The J. Aron Corporation & Anor v Newmont Yandal Operations Pty Ltd & Ors

Supreme Court of NSW|2004-06-22|Before: The J, Barrett J, Mr P

CITATION : The J. Aron Corporation & Anor v Newmont Yandal Operations Pty Ltd & Ors [2004] NSWSC 533 HEARING DATE(S) : 11/05/04 JUDGMENT DATE : 22 June 2004

JURISDICTION: Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Limited re-opening allowed

CATCHWORDS : PROCEDURE - application by plaintiffs to re-open hearing on costs - allegation by plaintiff that defendants failed to put relevant material before court at original hearing - reasons why plaintiffs did not adduce particular evidence on hearing of costs argument - whether defendants will suffer prejudice not compensable by costs order LEGISLATION CITED : Corporations Act (Cth) 2001 - s.600A, Part 5.3A Supreme Court (Corporations) Rules 1999, rule 2.13 Thomas A Edison v Bullock (1912) 15 CLR 679 Elton v Cavill (1994) NSWLR 289 Re Gruzman; Ex parte the Prothonotary (1968) 70 SR (NSW) 316 Hayden v Teplitzky (1997) 74 FCR 7 CASES CITED : Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839 In the Marriage of Black and Kellner (1992) 106 FLR 154 In the Marriage of Briese (1985) 10 Fam LR 642 Papandony v Citibank Ltd [2002] NSWSC 678 Smith v New South Wales Bar Association (1992) 176 CLR 256 Re South Downs Packers Pty Ltd [1984] 2 QdR 559 The J. Aron Corporation and The Goldman Sachs Group, Inc - Plaintiffs Newmont Yandal Operations Pty Ltd - First Defendant PARTIES : Clynton Court Pty Ltd (subject to a deed of company arrangement) - Second Defendant Mark Anthony Korda and Mark Francis Xavier Mentha - Third Defendants The Companies Listed in Schedule 1 - Fourth Defendants FILE NUMBER(S) : SC 4666/03 Mr V R W Gray - Plaintiffs COUNSEL : Mr P M Wood - First Defendant Ms H Symon SC/Mr M J Cohen - Second and Third Defendants Mr M D Howard - Bowler Enterprises Pty Ltd and Byrnecut Mining Pty Ltd Abbott Tout - Plaintiffs SOLICITORS : Arnold Bloch Leibler - First Defendant Gadens Lawyers - Second and Third Defendants Pullinger Readhead Stewart - Bowler Enterprise Pty Ltd and Byrnecut Mining Pty Ltd

