Rathner, in the matter of Toddler Kindy Gymbaroo Pty Ltd (no 2) [2022] FCA 683

1. There be no orders as to costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

ANDERSON J: 1 On 2 June 2022, I delivered judgment in Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd [2022] FCA 630 and made orders reserving the question of costs in proceeding VID 732 of 2021. 2 On 9 June 2022, the parties submitted to my chambers submissions on costs in proceeding VID 732 of 2021. 3 For the reasons that follow there will be no order as to costs. 4 Sino Group International Limited and Beijing Yingquidi Education and Technology Corporation Ltd (Sino Creditors) submit that the appropriate order in circumstances where there has been no determination on the merits is that there be no order as to costs. 5 There were four aspects to this proceeding: (a) An application by the administrators pursuant to s 439A(6) of the Corporations Act 2001 (Cth) (Act) to extend the time for convening the second meeting of creditors. This was not opposed by the Sino Creditors and orders were made by the Court on 10 December 2021. (b) An application by the administrators for a stay of the Arbitration Proceedings. This was not opposed by the Sino Creditors and orders were made by the Court on 28 January 2022. (c) An application by the administrators in relation to the preservation orders made in the Arbitration Proceedings to the effect that it would not be recognised or enforced against them. (d) The interlocutory application by the Sino Creditors seeking the removal of the administrators. 6 The last two applications were not pursued by the parties as a consequence of the deed of company arrangement (DOCA) being executed on 28 March 2022, as the relief sought was no longer of any utility. 7 The Court has a broad discretion as to costs under s 43 of the Federal Court of Australia Act 1976 (Cth). 8 In circumstances where there has been no adjudication on the merits, any application for costs must be evaluated by reference to the reasonableness or otherwise of the conduct of the parties; this is because the court will not usually be in a position to assess the likely outcome of the matter: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 624-5 per McHugh J. 9 In this matter, I find that there is no basis for ordering adverse costs against the Sino Creditors in respect of the first two aspects of the proceedings, as the applications would have been made in any event and were not opposed. 10 In relation to the Sino Creditors interlocutory application, which was different and distinct from the application to set aside the DOCA and subject to different considerations, there was no event which determined its success. Further, it cannot be said that the Sino Creditors acted unreasonably in commencing that application, in circumstances where they were the major creditors and had legitimate concerns about the conduct of the administration. Adverse costs orders have been made in proceeding VID 153 of 2022, which I heard and determined that the Sino Creditors were unsuccessful. 11 Similarly, in relation to the application by the administrators concerning the preservation orders, this is a case where it is not possible to say that the applicant would have been substantially successful, nor that it acted unreasonably. 12 In both latter instances, it was the supervening event (the entry into the DOCA) which disposed of these aspects of the proceeding.