Reported Decision : [1999] 32 ACSR 546 New South Wales Supreme Court CITATION : Debis Financial Services (Aust) Pty Ltd v Allied Bellambi Collieries Pty Ltd [1999] NSWSC 946 CURRENT JURISDICTION : Equity FILE NUMBER(S) : 3669/99 HEARING DATE(S) : 15 & 16 September 1999 JUDGMENT DATE : 16 September 1999 Debis Financial Services (Australia) Pty Limited (P) Allied Bellambi Collieries Pty Limited (Receivers Appointed) (Voluntary Administrator Appointed) (D1) PARTIES : Sandwork Pty Limited (Voluntary Administrator Appointed) (D2) Q Mining Systems Pty Limited (Voluntary Administrators Appointed) (D3) Gregory James Robertson in his capacity as Administrator of Allied Bellambi Collieries Pty Ltd & Sandwork Pty Limited (Voluntary Administrator Appointed) (D4) JUDGMENT OF : Hamilton J B A Coles QC and Miss M Williams (solicitor) (P) COUNSEL : R S Angyal (D1, 2 & 4) No appearance (D3) Clayton Utz (P) SOLICITORS : Anderson Legal (D1, 2 & 4) No appearance (D3) CATCHWORDS : CORPORATIONS [182] - Voluntary administration - Protection of company property - Secured creditor - Application under s 441D to limit powers of chargee where enforcement action commenced before administration - Costs - Basis of exercise of discretion. ACTS CITED : Corporations Law s 441D CASES CITED : Debis Financial Services (Aust) Pty Ltd v Allied Bellambi Collieries Pty Ltd [1999] NSWSC 935, Debis Financial Services (Aust) Pty Ltd v Allied Bellambi Collieries Pty Ltd [1999] NSWSC 936. DECISION : Order that unsuccesful secured creditor pay administrator's costs. IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J THURSDAY, 16 SEPTEMBER 1999 3669/99 DEBIS FINANCIAL SERVICES (AUSTRALIA) PTY LIMITED v ALLIED BELLAMBI COLLIERIES PTY LIMITED (RECEIVERS APPOINTED) (VOLUNTARY ADMINISTRATOR APPOINTED) & ORS JUDGMENT His Honour: 1 What is to be dealt with this morning is the costs of these proceedings and the appropriate manner of their final disposal. In the proceedings I have dealt with applications for relief and issues relating to certain machines in the failed West Bellambi Colliery ("the colliery"). The machines fell into two categories. The first category was a Joy Continuous Miner and in the second category were machines known as Un-a-Haulers ("the Un-a-Haulers"). The plaintiff was the mortgagee under a mortgage of the Joy Continuous Miner ("the mortgage") and entitled to its possession by reason of the first defendant's default under the mortgage. The plaintiff was also the lessor of the Un-a-Haulers. The first defendant was the operator of the colliery and was the owner and mortgagor of the Joy Continuous Miner. The second defendant was the holder of the coal lease under which the colliery was conducted. The third defendant was the lessee of the Un-a-Haulers. All of those three defendants were in voluntary administration. The fourth defendant was the administrator of the first defendant and the second defendant, but not of the third defendant. At different times Mr Coles of Queen's Counsel and Mr White of Counsel and Miss M. Williams, solicitor, have appeared for the plaintiff. At all times Mr Angyal of Counsel has appeared for the first, second and fourth defendants. There has never at any stage been any appearance of the third defendant, which has taken the stance that it consented to the plaintiff retaking possession of the Un-a-Haulers. Hereafter in this judgment the first, second and fourth defendants are referred to simply as ''the defendants''. 2 As I have indicated, there have only been quite narrow issues dealt with in the proceedings. Essentially, the plaintiff applied by summons for injunctive relief to assist it in regaining possession of the Joy Continuous Miner, and the fourth defendant cross applied by notice of motion for an order under s 441D(2) of the Corporations Law (''the Law''), to the effect that the plaintiff ought not be permitted to exercise its right of repossession during the continuation of the administration. Those issues I dealt with in a judgment of 10 September 1999 [1999] NSWSC 935. I refused the plaintiff the injunctive relief that it sought and granted to the administrator an order under s 444D(2). Subsequently, I dealt with an application by the plaintiff for injunctive relief to facilitate its taking possession of the Un-a-Haulers during the continuation of the administration of the first defendant and the second defendant. Although, as already appears, they had no direct interest in the Un-a-Haulers, I found that the Un-a-Haulers were in their possession and, therefore, s 440C of the Law did apply and the plaintiff did need leave under that section to repossess them. Application was made under that section and the leave was refused. This was dealt with in my judgment of 13 September 1999 [1999] NSWSC 936. That application was in fact pressed by the plaintiff to hearing on the last day of the administrations. 3 At all times it was apparent that the administrations must come to an end this week, either by the execution of a deed of company arrangement ("DCA") or, if the DCA were not executed, upon the expiry of the time specified for its execution. In fact, the DCA and the corresponding sale agreement referred to in my earlier judgments were executed late on Monday 13 September 1999. By the time the DCA and sale agreement were executed agreement had also been reached with the plaintiff as to what was to occur in relation to the Joy Continuous Miner. The effect of that agreement is that Joy Continuous Miner will remain in the colliery and the purchaser is to make payment for it in due course. Upon part payment being made in about two weeks there is to be a discharge of the plaintiff's mortgage over it. This means that the plaintiff's future rights in relation to that payment are now rights against the purchaser under the sale agreement. 