Popeye Bidco Pty Limited (Receivers and Managers Appointed) v Intermediate Capital Asia Pacific 2008 GP Limited

Solicitor for the Non-Parties: Cosoff Cudmore Knox

Counsel for the First, Second, Third, Fourth, Sixth, Seventh and Eighth Respondents: Mr J Lockhart SC (with Mr D Barnett on 4 May 2018)

Solicitor for the First, Second, Third, Fourth, Sixth, Seventh and Eighth Respondents: Clayton Utz

Counsel for the Fifth Respondent: The Fifth Respondent did not appear

BETWEEN: POPEYE BIDCO PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) Second Applicant

SCF HOLDING PTY LIMITED ACN 124128 141 Third Applicant SCF GROUP PTY LIMITED ACN 065 732 078 Fourth Applicant

AND: INTERMEDIATE CAPITAL ASIA PACIFIC 2008 GP LIMITED First Respondent

INTERMEDIATE CAPITAL ASIA PACIFIC FUND 2008 LP Second Respondent

INTERMEDIATE CAPITAL ASIA PACIFIC LIMITED (and others named in the Schedule) Third Respondent

JUDGE: BESANKO J DATE OF ORDER: 24 October 2018

The respondents' application for an order for costs against the non-parties be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Introduction 1 This is an application for an order for costs against non-parties to a proceeding. The Court has the power to make an order for the payment of costs by non-parties under s 43 of the Federal Court of Australia Act 1976 (Cth) and the question in this case is whether it is appropriate to make such an order. 2 The application is made by seven of the eight respondents to this proceeding and the costs in issue are the costs of an interim injunction obtained by the applicants ex parte, and the unsuccessful attempt by the applicants to have the injunction continued as an interlocutory injunction. The quantum of the costs which are claimed is considerable. At one point in the exchange of correspondence, the solicitors for the relevant respondents advised the non-parties that the costs of responding to the injunction, including counsel fees, but excluding GST, were in the order of $575,000. 3 The applicants in this proceeding and for the interim and then the interlocutory injunction were four companies, Popeye Holdco Pty Limited (Popeye Holdco), Popeye Bidco Pty Limited (Popeye Bidco), SCF Holdings Pty Limited (SCF Holdings) and SCF Group Pty Limited (SCF Group). Popeye Holdco has since gone into liquidation and has filed a notice of discontinuance. The non-parties are Mr Richard Sykes and Mr Nicholas Woodward and, at the material times, they were directors of each of the four companies. The respondents in this proceeding are Intermediate Capital Asia Pacific 2008 GP Limited, Intermediate Capital Asia Pacific Fund 2008 LP, Intermediate Capital Asia Pacific Limited, Intermediate Capital Group Plc, AET Structured Finance Services Pty Limited, Intermediate Capital Australia Pty Limited, Hartland Investments Pte. Limited and Mr Ryan Shelswell. AET Structured Finance Services Pty Limited is not a party to this application. It is convenient to refer to the respondents who bring this application as the respondents. 4 The commercial transactions which form the basis of the disputes which arise in the proceeding are complex. They are summarised in my reasons for refusing the application for an interlocutory injunction (Popeye Holdco Pty Limited v Intermediate Capital Asia Pacific 2008 GP Limited [2017] FCA 369 (injunction reasons)). I refer also to my reasons in Popeye Holdco Pty Limited (Receivers and Managers Appointed) v Intermediate Capital Asia Pacific 2008 GP Limited (No 2) [2018] FCA 408 (privilege reasons) for further background. 5 Before setting out the facts that bear upon the resolution of this application, I will summarise the arguments of the respective parties, the course of the application and the relevant principles.

