Mirembe Pty Ltd v Craig Dangar & ors (costs) [2010] NSWSC 679 (24 June 2010)

Last Updated: 28 June 2010

NEW SOUTH WALES SUPREME COURT

CITATION:
Mirembe Pty Ltd v Craig Dangar & ors (costs) [2010] NSWSC 679


JURISDICTION:
Equity Division

FILE NUMBER(S):
08/280480

HEARING DATE(S):
15 June 2010

JUDGMENT DATE:
24 June 2010

PARTIES:
Mirembe Pty Ltd (as trustee of Verna Stewart Superannuation Fund) (plaintiff/respondent)
Craig Gerard Dangar (first defendant)
Deputy Dog Pty Ltd (second defendant)
Meakin Pty Ltd (third defendant)
NSW Finance & Leasing Pty Ltd (fourth defendant)
Nicholas Crouch (as Deed Admin'r of NSW Finance & Leasing P/L) (fifth defendant/applicant)

JUDGMENT OF:
Brereton J

LOWER COURT JURISDICTION:
Not Applicable

LOWER COURT FILE NUMBER(S):
Not Applicable

LOWER COURT JUDICIAL OFFICER:
Not Applicable



COUNSEL:
Mr S Donaldson SC (plaintiff/respondent)
Mr A W Smith (fifth defendant/applicant)

SOLICITORS:
Certus Law (plaintiff/respondent)
Douros Lawyers (fifth defendant/applicant)


CATCHWORDS:
CORPORATIONS – Procedure – costs – whether order should be made against deed administrator

LEGISLATION CITED:
(CTH) Corporations Act 2001, s 447A

CATEGORY:
Consequential orders

CASES CITED:
Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622
Mirembe Pty Ltd v Dangar [2009] NSWSC 1268
Mirembe Pty Ltd v Dangar [2010] NSWSC 637
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72

TEXTS CITED:


DECISION:
No order as to costs as between plaintiff and fifth defendant, to the intent that each bear their own costs.



JUDGMENT:

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION



BRERETON J

Thursday, 24 June 2010

2008/280480 Mirembe Pty Ltd as trustee of Verna Stewart Superannuation Fund v Craig Dangar (Costs)

JUDGMENT

1 HIS HONOUR: This judgment is a sequel to (1) Mirembe Pty Ltd v Craig Dangar [2009] NSWSC 1268, in which on 15 October 2009 judgment was given that the fourth defendant NSW Finance & Leasing Pty Limited (subject to Deed of Company Arrangement) pay the plaintiff Mirembe Pty Limited as trustee of the Verna Stewart Superannuation Fund, the sum of $445,195.61; it was declared that the assets and undertaking of NSW Finance were charged in equity with payment to Mirembe of the said sum; and NSW Finance and the fifth defendant Nicholas Crouch (its Deed Administrator) were ordered to pay Mirembe’s costs of the proceedings as against them; and (2) Mirembe Pty Ltd v Craig Dangar [2010] NSWSC 637, in which on 4 May 2010 it was ordered that that costs order, insofar as it concerned Mr Crouch only, be set aside (it having been made in his absence). The remaining question for determination is what if any costs order should now be made as between Mirembe and Mr Crouch.

2 For Mirembe, it is contended that Mr Crouch having been properly joined as a defendant, and Mirembe having succeeded in the proceedings, he as a deed administrator should be treated no differently from any other properly joined defendant, and there is no reason to depart from the ordinary position that Mirembe should have a costs order in its favour against him. However, Mirembe does not oppose those costs being limited to those incurred in connection with and after the joinder of Mr Crouch, and although submitting that there was scant evidence of the financial position of NSW Finance (which has since gone into liquidation with Mr Crouch as the liquidator), does not seriously oppose any costs order being limited to the extent of Mr Crouch’s indemnity from the assets of the company in administration. The practical significance, from Mirembe’s perspective, of obtaining an order against the deed administrator personally is said to be that such an order, even if limited to the extent of his indemnity, may have priority so as to advantage Mirembe against the unsecured creditors generally, there being limited assets in the corporation. Mr Crouch opposes any costs order being made against him personally as distinct from against the company in administration (which order has already been made, and is not in dispute).

