FEDERAL COURT OF AUSTRALIA Australian Securities & Investments Commission v Axis International Pty Ltd (No 7) [2011] FCA 812 Citation: Australian Securities & Investments Commission v Axis International Pty Ltd (No 7) [2011] FCA 812 Parties: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION v AXIS INTERNATIONAL MANAGEMENT PTY LTD (ACN 075 799 772) FIREPOWER INVESTMENTS PTE LIMITED, OWSTON NOMINEES NO 2 PTY LTD (ACN 001 769 099), SATTVIC PTY LTD (ACN 114 153 954), SEASWAN HOLDINGS PTY LTD (ACN 059 000 538), QUENTIN PHILLIP O'DOHERTY WARD, TIMOTHY FRANCIS JOHNSTON and GREEN TRITON LIMITED File number: WAD 157 of 2008 Judge: GILMOUR J Date of judgment: 21 July 2011 Legislation: Corporations Act 2001 (Cth) s 471B Cases cited: Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1 Date of hearing: 16 June 2011 Place: Perth Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 16 Counsel for the Plaintiff: Ms W F Gillan Solicitor for the Plaintiff: Blake Dawson Counsel for the Defendants The Defendants did not appear IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 157 of 2008 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: AXIS INTERNATIONAL MANAGEMENT PTY LTD (ACN 075 799 772) Defendant FIREPOWER INVESTMENTS PTE LIMITED Second Defendant OWSTON NOMINEES NO 2 PTY LTD (ACN 001 769 099) Third Defendant SATTVIC PTY LTD (ACN 114 153 954) Fourth Defendant SEASWAN HOLDINGS PTY LTD (ACN 059 000 538) Fifth Defendant QUENTIN PHILLIP O'DOHERTY WARD Sixth Defendant TIMOTHY FRANCIS JOHNSTON Seventh Defendant GREEN TRITON LIMITED Eighth Defendant JUDGE: GILMOUR J DATE OF ORDER: 21 JULY 2011 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The plaintiff have leave, pursuant to s 471B of the Corporations Act 2001 (Cth) to proceed against the third defendant, Owston Nominees No 2 Pty Ltd and move for an order that the third defendant pay the plaintiff's costs. 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 Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 157 of 2008 BETWEEN: AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION Plaintiff AND: AXIS INTERNATIONAL MANAGEMENT PTY LTD (ACN 075 799 772) Defendant FIREPOWER INVESTMENTS PTE LIMITED Second Defendant OWSTON NOMINEES NO 2 PTY LTD (ACN 001 769 099) Third Defendant SATTVIC PTY LTD (ACN 114 153 954) Fourth Defendant SEASWAN HOLDINGS PTY LTD (ACN 059 000 538) Fifth Defendant QUENTIN PHILLIP O'DOHERTY WARD Sixth Defendant TIMOTHY FRANCIS JOHNSTON Seventh Defendant GREEN TRITON LIMITED Eighth Defendant JUDGE: GILMOUR J DATE: 21 JULY 2011 PLACE: PERTH REASONS FOR JUDGMENT 1 The plaintiff, by motion dated 10 June 2011, seeks leave pursuant to s 471B of the Corporations Act 2001 (Cth) (the Act) to proceed against the third defendant, Owston Nominees No 2 Pty Ltd, for an order for its costs of the action, including previous costs orders made against Owston, on 7 August and 12 December 2009. The application is supported by the affidavits of Gary Martyn Bertram and Lucas Mark Wilk each sworn on 13 June 2011 and that of Justin Duncan Jones affirmed on the same date. 2 Leave is required because on 12 November 2010 Owston was ordered by the Court to be wound up and Mr Jeff Herbert was appointed its liquidator. 3 The appointment of Mr Herbert as liquidator follows the appointment of a number of external administrators by is secured creditors to various assets of Owston. Those appointments are as follows: (a) Christopher Robert Powell and Stephen James Duncan of Korda Mentha accountants were appointed on 27 March 2009 as the joint and several receivers and managers of all of Owston's undertakings, assets and property apart from real property and the proceeds of a judgment debt in Supreme Court of Western Australia Action No CIV 2093 of 2003 together with any rights of appeal in that action (the "fire action" judgment). (b) Kimberley Stuart Wallman was appointed on 5 May 2009 as the receiver of the "fire action" judgment. (c) Michael Roger O'Sullivan was appointed on 18 May 2009 as controller of property owned by Owston at 38 Fern Road, Eagle Bay in the state of Western Australia. (d) Christopher Robert Powell and Stephen James Duncan were appointed on 19 November 2010 as the joint and several receivers and managers of real property owned by Owston known as "Fernhill" at Mulgoa, New South Wales. 4 The reports lodged by the receivers, and the receivers and managers, refer to debts owed to the secured creditors exceeding $97 million (of which some $14.9 million has been collected) but it is not clear what is owed to the secured creditor who appointed the controller, Mr O'Sullivan. 5 The assets under control are largely unvalued in each of the Reports as to Affairs filed by the receiver, and receivers and managers, as they each rely on the need to keep that information confidential on the basis it is commercially sensitive. 6 On 29 November 2010, Mr Herbert advised Mr Wilk, a partner of the plaintiff's solicitors, that he was not currently in funds because any available funds were under the control of the receivers and managers. However, Mr Herbert expressed the view that there may be funds available if Owston's assets were sold and the secured creditors paid out in full. 7 Whether the liquidator of Owston will be put in funds remains uncertain. 8 Section 471B of the Act is in general terms. The grant of leave is an absolute discretion subject only to it being exercised judicially: Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1 at [19]. It is impossible to state in an exhaustive manner all the circumstances in which leave will be granted. Refshauge J summarised the matters that the Court may consider on such an application at [21]-[26] and [30]. 9 The relevant considerations in this case are: (a) whether there is any merit in the case sought to be made out; (b) the stage at which any proceedings have reached; (c) whether there will be procedural or substantive prejudice to the creditors; and (d) whether leave will give rise to a avalanche of litigation. 10 Here the proceedings are essentially complete as against Owston. The plaintiff established at trial that it was entitled to certain declarations of breach in respect to Owston's conduct. The only order now sought by the plaintiff is for its costs. 11 Costs usually follow the event and there is nothing in the conduct of the plaintiff that would support a departure from that usual rule. Additionally, as I mentioned, some costs orders have already been made in favour of the plaintiff against the third defendant. 12 The plaintiff cannot crystallise it's entitlements to tax its costs and prove in the insolvency of Owston for those costs without an order of the Court. Accordingly a refusal of leave would significantly prejudice the plaintiff. 13 The liquidator, Mr Herbert, neither opposes nor consents to the application. 14 There is no suggestion that there are any other creditors in the position of the plaintiff so as to lead to any increased likelihood of litigation nor any procedural or substantive prejudice to the general body of creditors by the making of the order sought. 15 It is not to the point that there may not be any funds to meet a costs order. There remains the potential for a recovery of costs if the liquidator comes into funds. 16 I am satisfied that there is a proper basis for the exercise of my discretion in favour of a grant of leave. There will be an order accordingly. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gilmour. Associate: Dated: 21 July 2011