The Arguments 6 The respondents submit that they are entitled to an order for costs against the non-parties because the applicant companies were insolvent or impecunious or "men of straw", the non-parties played an active part in the conduct of the litigation, and the non-parties have an interest in the subject of the litigation. They rely on the principles stated in Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 (Knight v Special Assets) at 192-193 per Mason CJ and Deane J (with whom Gaudron J agreed). The respondents submit that they do not need to go any further than establishing these three matters in order to establish an entitlement to a costs order against the non-parties. However, they submit that if it is necessary for them to establish anything further, then, on the facts, they have established that the non-parties could have and should have brought proceedings in their own names and it was unreasonable for them to bring the proceedings in the name of the applicant companies. The respondents' case at its highest was that the proceedings in the name of the applicant companies was part of what was sometimes referred to in submissions as the "two-case strategy". This proceeding was commenced on 22 February 2017. On 13 April 2017, the non-parties (and other shareholders) commenced another proceeding in their own names, which proceeding substantially overlaps with this proceeding as far as the causes of action pleaded and the relief claimed are concerned. Broadly speaking, the two-case strategy as alleged by the respondents is that, throughout the relevant period, the non-parties and perhaps others, intended to bring two proceedings, one in the names of the applicant companies (or some of them) (the company proceeding) and the other, the shareholders' proceeding, with a view to bringing pressure to bear on the respondents to settle the proceedings. That pressure would result from the costs associated with having to defend two sets of proceedings. 7 The non-parties resisted the claim for costs. They advanced a number of submissions in opposition to such an order. First, they submitted that when all the circumstances are considered, to bring this proceeding and the application for an interlocutory injunction was a reasonable course to adopt in light of the circumstances of urgency which were engendered by the respondents and a belated undertaking by the respondents concerning the early redemption amount (see [54] of the injunction reasons). In addition, the non-parties made the following submissions. First, while the evidence might suggest "balance sheet insolvency" of the applicant companies, there was no evidence of insolvency in terms of an ability to pay debts as and when they fell due. Secondly, the respondents did not put the non-parties on notice about a possible claim for costs against them until after the costs had been incurred. Thirdly, the applicants are now able to meet an order for costs and an order for costs against non-parties should not be made in those circumstances. As to the alleged two-case strategy, the non-parties submitted that that is not made out on a proper analysis of the evidence.

Course of the Application 8 The application for costs against the non-parties has given rise to a substantial number of arguments. There was a major argument about privilege and I dealt with the issues which arose about that matter in my privilege reasons. Furthermore, even on the hearing of the application proper, a number of evidentiary issues arose. I now outline those issues and how they were resolved. 9 I mentioned that one of the arguments raised by the non-parties is that the applicant companies, other than Popeye Holdco which is in liquidation, can now meet any costs order made against them. The respondents accept that that is so. However, they submit that that circumstance is irrelevant, because if an order for costs is made against the applicant companies, the money will, in effect, come out of their pockets. The structure and organisation of the applicant companies in early 2017 and the ownership interests in them is set out in Diagram 3 annexed to the injunction reasons. There was a company reorganisation in early 2018 whereby, in practical terms, a company called Specialised Container Holdings Pty Ltd was substituted for Popeye Holdings and equity was swapped for debt. The respondents sought to prove their continuing ownership in the group by tendering a report of the administrator of Popeye Holdco dated 3 April 2018 and a document in the nature of an excerpt of a share register. After hearing argument, I received these documents in evidence. There was then an adjournment of the hearing for reasons I do not need to set out. By the time of the resumed hearing, the relevant fact which had given rise to the argument was agreed. In those circumstances, it is unnecessary for me to set out the reasons I admitted the documents into evidence, other than to say that I considered that they were admissible at the very least, having regard to s 75 of the Evidence Act 1995 (Cth), if not, also as far as the administrator's report is concerned under s 69(2) of the Evidence Act. 10 In February 2017, the non-parties were represented by Mr John Levy, solicitor, and Mr Tony Hurren of counsel. Mr Hurren prepared a draft letter of demand for the non-parties to send to the respondents and, at or about the time this proceeding was commenced, an email attaching a draft letter of demand was sent to the solicitors for the applicant companies. The respondents sought to tender the draft letter, but the non-parties claimed common interest privilege over the document. The applicant companies, now controlled by the respondents, indicated at the hearing that they waived whatever privilege may exist in the document. Whilst a waiver by one party who is entitled to privilege jointly with another does not result in the privilege being lost, there may be circumstances in which a waiver by one party otherwise entitled to common interest privilege affects a waiver by all (Heydon JD, Cross on Evidence (11th ed, LexisNexis Butterworths, 2017) at [25265]). However, no argument along those lines was put in this case. 11 The respondents put two arguments in support of the tender of the email and the draft letter. First, the respondents submitted that common interest privilege did not arise because the applicant companies had not at the precise time the draft letter was sent to the solicitors, engaged the solicitors. Technically, this is correct by a period of about 12 hours because the resolutions were only passed by the applicants later in the morning, but plainly the email and draft letter were sent in contemplation of imminent engagement and I think that is sufficient in the somewhat unusual circumstances. Secondly, the respondents submitted that the non-parties had acted inconsistently with the maintenance of the privilege in that they had asserted that there was independence between the non-parties and the applicants (Mann v Carnell [1999] HCA 66; (1999) 201 CLR 1 at [29]-[30] per Gleeson CJ, Gaudron, Gummow and Callinan JJ). The difficulty for the respondents in making out this argument was that there was not enough in the evidence or the submissions of the non-parties to make out the necessary inconsistency. In the circumstances, I upheld the non-parties' claim for common interest privilege. 12 Finally, I should mention that one of the deponents of an affidavit was cross-examined on the hearing of the application. Mr Jamie Driscoll swore an affidavit which was tendered by the respondents. Mr Driscoll is one of the management shareholders and he had a number of conversations with Messrs Sykes and Woodward over the period from December 2016 to March 2017. He was cross-examined by counsel for the non-parties. He was a credible witness, although as I will explain below, I do not think that he had a precise recollection as to the timing of some of the conversations.

