Palmer, in the matter of Queensland Nickel Pty Ltd (in liq) v Park [2017] FCA 651 | Case summary

KELLY-ANNE TRENFIELD IN HER CAPACITY AS A JOINT AND SEVERAL LIQUIDATOR OF QUEENSLAND NICKEL PTY LTD (IN LIQUIDATION) (ACN 009 842 068) (and another named in the Schedule) Third Respondent

Introduction 1 On 9 February 2017, Mr Palmer's applications (one in each proceeding: see [3] below) for orders relieving him of his obligations to produce documents at, and/or attend, an examination into the affairs of Queensland Nickel Pty Ltd (in liq) were dismissed: see [2017] FCA 618. 2 At that time, the applicants in each of these proceedings, Mr John Park and others as the General Purpose Liquidators (who I will hereafter refer to collectively as "Mr Park") in proceeding QUD 329 of 2016, and Mr Marcus William Ayres and others as the Special Purpose Liquidators (who I will hereafter refer to collectively as "Mr Ayres") in proceeding QUD 580 of 2016, sought an order that Mr Palmer pay their costs of his applications on an indemnity basis. Mr Ferret, who appeared for Mr Palmer, did not oppose a standard costs order being made, but he did oppose costs being ordered on an indemnity basis. Consequently, I ordered the parties to file any supporting materials and an outline of submissions that they wished to, directed to the question of costs of Mr Palmer's applications. Both Mr Park and Mr Ayres subsequently filed an outline of submissions, but Mr Palmer did not. 3 In his submissions, Mr Park contended that Mr Palmer's applications were procedural in nature and attracted the application of the overarching purpose of civil litigation expressed in s 37M of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act). Accordingly, Mr Park submitted that the Court should have regard to s 37N(4) of that Act, which requires the Court to take account of any failure to comply with the overarching purpose in exercising its discretion as to costs. This provision was relevant in this matter, so Mr Park submitted, because Mr Palmer had failed to comply with the overarching purpose in a number of respects. First, he submitted Mr Palmer was tardy in bringing the applications. Secondly, he submitted Mr Palmer brought the applications after already having had his convenience accommodated and in the face of an offer from his (Mr Park's) lawyers to consider any further accommodation he may request, an offer which he (Mr Palmer) had ignored. Thirdly, Mr Palmer brought his applications after ignoring an express request from the Court that, given their procedural nature, they should be resolved by discussion between the parties. By this course of conduct, Mr Park submitted, Mr Palmer had caused additional cost, inconvenience and delays to the Court and the parties which, in the case of the latter, would ultimately be borne by the creditors of Queensland Nickel Pty Ltd (in liq). Mr Park also submitted that an indemnity costs order would be appropriate to mark the Court's disapproval of Mr Palmer's conduct in bringing the applications. Finally, Mr Park sought an order under r 40.13 of the Federal Court Rules 2011 (Cth) (the Rules) that the costs order be taxable forthwith. In making this application, Mr Park submitted that, since this proceeding is an examination proceeding under Part 5.9 of the Corporations Act 2001 (Cth) (the Corporations Act), it was not a proceeding that will be "finished" in the usual sense by a final hearing or determination. 4 Mr Ayres also relied upon the procedural nature of Mr Palmer's applications, his failure to comply with Part VB of the Federal Court Act, the tardiness of his applications and the fact the applications were brought on an urgent basis ignoring the offers of accommodation by the General Purpose Liquidators and the express request of the Court to resolve such procedural matters by negotiation. Mr Ayres also submitted that an indemnity costs order was appropriate because: Mr Palmer was entirely unsuccessful; his applications were entirely without merit; and he had offered no explanation for his various failures mentioned above. Furthermore, Mr Ayres submitted the Court should also take account of the fact that these applications were the sixth applications of a similar kind brought by Mr Palmer during the course of these examination proceedings. 