Norman, in the matter of Forest Enterprises Australia Limited (Subject to Deed of Company Arrangement) (Receivers & Managers Appointed) v FEA Plantations Limited (Subject to Deed of Company Arrangement) (Receivers Appointed) (No 2) [2011] FCAFC 169 (23 December 2011)

Last Updated: 23 December 2011

FEDERAL COURT OF AUSTRALIA

Norman, in the matter of Forest Enterprises Australia Limited (Subject to Deed of Company Arrangement) (Receivers & Managers Appointed) v FEA Plantations Limited (Subject to Deed of Company Arrangement) (Receivers Appointed) (No 2) [2011] FCAFC 169

Citation:		Norman, in the matter of Forest Enterprises Australia Limited (Subject to Deed of Company Arrangement) (Receivers & Managers Appointed) v FEA Plantations Limited (Subject to Deed of Company Arrangement) (Receivers Appointed) (No 2) [2011] FCAFC 169
Appeal from:		Norman, in the matter of Forest Enterprises Australia Limited (Administrators Appointed) (Receivers & Managers Appointed) v FEA Plantations Ltd (Administrators Appointed) (Receivers Appointed) [2010] FCA 1444
Parties:		TIMOTHY BRYCE NORMAN AND SALVATORE ALGERI IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS & MANAGERS APPOINTED) AND OF FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED) AND AS CONTROLLERS OF TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING), FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED), TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING) AND FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (MANAGERS AND RECEIVERS APPOINTED) v FEA PLANTATIONS LIMITED ACN 055 969 429 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS APPOINTED) and FEA GROWERS GROUP INC A0054610B
File number(s):		VID 1179 of 2010
Judges:		JACOBSON, NICHOLAS AND YATES JJ
Date of judgment:		23 December 2011
Cases cited:		Norman; in the matter of Forest Enterprises Limited v FEA Plantation Limited [2011] FCAFC 99; (2011) 280 ALR 470 Norman, in the matter of Forest Enterprises Australia Limited (Administrators Appointed) (Receivers & Managers Appointed) v FEA Plantations Ltd (Administrators Appointed) (Receivers Appointed) (No 3) [2011] FCA 624
Date of hearing:	Determined on the papers
Date of last submissions:	13 September 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	No catchwords
Number of paragraphs:	16
Counsel for the Appellants:	Mr P D Crutchfield SC with Dr O Bigos
Solicitor for the Appellants:	Maddocks
Counsel for the First Respondent:	Dr C L Pannam QC with Mr A P Young
Solicitor for the First Respondent:	DLA Phillips Fox
Counsel for the Second Respondent:	Mr G T Bigmore QC with Mr S Hopper
Solicitor for the Second Respondent:	Clarendon Lawyers

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 1179 of 2010

IN THE MATTER OF FOREST ENTERPRISES AUSTRALIA LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS & MANAGERS APPOINTED)
ACN 009 553 548

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

TIMOTHY BRYCE NORMAN AND SALVATORE ALGERI IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS & MANAGERS APPOINTED) AND OF FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED) AND AS CONTROLLERS OF TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING), FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED), TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING) AND FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (MANAGERS AND RECEIVERS APPOINTED) Appellants

AND:

FEA PLANTATIONS LIMITED ACN 055 969 429 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS APPOINTED) First Respondent FEA GROWERS GROUP INC A0054610B Second Respondent

JUDGES:	JACOBSON, NICHOLAS AND YATES JJ
DATE OF ORDER:	23 DECEMBER 2011
WHERE MADE:	SYDNEY (VIA TELEPHONE TO MELBOURNE)

THE COURT ORDERS THAT:

1. Order 1 made by the primary judge on 3 June 2011 with respect to costs be set aside.
2. The first respondent (FEA Plantations Limited (Administrators Appointed) (Receivers Appointed)) pay the appellants’ costs of the proceeding before the primary judge and of this appeal.
3. There be no order for costs in respect of the costs of the second respondent (FEA Growers Group Inc) of the appeal.
   

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION	VID 1179 of 2010

IN THE MATTER OF FOREST ENTERPRISES AUSTRALIA LIMITED (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS & MANAGERS APPOINTED)
ACN 009 553 548

ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

TIMOTHY BRYCE NORMAN AND SALVATORE ALGERI IN THEIR CAPACITIES AS RECEIVERS AND MANAGERS OF FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS & MANAGERS APPOINTED) AND OF FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED) AND AS CONTROLLERS OF TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING), FOREST ENTERPRISES AUSTRALIA LIMITED ACN 009 553 548 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS AND MANAGERS APPOINTED), TASMANIAN PLANTATION PTY LTD ACN 009 560 463 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (CONTROLLERS ACTING) AND FEA CARBON PTY LTD ACN 009 505 195 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (MANAGERS AND RECEIVERS APPOINTED) Appellants

AND:

FEA PLANTATIONS LIMITED ACN 055 969 429 (SUBJECT TO DEED OF COMPANY ARRANGEMENT) (RECEIVERS APPOINTED) First Respondent FEA GROWERS GROUP INC A0054610B Second Respondent