Relevant Principles 13 I have already referred to Knight v Special Assets. I note the following additional matters. First, Mason CJ and Deane J referred to the prime facie general principle that an order for costs is only made against a party to the litigation (at 192). Secondly, the three matters which I identified above (at [6]) give rise to a power to make an order for costs against a non-party "if the interests of justice require that it be made" (at 193). That is an important qualification. Thirdly, in his reasons, Dawson J spoke in terms of the non-party being the "effective" or "real" litigant (at 202). 14 Both parties referred to the decision of the Full Court of this Court in Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50; (2012) 200 FCR 154. In that case, the Registrar of an Aboriginal Corporation who had been unsuccessfully sued by the Corporation sought costs against the directors of the Corporation in circumstances where the Corporation could pay the Registrar's costs. The Registrar did so on the basis that the directors had acted in their own interests and not those of the Corporation. The Full Court of this Court confirmed the power to award costs against non-parties even where the unsuccessful party can pay the costs (i.e., is not impecunious), but said that in such a case, the power would only be exercised in exceptional circumstances (at [87] and [91]). The Court refused the Registrar's application because it could not be satisfied that the directors had acted in their own interests, rather than the interests of the Corporation. 15 More generally as to the power to award costs against non-parties, the Full Court made the following observations. First, the power has been exercised against a director of an impecunious company where the director was the real party to the litigation (at [85]). Secondly, the categories of cases in which an order for costs may be made against a non-party are not closed (at [88]). Thirdly, an order for costs against a non-party is not punitive in the sense that it is not imposed in order to punish the non-party for conduct that is reprehensible. The purpose of an order for costs remains compensatory with the added requirement in the case of an order for costs against a non-party that it is just in the circumstances than an order be made (at [93], [95]). 16 In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, Basten JA (with whom Beazley and Giles JJA agreed) considered the Court's power to award costs against the sole director and secretary of an unsuccessful corporate party. The Court refused to make such an order in circumstances in which: (1) it could not be suggested that the company was merely a nominal party and the director was the real party. The company was a proper party and would receive the benefits of the litigation if successful (at [206]); (2) although the director swore affidavits and instructed counsel, that in itself did not mean that the litigation was run for his benefit in the relevant sense (at [207]); and (3) the unsuccessful company was not insolvent or a person of straw (at [211]). 17 Basten JA said (at [210]): There may be other cases where such an order is appropriate including the circumstances of Knight v FP Special Assets itself, in which the company was in receivership. Again, that is not the present case, the primary judge expressly finding: "There is nothing to indicate that FPM is in receivership." It is also true that the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms. A further example, not encompassed by those identified to date, is illustrated by Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429, a decision of the Full Court of the Federal Court in relation to an order sought against a litigation funder. The judgment contains an extensive analysis of the case law, including consideration of the judgment of Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406. It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw. 18 Finally, it is clear from the authorities that the failure to warn a non-party that an order for costs will be sought against them is a material, but not decisive, consideration. A case in which the Court made that point and held that, in the circumstances of that case, the failure to warn was not of particular significance is Australasian Academy of Natural Medicine Pty Ltd v Walters [2003] SASC 56; (2003) 85 SASR 36 in which Duggan J (Doyle CJ and Gray J concurring) said (at [69] and [72]): As the Full Court of the Federal Court pointed out in Yates v Boland [2000] FCA 1895 para 34 when speaking of the giving of warnings to non-parties of an intended application for costs: The discussion concerning Symphony and Vestris in pars 18 to 32 of these reasons shows that the question of warning has been treated as a material consideration in certain circumstances. Whether such a requirement arises in a particular case depends on the facts and circumstances of the individual case. The necessity to warn a non-party of an intention to claim costs is not a principle applicable in every case in which costs are sought against a non-party. Rather it may be a material consideration depending on the situation disclosed in the case under consideration. I do not regard the failure to give notice in these circumstances as particularly relevant to the exercise of the discretion to order costs against Dr Kumar. In any event, I am of the view that it was open on the evidence for the trial judge to conclude, as he did, that the giving of notice would not have altered the manner in which the case was conducted.