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

4666/03 - J ARON & COMPANY v NEWMONT YANDAL OPERATIONS PTY LTD (ADMINISTRATORS APPOINTED) & 2 ORS JUDGMENT - APPLICATION TO RE-OPEN ON COSTS 1 It is necessary to recite, by way of background, some earlier aspects of the present proceedings. By an originating process filed on 3 September 2003, "J Aron & Company" (which I shall call "the original plaintiff") claimed an order pursuant to s.600A of the Corporations Act 2001 (Cth) setting aside a resolution passed at the second meeting of creditors in the Part 5.3A administration of Newmont Yandal Operations Pty Limited ("NYOL"). By an interlocutory process, the original plaintiff sought an interlocutory injunction restraining execution of a deed of company arrangement in conformity with that resolution. I heard the interlocutory process on 8 September 2003 and dismissed it. On 1 April 2004, I heard argument on costs in relation to the interlocutory process and reserved my decision. 2 By that time, The J Aron Corporation and The Goldman Sachs Group, Inc (which I shall call "the plaintiffs") had become plaintiffs. I was informed that this was because "J Aron & Company" was a partnership without any independent existence as a juristic person, while the plaintiffs, as newly named, were the corporations that, at least in a substantial or beneficial sense, made up "J Aron & Company". 3 I come now to the matter with which these reasons are concerned. On 16 April 2004, the plaintiffs filed an interlocutory process by which they sought leave to re-open the hearing on costs and to present further evidence and argument. That interlocutory process came before me for hearing on 11 May 2004. The grant of the relief the plaintiffs sought was opposed by the other parties to the proceedings, as well as by certain companies that had been granted leave to be heard in the proceedings without becoming parties (Supreme Court (Corporations) Rules 1999, rule 2.13). 4 The plaintiffs say that there were matters of relevance to the issue of costs in relation to the interlocutory application determined on 8 September 2003 that were not placed before the court when the question of what order, if any, should be made as to those costs was argued on 1 April 2004. In the plaintiffs' submission, there is at least a significant possibility that the matters in question will have a material hearing in the proper determination of the costs questions. 5 The matters in question are contained in an affidavit of the plaintiffs' solicitor, Mr Ryckmans, sworn on 3 May 2004. The substance of what is said there is that the hearing of the interlocutory process on 8 September had, in effect, proceeded on something of a misapprehension. There were two aspects to the supposed misapprehension. The first is to the effect that resolutions in favour of execution of the deed of company arrangement had been duly passed at meetings of the creditors of all fourteen relevant companies, whereas, in reality, there had been no such resolution of the creditors of nine of the fourteen companies. The second concerns the value of the assets of the relevant companies and, in particular, the value of the Wiluna gold mine. On the evidence presented at the time, that mine was said to have a value of some $5 million. The plaintiffs now point to matters which, they say, should have caused evidence to be given that there were then in train negotiations which resulted in the mine's being sold on terms much more advantageous to the seller than a price of $4 million. The plaintiffs say that if the court had been aware of both these matters on 8 September the balance of convenience may have been viewed differently. 6 The proposition I have just outlined regarding absence of a resolution in nine cases is extracted by the plaintiff from material in an affidavit of Mr Korda, the administrator, that was before the court on 8 September 2003. The affidavit was sworn on that day and had annexed to it a document apparently reporting voting results at the several meetings. In nine cases, the votes in favour and the votes for and against are shown as zero and 13 abstentions are shown. Mr Ryckmans says in his evidence that he did not notice this until after I had heard the interlocutory process and had retired briefly before delivering judgment some time after 6 pm. He raised it with the solicitors for other parties after judgment had been given. 7 In pursuing their application for leave to re-open on costs, the plaintiffs are saying that, because of what they see as a basic flaw in the basis on which the defendants successfully resisted the interlocutory application heard on 8 September 2003, it would be wrong for the question of costs to be approached - as it will be, if re-opening is not allowed - on the basis that the defendants' success in defending was warranted on the merits. They go further and say that the defendants failed, on 8 September 2003, to discharge a duty of candour owed by them to the court and that this too is something that ought to cause the costs argument to be re-opened. 