Warner v Wong, in the matter of Bellpac Pty Limited

Solicitor for the Seventh, Ninth and Tenth Defendants: Mr T Tzovaras of JT Law t/as Tomaras Lawyers

Counsel for the Eighth Defendant: Mr G Stapleton

Solicitor for the Eighth Defendant: Avantro

Solicitor for the Twelfth Defendant: Holding Redlich

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1063 of 2012

IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 BETWEEN: ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

GUJARAT NRE COKING COAL LIMITED (FORMERLY KNOWN AS GUJARAT NRE MINERALS LIMITED)

JUDGE: GRIFFITHS J DATE OF ORDER: 3 November 2015 WHERE MADE: SYDNEY

1. DECLARES that the second plaintiff is the true owner of the 8% convertible bonds issued to the second plaintiff by the twelfth defendant on or about 23 July 2008 and described as Series IV bonds (4000001-4000020) (the Good Team Bonds).
2. ORDERS that the sixth defendant (Good Team Investments Limited) deliver up, or otherwise do all things as are reasonably necessary to cause to be delivered up, to the plaintiffs the original certificates and the originals and copies of any signed transfer forms or applications to convert or redeem any bonds in connection with the Good Team Bonds within fourteen (14) days.
3. DECLARES that the second plaintiff is the true owner of the 8% convertible bonds issued to the second plaintiff by the twelfth defendant on or about 23 July 2008 and described as: (a) Series II bonds (2000011-2000030); and (b) Series III bonds (3000031-3000050), (the Great Investments Bonds).
4. ORDERS that the seventh defendant (Great Investments Limited) deliver up, or otherwise do all things as are reasonably necessary to cause to be delivered up, to the plaintiffs the original certificates and the originals and copies of any signed transfer forms or applications to convert or redeem any bonds in connection with the Great Investments Bonds within fourteen (14) days.
5. DECLARES that the second plaintiff is the true owner of the 8% convertible bonds issued to the second plaintiff by the twelfth defendant on or about 23 July 2008 and described as Series I bonds (1000011-1000050) (the Kwok Bonds).
6. ORDERS that the eighth defendant (Osmond Tze Leung Kwok) deliver up, or otherwise do all things as are reasonably necessary to cause to be delivered up, to the plaintiffs the original certificates and the originals and copies of any signed transfer forms or applications to convert or redeem any bonds in connection with the Kwok Bonds within fourteen (14) days.
7. DECLARES that the second plaintiff is the true owner of the 8% convertible bonds issued to the second plaintiff by the twelfth defendant on or about 23 July 2008 and described as Series II bonds (2000031-2000050) (the Xu Bonds).
8. ORDERS that the ninth defendant (Hong Xu) deliver up, or otherwise do all things as are reasonably necessary to cause to be delivered up, to the plaintiffs the original certificates and the originals and copies of any signed transfer forms or applications to convert or redeem any bonds in connection with the Xu Bonds within fourteen (14) days.
9. DECLARES that the second plaintiff is the true owner of the 8% convertible bonds issued to the second plaintiff by the twelfth defendant on or about 23 July 2008 and described as: (a) Series III bonds (3000011-3000030); and (b) Series IV bonds (4000031-4000050), (the Lee Bonds).
10. ORDERS that the eleventh defendant (Chiah Cheang Lee) deliver up, or otherwise do all things as are reasonably necessary to cause to be delivered up, to the plaintiffs the original certificates and the originals and copies of any signed transfer forms or applications to convert or redeem any bonds in connection with the Lee Bonds within fourteen (14) days.