The Facts 19 The transactions which took place in 2012 are described in my injunction reasons and I will not repeat what I said in those reasons. 20 The circumstances which gave rise to the interim injunction and application for an interlocutory injunction were described in my injunction reasons as follows (at [38]-[39]): Bidco has not delivered to the Agent the audited consolidated financial statements for the Holdco group for the financial year ended 30 June 2016 as required by clause 16.1 of the PLNSA. That led to a letter from the ICG to Holdco and Bidco dated 20 February 2017, but not delivered until 21 February 2017. The next step, assuming the interlocutory injunction is not granted, will be a formal demand under clause 18.2(b), and if that is not met, the ICG could (among other things) declare all or part of the Loan payable on demand under clause 18.9. There is also power under the General Security Interest to appoint a receiver. A meeting of the board of directors of each of the four applicants was held on 22 February 2017. Dr Heine and Mr Shelswell resigned from the board of each of Holdco and Bidco before a resolution authorising the appointment of lawyers on behalf of the companies was passed. In the case of SCF Holdings and SCF Group, the resolution authorising the appointment of lawyers was passed on the casting vote of Mr Sykes. 21 I granted an interim injunction on 22 February 2017 in the following terms: 3. Upon the applicants giving the undertaking set out in Annexure A to these orders, the respondents and each of them be restrained, whether by their servants, agents, or otherwise, until further order from taking any steps under, or purporting to invoke or exercise any rights set out in any of the written agreements, deeds or other instruments between any one or more of the respondents and any one or more of the applicants, including, without limitation: 3.1 the Share Sale/Purchase Agreement dated 25 May 2012 between Archer Capital Growth Funds Pty Limited as Custodian for Archer Capital GF1A Pty Limited as Trustee for the Archer Capital GF Trust 1A, Archer Capital Growth Funds Pty Limited as Custodian for Archer Capital GF1B Pty Limited as Trustee for the Archer Capital GF Trust 1B, LMPACT Pty Limited as Trustees for the LMPAC Family Trust, Richard Sykes as Trustee for the Richard Sykes Family Trust, Richard Sykes, LMPACA Pty Limited ACN 125 011 636 as Trustee for the LMPAC1 Super Fund; Kym Malcolm Dunn, Masnun McNamara, Paul Desmond Teisseire and Joyce Kay Woody as Trustees for the Teisseire/Woody Superannuation Fund; Matthew William Hancock and Alicia Michelle Hancock, Nicholas Schwartz and Nicole Elizabeth Handley, Nicholas Woodward as Trustee for the Woodward Family Trust, Jonathan Paul Coad, Matthew Davis Harris and Rose Harris, Popeye Bidco Pty Limited ACN 158 359 285, Popeye Holdco Pty Limited ACN 158 356 471; 3.2 the Subscription and Shareholders Deed dated 25 May 2012 between Richard Sykes, Nicholas Woodward, Kym Malcolm Dunn, Jonathan Paul Coad, Matthew William Hancock, Nicholas Schwartz, Matthew Davis Harris and Brett Carthew, Richard Sykes as Trustee for the Richard Sykes Family Trust, Nicholas Woodward as Trustee for the Woodward Family Trust, Alicia Michelle Hancock, Nicole Elizabeth Handley, Rose Harris and LMPACT Pty Limited as Trustee for the LMPAC Family Trust, Intermediate Capital Group Plc, Popeye HoldCo Pty Limited ACN 158 356 471, Intermediate Capital Group plc; and 3.3 the Preferred Loan Notes Subscription Agreement dated 25 May 2012 between Popeye Bidco Pty Limited ACN 158 359 285, Popeye Holdco Pty Limited ACN 158 356 471, Intermediate Capital Australia Pacific Limited, Intermediate Capital Group plc, and AET Structured Finance Services Pty Limited ACN 106 424 088. 22 I heard submissions on whether an interlocutory injunction should be granted on 7 March 2017. The interlocutory injunction which was sought was in similar terms to the interim injunction, save that reference to action under the Subscription and Shareholders Deed dated 25 May 2012 was removed. On 10 April 2017, I refused the application for an interlocutory injunction. The costs now sought relate to those applications. 23 It is necessary for me to provide some further details of the relevant events. 24 On 21 February 2017, the respondents provided a letter to the Popeye Companies, dated 20 February 2017, advising them that they were in breach of a clause in the Preferred Loan Note Subscription Agreement concerning the provision of audited consolidated financial statements for the Group and that they had until 5.00 pm on 22 February 2017 to remedy the breach and that failing the remediation of the breach, the respondents intended to instruct the agent to serve a formal demand. Upon receiving the letter, Mr Sykes on behalf of "SCF" sought legal advice. One firm approached by Mr Sykes declined to act because it did not have the resources to deal with the matter. Mr Sykes approached Cosoff Cudmore Knox late in the evening of 21 February 2017. 