8 The respondents to the present motion make several points in response. First, they say that, having regard to what has transpired since 8 September 2003, the question whether the relevant resolution was passed at the nine meetings in question has become an issue in the proceedings, with the result that it would be inappropriate and premature for any definitive finding on it to be drawn by me at this point. Second, they note (and the plaintiffs do not deny) that Mr Ryckmans had sworn, in advance of the 1 April 2004 costs hearing, an affidavit covering the points the plaintiffs now wish to ventilate about the voting or lack thereof at the nine meetings. That affidavit was sworn by Mr Ryckmans on 30 March 2004. It was not however served. Nor was it read. Mr Ryckmans deposes that he gave the affidavit and an outline of submissions he had prepared to the senior counsel he briefed on 31 March 2004 to appear at the costs hearing on 1 April 2004. Mr Ryckmans further deposes that, in the course of that hearing, he asked that counsel on three occasions to seek leave to file and read that affidavit but counsel did not do so. The decision not to rely on the affidavit was apparently made by counsel. It was a decision with which Mr Ryckmans did not agree. 9 The third point the respondents make is that material in the body of Mr Korda's affidavit of 8 September 2003 had a strong bearing on the question whether resolutions of the creditors of the nine companies had been passed and that it would be wrong to view the annexure stating voting results in isolation. In the body, Mr Korda referred to cross guarantees existing among the group companies and to his having held proxies in respect of inter-company debt. 10 The fourth point the respondents make is that the issue concerning the passing of the resolution at the nine relevant meetings was aired by the plaintiffs on the costs hearing on 1 April 2004. They refer to the following passage in the address of the senior counsel briefed by Mr Ryckmans: "The next point is this. Your Honour was told in the evidence before the court on the injunction hearing, by an affidavit of Mr Korda, and this is recorded in your judgment, that at the meeting of creditors - and there were in fact 13 companies, there was a major deed and 13 subsidiary companies with subsidiary deeds - that the creditors of all those companies had voted to enter into a deed of company arrangement. There is at least an issue which will need to be dealt with at the final hearing as to whether the proposition was right or not. We say not all of the companies had voted in favour of the deed. Because the deeds are all interlinked, there was never a resolution for any of the companies to enter into a deed. If that be right, then your Honour was inadvertently misled as to the proposition that if your Honour did make an injunction on that day, the whole thing would fall over. But more importantly, the company was never under a deed and my client is not bound by the deed. That issue which my client sought to have Justice Austin deal with as a separate issue, but failed, because we were told we were not a creditor of these other companies, will e determined at the final hearing of this matter and it will be determinative of our case. But also, if that be right, then it really would be a strange result that we would have ended up paying the costs of the injunction hearing, when your Honour is, on that hypothesis, told something that ultimately was not right. All I am saying is that that is a good reason why often injunction costs consequences are left to be dealt with when the court actually knows the true outcome of the case and what really happened." 11 The fifth point the respondents make is that there is no evidence that the subsequent events concerning the value of the Wiluna mine were known or could have been known on 8 September 2003. The events from which the inferences are said to be available happened in October 2003. 12 The sixth point made by the respondents is that the supposed duty of candour on their part said by the plaintiffs to have been breached in connection with the hearing on 8 September 2003 is not such a duty as applied in the circumstances prevailing at that time. 13 Considerations relevant to the question whether a completed hearing should be re-opened to allow further evidence to be tendered were discussed by member of the High Court in Smith v New South Wales Bar Association (1992) 176 CLR 256 and were outlined by Gzell J in the following passage in his judgment in Papandony v Citibank Ltd [2002] NSWSC 678: "Where the basis for re-opening is the reception of further evidence, a number of considerations are relevant: the reasons why the evidence was not led in the first place ( Urban Transport Authority v Nweiser (1992) 28 NSWLR 471 at 478), whether there was a deliberate decision not to call the evidence which, ordinarily, will tell decisively against the application ( Smith v NSW Bar Association (1992) 176 CLR 256 at 266, Urban Transport Authority at 478), whether the decision not to call the evidence was based on a tactical ground which, ordinarily, will be fatal to the application ( Urban Transport Authority at 478), whether the decision is based on a mistaken apprehension of the law or the facts resulting from an error by counsel ( Urban Transport Authority at 478), whether, where the hearing is complete but reasons for judgment have not been delivered, the other side will suffer prejudice or embarrassment ( Smith at 267), whether, where reasons for judgment have been delivered, the appeal rules relating to further evidence would permit the evidence to be called ( Smith at 267).

