FEDERAL COURT OF AUSTRALIA Mijac Investments Pty Ltd (ACN 084 820 280) v Graham (No 3) [2009] FCA 1109 MIJAC INVESTMENTS PTY LTD (ACN 084 820 280) v WILLIAM GRAHAM, COSMICK PTY LTD (ACN 065 356 149) and MELBOURNE GRAVITY PTY LTD (ACN 490 584 339) VID 297 of 2005 GORDON J 1 OCTOBER 2009 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 297 of 2005 GENERAL DIVISION BETWEEN: MIJAC INVESTMENTS PTY LTD (ACN 084 820 280) Applicant AND: WILLIAM GRAHAM First Respondent COSMICK PTY LTD (ACN 065 356 149) Third Respondent MELBOURNE GRAVITY PTY LTD (ACN 490 584 339) Fifth Respondent JUDGE: GORDON J DATE OF ORDER: 1 OCTOBER 2009 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Leave be granted for the Respondents to amend their Notice of Motion in the proposed form filed with the Court on 9 September 2009 (the "Motion"). 2. Paragraphs 1 and 2 of the Motion be dismissed. 3. The Respondents pay the Applicant's costs of and incidental to paragraphs 1 and 2 of the Motion, such costs to be taxed in default of agreement. 4. The hearing of the balance of the Motion otherwise be adjourned to be heard on the same date as the Notice of Motion dated 28 July 2009. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 297 of 2005 GENERAL DIVISION BETWEEN: MIJAC INVESTMENTS PTY LTD (ACN 084 820 280) Applicant AND: WILLIAM GRAHAM First Respondent COSMICK PTY LTD (ACN 065 356 149) Third Respondent MELBOURNE GRAVITY PTY LTD (ACN 490 584 339) Fifth Respondent JUDGE: GORDON J DATE: 1 OCTOBER 2009 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 The substantive proceeding was heard in February and March of this year. On 22 July 2009, I dismissed the Applicant's application (para 1 of the Orders), made no order as to costs (para 2 of the Orders) and published reasons for decision: Mijac Investments Pty Ltd (ACN 084 820 280) v Graham (No. 2) [2009] FCA 773 (the "Reasons for Decision"). 2 Now, by a proposed Amended Notice of Motion (the "Motion") filed with the Court on 9 September 2009, the Respondents seek a number of orders. I consider the Respondents should be granted leave to rely upon the Motion. 3 In the present application, I am concerned only with the first two orders sought in the Motion, namely that: 1. Paragraph 2 of the order made on 22 July 2009 be set aside pursuant to Rule 35.07(2)(a) or alternatively pursuant to the implied jurisdiction of the Court or Rule 35.07(4). 2. An order that the Applicant pay the Respondents' costs of the proceeding including reserved costs. 4 The Applicant opposes these orders. Given the views I have formed that the Applicant should not be ordered to pay the Respondents' costs of the proceeding including any reserved costs, it is unnecessary to resolve the question whether the Court has power to reopen paragraph [2] of the orders made on 22 July 2009. The order has been entered. In those circumstances, there may very well be very large hurdles in the way of making an order of the kind that now is sought. I will, however, put aside any consideration of those difficulties and proceed on the assumption (without deciding) that there is power to make an order of the kind now sought. 5 A Court has a wide discretion to award costs: s 43 of the Federal Court of Australia Act 1976 (Cth) and DSE (Holdings) Pty Ltd v InterTAN Inc (2004) 51 ACSR 555 at [14]. Although a number of decisions have identified certain principles to be applied in the exercise of that discretion (see e.g. Hughes v Western Australian Cricket Association Inc (1986) ATPR 40-748 at 48,136 and Dr Martens Australia Pty Ltd v Figgins Holdings Pty Ltd (No 2) [2000] FCA 602), there are no hard and fast rules. Why? Because the facts and circumstances of each case are the relevant guide in the exercise of the Court's discretion to award costs. 6 As a result, in the circumstances of this case, acceptance of the "settled practice" that a successful party in the absence of special circumstances should be awarded its costs (see Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 at [11]), does not result in a different costs order from that ordered on 22 July 2009. 