FEDERAL COURT OF AUSTRALIA Australian Securities and Investments Commission v FUELbanc Australia Limited (No 2) [2007] FCA 1033 Federal Court Rules O35 r 7(2)(c) Australian Securities and Investments Commission re Richstar Enterprises Pty Ltd v Carey (No 5) (2006) 58 ACSR 6 cited Evans v Clayhope Properties Pty Ltd [1988] 1 All ER 444 cited Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 cited AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v FUELBANC AUSTRALIA LIMITED (NO 2) VID 785 OF 2006 HEEREY J 6 JULY 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 785 OF 2006 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: FUELBANC AUSTRALIA LIMITED & ORS (according to the attached schedule) Defendants JUDGE: HEEREY J DATE OF ORDER: 6 JULY 2007 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: Paragraph 9 of the orders of Young J herein made 20 July 2006 be varied so as to read: "The costs and expenses of the receivers appointed under paragraph 5 be paid by the First to Fifth Defendants." Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 785 OF 2006 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: FUELBANC AUSTRALIA LIMITED & ORS (according to the attached schedule) Defendants JUDGE: HEEREY J DATE: 6 JULY 2007 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 On 20 July 2006 Young J made interim orders in relation to an unregistered managed investment scheme known as the FUELbanc scheme. On 29 June 2007 I made final orders, including an order for the winding up the scheme: Australian Securities and Investments Commission v FUELbanc Australia Limited [2007] FCA 960. The present application is brought by Matthew and Timothy McDougall, who are the sixth and seventh defendants and the sons of Stephen McDougall, the fifth defendant. Stephen McDougall was, I have found, the mastermind of the scheme. 2 Young J's orders included an order (par 9) that Timothy and Matthew McDougall pay the costs and expenses of the receivers. In the final orders I made, ASIC did not seek any costs orders, or indeed any orders, against Timothy and Matthew McDougall. In these circumstances Timothy and Matthew McDougall apply under order 35 rule 7(2)(c), (e) and/or (3) of the Federal Court Rules for an order that the order of Young J be varied so as to exclude the order for costs made against them. 3 One of the grounds relied on was that an error was made when Young J considered the matter and that his Honour either did not intend to make an order against Timothy and Matthew McDougall, or possibly that the matter was raised but overlooked. In looking at the transcript, I conclude that the better reading is that the question costs of those defendants was not adverted to; rather what was raised was the question of whether, as initially proposed by ASIC, there should be an appointment of provisional liquidators and what should be done in relation to the costs of such appointment. 4 However, I think the application should be granted on the more general ground contained in O 35 r 7(2)(c), namely that the order of Young J was interlocutory. 5 At the time of the application Timothy and Matthew McDougall were not represented, they had had very brief notice of the application and an ex parte order had been made three days earlier. His Honour quite properly stressed that the matter was not final and that he was not going to make any final decisions about anything that day. 6 As French J said in Australian Securities and Investments Commission re Richstar Enterprises Pty Ltd v Carey (No 5) (2006) 58 ACSR 6, s 1323 of the Corporations Act 2001 (Cth) does not authorise the Court to order that the person or company the subject of the orders appointing receivers to the property pay the costs of the receivers in discharging their function. This is consistent with a long established practice in England, see Evans v Clayhope Properties Pty Ltd [1988] 1 All ER 444 at 446. 7 I think in the circumstances of this case, and particularly the fact that no final order for costs, or indeed any order, was sought against Timothy and Matthew McDougall, it is appropriate to grant the relief sought. Mr Scott on behalf of ASIC did not oppose the making of the order, but helpfully drew the Court's attention to various circumstances of the case. He did point out that Timothy and Matthew McDougall had had legal representation from some time last year and had only made this application recently. However, he accepted that this had not caused ASIC any particular prejudice. For those reasons I will make the order sought. No costs are sought. 8 It is the almost invariable practice for courts not to make any final order for costs in favour of a plaintiff on an interim application, the reason being that usually the substantive merits remain to be determined. The plaintiff's case may then appear to be very strong, indeed unanswerable, but as Dixon CJ pointed out in Pontifical Society for the Propagation of the Faith v Scales (1962) 107 CLR 9 at 20: "Experience of forensic contests should confirm the truth of the common saying that one story is good until another is told …" It would be better if ASIC did not seek final orders for costs in interim applications of this nature. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey. Associate: Dated: 6 July 2007 Counsel for the Plaintiff: M Scott Solicitor for the Plaintiff Australian Government Solicitor Counsel for Receiver for first and fourth N Fryde Defendants: No appearance for fifth Defendant Counsel for sixth and seventh Defendants: N Evans Solicitor for sixth and seventh Defendants Baker & McKenzie Date of Hearing: 6 July 2007 Date of Judgment: 6 July 2007 SCHEDULE OF PARTIES AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION Plaintiff - and - FUELBANC AUSTRALIA LIMITED (ACN 117 937 327) ("Fuelbanc") FirstDefendant - and - PAYCARDS GLOBAL PTY LTD (ACN 116 759 472) ("PayCards Global") Second Defendant - and - PAYCARDS INVESTMENTS PTY LTD (ACN 118 252 369) ("Paycards Investments") Third Defendant - and - C PROPERTY GROUP PTY LTD (ACN 118 252 387) ("PC Property Group") FourthDefendant - and - STEPHEN JOHN MCDOUGALL ("McDougall") Fifth Defendant - and - TIMOTHY ROSS MCDOUGALL ("Timothy McDougall") SixthDefendant - and - MATTHEW ALAN MCDOUGALL ("Matthew McDougall") SeventhDefendant