4 The plaintiff on the one hand and the defendants on the other hand now ask for their costs of the proceedings against the other side. Mr Angyal, of counsel for the defendants, has given me a succinct written outline of his submissions on their behalf. Their position is put as high as a submission that the bringing of the proceedings by the plaintiff at the time and in the circumstances at which this occurred was an abuse of process. I do not think that a proposition as high as that in favour of his clients can be sustained. The plaintiff, after all, is a mortgagee under a mortgage in default and had commenced enforcement action prior to the commencement of the administrations, so that s 441B of the Law applied. However, Mr Angyal has set out in his submissions a detailed history of the matter including the public stances taken by the parties and the negotiations that were going on behind those stances. That history is not contested. I said at one stage during the hearing that the proceedings had something of the air of negotiating parties circling each other looking for an advantage. Although Mr Coles of Queen's Counsel was at the time enthusiastic to accept this characterisation in relation to Mr Angyal's clients, in my view his client was at least equally engaging in that exercise. 5 Various considerations militate against the plaintiff's submissions. The suggestion put by Mr Coles of Queen's Counsel that one of the things to be said against Mr Angyal's clients was that they had left it till the last moment to apply for relief under s 441D has no merit. It was Mr Coles' client which initiated the proceedings, and that in a situation where the administrator had made it plain at all times that if the plaintiff sought curial intervention the administrator would then apply to the Court for relief under s 441D. It was obviously important from the point of view of the administrator's negotiations with the purchaser that the Joy Continuous Miner be kept in situ until it could be seen whether or not the DCA and sale agreement would be entered into and whether or not the purchaser would take the Joy Continuous Miner under the sale agreement, the purchaser having an option under its terms to take it or not to take it. The action brought by the plaintiff was brought very late in the day, which adds to the suggestion that it was a negotiating tactic. I also found it very hard to believe on the facts as proved in this matter that the Joy Continuous Miner would, in fact, be removed from the colliery, bearing in mind that the removal was very inconvenient and the estimates of the cost of removal ranged between $150,000 and $250,000, as against a value of the machine in the vicinity of $1 million. 6 Perhaps Mr Coles' principal submission was that proceedings under s 441D generally are, and that these certainly were, in the nature of an application for an indulgence, so that the general rule in relation to costs should be that the applicant, even if the indulgence be granted, should pay the costs of obtaining it. He cited well known instances where this rule does apply, such as the setting aside of default judgments and the obtaining in equity of relief against forfeiture. He also drew attention to proceedings under s 88K of the Conveyancing Act 1919, where an order for the compulsory grant of an easement is made subject to a statutory liability for costs. 7 In my view s 441D does not provide an instance where the relief sought can readily, or universally, be characterised as an indulgence, such as to attract the operation of such a general rule. The statute is specific, that the applicant is not the company, which is ex hypothesi in default under its obligations, and so might be thought a supplicant for an indulgence. It is the administrator, who has statutory duties to see if the company can be restructured or carried on as a viable entity, or at least, as in the present instance, to see it the enterprise that it has conducted can continue life as a viable entity in the hands of a purchaser so that the company's return to be shared among its contributories can be maximised by the disposal of the enterprise as a going concern. Part of the policy which the courts have seen in the legislation in this regard is that the administrator should not be delayed or hampered in that task, and another part of that policy is that the administrator should not be subjected to unnecessary personal liabilities which might have that effect upon him. It seems to me that it would be quite wrong in those circumstances for the courts to enunciate a rule that the administrator should generally pay the costs of obtaining such relief on the basis that it should be characterised as an indulgence. In my view, the proper general approach is that the costs of such application should be completely at large, the discretion in relation to them to be exercised so as to produce a just result in the widely varying circumstances in which such applications may be made. 8 In the present case, it seems to me that the proceedings were in effect conducted as adversary litigation, in which each side sought to obtain the result for itself that it desired or thought commercially beneficial. The simple fact of the matter is that, in respect of each of the applications that was made to the Court, the plaintiff lost and the defendants won. In those circumstances it is my opinion that the correct order for costs in the circumstances of these proceedings is that they should follow the event, and that the plaintiff should be ordered to pay the defendants' costs of the proceedings. 