012, I made orders by consent reserving the question of costs and otherwise dismissing the plaintiffs' application. Those orders also required the exchange of short written submissions from the parties as to costs. All but five of the plaintiffs seek an order that their costs be paid by the defendants. The defendants resist such a course. For the reasons that follow, I have determined that there be no order as to costs.
background 2 The background facts to this application are complex but need not be referred to here other than by a brief outline. The first defendant ("ION") is a public company which, together with other associated companies in the ION group of companies ("the ION Entities"), is subject to a Deed of Company Administration. The second to sixth defendants were variously appointed as Deed Administrators of one or more of the ION Entities ("the Administrators"). The plaintiffs are some of a large number of shareholders of ION ("Shareholder Claimants") who have submitted proofs of debt in relation to claims made by them against ION for damages in relation to shares acquired in ION. 3 The plaintiffs' application alleges that the Administrators determined that Shareholder Claimants could elect not to submit any evidence of causation in respect of their claims and accept admission of their proofs of debt at 80% of the value of the losses sustained. The plaintiffs allege that, despite that determination, which has been applied generally to Shareholder Claimants, the Administrators on 30 January 2012 and 15 February 2012 determined that they would not apply the determination to the plaintiffs' proofs of debt. The plaintiffs allege that those acts of the Administrators were discriminatory and had unfairly prejudiced the interests of the plaintiffs. Orders were sought including an order that the Court reverse the decision of the Administrators not to admit and pay a dividend on the proofs of debt filed by the plaintiffs to the extent of 80% of their admissible value. 4 On the question of costs, the plaintiffs contend that all but five of them have been wholly successful in their application, because the orders made by the Court resulted in the 49 successful plaintiffs being paid in full as claimed. They contend that the successful plaintiffs should be awarded their costs because the conduct of the defendants prior to the institution of the proceeding left those plaintiffs no choice but to bring the action in which they have been wholly successful. 5 The defendants, on the other hand, contend that the undertakings given by the plaintiffs were crucial to the resolution of the dispute affected by the consent orders made. The undertakings are said by the defendants to be the quid pro quo for the Administrators' agreement to the consent orders made and to the subsequent processing of the 80% payments to the successful plaintiffs. 6 Supported by affidavits filed as to the question of costs, the defendants contest any suggestion that they have acted unreasonably. They agree that their determination to pay Shareholder Claimants at the 80% rate was suspended in respect of the plaintiffs. They contend that occurred by reason of the plaintiffs' conduct which was the subject of correspondence of 30 January 2012. They say that the impediment which led to the suspension of payments to the plaintiffs was removed by the undertakings given to the Court. Accordingly, they contend that the consent resolution arrived at by the parties included concessions from the plaintiffs and could not be properly described as a situation in which the plaintiffs have been "wholly successful".
relevant principles 7 Section 43 of the Federal Court of Australia Act 1976 (Cth) confers a wide and unfettered discretion upon the Court to award costs. That discretion is to be exercised judicially and not against a successful party, except for some reason in connection with the case: Ruddock v Vadarlis (No 2) [2001] 115 FCR 229 at [9] (Black CJ and French J). The discretion enables the Court to respond to a wide range of circumstances: Ruddock at [16]. 8 There are well established principles developed by the authorities to guide the Court in the exercise of its discretion to award costs in the event where there has been no hearing on the merits and a proceeding is discontinued or, as in this case, dismissed. 9 As, McHugh J observed in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-625: In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order. In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. … Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried…But such cases are likely to be rare. If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases [footnotes omitted]. 