11. ORDERS that the twelfth defendant rectify its register of bondholders to record the second plaintiff as the registered holder of the Good Team Bonds, Great Investments Bonds, Kwok Bonds and Xu Bonds within fourteen (14) days.
12. ORDERS that the twelfth defendant cancel any bond certificates in connection with the Good Team Bonds, Great Investments Bonds, Kwok Bonds and Xu Bonds which do not record the second plaintiff as the owner of the bonds within fourteen (14) days.
13. ORDERS that the twelfth defendant re-issue bond certificates in connection with the Good Team Bonds, Great Investments Bonds, Kwok Bonds, Xu Bonds and Lee Bonds in the name of the second plaintiff and deliver those certificates to the plaintiffs within twenty-one (21) days. Security for Costs
14. ORDERS under r 2.43(1) of the Federal Court Rules 2011 (Cth) that the sum of $45,000 paid into Court by the plaintiffs in accordance with Order 1 made on 23 July 2013 in the proceedings be released to the plaintiffs by payment to the following account: Name: Breene and Breene Solicitors Law Practice Trust Account BSB: 082-080 Account no: 59-974-1496 Costs
15. ORDERS that the third defendant pay 35 percent of the plaintiffs' costs of the proceedings, as agreed or assessed.
16. ORDERS that the sixth and eleventh defendants each pay 10 percent of the plaintiffs' costs of the proceedings, as agreed or assessed, but excluding: (a) costs incurred by the plaintiffs in connection with the claims made by the plaintiffs against the first to fifth, thirteenth and fourteenth defendants; and (b) costs incurred by the plaintiffs in connection with any claims or applications made by any defendant other than the sixth and eleventh defendants.
17. ORDERS that the seventh and tenth defendants pay 15 percent of the plaintiffs' costs of these proceedings, as agreed or assessed, but excluding: (a) costs incurred by the plaintiffs in connection with the claims made by the plaintiffs against the first to fifth, thirteenth and fourteenth defendants; and (b) costs incurred by the plaintiffs in connection with any claims or applications made by any defendant other than the seventh and tenth defendants.
18. ORDERS that the eighth defendant pay 15 percent of the plaintiffs' costs of the proceedings, as agreed or assessed, but excluding: (a) costs incurred by the plaintiffs in connection with the claims made by the plaintiffs against the first to fifth, thirteenth and fourteenth defendants; and (b) costs incurred by the plaintiffs in connection with any claims or applications made by any defendant other than the eighth defendant.
19. ORDERS that the liability under the order in paragraph 18 above be set-off against the plaintiffs' liability to the eighth defendant arising under costs orders dated 23 July 2013 and 11 February 2014.
20. ORDERS that the ninth defendant pay 15 percent of the plaintiffs' costs of these proceedings, as agreed or assessed, but excluding: (a) costs incurred by the plaintiffs in connection with the claims made by the plaintiffs against the first to fifth, thirteenth and fourteenth defendants; and (b) costs incurred by the plaintiffs in connection with any claims or applications made by any defendant other than the ninth defendant.
21. ORDERS that the sixth, seventh, eighth, ninth and tenth defendants jointly and severally pay the twelfth defendant's costs incurred in relation to three notices to produce issued to the twelfth defendant and dated 4 March 2015 (two) and 8 March 2015 respectively.
22. GRANTS liberty to the plaintiffs to apply to have the proceeding restored to the list in the event that further or alternative relief is required to give effect to the reasons for judgment dated 18 September 2015. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 1063 of 2012

