Australian Prudential Regulation Authority v Rural & General Insurance Limited [2004] FCA 273

FEDERAL COURT OF AUSTRALIA

Australian Prudential Regulation Authority v Rural & General Insurance Limited [2004] FCA 273 PRACTICE AND PROCEDURE – costs – consent application for leave to discontinue –proper order as to costs where no hearing on merits AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY v RURAL & GENERAL INSURANCE LIMITED (ACN 000 007 492) N 3050 OF 2003 GYLES J 17 MARCH 2004 SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 3050 OF 2003

BETWEEN: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

PLAINTIFF

AND: RURAL & GENERAL INSURANCE LIMITED (ACN 000 007 492)

DEFENDANT

JUDGE: GYLES J

DATE OF ORDER: 17 MARCH 2004

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. Upon the undertaking of the plaintiff by its counsel to file a notice of discontinuance, leave to discontinue is granted. 2. There be no further order as to costs as between plaintiff and defendant. 3. Reserve leave to the recipient of a subpoena to make application on two days' notice.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 3050 OF 2003

BETWEEN: AUSTRALIAN PRUDENTIAL REGULATION AUTHORITY

PLAINTIFF

AND: RURAL & GENERAL INSURANCE LIMITED (ACN 000 007 492)

DEFENDANT

JUDGE: GYLES J

DATE: 17 MARCH 2004

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 Something of the background to this case has been set out in two previous interlocutory judgments – Australian Prudential Regulation Authority v Rural & General Insurance Limited [2003] FCA 1567 and Australian Prudential Regulation Authority v Rural & General Insurance Limited [2004] FCA 185. I will not repeat that background. 2 At a meeting of creditors of the defendant (Rural & General) convened by the administrators in accordance with s 439A of the Corporations Act 2001 (Cth) (the Act) on 10 March 2004 and reconvened on 12 March 2004 the creditors resolved that the company execute a deed of company arrangement and that the voluntary administrators be the deed administrators of a deed of company arrangement on the terms contained in that deed. That deed was executed on 15 March 2004 and is in evidence before me. The plaintiff (APRA) takes the view that the deed is a reasonable proxy for winding up and that it would not be appropriate to continue this proceeding with the attendant costs to obtain a winding up order where the costs expended may well result in creditors receiving less. APRA has therefore sought leave to discontinue the proceeding. This is consented to on the part of Rural & General provided that APRA gives an undertaking to in fact file a notice of discontinuance. Each side says that it should have its costs paid by the other. Neither the application for leave to discontinue nor the consent to it is conditional upon the order for costs which is made. 3 I have been referred to a number of authorities as to orders for costs where there is no hearing on the merits including Re the Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin (1997) 186 CLR 622, particularly at 624–625; Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 283 at 287; Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201–202; Grundy v Lewis [1998] 563 FCA (28 May 1998); O'Neill v Mann [2000] FCA 1680 at [12]–[13]; and FAIRA Aboriginal Corporation v Minister for Aboriginal and Torres Strait Islander Affairs [2002] FCA 9 at [7]. 4 Counsel for APRA submits that it is entitled to costs as the occasion for discontinuance is a result which is as effective in practical terms as relief if the case were to succeed. I disagree with that submission. The result flows from a decision of the creditors of the company. It may be that the litigation was a factor in that decision but it cannot be said that the deed of company arrangement is the result of APRA having established its case. On the other hand I am satisfied that this circumstance tends to overcome the prima facie entitlement of a respondent to costs in the event of discontinuance. 5 Counsel for Rural & General submits that there should be an order for costs in its favour. In addition to relying upon the prima facie position, he submits that, bearing in mind the terms of s 462(3) of the Act, there was no proper basis upon which the proceeding should have been commenced by APRA. In order to make that submission good, counsel took me to the evidence as it stood at the time of the adjournment in December in a little detail most, if not all, of which had been discussed at the time of the adjournment. He submitted that the evidence of insolvency which was filed initially was deficient and simply did not establish insolvency. Whilst there is substance to those submissions, the evidence was supplemented prior to the December hearing. Although the evidence was not then in proper form, the substance of it was that the company was insolvent, although that conclusion was based upon a somewhat different set of assumptions from those in the report that had originally been relied upon as the basis for commencement of the proceedings. That evidence has since then been supplemented further in a manner which counsel for APRA contends is admissible in form. That may or may not be so. Counsel for APRA further submits that satisfaction of s 462(3) depends upon the evidence in its final form and that it is not to the point to attack the evidence in its initial form. That is sound in principle. 6 I do not find that the proceeding should not have been commenced. I certainly cannot conclude that it would not have succeeded. Even if attention is paid to the material as it was at the commencement of the proceeding, APRA was entitled to commence the proceeding on the basis of the reports by the Inspector appointed by it. Indeed, from a practical point of view, it was virtually bound to do so. 7 Under all the circumstances, in my opinion, the appropriate order is that there be no further order as to costs of the proceeding. Existing costs orders will stand. Leave to discontinue is granted upon the required undertaking.