Re Quality Blended Liquor Pty Ltd (No 2)
[2014] QSC 307
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- Unreported Judgment
- Re Quality Blended Liquor Pty Ltd (No 2)[2014] QSC 307
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Re Quality Blended Liquor Pty Ltd (No 2)[2014] QSC 307
Re Quality Blended Liquor Pty Ltd (No 2)[2014] QSC 307
SUPREME COURT OF QUEENSLAND
PARTIES: | |
FILE NO/S: | |
Trial | |
PROCEEDING: | Applications |
DELIVERED ON: | 18 December 2014 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 12, 13, 14, and 15 May 2014, 24 July and 8 October 2014; written submissions on costs received up to and including 24 October 2014 |
JUDGE: | Alan Wilson J |
ORDERS: | 2133/14 & 3073/14 Order that:
3213/2014 No order as to costs. |
CATCHWORDS: | PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – CONDUCT OF PARTIES – OTHER CONDUCT – where the third respondent’s solicitors failed to register security instruments in time – where the third respondent brought an application during the substantive hearing for an extension of time to register those instruments under s 588FM of the Corporations Act 2001 (Cth) – where the applicant opposed the extension – where the extension was granted – where the third respondent seeks its costs – where the applicant contends that no order as to costs should be made, because the applicant only opposed the application on a legal basis and did not actively contest its factual basis, and because the applicant alleges that it should not have to bear the costs of an application that was necessary due to the oversight or error of the third respondent’s solicitors – whether an order should be made as to costs PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – OTHER CASES – FAILURE IN PORTION OF A CASE – where the applicant was successful in obtaining an order that the first respondent’s conduct as controller of the applicant’s companies should be subject to an inquiry – where the applicant was unsuccessful in relation to its argument that the first respondent’s appointment as controller was invalid – where the normal rule is that costs follow the event and that the unsuccessful party pay the successful party’s costs – where the court’s discretion to make costs orders in Uniform Civil Procedure Rules 1999 (Qld) rr 681 and 684 is broad enough to allow the court to apportion costs reflecting opposing parties’ levels of success on issues determined at trial – whether the first and third respondents should pay a portion of the applicant’s costs to reflect its partial success at trial, and vice versa PROCEDURE – COSTS – RECOVERY OF COSTS – where the second respondent receivers and managers indicated at trial that they would stand by the order of the court after becoming aware at trial of the nature of relief sought by the applicant – where the parties exchanged written submissions following trial – where the second respondent alleged after receiving the applicant’s written submissions that the applicant was seeking relief that would have more serious consequences for the second respondent than that originally claimed – where the second respondent indicated that, if the applicant wished to press for that relief, it would wish to call evidence and reopen the hearing – where a hearing was conducted at the second respondent’s request to deal with that issue – where the applicant indicated at that hearing that it would defer the question of relief until judgment – where the second respondent seeks its costs – whether the applicant should pay the second respondent’s costs of and incidental to that hearing Civil Proceedings Act 2011 (Qld), s 15 Uniform Civil Procedure Rules 1999 (Qld), r 680, r 681, r 682, r 684 Aion Corporation Pty Ltd v Yolla Holdings Pty Ltd & Anor [2013] QSC 216, cited Potter v Dickenson (1905) 2 CLR 668, cited Re Quality Blended Liquor Pty Ltd [2014] QSC 234, related Yolla Holdings Pty Ltd v Aion Corporation Pty Ltd & Anor [2014] QCA 137, cited Yolla Holdings Pty Ltd v Aion Corporation Pty Ltd & Anor [2014] QCA 156, cited |
COUNSEL: | S Hogg, of counsel, for the applicant in proceedings 2133/14 and 3073/14 A O'Brien, of counsel for the first respondent and for the third respondent in proceeding 2133/14, and for the applicant in proceeding 3213/14 SJ Webster, of counsel, for the second respondent in proceeding 2133/14 and the respondent in proceedings 3073/14 and 3213/14 |
SOLICITORS: | JHK Legal for the applicant in proceedings 2133/14 and 2073/14 Heydons Lawyers and Attorneys for the first respondent and the third respondent in proceeding 2133/14, and the applicant in proceeding 3213/14 McInnes Wilson Lawyers for the second respondent in proceeding 2133/14 and the respondent in proceedings 3073/14 and 3213/14 |
[1] Alan Wilson J: These proceedings involved a wholesale liquor business on the Gold Coast conducted, primarily, by the company Quality Blended Liquor Pty Ltd and a number of associated companies whose names appear in the head note. After a hearing in May (and July) 2014, judgment was given on the issues to be determined in the three proceedings on 8 October 2014: Re Quality Blended Liquor Pty Ltd [2014] QSC 234.
[2] They involved, in essence, members of the Lewis family who had conducted the business for some years and Mr Tschannen, the first respondent, who became involved in the business in 2013 and, eventually, was appointed as controller of it in early 2014. In the proceedings the Lewis interests alleged that his appointment was invalid and, in any event, sought an inquiry into what he had done during the period of his controllership.