IN THE MATTER OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017 BETWEEN: ANTHONY JOHN WARNER AND STEVEN KUGEL IN THEIR CAPACITIES AS JOINT AND SEVERAL LIQUIDATORS OF BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

BELLPAC PTY LIMITED (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) ACN 101 713 017

GUJARAT NRE COKING COAL LIMITED (FORMERLY KNOWN AS GUJARAT NRE MINERALS LIMITED)

JUDGE: GRIFFITHS J DATE: 3 November 2015 PLACE: SYDNEY

Introduction 1 Following publication of the reasons for judgment in Warner v Wong, in the matter of Bellpac Pty Limited (Receivers and Managers Appointed) (In Liq) (No 5) [2015] FCA 784, the parties were invited to seek to agree orders, including as to costs, which gave effect to the reasons for judgment. They were also provided with an opportunity to make written submissions concerning final relief if consent could not be achieved. 2 The parties were unable to agree final orders. Outlines of written submissions were provided by the plaintiffs, the eighth defendant (Dr Kwok); the seventh; ninth and tenth defendants (Great Investments Ltd, Mr Xu and Mr Hong); and the twelfth defendant (Gujarat). For completeness, it should be noted that none of the following parties availed themselves of the opportunity to provide an outline of written submissions on final orders: the third defendant (Mr Alfred Wong); the fifth defendant (Shan Pei Investment Limited); the sixth defendant (Good Team Investments Limited) and the eleventh defendant (Mr Lee). No party requested a further oral hearing on final relief. Accordingly, the matter has been determined on the papers.

Parties' written submissions summarised 3 The plaintiffs submitted that declarations and orders should be made requiring the relevant defendants to deliver up the original bond certificates and the original or copies of any signed transfer forms or applications to convert or redeem the bonds. They also sought that Gujarat be required to rectify its register, cancel bond certificates and issue new bond certificates to the second plaintiff. The plaintiffs submitted that, given their success in the proceedings, the sum of $45,000 which was paid into Court on account of security for the defendants' costs, should be returned to them. These proposed orders were not opposed. 4 The plaintiffs submitted that costs should follow the event and, therefore, be in their favour. They accepted, however, that any order for costs in their favour against Dr Kwok should be limited so as to exclude any liability on his part for costs incurred by the plaintiffs in dealing with issues or aspects of the proceeding generally which did not involve Dr Kwok. The plaintiffs submitted that, rather than order Dr Kwok to pay a percentage proportion of their costs, a better option was to order Dr Kwok to pay the plaintiffs' costs, but to exclude certain costs incurred by them in relation to matters which did not concern Dr Kwok. 5 As to Gujarat, the plaintiffs accepted that no order for costs should be made against it. They did not oppose an order, as sought by Gujarat, that costs should be made in its favour against the sixth, seventh, eighth, ninth, tenth and eleventh (sic) defendants jointly and severally in respect of Gujarat's costs in relation to the three notices to produce dated 4 March 2015 and 8 March 2015. (The reference to the eleventh defendant was in error). 6 Dr Kwok's outline of written submissions may be summarised as follows. Dr Kwok acceded to the Court's decision concerning substantive orders but made detailed submissions regarding costs. In particular, he contended that: (a) the general rule that unsuccessful defendants be jointly and severally liable for the plaintiffs' costs be displaced; (b) the Court should apportion liability for costs between the defendants resulting in Dr Kwok being liable for a maximum of 10 percent of the plaintiffs' costs as agreed or assessed; (c) for the purpose of paragraph (b), the plaintiffs should exclude costs incurred in respect of defendants against whom relief was not ultimately sought and in respect of the claims against the other active defendants such that Dr Kwok would only be liable for costs relating to the plaintiffs' claims against him personally; and (d) Dr Kwok's liability to pay costs should be off-set against the plaintiffs' liability to him in respect of costs orders which were made by the Court on 23 July 2013 and 11 February 2014. 