7 The Respondents contend that "[t]he Respondents and each of them were successful". In my view, that contention misrepresents the outcome of the proceedings. It is true that the Applicant's application was dismissed. However, it was dismissed in circumstances which were not to the advantage of any one of the Respondents for at least the following reasons. 8 Mr Graham, the First Respondent was the sole director and shareholder of the Third Respondent, Cosmick Pty Ltd (ACN 065 356 149) ("Cosmick"). Mr Graham initially admitted he was a controller but, at the conclusion of the hearing, sought to withdraw that admission to contend he was not a controller. Mr Graham was: see [143] to [151] of the Reasons for Decision. Moreover, his role as the sole director and shareholder of Cosmick, the mortgagee in possession, cannot be ignored. Mr Graham was for present purposes its controlling mind. 9 Cosmick, as mortgagee in possession of the assets of Lawrenson Light Metal Die Casting Pty Ltd (ACN 081 829 790) ("LLMDC"), had a mortgagee's general law duty in relation to its power of sale to act in good faith and a statutory duty under s 420A of the Corporations Act 2001 (Cth): paras [159]-[161] of the Reasons for Decision. It breached those duties: paras [162]-[166] of the Reasons for Decision. The breaches were serious. The facts and circumstances that resulted in those breaches were less than satisfactory. To take just one example, as I said in the Reasons for Decision, "the process of obtaining the mortgaged property for sale and selling that property appeared to ensure a sale to a related entity …" (emphasis added). Put another way, on its face the conduct was deliberate. 10 The related entity, in fact, was the Fifth Respondent, Melbourne Gravity Pty Ltd (ACN 490 584 339) ("Gravity"). Gravity was a company set up by Mr Graham (the First Respondent) with a Mr McGregor: see para [122] of the Reasons for Decision. Mr McGregor was a businessman. But he was a businessman who should have known better – he previously had been a chartered accountant specialising in insolvency – and a businessman who benefited from the events the subject of these proceedings. Mr McGregor and Mr Graham were the controlling minds of Gravity: see para [122] of the Reasons for Decision. The evidence also disclosed that Mr McGregor was instrumental in the steps taken that resulted in the breaches of duty by Cosmick and the sale of LLMDC's assets to Gravity in the circumstances outlined in the Reasons for Decision. 11 It is in these circumstances that I made no order as to costs. The history of the facts giving rise to the dispute, the circumstances surrounding the sale of assets to Gravity, the conduct of both the Applicant and the Respondents and the merits of the parties' respective positions both factually and legally were exceptional. To suggest as the Respondents have recently done that the trial was primarily concerned with loss and damage, in my view, seeks to rewrite history. One critical issue for the Court was whether Cosmick owed duties to LLMDC, and breached those duties, to LLMDC. The Reasons for Decision address the legal principles and facts relevant to those issues at length, issues about which Cosmick was unsuccessful and in which each of the other Respondents was directly involved. Put another way, in the absence of the involvement of entities and persons related to Cosmick – Graham, Gravity and McGregor – the legal and factual issues of what duties were owed and whether those duties were breached – could not be addressed. 12 Given the identity of, and connections between, the Respondents, their joint legal representation and the facts and circumstances described in the Reasons for Decision, there is no basis for a separate costs order in relation to Mr Graham and Gravity. There was serious fault and error on the part of all parties. 13 It was, and remains, my view appropriate in the exercise of the Court's discretion to make no order as to costs. That order, of course, does not deal with any previous costs orders of the Court in favour of one or other of the parties. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gordon. Associate: Dated: 1 October 2009 Solicitor for the Applicant: Lesley Simons & Associates Counsel for the Respondents: PG Cawthorn SC Solicitor for the Respondents: B2B Lawyers Date of Written Submissions: 23 September 2009 and 28 September 2009 Date of Judgment: 1 October 2009