Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) v Australian Securities and Investments Commission

Federal Court of Australia (Full Court)|2010-09-09|Before: Buchanan JJ

north AND siopis jj: 1 On 24 May 2010, the Full Court (by a majority) allowed Lanepoint's appeal, set aside the orders of the primary judge for the appointment of a liquidator to the appellant, Lanepoint, and stayed the application made by the respondent, the Commission, for the winding-up of Lanepoint (Lanepoint Enterprises Pty Ltd (Receivers and Managers Appointed) v Australian Securities and Investments Commission [2010] FCAFC 49). The Full Court also gave the parties an opportunity to make written submissions on the question of costs. 2 The following issues arise in relation to the question of costs: (a) the costs of the appeal; (b) the costs of the proceeding before the primary judge; (c) whether there should be any special order for costs; and (d) the costs of the liquidator.

costs of the appeal 3 The Commission submitted that the costs of the appeal should be the costs in the winding-up application, alternatively, the Commission should pay no more than 50% of the costs of the appeal because there were grounds of appeal on which Lanepoint was unsuccessful and also Lanepoint failed in its application to amend its grounds of appeal to include a ground of appeal alleging apprehended bias. 4 In our view, Lanepoint should be awarded the costs of the appeal. It was unnecessary, for the Full Court, in light of its findings on the primary ground of appeal which was dispositive of the appeal, to deal with the other grounds of appeal. This did not reflect upon the lack of merit or otherwise in the other grounds of appeal. There was, in any event, also some overlap between some of the other grounds of appeal and the primary ground of appeal. Lanepoint's application to amend the grounds of the appeal to allege apprehended bias was a subsidiary matter. The fact that Lanepoint failed in that application did not detract from the fact that Lanepoint was substantially successful in its appeal. 5 Further, we should observe that, on 29 July 2009, Siopis J made an order that Lanepoint provide security for costs in relation to the appeal in the sum of $16,000. This security was provided by the provision of a bank guarantee. 6 The Full Court will make an order discharging that order and requiring that the District Registrar return to Lanepoint the bank guarantee provided by way of security for costs of the appeal.

The costs of the proceedingS below 7 The Full Court found that the Commission's application for the winding-up of Lanepoint should be stayed pending the determination of any proceedings brought by the liquidator of Westpoint Management Ltd to determine the extent of the WIF liability. 8 The Commission contended that, in those circumstances, the appropriate order was that costs of the proceedings below should be the costs in the cause of the original application. The making of costs orders should, therefore, contended the Commission, await the determination of the winding-up application. 9 This approach, submitted the Commission, was consistent with authorities to the effect that where a winding-up application is dismissed, if the applicant in commencing and proceeding with the application acted reasonably, there should be no order for costs. The Commission relied on Keay A, McPherson's Law of Company Liquidation (Thomson Reuters, subscription service) at [3-1950] (2nd ed), and the cases referred to in that reference. The Commission contended that it acted reasonably in bringing and continuing with the winding-up application. 10 The authorities relied upon by the Commission are distinguishable. Those cases dealt with the circumstance of a winding-up application brought by a creditor, whose debt had been conclusively established, being dismissed on the grounds that the winding-up of the company was contrary to the wishes of the majority of the creditors. In this case, the Commission was not a creditor. Further, it brought a winding-up application which was the inappropriate vehicle within which to determine whether a company was insolvent because that question depended upon the resolution of a disputed liability. 11 It would be inappropriate to await the outcome of any renewed application to wind-up Lanepoint before awarding costs of the proceedings before the primary judge. This is because any continuation of the winding-up proceedings will be very different in character to the proceedings which took place before the primary judge. In any renewed proceedings, the extent of the WIF liability would already have been determined in contested proceedings in an appropriate forum. The proceedings before the primary judge related to matters which will not be the subject of any renewed winding-up proceedings. Substantial costs were incurred in the conduct of the proceedings before the primary judge which will be of no utility in any renewed proceedings. It is appropriate, therefore, that the Commission pay the costs of Lanepoint of the proceedings before the primary judge at this time.