5 There is no express power in Part 5.9 of the Corporations Act to award an applicant the costs of an examination conducted under that Part. As an aside, it is to be noted that there is an express power to order an applicant to pay an examinee's costs where the examination is found to have been obtained without reasonable cause: s 597B. Nonetheless, the Court has a broad general power to award costs in all proceedings before it under s 43 of the Federal Court Act: see, for example, DSE (Holdings) Pty Ltd v InterTan Inc (2004) 51 ACSR 555; [2004] FCA 1251 per Allsop J (as he then was). 6 It is well-established that the purpose of a costs order is to indemnify the successful party for its costs, not to punish the unsuccessful party: Latoudis v Casey (1990) 170 CLR 534 at 543 per Mason CJ; Cachia v Hanes (1994) 179 CLR 403 at 410 per Mason CJ, Brennan, Deane, Dawson and McHugh JJ. While s 37N(4) is a specific provision with a particular object, namely addressing a failure to comply with the duty to act consistently with the overarching purpose imposed by s 37N(1) and (2) of the Federal Court Act, I do not consider that section is intended to override the well-established principle about costs stated above. I note that Flick J took a similar view in relation to the interaction between ss 37N and 37M and well-established rules of evidence in Buggy v Reinisch [2010] FCA 917 at [59]. Accordingly, I consider s 37N(4) should not be used to punish a party for not complying with the overarching purpose of civil practice and procedure set out in s 37M, but rather to compensate an opposing party for the additional costs occasioned by that party's failure to conduct its proceedings quickly, inexpensively and efficiently in accordance with the duty imposed by s 37N(1). 7 It is also well-established that "some special or unusual feature" must exist to justify an indemnity costs order: see, for example, the authorities cited by Davies J in TSG Franchise Management Pty Ltd v Cigarette & Gift Warehouse (Franchising) Pty Ltd (No 3) [2016] FCA 828 at [7]. Both Mr Park and Mr Ayres have referred to s 37N(4) to support their applications for an indemnity costs order against Mr Palmer. Accordingly, I take those submissions to mean that a failure to comply with the duty imposed by s 37N(1) should be treated as a "special or unusual" feature justifying an indemnity costs order. If I am correct in this understanding, I agree. However, it would still be necessary, in my view, to consider all of the relevant circumstances of the breach of that duty to determine whether it was sufficiently significant that it could properly be characterised as "special or unusual". 8 Applying these principles to this matter, I consider there are special or unusual features that justify an indemnity costs order being made against Mr Palmer. In no particular order, they are as follows. First, despite Mr Park's lawyers having accommodated Mr Palmer's convenience and having offered to consider any further request he may wish to make, and despite Mr Palmer having been expressly reminded of his duty under Part VB of the Federal Court Act, he ignored both and proceeded with his applications. This conduct, in my view, involved a serious breach of Mr Palmer's duty as a party under s 37N(1) of the Federal Court Act. Secondly, Mr Palmer was wholly unsuccessful in his application and, as I outlined in my ruling ([2017] FCA 618), all of his arguments were either unsupported by evidence, or completely lacking in merit, or both. Thirdly, and most importantly, I accept the submissions of Mr Park and Mr Ayres that Mr Palmer's course of conduct which I have described above, has caused additional costs in the liquidation which, if Mr Palmer is not required to meet them, will ultimately be borne by the creditors of Queensland Nickel Pty Ltd (in liq). 9 I also consider it is appropriate to make an order to overcome the effect of r 40.13. That rule provides: If an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. 10 In making an order that these costs orders be taxed forthwith, I have had regard to the fact that Mr Palmer's application involved a discrete aspect of these examination proceedings. Furthermore, I have taken into account the fact that examination proceedings of this kind do not usually result in final orders being made to "finish" the proceedings. Instead, examination proceedings are usually directed to gathering information to support a claim for relief which is usually pursued in separate future proceedings: see Palmer v Ayres (2016) 91 ALJR 325; [2017] HCA 5 at [31] (per Kiefel, Keane, Nettle and Gordon JJ). 11 I will therefore make orders consistent with these reasons. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Reeves.

Palmer, in the matter of Queensland Nickel Pty Ltd (in liq) v Park

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