9 It is important that it be remembered at all times, including in coming to a decision as to the appropriate manner of determination of these proceedings, that the quite narrow issues outlined above were the only issues contested in these proceedings and are the only issues that have been determined by the Court in the judgments which I have delivered. There may, potentially, be other issues between the parties relating to the various machines. These have not been raised. Nor in the context of these proceedings, conducted as urgent proceedings in the dying and diminishing days of this administration, was it appropriate that these other issues be dealt with. To take but one instance, even when it was suggested that I should determine it, I declined to determine the issue as to whether or not there was already in force a binding agreement relating to the disposition of the Joy Continuous Miner as unnecessary to the disposal of these proceedings. 10 In the light of the foregoing, I turn to the appropriate fate of the proceedings at this stage. Mr Angyal has asked that they be dismissed, so that his clients may be discharged from the trouble and costs of any further attendances. Miss Williams, on behalf of the plaintiff, asks instead that the proceedings be stood over for three or four weeks to see whether the terms of the agreement as to the disposition of the Joy Continuous Miner be carried into effect. Miss Williams says that, so long as there is any possibility of the exercise of rights under the mortgage, these proceedings should remain on foot. However, these proceedings have been proceedings under the mortgage only of a very limited scope. It was never denied that the mortgage was in default and the plaintiff entitled to take possession. The only injunctive relief sought was against the first defendant, as former operator, and the second defendant, as leaseholder of the colliery, to permit unfettered access to remove the machine. If there is default in the agreement with the now purchaser, the principal defendant in that claim for relief will be the purchaser rather than the first defendant, even if it is a necessary party as still having an interest in the Joy Continuous Miner. Whilst it is possible that the purchase agreement may not be carried into effect, there seems to be no reason at the moment to think that it will not. In all the circumstances, save for the relief already granted, the appropriate course is to dismiss the plaintiff's proceedings by summons as against all defendants. 11 I have already indicated that the plaintiff should pay the defendants' costs of the proceedings in general terms. Difficult questions may arise as to the incidence of that order as it relates to the first and the second defendants on the one hand, and to the fourth defendant on the other, arising out of the first and second defendants' insolvent position and also, in relation to the first defendant, out of the fact that it may have other obligations to the plaintiff under the mortgage. Those questions do not need exploration here, but Mr Angyal has put forward a proposed regime of dissection whereby he suggests that instead of the costs being globally ordered in favour of all three of his clients, the costs of the plaintiff's claims against the first and second defendants ought be ordered in favour of the first and second defendants only, and that the costs of the claim of the fourth defendant, the administrator under s 441D, ought be ordered in favour of the fourth defendant alone. He, after all, alone made that claim and, under statute, was the only person who could make that application. Mr Angyal has also suggested that the Court ought note, for the assistance of the parties and any costs assessor, that approximately equal amounts of time in the proceedings related to the plaintiff's claims against the first and second defendants on the one hand and to the fourth defendants' notice of motion on the other. 12 This regime does appeal to me as offering a sensible and practical solution in the circumstances. Whilst a great deal of time and money could be taken up dissect, or attempting to dissect, what portions of, or issues in, the proceedings various costs items were referable to, the equal distribution suggested, it appears to me, as the person who presided over the proceedings, to be reasonably accurate in fact and a fair one in all the circumstances. I therefore propose to make the orders in the form propounded by Mr Angyal. I shall add a liberty to apply in case further orders are required of the Court in the spelling out or enforcement of the costs orders. 13 I propose to dismiss the summons pursuant to Part 40 r 8(1), and I shall add at the end of the short minutes, ''5. Liberty to apply in respect of costs orders on two days notice''. With those alterations, I make orders in accordance with the short minutes initialled by me and placed with the papers. …oOo… Last Modified: 09/30/1999 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.