7 Dr Kwok submitted that there were only seven active defendants, namely Good Team Investments Limited and Mr Lee (who filed defences but did not actively participate), Great Investments Limited, Mr Xu, Mr Hong and Dr Kwok (who all actively participated). Alfred Wong did not actively participate in the trial but he unsuccessfully attempted to file a defence the day before the hearing commenced and provide an outline of submissions four weeks after the hearing finished. Dr Kwok submitted that Alfred Wong was "the conspicuous protagonist" in the events which gave rise to the proceedings. Dr Kwok also emphasised that it was relevant in determining costs that, of the active participants, his evidence and that of his wife was accepted, however, a Jones v Dunkel inference was drawn because Ivan Wong was available but did not give evidence. 8 Dr Kwok submitted that it would be unjust for him to be held jointly and severally liable for the plaintiffs' costs along with the other defendants: it was appropriate to apportion costs under s 43(3)(c) of the Federal Court of Australia Act 1976 (Cth) (the FCA Act). While he acknowledged that the plaintiffs' position was likely to be that their costs may not be met by any of the defendants, Dr Kwok pointed to the following factors as weighing against him being jointly and severally liable: (a) the bonds registered in his name represented approximately 25 percent of the value of the bonds in issue in the proceedings; (b) Alfred Wong's significant role in the purported transfer of the bonds to Dr Kwok as his personal creditor; (c) Alfred Wong's did not file and serve his defence and submissions on time and otherwise he took an inactive role in the proceedings, unlike the active role played by Dr Kwok and his wife; and (d) neither Good Team Investments Limited nor Mr Lee filed any evidence or actively participated in the proceedings. 9 In all the circumstances, Dr Kwok submitted that he should be liable for a maximum of 10 percent of the plaintiffs' costs calculated by reference to the costs relating to the claim against him specifically and not the other defendants. This "carve out" was justified, Dr Kwok submitted, because the plantiffs originally proceeded against 14 defendants but then discontinued against some and did not seek relief against some others. Nor was it appropriate for Dr Kwok to have to contribute to the plaintiffs' costs in having to deal with Alfred Wong's applications for leave to file his defence and submissions outside the timetable set by the Court. 10 Dr Kwok submitted that Alfred Wong should bear a proportionately higher percentage of the plaintiffs' costs, but he declined to specify any precise amount. 11 Dr Kwok also submitted that any costs he was ordered to pay should be set-off against the plantiffs' liability to him for costs in interlocutory hearings which resulted in costs orders being made on 23 July 2013 and 11 February 2014. This was not opposed by the plaintiffs. 12 The seventh, ninth and tenth defendants did not object to the orders proposed by the plaintiffs, apart from those in respect to costs. These parties substantially adopted Dr Kwok's submissions on costs, namely that: (a) this was an appropriate case to displace the general rule that unsuccessful defendants be jointly and severally liable for the plaintiffs' costs; (b) the appropriate order in the circumstances was that the Court apportion liability for costs between the defendants, resulting in Great Investments Ltd and Mr Hong (who were to be treated as one part for this purpose) and Mr Xu being liable for a maximum of 10 per cent of the plaintiffs' costs as agreed or assessed; (c) an order that the plaintiffs' costs for the purpose of (b) be reduced by the amount of costs incurred in respect of the defendants against whom relief was not ultimately sought, and in respect of the plaintiffs' claims against the other defendants. 13 Gujarat emphasised that it had submitted to jurisdiction, save as to costs, and that it took no active role in the proceeding. Accordingly, it submitted that there should be no order for costs made against it. This proposed order was not opposed by either the plantiffs or the seventh, ninth and tenth defendants. 14 As noted above, however, Gujarat sought an order for costs in its favour in relation to three notices to produce, which it identified in its written submissions as one dated 4 March 2015 which was issued by the plaintiffs; another issued on the same date by the eighth defendant and a third notice issued by the sixth, seventh, ninth and tenth defendants on 8 March 2015. Some of these details as to dates and who issued the notices were not reflected in the draft orders proposed by the plaintiffs. The details could not be verified as the notices to produce were not in evidence, however, Gujarat confirmed the correct details.