should there be a special order for costs 12 The next question is whether there should be a special order for costs. Lanepoint contended that the costs should be awarded on an indemnity basis. 13 Lanepoint contended that the Commission had acted unreasonably in bringing the winding-up application. It contended that from the beginning the Commission was determined to bring the winding-up application and, notwithstanding the efforts of Lanepoint to dissuade the Commission from continuing with that course, the Commission could not be swayed from that view. 14 Lanepoint also contended that the winding-up application was brought in circumstances where the application lacked legal merit and commercial justification. 15 It is the case, of course, that a court may award indemnity costs on the basis that one party has unreasonably refused an offer of compromise. 16 In support of its contention that the Commission had acted unreasonably in refusing to compromise the proceeding, Lanepoint referred to a number of documents it sent to the Commission prior to the hearing of the winding-up application, and the Commission's responses. 17 First, Lanepoint referred to a document drafted by its solicitors entitled, "Without Prejudice Discussion Paper for Purposes of a Proposed Informal Conference" dated 23 October 2006, and a letter from the Commission dated 3 November 2006, responding to the discussion paper. The Lanepoint discussion paper proposed a cooperative approach between the Lanepoint related parties and the Commission to the winding-up of some, but not all, of the Lanepoint related entities, then the subject of pending winding-up applications brought by the Commission. The letter from the Commission declined the invitation. 18 Secondly, Lanepoint referred to Lanepoint's outline of submissions dated September 2007, in support of the adjournment sine die of the application to wind-up Lanepoint, and to the Commission's submissions dated 20 September 2007, responding to Lanepoint's submissions. In its submissions, Lanepoint contended that the winding-up application should be adjourned on the basis of the uncertainty as to the WIF liability. The Commission disagreed. 19 Thirdly, Lanepoint referred to the offer of compromise made pursuant to O 23 of the Federal Court Rules (the Rules) dated 16 June 2008, which the Commission did not accept. 20 The offer of compromise stated: TAKE NOTICE THAT pursuant to Order 23 of the Federal Court Rules, the Respondents in the above actions, Lanepoint Enterprises Pty Ltd and Bowesco Pty Ltd, hereby offer to compromise the proceedings on the following basis: 1. The applications to wind up the Respondents in WAD 152 of 2006 and WAD 177 of 2006 be dismissed; 2. There be no order as to costs. This offer, in accordance with Order 23 r 4(i), is inclusive of the costs of the proceedings to date. Please note that this Offer of Compromise shall expire on 2 July 2008. 21 We observe, in passing, that the Full Court did not make an order dismissing the winding-up application made by the Commission. Rather, the Full Court granted a stay of the winding-up application. Accordingly, O 23 r 11(6) has no application because of the difference between the offer and the orders made by the Full Court. 22 However, Lanepoint's contention is not that it has technically complied with the requirement of O 23 of the Rules, but rather that by means of the compromise offer, as well as the other means referred to above, it had prior to the trial submitted to the Commission that the winding-up application was misconceived, and that the Commission had, nevertheless, persisted with the winding-up application. Accordingly, said Lanepoint, the Commission had acted unreasonably in continuing with the proceeding in those circumstances. 23 In this case, however, both the primary judge, and Buchanan J, on appeal, came to the view that the Commission's application for the winding-up of Lanepoint should succeed. 24 In those circumstances, it is not possible to characterise the refusal by the Commission to respond favourably to Lanepoint's suggestions that the winding-up application should be dismissed, with no order as to costs, as comprising unreasonable conduct of such a nature as to warrant an order for indemnity costs. 25 The same reasoning applies to Lanepoint's contentions to this Court that the Commission could not justify its action on the grounds of public interest because the Commission's action was devoid of commercial justification, and also that the case was devoid of legal merit. 26 Accordingly, Lanepoint's contention that costs should be awarded on an indemnity basis should be dismissed.

costs of the liquidation 27 The Commission contended that the costs of the liquidation should be assessed in the context of an application made by reference to any actual costs which may have been incurred by the liquidator prior to his removal by the order of the Full Court. 28 In our view, it is unnecessary to await the making of a separate application for costs. The appointment of the liquidator occurred at the instance of the Commission, in the face of Lanepoint's opposition. Lanepoint should not be out-of-pocket by reason of the Commission's flawed action, and the Commission should indemnify Lanepoint in respect of all costs and charges incurred by the liquidator during the period that the liquidator acted as such. Lanepoint and the Commission will, of course, have the right to an account from the liquidator in respect of the costs and damages which he may claim. 29 It is unnecessary to make any order terminating the appointment of Mr Simon Theobold as liquidator, because his appointment was terminated as an incident of the making of the orders by the Full Court on 24 May 2010. I certify that the preceding twenty‑nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices North and Siopis.

GENERAL DIVISION WAD 92 of 2009

BETWEEN: LANEPOINT ENTERPRISES PTY LTD (ACN 110 693 251) (RECEIVERS AND MANAGERS APPOINTED)

AND: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION

REASONS FOR JUDGMENT BUCHANAN J: 30 For the reasons stated in the principal judgment, I would have dismissed the appeal and ordered costs in favour of the respondent. In light of the fact that North and Siopis JJ are agreed on the way with which costs should be dealt, as a result of their conclusions in the principal judgment, it is not necessary for me to express any view about that matter. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Buchanan.

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