New South Wales Supreme Court CITATION : Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd; Application of Campbell & Ors - Costs [2005] NSWSC 847 HEARING DATE(S) : 18/07/05 JUDGMENT DATE : 25 August 2005 Equity Division JURISDICTION : Corporations List JUDGMENT OF : Barrett J DECISION : See paragraph 16 CATCHWORDS : PROCEDURE - costs - no matter of principle LEGISLATION CITED : Corporations Act 2001 (Cth), ss.466(1) and (2) CASES CITED : Re Campbell; Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd ((2005) 54 ACSR 111 Gebo Equity Investments (Labuan) Limited - First Plaintiff Christopher Paul Levick - Second Plaintiff Botany Holdings Limited, a company incorporated in Labuan, Malaysia - Third Plaintiff Signatory Investments Pty Limited - First Defendant Life Wealth 8 Limited, a company incorporated in Labuan, Malayusia - Second Defendant David Martin Johnson trading as Johnson Lawyers - Third Defendant PARTIES : John Vouris - Respondent to Second Interlocutory Process John Campbell - First Applicant Erminio Kotlar - Second Applicant Plover 8 Limited, a Company Incorporated in Malaysia - Third Applicant Green Co Limited, a Company Incorporated in Malaysia - Fourth Applicant FILE NUMBER(S) : SC 6680/04 Mr R.K. Eassie - First to Third Plaintiffs Mr D.M. Johnson, Solicitor - Third Defendant COUNSEL : Mr G.P. George - Respondent to Second Interlocutory Process Mr R.E. Dubler SC/Mr A. Ivantsoff - Applicants Nash O'Neill Tomko - First to Third Plaintiffs Johnson Lawyers - Third Defendant SOLICITORS : Holding Redlich - Respondent to Second Interlocutory Process Matthews Folbigg Pty Limited - Applicants LOWER COURT JURISDICTION : IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J THURSDAY, 25 AUGUST 2005 6680/04 – GEBO INVESTMENTS (LABUAN) LIMITED & 2 ORS v SIGNATORY INVESTMENTS PTY LIMITED & 2 ORS; APPLICATION OF JOHN CAMPBELL & 3 ORS JUDGMENT - COSTS 1 Following publication of reasons for judgment on 9 June 2005 (see Re Campbell; Gebo Investments (Labuan) Ltd v Signatory Investments Pty Ltd ((2005) 54 ACSR 111), orders were made on 27 June 2005 dismissing the amended interlocutory process filed on 23 December 2004 and the interlocutory process filed on 29 March 2005. Winding up orders were made upon the originating process filed on 9 December 2004 in respect of both Signatory Investments Pty Ltd ("Signatory") and Life Wealth 8 Ltd ("Life Wealth Labuan"), Mr Cussen and Mr Hancock being appointed liquidators in each case. It remains to deal with the matter of costs. 2 I deal first with the amended interlocutory process of 23 December 2004 by which the applicants (Mr Campbell, Mr Kotlar, Plover 8 Limited and Green Co Limited) sought a variety of orders directed towards revocation or termination of the appointment of Mr Vouris as provisional liquidator of both Signatory and LifeWealth Labuan. Each of those applicants was a shareholder or contributory of both LifeWealth Labuan and Signatory but was not a party named in the originating process seeking winding up orders in respect of those companies. The plaintiffs in the proceedings (as named in the originating process) were other shareholders or contributories of Signatory and LifeWealth Labuan, being Gebo Investments (Labuan) Limited, Mr Levick and Botany Holdings Limited. These plaintiffs were the respondents named in the amended interlocutory process. They were the successful parties in respect of the claims in that amended interlocutory process and the claims in the originating process. 3 The applications advanced by means of the amended interlocutory process of 23 December 2004 were eventually pressed by the applicants only in respect of LifeWealth Labuan. The contention was that the court had no jurisdiction in respect of LifeWealth Labuan. Jurisdiction was accepted in respect of Signatory. The applications were opposed by the plaintiffs whose winding up applications in respect of both companies were pending. 4 I begin with the costs of the plaintiffs. Sections 466(1) and (2) of the Corporations Act 2001 (Cth) are relevant: "(1) The persons, other than the company itself or the liquidator of the company, on whose application any winding up order is made must, at their own cost, prosecute all proceedings in the winding up until a liquidator has been appointed under this Part. (2) The liquidator must, unless the Court orders otherwise, reimburse the applicant out of the property of the company the taxed costs incurred by the applicant in any such proceedings." 5 Now that winding up orders have been made in respect of both Signatory and LifeWealth Labuan, s.466(2) operates to oblige the liquidator, in each case, to pay the costs "incurred by the applicant in any such proceedings", the "applicant" being, of course, the plaintiffs. This is subject to any contrary order of the court but no one submits that any contrary order should be made. It is relevant, in this connection, to note that the plaintiffs' costs in "all proceedings in the winding up until a liquidator has been appointed" are covered by s.466(1) and that the statutory directive in s.466(2) extends to "the taxed costs incurred by the applicant in any such proceedings". This description extends, in my opinion, to costs of and incidental to the interlocutory process filed on 23 December 2004 in which the plaintiffs under the originating process were named as respondents. These were, clearly enough, proceedings in the winding up pre-dating the appointment of the liquidator and thus covered by ss.466(1) and (2). 6 The plaintiffs say that there should be an order catering for the possibility that the assets of the respective companies are insufficient to meet their costs covered by s.466(2). They contend that the applicants should meet any shortfall on the principle that costs should follow the event. The applicants do not dispute that as a general proposition. There is, however, a matter to be determined as to the application of the general proposition in the particular circumstances. 7 The applicants say that the order, of a secondary kind, that they pay the plaintiff's costs not recoverable from the relevant company's assets should exclude costs of collaboration between the plaintiffs (respondents) and the provisional liquidator, Mr Vouris, which collaboration before a directions hearing of 3 March 2005 is, it is said, is indicated by Exhibit D document 2.9. The applicants say that if they are also ordered to pay Mr Vouris's costs, the collaboration aspect will mean that there is an inappropriate element of double counting. 