25 The next day, there were board meetings of each of the four applicant companies. During the meetings, Dr Heine and Mr Shelswell resigned as directors of Popeye Holdco and Popeye Bidco. In the case of each applicant, a resolution was passed that the company appoint independent lawyers to advise and act in relation to its rights and obligations. In the case of Popeye Holdco and Popeye Bidco, the resolution was passed by its two directors (Messrs Sykes and Woodward) and, in the case of SCF Holdings and the SCF Group, by Mr Sykes exercising his casting vote over the opposition of Dr Heine and Mr Shelswell. 26 Cosoff Cudmore Knox immediately sought an undertaking from the respondents not to proceed on their notice. A very short time after, the applicant companies sought relief from the Court which relief I granted on an interim basis. On the same day, the solicitors acting for the respondents wrote to the solicitors acting for the applicant companies advising him that they considered that Messrs Sykes and Woodward were acting in their own interests and not in the interests of the companies. The matter came back before the Court on 27 February 2017 at which time the respondents made submissions concerning the inadequacy of the undertaking as to damages. On that day, the issue of whether an interlocutory injunction should be granted was listed for hearing on 7 March 2017. On 3 March 2017, the solicitors for the respondents wrote to the solicitors for the applicant companies advising them that they considered the undertaking as to damages to be worthless. On 7 March 2017, I heard the application for an interlocutory injunction and reserved my decision. On 22 March 2017, the respondents put the non-parties on notice by letter that they intended to seek non-party costs. On 10 April 2017, I refused the application for an interlocutory injunction. The applicant companies did not seek leave to appeal and nor have the non-parties sought to progress this proceeding under some residual power as directors or by the exercise of derivative rights. On 13 April 2017, the non-parties and other shareholders commenced the shareholders' action. The documents put before the Court on this application indicate that the legal fees of the applicant companies were paid by the SCF applicants, rather than the Popeye applicants. 27 The respondents pointed to my identification in the injunction reasons of difficulties in the case of the applicant companies, particularly the state of mind attribution point (at [49]-[53]) and submitted that some of these difficulties would not be faced by the shareholders. 28 One of the elements the respondents seek to establish is that the applicant companies were insolvent or men of straw. I made the following findings in the injunction reasons (at [36], [57] and [71]): The business of the Holdco group did not grow as anticipated and rather than five years of growth before another sale process and the realisation of the investment in equity envisaged for June 2017, those with an interest in the Holdco group were, towards the end of 2016, considering the refinancing and restructuring of the Holdco group with a view to what was called delivery of a new plan to June 2019. The proposal for refinancing and restructuring involved converting the Preferred Loan Notes to equity and, as the paper which sets out the proposal states, setting all current equity to zero. The senior debt (i.e., the NAB debt) is said to be approximately $40 million and the estimated value of the enterprise is said to be $132 million. The parties with an interest in the Holdco group have not been able to reach an agreement as to the refinancing and restructuring of the group. Absent an injunction, the ICG could serve a notice under clause 18.2(b) of the PLNSA. Failure to comply with the notice would be an Event of Default which could lead to a declaration that the Loan is payable on demand and the appointment of a receiver. The steps which the respondents could take would be subject to the undertaking, but leaving aside the penalty issue, Holdco and Bidco would be required to repay approximately $173 million. They could not do that. They could not do that even if all of their assets are sold. On present indications, there would be a shortfall in repayment to the ICG of approximately $81 million (Enterprise value $132 million - Senior debt of $40 million - Respondents' debt of $173 million). The applicants do not contend that from 25 May 2017 the respondents will not be able to initiate an Exit Event and that the respondents will not be entitled to the repayment of an amount of approximately $173 million. If the respondents' case is correct, then absent the respondents granting an extension of time, the applicants will be liable to repay the respondents approximately $173 million on 30 June 2017. On the evidence before me, there is no prospect the applicants will be able to do that without a major injection of cash. On the evidence before me absent a major injection of cash, the applicants will recover something in the order of $92 million. 