10 The test enunciated by McHugh J has frequently been applied in relation to the discontinuance or dismissal of a proceeding without a hearing. The relevant authorities are helpfully collected by Greenwood J in Akiba and Another v Queensland (2010) 184 FCR 406 at [83] - [96] and also by Kenny J in Ann Street Mezzanine Pty Ltd v KPMG [2011] FCA 453 at [24]-[29]. The many authorities there considered may be supplemented by the Full Court's judgments in Mineralogy Pty Ltd v National Native Title Tribunal & Ors [1998] FCA 1700 at 7 and Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112 at [118]. 11 The guiding principles are firm in their resolve that where parties wish to end the litigation, the Court will facilitate that course. The Court will not conduct a hypothetical trial to assess the merits of the substantive application before it, for the purpose of determining who should bear the costs. Commonly, a discontinuance will result in no order as to costs so that each party will bear its own costs. Whilst it has been suggested that "special circumstances" may be required to be demonstrated to avoid such a result, the better view is that the imposition of that qualification would be an overly strict approach. 12 Where the further prosecution of a proceeding has become futile, there are two well recognised reasons for the making of adverse costs orders, each of which is referred to by McHugh J in Lai Qin. 13 The first is where the judge is confident that one party was "almost certain" to have succeeded. A discontinuance amounting to an effective surrender by an applicant provides an obvious example of where an adverse costs order against an applicant will be made. But as McHugh J emphasised, reaching the requisite level of confidence as to the apparent certainty that one party will have won, is "likely to be rare". 14 The second category relates to cases where one of the parties has acted "so unreasonably" that the other party should obtain the costs of the action. The unreasonableness of the conduct of a party may be examined by reference to the commencement of, and the conduct of, the proceeding. 15 The plaintiffs' submission on costs does not point to any unreasonable conduct on behalf of the defendants. There is no basis upon which I could confidently come to the conclusion that it was almost certain that the plaintiffs would have won, if their application had been determined. The willingness of the defendants to pay the successful plaintiffs is deposed by them to be referrable to the undertakings given by the plaintiffs. The concession made by the defendants does not, in those circumstances, provide a basis for the conclusion that the plaintiffs would have won. Nor have the plaintiffs shown that they were "wholly successful" given the undertakings which they gave. The material before me does not demonstrate a surrender, but does demonstrate that a supervening event (the giving by the plaintiffs of the undertakings to the Court) so removed or modified the subject of the dispute as to lead to the settlement arrived at. In the circumstances, there is no reason why one party, rather than the other, should bear the costs of the proceeding and no basis for the Court to do other than to order that there be no order as to costs. 16 That is the order that I will make. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Bromberg.
Associate: Dated: 13 June 2012 Schedule A Entity Name ABN / ACN Deed Administrators Appointed ION Limited (Subject to Deed of Company Arrangement) 29 009 106 272 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON Core Cast Limited (Subject to Deed of Company Arrangement) 87 097 447 660 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ION Automotive Group Limited (Subject to Deed of Company Arrangement) 87 104 279 156 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ION Light Metal Castings Pty Ltd (Subject to Deed of Company Arrangement) 51 104 930 181 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON Yollatsac Limited (formerly Castalloy Limited) (Subject to Deed of Company Arrangement) 56 007 528 583 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON SAMUEL CHARLES DAVIES Yollatsac Manufacturing Pty Ltd (formerly Castalloy Manufacturing Pty Ltd) (Subject to Deed of Company Arrangement) 79 007 838 986 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON SAMUEL CHARLES DAVIES Yollatsac