[3] In action 2133/14 the Lewis interests pressed those questions. In action 3073/14 they sought the appointment of a provisional liquidator to QPL. In application 3213/14 the third respondent, Toyco (a company associated with Mr Tschannen), sought an extension of time to register security documents which were relevant to Mr Tschannen’s appointment as controller.
[4] On the last day of the original hearing, 15 May 2014 a provisional liquidator was appointed to QPL.
[5] Costs fall to be determined in three respects: the four day hearing in May 2014 in proceedings 2133/14 and 3073/14; costs associated with another hearing, in those matters, on 24 July 2014; and, the costs of the application brought by Toyco in 3213/14 for an extension of time to register its security.
Hearing costs: 2133/14 & 3073/14
[6] The hearing in May 2014 involved two central questions: whether the appointment of the first respondent Mr Tschannen as controller was valid; and, in any event, whether the court should order an inquiry into his conduct as controller. Both issues were contested, and the subject of evidence.
[7] The issue concerning Mr Tschannen’s appointment as controller involved the validity of security documents. The central factual questions were whether or not security documents supporting Mr Tschannen’s later appointment as controller were executed on 3 January 2014 or some other date; whether or not they were executed by a person with power to do so (Ms Alica Gorham); and, whether Toyco had in fact issued a notice of default in reliance upon those security documents, sufficient to support Mr Tschannen’s appointment as controller.
[8] It was held that the security documents were validly executed; that, while some uncertainty surrounded the events which led to Mr Tschannen’s appointment, there was a sufficient documentary and evidentiary basis for that appointment; and, hence, that the application by International Network Consultants Pty Ltd for relief in that respect should be refused.
[9] INC was, however, successful in obtaining an order that an inquiry should be conducted into Mr Tschannen’s conduct as controller. Mr Tschannen’s actions once he assumed that position took up the greater part of the affidavit evidence prepared before the hearing, and the hearing itself. Only one witness gave evidence about the validity of the security documents, Ms Gorham. All the other evidence concerned what Mr Tschannen did, or did not do, during the period of his controllership.
[10] In those circumstances INC seeks 90% of its costs in these two applications. While conceding, in its written submissions, that the discrete resolution of the two major issues might suggest that it should only have half of its costs, it argues that costs should reflect a fair and reasonable estimate of what was involved in the proceedings themselves.
[11] Against that Mr Tschannen contends that INC should pay the costs of that part of the proceeding which concerned the validity of his appointment as controller; and, indeed, argues that Mr and Mrs Lewis ought to pay those costs personally.
[12] The second argument relies upon their close involvement with the QBL business and the transactions which fell to be considered in the case. While both those things are true, neither warrants or justifies any personal costs orders against them. The transactions were those of corporate entities with which they were involved; there was no finding of personal wrongdoing or any kind of misconduct or, indeed, anything in the nature of an adverse finding about a matter of credit against either of them. There is no reason, then, to go behind the corporate veil in an attempt to dun them, as company officers, personally.
[13] Costs are a creature of statute.[1] In Queensland, the relevant statutory provisions appear in the Uniform Civil Procedure Rules 1999 (Qld) rr 680, 681, 682 and 684; and, in s 15 of the Civil Proceeding Act 2011 (Qld). Costs are within the discretion of the court. Their purpose is compensatory.
[14] Where, as here, opposing parties can claim some degree of success, the width of the power is reflected in UCPR rr 681, and 684.
[15] As Jackson J observed in Aion Corporation Pty Ltd v Yolla Holdings Pty Ltd & Anor [2013] QSC 216[2] at [5], the discretion plainly extends so as to allow the court to decide costs by reference to particular questions in, or in parts of, a proceeding.
[16] As his Honour went on to observe (at [15]-[16]), courts have from time to time encouraged an ‘intelligently made’ apportionment of costs which fairly reflects both the outcome, and the costs associated with, the determination of different questions or paths. In my view, that is what the present case calls for.
[17] I accept INC’s submission that the factual issues surrounding Mr Tschannen’s actions once he assumed the position of controller took up the greater part of trial and that, because INC succeeded in respect of that part of its case, costs which follow the event ought to reflect that apportionment. Any attempt at a precise, mathematic calculation would import a falsely scientific air to an exercise which involves a judicial discretion, with a number of inchoate elements.
[18] That said, I am confident that the Reasons provided with my judgment of 8 October 2014 reflect, in broad terms, the time and effort devoted to each issue. Of their 18.5 pages, something less than four were devoted to questions associated with the validity of Mr Tschannen’s appointment, while slightly more than 4.5 related to issues surrounding his controllership. This apportionment accords with my recollection of the time and effort each issue took up at the trial and points to the conclusion that INC ought to be awarded 60% of its costs in these two actions.