29 Nothing was put on the present application to suggest that these conclusions need to be qualified in any way. It is clear that any costs incurred by the applicant companies would diminish the secured amount ultimately recovered by the respondents. The non-parties suggested in argument that there was no proof that the applicant companies were insolvent in the sense of being unable to pay their debts as and when they fell due. I do not think that this is the correct way to analyse the matter. The key point is that the applicant companies were in a parlous financial condition and could not survive without a major injection of cash. I think that is sufficient to engage the first of the three elements I have previously identified. 30 It is convenient to note the current financial position of the applicant companies, other than Popeye Holdco. The facts agreed between the respondents and the non-parties are as follows: The ICG Parties, Mr Sykes and Mr Woodward agree the following matters 1. In early 2018, the receivers for Holdco accepted an offer from Intermediate Capital Asia Pacific 2008 GP Limited for the acquisition of 100% of the shares in Bidco in accordance with [3] below, in return for a release of Holdco and a reduction of the debt owed by Bidco under the PLNs. 2. The assets of Bidco, SCF Holdings and SCF Group now exceed the amount owing on the PLNs and each of those companies: a. is solvent; and b. is able to meet a costs order. 3. Popeye Bidco is, in consequence of the transaction referred to at [1] above, now wholly owned by Specialised Container Holdings Pty Limited (Newco). Newco is itself wholly owned by a Jersey Limited Partnership known as Specialised Container Holdings L.P (JLP)., which is registered in Jersey. Intermediate Capital Asia Pacific 2008 GP Limited is the general partner of JLP. 4. Holdco is now in liquidation and has no assets. 5. The limited partners of the JLP are Intermediate Capital Group PLC, Hartland Investment Pte. Ltd, and Intermediate Capital Asia Pacific 2008 GP Limited as general partner for Intermediate Capital Asia Pacific Fund 2008 L.P., each of whom is an ICG Party. 31 I turn now to the evidence of Mr Driscoll. He, like the non-parties and others, was a management shareholder. By December 2016, it was apparent to all concerned with the group that it could not survive without a major restructure. The management shareholders were trying to negotiate a favourable deal with the respondents and Mr Sykes was involved in negotiations with the respondents' representatives. Mr Sykes was also trying to rally the management shareholders to support the negotiations and then, as events transpired, to take legal proceedings. 32 Mr Driscoll gave evidence of discussions he had with Mr Sykes. At some point, it is clear that Mr Sykes considered that having two actions against the respondents could result in a favourable settlement for management shareholders because of the costs to the respondents of defending two actions. I do not think that this conclusion could be contentious. Nor could it be contentious that, from January 2017, if not before, legal proceedings by the management shareholders were a possibility. The critical issue is whether an action by the applicant companies was part of a formulated strategy prior to 22 February 2017 or was no more than a reaction to the notice served by the respondents. If the former, that would be a powerful reason in favour of an order for non-party costs. If the latter, that might affect the long-term costs of these proceeding if they are continued, or perhaps aspects of the shareholder proceedings, but not the present application. 