Wheels Pty Ltd (formerly Castalloy Wheels Pty Ltd) (Subject to Deed of Company Arrangement) 14 007 894 984 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON SAMUEL CHARLES DAVIES XCTA Pty Ltd (formerly Cootes Transport Pty Ltd) (Subject to Deed of Company Arrangement) 76 010 383 016 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XCTS Pty Ltd (formerly Cootes Tanker Service Pty Ltd) (Subject to Deed of Company Arrangement) 14 004 495 765 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XIAS Pty Ltd (formerly ION Automotive Systems Pty Ltd) (Subject to Deed of Company Arrangement) 35 104 930 109 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON MICHAEL JOHN HILL XIRC Pty Ltd (formerly I.R. Cootes Pty Ltd) (Subject to Deed of Company Arrangement) 20 004 801 076 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XITMS Pty Ltd (formerly ION Transmissions Pty Ltd) (Subject to Deed of Company Arrangement) 90 099 982 180 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON MICHAEL JOHN HILL XLC Pty Ltd (formerly Liquip Corp Pty Limited) (Subject to Deed of Company Arrangement) 81 082 859 970 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XLO Pty Ltd (formerly Liquip Overseas Pty Ltd) (Subject to Deed of Company Arrangement) 094 440 589 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XLS Pty Ltd (formerly Liquip Sales Pty Limited) (Subject to Deed of Company Arrangement) 48 001 595 222 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XLSE Pty Ltd (formerly Liquip Service Pty Ltd) (Subject to Deed of Company Arrangement) 71 082 859 989 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XLSV Pty Ltd (formerly Liquip Sales (Vict.) Pty Limited) (Subject to Deed of Company Arrangement) 28 005 691 761 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN XST Pty Ltd (formerly Stevenson Transport Pty Ltd) (Subject to Deed of Company Arrangement) 48 006 271 352 KEITH ALEXANDER CRAWFORD PETER MCKENZIE ANDERSON ROBYN BEVERLY MCKERN
Schedule B Second Plaintiff: GWENETH HOPE HYDE Third Plaintiff: WEI LIN HU Fourth Plaintiff: GOWER ANTHONY MCGIFFORD Fifth Plaintiff: WEI BIN CHOU Sixth Plaintiff: LING WEI Seventh Plaintiff: LENNARD WILLIAM COX Eighth Plaintiff: SENRENDIPITY INVESTMENTS PTY LIMITED ACN 001 138 478 Ninth Plaintiff: IAN ANNABEL Tenth Plaintiff: PEGGY ANNABEL Eleventh Plaintiff: MEGAN JANE BOWN Twelfth Plaintiff: CAROLINE ROSENA PHIPPARD Thirteenth Plaintiff: JOHN THOMAS BOYTON Fourteenth Plaintiff: GWENDA JEAN BOYTON Fifteenth Plaintiff: SIDNEY ROBERT FRESHWATER Sixteenth Plaintiff: GWENDOLINE ETHEL FRESHWATER Seventeenth Plaintiff: ANGELA WOON CHEUNG HO Eighteenth Plaintiff: RONALD PAUL BOWN Nineteenth Plaintiff: MEGAN JANE BOWN Twentieth Plaintiff: SUSAN MARGARET ROBB Twenty First Plaintiff: LICINIO MACEROLA Twenty Second Plaintiff: DANIELA MACEROLA Twenty Third Plaintiff: NORMA EDITH SIMES Twenty Fourth Plaintiff: BRUCE WHITTING Twenty Fifth Plaintiff: R J PEPPERELL PTY LTD ACN 006 569 955 Twenty Sixth Plaintiff: VENIERO GIUSEPPE STENTA Twenty Seventh Plaintiff: NEIL WALLACE RANKINE Twenty Eighth Plaintiff: NOLA MARY MAXFIELD Twenty Ninth Plaintiff: JOHN SIMON MCDONNELL Thirtieth Plaintiff: GLEN PAUL ALSEMGEEST Thirty First Plaintiff: KANTI SHAH Thirty Second Plaintiff: BHANU SHAH Thirty Third Plaintiff: ALEXANDER JOHN NICHOLS Thirty Fourth Plaintiff: RICHARD GREGGOR Thirty Fifth Plaintiff: COLIN DAVID HAYWOOD Thirty Sixth Plaintiff: ANN JOYCELIN HAYWOOD Thirty Seventh Plaintiff: KELVIN ALAN HEATH Thirty Eighth Plaintiff: PETER ANATOL KRAWEC Thirty Ninth Plaintiff: RICHARD DAVID YOUNG Fortieth Plaintiff: HEATHER FAYE HOBBS Forty First Plaintiff: TERESA MARIA ROETZER Forty Second Plaintiff: JOHN DAVID PARTRIDGE Forty Third Plaintiff: BETH MARGARET COOK Forty Fourth Plaintiff: PETER KLAUS GROMOTKA Forty Fifth Plaintiff: ANITA LORRAINE GROMOTKA Forty Sixth Plaintiff: ALENE AUCHETTL Forty Seventh Plaintiff: DARRYL CRAIG AUCKETT Forty Eighth Plaintiff: ANTHONY JOHN PRICE Forty Ninth Plaintiff: ANDREA LEIGH BULL Fiftieth Plaintiff: DOUGLAS ALEXANDER SPRINGALL Fifty First Plaintiff: GRANADILLA NOMINEES PTY LTD ACN 008 732 269 Fifty Second Plaintiff: GREGORY PAUL COOPER Fifty Third Plaintiff: CHARMAINE AILSA COOPER Fifty Fourth Plaintiff: JOHN CHARLES HOLLAND
Schedule C Second Defendant: KEITH ALEXANDER CRAWFORD Third Defendant: PETER MCKENZIE ANDERSON Fourth Defendant: SAMUEL CHARLES DAVIES Fifth Defendant: ROBYN BEVERLEY MCKERN Sixth Defendant: MICHAEL JOHN HILL
Hyde
ION Limited
(2001) 115 FCR 229
(1997) 186 CLR 622
(2010) 184 FCR 406
(2010) 265 ALR 112