Under the Supreme Court Act 1970, s 75A(8), further evidence will only be received, on appeal from a judgment after a trial or hearing on the merits, on special grounds. In Wollongong Corporation v Cowan (1955) 93 CLR 435 at 444, Dixon CJ stated the common law rule for the admission of further evidence as requiring that, if the evidence had been available at trial, it is reasonably clear that an opposite outcome would have resulted and that the evidence could not, with reasonable diligence, have been obtained for use at the trial. (See, also, McCann v Parsons (1954) 93 CLR 418 and Orr v Holmes (1948) 76 CLR 632).

In CDJ v VAJ (1998) 197 CLR 172 it was held that common law principles do not apply to the exercise of a general statutory power to admit further evidence. The Supreme Court Act 1970, s 75A(8), however, is not a general power. It requires the existence of special grounds and the normal practice of the Court of Appeal of New South Wales has been to find special grounds only where three requirements are satisfied: first, it must be shown that the evidence could not have been obtained with reasonable diligence for use at the trial, secondly, the evidence must be such that there is a high degree of probability that there would be a different verdict and, thirdly, the evidence must be credible ( Wall v Timbertown Community Enterprises Ltd (in liq) [2002] NSWCA 162 at par 24)." 14 Recognising that it is for the applicant (here, the plaintiffs) to show affirmatively that the need for re-opening and the introduction of further evidence in the interests of justice is superior to the public interest in finality of litigation, I turn to the several matters on which the plaintiffs rely. 15 I deal first with the proposition that the plaintiffs were, as it were, victims of a breach of a duty of candour owed to the court. It is beyond argument that a party making an application to the court ex parte is bound by a duty of candour and "the party inducing the Court to act in the absence of the other party, fails in his obligation unless he supplies the place of the absent party to the extent of bringing forward all material facts which that party would presumably have brought forward in his defence to that application": Thomas A Edison v Bullock (1912) 15 CLR 679 at 682 per Isaacs J. See also: Hayden v Teplitzky (1997) 74 FCR 7 and Re South Downs Packers Pty Ltd [1984] 2 QdR 559. The unique character of ex parte applications in a legal system based upon adversarial justice has necessitated the imposition of this duty of candour upon applicants to avoid an abuse of the court's processes. 16 The contention of the present plaintiffs is that such a duty of disclosure extends beyond ex parte applications and is also at work upon the hearing of interlocutory applications where the opposing party is present. This submission is based primarily on the decision of Santow J in Kavia Holdings Pty Ltd v Werncog Pty Ltd [1999] NSWSC 839. At [1] His Honour said: "While that duty of candour applies with especial stringency to ex parte applications (see for example Frigo v Culhaci (Court of Appeal, 17 July 1998, unreported)), its scope extends to any application, contested or not, where evidence is presented to the court in support of an application. Those duties apply to the parties."

17 It appears however that this position was based to some extent, although it is not clear to what degree, upon the duty to the court owed by legal advisers. His Honour continued at [2]: "A legal advisor depends on the instructions given. Nonetheless the legal advisor should remain alert to the importance of ensuring he or she can fulfil the personal duty of candour he or she owes to the Court." And at [11]: "This is because the duty of candour is firstly a duty of the party involved, though reinforced by the legal advisor's corresponding duty to the Court."

18 I find it difficult to justify the imposition of such a broad duty on parties and their legal advisers in adversarial litigation where the parties are present and represented. Solicitors and counsel, as officers of the court, will always have, in the first place, a duty to the court. That duty includes a clear obligation to be frank and "not to keep back from the court any information that ought to be before it": Re Gruzman; Ex parte the Prothonotary (1968) 70 SR (NSW) 316 at 323. However where both parties are before the court and represented I do not think that they have a duty to "supply the place of the absent party". As long as litigation remains adversarial, a party can be presumed - indeed expected - to put their best case forward. That is not to say that a wilful misleading of the court will pass without remedy, but a mere failure to present a neutral case or to seek to remedy some deficiency in an opponent's evidence cannot lay the foundations for subsequent intervention. In the Marriage of Briese (1985) 10 Fam LR 642 was a case dealing with the specific need for full disclosure of financial affairs in financial proceedings between spouses. At 662 Smithers J said: "This is quite a different form common law litigation between strangers, in which such a general duty does not exist, and obligations would only exist in so far as statute or court rules required.