33 There was correspondence between Mr Sykes on the one hand, and Dr Heine or Mr Shelswell on the other, in late 2016, with a view to deciding upon a restructure, including a Management Incentive Package, which would be acceptable to the management shareholders and the respondents. Proposals were put by the respondents, but they were not acceptable to Mr Sykes who, on 13 December 2016, wrote that the respondents' offer did not "address the small shareholders along with a fairly poor result for myself". It seems that Mr Sykes sought legal advice as to the position of the management shareholders before 16 December 2016 and had not yet received it when he wrote to Mr Shelswell on that date. 34 At or about the same time, Mr Sykes was communicating with a group of management shareholders about his discussions with the respondents. On 19 December 2016, Mr Driscoll received a notice of a shareholders' meeting to be held on 21 December 2016. He attended the meeting and he gave unchallenged evidence that either Mr Sykes or Mr Woodward said the following: We received an offer from ICG. It does not sufficiently deal with my shareholding, and it completely overlooks Brett and Kym [referring to Brett Carthew and Kym Dunn, former employees of SCF]. ICG is acting outside of the terms of its contract. It is trying to revalue our shareholding and reset everything at $0. We [that is, Richard Sykes and Nicholas Woodward] are trying to strike a new deal with ICG, to try and recover some of our funds [I took that as a reference to the Management Shareholders' investments in Holdco]. Management would seek to make you [that is, Management Shareholders] whole. You will get an update from us later on. 35 By the time Mr Sykes wrote to Dr Heine on 19 January 2017, he had received some initial advice that there may be a number of causes of action associated with the transactions in 2012 and, in particular, that aspect of the transaction which involved the issuing of the Preferred Loan Notes. The tenor of the letter is that the causes of action were vested in the "non-ICG shareholders". Evidence of Mr Sykes confirms that in that he refers to rights "in our capacities as shareholders, against ICG and entities in the ICG Group". 36 Returning to Mr Driscoll's evidence, as I have said, there was a meeting of management shareholders on 21 December 2017. There was a second meeting on 14 March 2017. Although I did not deliver judgment on the application for an interlocutory injunction until 10 April 2017, all the costs which are the subject of the present application were effectively incurred up to and including the hearing on 7 March 2017, save and except for the costs of handing down judgment on 10 April 2017. 37 Mr Driscoll gave evidence of numerous telephone conversations and other conversations with Mr Sykes between 21 December 2016 and 14 March 2017 wherein Mr Sykes was urging Mr Driscoll to join a proposed class action by management shareholders against the respondents. Mr Driscoll thought that during the last week of February and the first week of March 2017, he was receiving at least three telephone calls a day from Mr Sykes. During those telephone conversations, Mr Sykes said words to the following effect: ICG's offer is not sufficient. We will seek to apply financial pressure on ICG to force a settlement. We will commence law suits against them. We are launching two Court proceedings. The first is on behalf of the business. The second will be a class action on behalf of all the Management Shareholders. The first proceeding is to get an injunction to stop ICG from taking over the business and resetting our shareholding at $0. The second action is to get a better outcome for the Management Shareholders and it will flow straight after the first. The entire management team needs to band together to force a negotiated outcome. You have nothing to worry about. I am very confident that we will win. This [the second action] will never go to Court. ICG will fold before that. It's 100% given that ICG will fold. If we all band together, ICG will have to blink. They will have no option but to settle. They will not want this in the press, and they cannot afford to have a business without a management team. Your job is safe if you stick with the management team. 38 I have considered Mr Driscoll's evidence very carefully. As I have said, the critical question is whether the two-case strategy was in place at the time the applicant companies brought this proceeding on 22 February 2017. I have taken into account as a significant factor that neither Mr Sykes nor Mr Woodward gave evidence refuting Mr Driscoll's evidence. Nevertheless, having regard to the cross-examination of Mr Driscoll, I am not satisfied that the two-case strategy was in place before the institution of this proceeding. Of importance in reaching this conclusion is the fact that the proceeding seems to have followed as a matter of urgency from the service of the notice by the respondents. Proceedings in those circumstance would not be unexpected. In saying that, I am not making any assumption about the merits. One of the perhaps unusual features of this application is that it is made before a final determination of the merits of the substantive issues in either this proceeding or the shareholders' proceeding.