JUDGES:	JACOBSON, NICHOLAS AND YATES JJ
DATE:	23 DECEMBER 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT

THE COURT

1. Judgment was given in this matter on 9 August 2011, at which time orders were made allowing the appeal and setting aside the orders made by the primary judge on 24 December 2010. A declaration was also made to the effect that FEA Plantations Limited (FEAP) was not entitled to maintain an equitable set-off against certain rent due to FEA: Norman; in the matter of Forest Enterprises Limited v FEA Plantation Limited [2011] FCAFC 99; (2011) 280 ALR 470.
2. At the time we expressed the provisional view that, as between the appellants and FEAP, costs should follow the event, so that FEAP should pay the appellants’ costs of the proceeding before the primary judge and on appeal.
3. We also expressed the provisional view that there should be no order as to the costs of FEA Growers Group Inc (the Growers) at first instance or on appeal.
4. Nevertheless, we reserved the question of costs and gave leave to the parties to file short written submissions on that question.
5. In the events which have happened, the appellants have adopted our provisional views. They say that, although both FEAP and the Growers were unsuccessful, they (the appellants) would be content with an order that their costs be paid by FEAP only. They also submit that we should order that FEAP’s costs be paid out of:

(a) the scheme property of the scheme the subject of the proceeding; and

(b) to the extent that the scheme property is insufficient to meet those costs, they should be paid as an expense of the deed administration of FEAP.

6. In seeking this particular order, the appellants submit that it is appropriate for the schemes to bear the costs. They contend that FEAP made submissions with the aim of protecting the Growers and, as responsible entity, it is entitled (under the scheme constitutions) to be indemnified out of scheme property for liabilities or expenses incurred in relation to the proper performance of its duties. The appellants submit that, if the scheme property is insufficient, then costs should not be borne from the assets available to the secured creditors under the charges but should be paid from any assets or funds available to FEAP’s deed administrators (whether such assets or funds are available to them in that capacity or in their capacity as administrators or liquidators of FEAP).
7. FEAP has not opposed the orders sought by the appellants.
8. Whilst we are of the view that an order should be made that FEAP pay the appellants’ costs at first instance and on appeal, we are not persuaded that we should go further and make the additional order that the appellants seek. It seems to us that it will be a matter for FEAP to determine how its liability for those costs will be met and whether it should exercise such rights as it might have to be indemnified for those costs.
9. The Growers, for their part, submit that we should not disturb the order for costs made in their favour by the primary judge on 3 June 2011. In that connection, the primary judge ordered the appellants (as then plaintiffs) to pay the costs of the Growers on an indemnity basis: Norman, in the matter of Forest Enterprises Australia Limited (Administrators Appointed) (Receivers & Managers Appointed) v FEA Plantations Ltd (Administrators Appointed) (Receivers Appointed) (No 3) [2011] FCA 624. When making that order the primary judge noted that the economic interests of the Growers were directly affected by the outcome of the application brought by the appellants (as plaintiffs) and, importantly, that the Growers had been required by the Court to be represented so as to ensure that all investors had a voice in the proceeding and were bound by the result. The primary judge reasoned that it was usual for a party of that nature to be paid its costs on an indemnity basis.
10. The Growers submit that the appellants commenced the proceeding for their own protection and pointed to the basis on which they (the Growers) had been joined as a party. They submit that there is nothing to suggest that their conduct before the primary judge would displace the ordinary rule and that, even if the appellants had been successful before the primary judge, they (the Growers) would still have been entitled to their costs. They submit, therefore, that it would be incongruous if they were now to be denied the benefit of their costs at first instance simply because the appellants had now been successful on appeal.
11. They submit that the same outcome should ensue in relation to their costs on appeal, namely that the appellants should pay the Growers’ costs on an indemnity basis. They submit that the appeal was commenced for the same reason as the principal proceeding. They submit that they were necessary parties to the appeal and that their defence of the judgment below was reasonable. They also submit that the primary judge did not deal with a number of the submissions they had made below and that they were entitled and duty-bound to press those submissions on appeal. They submit that their submissions were argued economically, and were justifiably advanced, and that they did not obstruct or delay the appeal.
12. As we noted in the appeal judgment (at [204]), the Growers’ submissions in the appeal went to a number of issues, including the constraints that may be imposed on applications for directions under s 424 of the Corporations Act 2001 (Cth). The Growers’ submissions generally supported those advanced by FEAP. However, the Growers also sought to rely on a notice of contention which advanced submissions to the effect that the appellants owed duties to the Growers, and that Forest Enterprises Australia Ltd was estopped from impeding the rights of the Growers to tend and harvest the timber. We dealt with those submissions, finding the contention that the appellants owed duties to the Growers to be misconceived and that the estoppel claim was simply not made out. The Growers also raised issues which we considered simply did not arise for present consideration.
13. We can see force in the submission that the costs order made by the primary judge in the Growers’ favour should not be disturbed. The primary judge was best placed to determine the cost consequences of the Growers’ participation in the proceeding before him. Even though the primary judge’s costs order was made in circumstances where the appellants (as plaintiffs) were unsuccessful, there is nothing to suggest that the primary judge would have made a different order had the appellants been successful at first instance.
14. Moreover, we would not interfere with that aspect of the primary judge’s costs order that provides that the Growers’ costs should be paid on an indemnity basis. It was a matter for the primary judge to determine the basis on which the Growers’ costs should be paid. Although the appellants submit that there should be no order providing for the Growers’ costs, they have not otherwise challenged the particular basis on which costs were awarded by the primary judge. We are not persuaded that we should interfere with the discretion exercised by the primary judge in that regard.
15. The costs of the appeal stand on a different basis. It was open to the Growers simply to abide the outcome of the contest between the appellants and FEAP. The Growers chose not to adopt that course but to advance an additional case, aspects of which we have found to be misconceived, not made out or irrelevant for present purposes. In these circumstances we are not persuaded that we should depart from our provisional view that there be no order as to the Growers’ costs on appeal.
16. Orders will be made accordingly.
    

I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Jacobson, Nicholas and Yates.

Associate:

Dated: 23 December 2011