In my view it is fundamental to the whole operation of the Family Law Act in financial cases is that there is an obligation of the nature to which I have referred." This view was confirmed by the Full Court of the Family Court of Australia in In the Marriage of Black and Kellner (1992) 106 FLR 154. 19 An approach less comprehensive than that suggested in Kavia Holdings was outlined by Young J in Elton v Cavill (1994) NSWLR 289. In that case, the applicant for an interlocutory injunction failed to disclose all the material facts in a hearing at which the respondent was present. At 304 His Honour said: "The court needs to maintain its policy that if a person is to obtain an interlocutory order the proper standard of disclosure must be maintained. I appreciate that the present injunction was not granted on an ex parte basis, but it seems to me that a similar policy consideration arises where injunctions are granted on an interlocutory basis where both parties are present because of the limited inquiry which judges customarily make on such an application." 20 The well-recognised rule in Edison v Bullock and the suggested variants emerging from Kavia Holdings and Elton v Cavill are concerned with parties who invoke the jurisdiction of the court. They do not, in my opinion, imply that a defendant who is brought before the court upon an application for an interlocutory injunction is fixed with any duty as to placing matters before the court or drawing matters to its attention. Any such duty would be entirely at odds with the simple reality that a defendant has the option of remaining silent (or making such minimal contribution as he chooses), leaving it to the plaintiff to do the best he can to discharge the onus he bears. 21 In the present case, I am not satisfied that any of the respondents failed in the due discharge of any relevant duty. 22 Turning to the desire of the plaintiffs to tender further evidence, I am of the opinion that the evidence in question should be regarded as having some potential capacity to affect the outcome on the costs questions argued before me on 1 April 2004. The evidence was not adduced on that occasion because of a decision by the plaintiffs' counsel which did not accord with the way in which their solicitor, Mr Ryckmans, wished the case to be conducted. In one sense, that is a situation with which the plaintiffs should be required to live. But the evidence given by Mr Ryckmans warrants the inference that counsel's decision was motivated, in part at least, by a view that large parts of the affidavit were objectionable in form and that, as it then stood, the affidavit was not an appropriate vehicle for the introduction of the evidence. But it was the only vehicle that counsel then had. 23 In the end, I think the overriding question here is whether the respondents will, by reason of re-opening and the production of further evidence, suffer embarrassment or prejudice that cannot be compensated by an order for costs. In my view, an order that costs of the application to re-open and costs thrown away by reason of the re-opening be paid by the plaintiffs will resolve the prejudice of the respondents. I am also of the opinion that the respondents' position should be wholly made good in those respects and that the costs should be assessed on the indemnity basis and payable forthwith. 24 Re-opening will be permitted but not in the comprehensive terms sought in the interlocutory process filed on 16 April 2004. It will be permitted only to the extent of allowing the plaintiffs to file and serve an affidavit of Mr Ryckmans covering the matters that counsel for the plaintiff outlined to the court upon the hearing of the application for leave to re-open, followed by filing and service of any affidavits in reply on which other parties may wish to rely, any cross-examination of deponents and further addresses. There will be an order for costs against the plaintiffs as outlined. 25 The orders of the court are as follows:

Order that the hearing on costs that took place before me on 1 April 2004 be re-opened but only to the extent that (a) the plaintiffs may, within seven days, file and serve an affidavit of Marc Ryckmans limited to the further evidence outlined by counsel for the plaintiffs upon the hearing of the application to re-open; (b) the respondents may, within fourteen days after service of any such affidavit of Marc Ryckmans, file and serve any affidavits in reply thereto; and (c) cross-examination of deponents of any such affidavits and any further submissions on costs shall occur on a date to be fixed by me after all such affidavits have been filed.

Order that the costs of the parties named as defendants in the plaintiffs' interlocutory process filed on 16 April 2004 of and incidental to that interlocutory process and costs of those parties thrown away by the re-opening of the hearing on costs be paid by the plaintiffs, such costs to be assessed on the indemnity basis and to be payable forthwith. **********

Last Modified: 06/25/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

(1985) 10 Fam LR 642

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Judgment (13 paragraphs)

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Cases Cited (13)