Consideration 15 None of the active defendants who made submissions concerning final orders opposed the substantive orders proposed by the plaintiffs. I consider that it is appropriate to make those orders, substantially for the reasons given by the plaintiffs in their outline of written submissions. I consider that it is appropriate, however, to adjust some of the time periods in which relevant practical steps must be taken relating to the disputed bonds. 16 As to costs, I consider that Gujarat, who did not actively participate in the proceedings, should not have to bear any of the plantiffs' costs. Moreover, I consider that it is appropriate that an order for costs be made in its favour regarding the notices to produce referred to above. I will rely on Gujarat's description of the details of these notices to produce. 17 As to Dr Kwok, I generally agree with the submissions made on his behalf by Mr Stapleton. This is an appropriate case in which to apportion costs, as authorised by s 43(3)(c) of the FCA Act, even though this is not a case where the plaintiffs have only enjoyed mixed success on the issues they have raised. Rather, the reason why apportionment is appropriate here relates to the fact that there were multiple defendants in the proceedings, the plaintiffs discontinued in respect of some of the defendants and did not seek relief against some others and, of the defendants who did participate in the proceedings, the nature and extent of their involvement varied considerably. Furthermore, there needs to be appropriate recognition of both the pivotal role played by Alfred Wong in the events which have led to the proceedings, as well as the unusual history of his involvement in the litigation. 18 The apportionment of costs is not an exact science. The exercise of evaluative judgment is unavoidable (see REA Group Ltd v Real Estate 1 Ltd (No 2) [2013] FCA 968 at [22] per Bromberg J). As Pagone J observed in Morris v Riverwild Management Pty Ltd & Ors [2009] VSC 439 at [13]: The apportionment of costs between parties should bear some relationship to the part played by the parties in the overall proceedings however imprecise that relationship must be in any given case. 19 Having regard to the nature and extent of Dr Kwok's participation in the proceedings and the findings made in respect of he and his wife, I consider that Dr Kwok should pay 15 percent of the plaintiffs' costs, as limited by the "carve out" proposed by him. I prefer his proposed "carve out" to that proposed by the plaintiffs. I do not consider that the 10 percent figure proposed by Dr Kwok adequately reflects the fact that he strongly defended the plaintiffs' claims against him, for which they should be compensated. 20 I accept Dr Kwok's submission that Mr Alfred Wong should bear a proportionately higher percent of the plaintiffs' costs. Such an order is appropriate to reflect Alfred Wong's central role in the events the subject of these proceedings. It was he who purported to transfer bonds in Bellpac's name to his personal creditors to satisfy personal debts, using Bellpac's Power of Attorney to him. He filed no evidence to explain or defend his actions, which added to the plaintiffs' evidentiary burden. Moreover, in contrast with the other active defendants, including Dr Kwok, Alfred Wong elected to wait almost two years beyond the time set by the Court to attempt to file his defence and then he sought to have the proceedings adjourned on the eve of the trial because of his claimed overseas travel plans (which applications were both rejected). He then waited four weeks until after the Court had reserved its judgment to seek to provide a written outline of submissions (which was also rejected). The plaintiffs were put to additional expense in opposing Mr Wong's various applications, for which they should also be compensated. 21 In my view, this is an appropriate case in which an order for costs should be made that Alfred Wong pay 35 percent of the plaintiffs' costs, as agreed or assessed, and without any carve out. In arriving at this figure I have taken into account that an order for costs is compensatory and is not by way of punishment (Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 at 543 per Mason CJ). 22 As to Great Investments Limited, Mr Xu and Mr Hong, I accept that their active and responsible participation in the proceedings places them in a different position from Mr Alfred Wong. In all the circumstances, I propose to make an order that Great Investments Limited and Mr Hong (who have the same interest and ought to be regarded for costs purposes as a single party) and Mr Xu each be liable for a maximum of 15 percent of the plaintiffs' costs, as agreed or assessed. In my assessment, this figure reasonably reflects the participation of these parties in the proceedings, noting that, like Dr Kwok, the plantiffs' claims were strongly defended by them. I do not consider that this figure should be adjusted in the light of findings concerning Mr Hong's credibility. His evidence occupied no greater time than that of Dr and Mrs Kwok. For the purpose of calculating these costs, I accept that a "carve out", in similar terms to that applying to Dr Kwok, should also be made and for similar reasons. 23 Finally, as to Good Team Investments Limited and Mr Lee, as noted above, neither actively participated in the proceedings apart from filing defences which put the plaintiffs to proof on most of the relevant claims made against them. Each should pay 10 percent of the plaintiffs' costs, as agreed or assessed. In quantifying those costs, there should also be a similar "carve out". 24 Appropriate orders will be made accordingly. I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.