[19] The next question is whether, in the course of exercising this discretion, Mr Tschannen ought to have his costs of successfully resisting an adverse finding on the ‘validity’ question. As the Reasons show, the evidence about the execution of the documents was vague and uncertain and, ultimately, did not require a finding to be made.[3] The same conclusion was reached in relation to the alleged default under them.[4] The third element which arose for consideration on this issue was a legal one.[5] As was also observed, in context of considering these issues, they were part of a course of conduct by Mr Tschannen which raised ‘… sufficient doubt about [his] actions, and his motives for them, to warrant an investigation of his controllership’.[6] In circumstances where a party has been able to, in effect, skate around some issues and positive findings in its favour cannot be made but, in the context of the action, they have some relevance to findings which were adverse, and were resisted, that party does not have a strong argument for a costs award. That is the conclusion called for, here, in respect of the validity question, and the better exercise of the discretion would simply involve no award about costs, either way.
[20] For these reasons I accept the applicant’s submission that the first and third respondents should pay a proportion of the applicant’s costs in proceedings 2133/14 and 3073/14 (including reserved costs); and, in line with the reasons set out above, that proportion should be 60%.
Toyco’s application 3213/14
[21] Toyco had an obligation under Commonwealth legislation to register the security documents entered into on some undetermined date in January 2014 within 20 business days, but failed to do so. In this application it sought an extension of time. The matter was dealt with in the judgment at [2014] QSC 234 at [75]-[86]. An extension of time was granted. Toyco’s explanation for the failure to register the securities within the statutory time limit involved an oversight by its former solicitors, which I accepted as sufficient to attract the statutory discretion.
[22] INC submits that, although Toyco succeeded in the application, there should be no order as to costs. INC opposed the extension of time but the argument was a legal one, not without some merit or substance but, ultimately, unsuccessful. I agree that in circumstances where a party seeks a boon from the court because of its own oversight or an error by its advisors, the proper exercise of the discretion involves an order that there be no order as to costs.
The hearing on 24 July 2014
[23] After the hearing in May the parties were directed to exchange submissions in writing according to a timetable, and did so. In its post-trial submissions the applicant INC sought different relief against the receivers and managers (the second respondents) than had been signified in its original application, or at the hearing. I accept that, in the face of the limited relief originally sought by INC, the receivers and managers had taken a quiet and neutral position at the hearing where they were represented by solicitors who signified – unsurprisingly, in light of the relief originally sought against their clients – that the receivers would simply abide the order of the court.
[24] After the receivers and managers received INC’s post-trial submissions they protested that the relief sought in them was different, and much more serious and intrusive, than that originally claimed, and asserted that, if INC was to pursue that expanded relief, the receivers would be obliged to take a more active role, and, indeed, call evidence – and, for that purpose, the hearing would need to be reopened.
[25] Despite that protest INC signified an intention to persist with submissions seeking the new relief. This new dispute was listed for a hearing on 24 July.
[26] The expanded relief was premised on the contention that the underlying security deeds pursuant to which the receivers and managers had been appointed were void, or invalid. While, ultimately, INC did not succeed in that contention, that was not apparent at the hearing on 24 July when my decision was still reserved.
[27] At the hearing on 24 July the applicant indicated that it was prepared to defer that question of relief against the receivers and managers until the judgment was delivered. That provided an interim solution to that new dispute, and allowed the matter to proceed to judgment. Costs were reserved.
[28] The matter is now, it appears, academic because the judgment included a determination that the security deeds were not void or invalid. Certainly, no attempt has been made to re-list the questions which arose on 24 July for further determination.
[29] The question which does arise is whether or not the receivers and managers should, as they seek, have their costs of and incidental to the hearing on 24 July.
[30] In submissions about these costs it is said for INC that the protest of the receivers and managers which led to the hearing on 24 July was, in effect, unnecessary and exaggerated. I do not agree. The receivers’ concerns, and alarm, on receipt of INC’s post-trial submissions was legitimate, and unsurprising. Had INC succeeded in its argument that the security documents were invalid then, under those submissions, the receivers and managers were exposed to consequences which had not been sought in the original proceeding, and to which the receivers had not been alerted at any time before the May hearing.
[31] In those circumstances it is appropriate to order that the applicant pay the second respondent’s costs of and incidental to the hearing on 24 July 2014, assessed on the standard basis.
Footnotes
[1] Potter v Dickenson (1905) 2 CLR 668, at 678-9.
[2] Overturned on appeal, but not in a way involving any adverse conclusion about this part of the decision at first instance: Yolla Holdings Pty Ltd v Aion Corporation Pty Ltd & Anor [2014] QCA 137; Yolla Holdings Pty Ltd v Aion Corporation Pty Ltd & Anor [2014] QCA 156.
[3] Re Quality Blended Liquor Pty Ltd [2014] QSC 234, at [27]-[31].
[4] Ibid, at [37].
[5] Ibid, at [38]-[46].
[6] Ibid, at [37].