3 In Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622, Austin J held that the obligation of an administrator to pay costs to another party involved in litigation unsuccessfully defended by the administrator and the company in administration was a matter distinct from the administrator’s entitlement to an indemnity against the company and recoupment out of the company’s assets, and that the court should generally be guided by principles worked out for trustees, trustees in bankruptcy and liquidators in deciding whether an administrator should be subjected to a personal costs order, though it was important to consider whether the position of an administrator was materially different. Normally, the same costs order would be made against a deed administrator as an unsuccessful defendant as against a deed administrator as unsuccessful plaintiff – namely, that the administrator pay the successful party’s costs without limitation to the company’s assets. However, the power to order an administrator to pay costs was discretionary, and in the exercise of that discretion the court may take into account the circumstances of the appointment, whether it was appropriate for the administrator to be joined personally as a defendant to the proceedings – especially where the company under administration is also a defendant – and, where the administrator had properly been joined and the company was a defendant, the exercise of discretion may take into account whether the administrator would have a right of indemnity in the circumstances to recover from the company. All this necessarily required an examination and assessment of the administrators’ conduct. In Cresvale, it was found that it was unreasonable for the administrator to conduct an active defence to proceedings to terminate the Deed of Company Arrangement (“DoCA”) and remove him from office, his duty to defend the DoCA having been effectively superseded by circumstances of his own wrong-doing which disentitled him to an indemnity and lien.

4 It is true that in Cresvale, Austin J observed (at [64]) that the normal costs order against a deed administrator as unsuccessful defendant would be the same as the normal costs order against a deed administrator as unsuccessful plaintiff, namely one that the administrator pay the successful party’s costs, without limitation to the company’s assets. But that assumes that the deed administrator can properly be characterised as an unsuccessful party.

5 Insofar as Mirembe’s claim for costs against Mr Crouch rests on the proposition that Mirembe, having succeeded, is entitled to its costs, that proposition needs some elaboration. The ordinary rule has two elements, namely that a successful party should generally receive its costs, and that those costs should generally be paid by the unsuccessful party [see, for example, Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, [67] (McHugh J)]. Mirembe certainly succeeded against NSW Finance, obtaining a monetary judgment and declaratory order against the company in administration. In addition, Mirembe had already obtained (by consent) a judgment against the first defendant; and its proceedings against the third defendant were settled; as against the second defendant, the proceedings were stayed by its winding up. However, as against Mr Crouch, Mirembe obtained no final relief. The Further Amended Statement of Claim sought no relief directly against him. Mirembe did seek an order under (CTH) Corporations Act 2001, s 447A, providing that for the purposes of the DoCA it be treated as a secured trust creditor with priority over all other creditors. As Deed Administrator, Mr Crouch was a necessary party to that claim. However, that relief was not granted [see [2009] NSWSC 1268, [12]]. Thus Mirembe did not obtain any relief against Mr Crouch, and it cannot be said that Mirembe succeeded as against Mr Crouch.

6 For Mirembe, it is argued that Mr Crouch was nonetheless a proper contradictor to be joined, to represent the interests of the deed creditors in circumstances where the relief sought by Mirembe would be adverse to their interests. But, as is fairly submitted for Mr Crouch, his authority under the DoCA was limited, and did not extend to the defence of claims against the corporation; the DoCA returned management of the company to its directors. That it appeared that the director Mr Dangar would not defend the proceedings did not give the deed administrator authority or responsibility to do so.

7 In my view, in this case Mr Crouch cannot be characterised as an unsuccessful party. I accept that Mr Crouch was properly joined, particularly as a respondent to the s 447A application; but Mirembe did not obtain the relief it claimed that necessitated his joinder. His conduct is criticised, on the basis that, by failing to submit and not actively participating in the proceedings, he put Mirembe to proof of its case. But had he submitted, Mirembe would still have had to prove its case against the fourth defendant NSW Finance, and active participation on his part would more likely have increased than decreased the costs. Accordingly, Mirembe did not succeed as against Mr Crouch. The conditions attracting the operation of the rule that an unsuccessful defendant pays a successful plaintiff’s costs are not satisfied.

8 In my view, it cannot be said that Mirembe succeeded against Mr Crouch. Nor can it be said that Mr Crouch so unreasonably conducted himself as to justify a personal costs order against him. As between Mirembe and Mr Crouch there should be no order as to costs, to the intent that each bear their own costs.

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LAST UPDATED:
25 June 2010