Conclusions 39 I have concluded that an order for costs should not be made against the non-parties. 40 I am not satisfied that the two-case strategy was in place prior to the commencement of this proceeding on 22 February 2017. Up until that date, the non-parties certainly seem to have been contemplating some form of shareholders' action. They did decide fairly soon after that they would institute a shareholders' action in the hope that the costs of the two actions to the respondents would result in a settlement. 41 As I have said, I am satisfied that in February 2017, the applicant companies were in a parlous financial state and that the payment of costs would reduce the funds or property that would otherwise be available to the respondents under their security. The non-parties were actively involved in the conduct of the litigation in that they voted in favour of it and they gave instructions to the solicitors. The non-parties clearly had an interest in the subject of the proceeding. However, I do not think it just that the non-parties be ordered to pay the respondents' costs. I have reached that conclusion for two reasons. First, the non-parties and the applicant companies were required to respond urgently to the notice served by the respondents and they responded in a not unexpected way over a short period. To an extent they were committed to seek to maintain the injunction they had obtained on 22 February 2017, at least in the short term. Secondly and relatedly, the costs were incurred over a short period of time. The point may be illustrated by pointing out that had the non-parties caused the applicants to take a major step in this proceeding after my decision, the costs of that, if unsuccessful, may have well resulted in a costs order against the non-parties. 42 I have considered carefully the respondents' submission that there was no reason to join the SCF applicants to this proceeding as they were not a party to any of the agreements. The suggestion was that they were only joined because they had the funds to pay the costs. I am not prepared to make that finding. It does not seem to me that the issue of proper parties would have been so obvious that such an inference should be drawn. 43 I should identify matters I have not relied on in reaching my principal conclusion, or not relied on to any significant extent. I have not relied on the fact that the applicant companies can now meet an order for costs. An order for costs at the time would have reduced the value of the respondents' secured interest and an order for costs now would reduce the value of its ownership interest. Nor have I put any significant weight on the absence of a warning. It seems to me that, in the particular circumstances of this case, including the fact that the respondents asserted on 22 February 2017 that the non-parties were acting in their own interests and not those of the companies, the possibility of an application for costs against non-parties would have been obvious to a reasonable person. Nor have I put other than quite limited weight on the point made by the non-parties about the early redemption amount. It is not irrelevant, but the reality is that it was not in any way the main focus of the issues on the application for an interlocutory injunction. 44 For these reasons, I dismiss the respondents' application for an order for costs against the non-parties. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Besanko.

SCHEDULE OF PARTIES SAD 54 of 2017 Respondents Fourth Respondent: INTERMEDIATE CAPITAL GROUP PLC Fifth Respondent: AET STRUCTURED FINANCE SERVICES PTY LIMITED ACN 106 424 088 Sixth Respondent: INTERMEDIATE CAPITAL AUSTRALIA PTY LIMITED Seventh Respondent: HARTLAND INVESTMENTS PTE LIMITED Eighth Respondent: RYAN SHELSWELL