8 It becomes appropriate, at this point, to digress on to the subject of any entitlement Mr Vouris may have to costs. The first point to be noted is that he did not become a party to the proceedings under either the originating process or by virtue of the amended interlocutory process filed on 23 December 2004. His only status was as the sole respondent to the applicants' notice of motion filed on 29 March 2005, the applicants under which were again Mr Campbell, Mr Kotlar, Plover 8 Limited and Green Co Limited. The plaintiffs in the proceedings were neither applicants nor respondents under the interlocutory process. 9 It is true that Mr Vouris gave evidence and that some of his evidence was directed towards the matters raised by the amended interlocutory process filed on 23 December 2004 but he was, in that connection, merely a witness: he was, as I have said, not a party. Any entitlement he might have to costs could only be an entitlement related to the interlocutory process filed on 29 March 2005. 10 Mr Vouris was, as I have said, the sole respondent to the interlocutory process filed on 29 March 2005. This is because the substantive orders there sought by the applicants were orders that Mr Vouris not be appointed liquidator of either company if and when a winding up order was made. Mr Vouris began by opposing that application. Indeed, he maintained that stance to the end of the hearing. Then, in written submissions filed after the hearing, Mr Vouris made it clear that he did not wish to be appointed liquidator if and when a winding up order was made in respect of either or both of the companies. It thus emerged at that very late stage that there was no surviving issue between the applicants and Mr Vouris. Had he made that plain at an earlier point, there would have been no need for Mr Vouris to be involved at all and much expense and effort would have been saved. It is clear that Mr Vouris is not entitled to costs against anyone. Indeed, the somewhat remarkable course of events to which I have referred warrants the conclusion that Mr Vouris should pay the costs of the applicants under the interlocutory process filed on 29 March 2005, being the costs of and incidental to that interlocutory process. 11 I return to the matter of alleged collaboration between the applicants and Mr Vouris in relation to the application advanced by means of the amended interlocutory process of 23 December 2004. There, as I have said, Mr Vouris was a witness, not a party. Furthermore, I am satisfied that he was properly a witness and that it was proper for the applicants to liaise with him, as the provisional liquidator of the companies, in the preparation of their case; likewise, it was proper for him to liaise with him. It follows that no special treatment is required in relation to such part of the costs of the applicants of and incidental to the amended interlocutory process filed on 23 December 2004 as relates to interaction with Mr Vouris. 12 The applicants say, in relation to the amended interlocutory process filed on 23 December 2004, that their costs should be assessed on the indemnity basis. They say, in effect, that the outcome on the only matter really in contention (namely, whether LifeWealth Labuan carried on business in Australia) was obvious from the start and that the plaintiffs should have conceded that. They put the plaintiffs on notice by a letter dated 24 March 2005 that they would seek indemnity costs if the result was that the amended interlocutory process of 23 December 2004 was dismissed. 13 I accept that, in light of my findings, there was, at all material times, compelling evidence in support of the proposition that LifeWealth Labuan had carried on business in Australia. But there was the added legal question whether a past and concluded course of business was sufficient to support the winding up jurisdiction under s.583. That is a matter which became the subject of submissions on both sides and which I determined by finding adversely to the applicants. This factor was, in my view, sufficient to put the case outside the class of cases where the result is so far obviously predictable that a party persisting in a contrary attitude should be ordered to pay costs on the indemnity basis. 14 It remains to consider the costs of the third defendant named in the originating process, Mr Johnson, an Adelaide solicitor. Although Mr Johnson is so named, the originating process sought no relief against him. There was, however, an application in an interlocutory process filed at the same time as the originating process for an order that Mr Johnson be restrained from dealing with certain moneys in his trust account said to be held by him for LifeWealth Labuan and related entities; also an order that Mr Johnson disclose certain details of those moneys. Those matters were dealt with expeditiously, although it was necessary for Mr Johnson to appear before the court on 15 December 2004. 15 Mr Johnson considers himself entitled to a costs order. I agree. At most, he held property for a client and was subject to that client's instructions with respect to it. If the client's instructions were to be overridden, there was a need for an order of the court. Mr Johnson was, in the context, in the position of a third party against whom relief of a Mareva kind is sought to prevent dissipation of the assets of an immediate defendant. To the extent that it was necessary for him, as an outsider to the substantive dispute, to be involved in order to ensure that the Mareva-like regime was properly put in place, the plaintiffs, as the applicants for the orders against him, should pay his costs. That is limited, in this case, to costs up to the entry of the orders affecting him consequent upon the hearing on 15 December 2004 plus the costs of his subsequent application for costs. 16 In light of the above, the orders of the court are as follows: 1. Order that the whole of the plaintiffs' costs of the entire proceedings (including, but not limited to, costs of and incidental to the amended interlocutory process filed on 23 December 2004) are costs incurred by the plaintiffs as referred to in s.466(2) of the Corporations Act 2001 (Cth) and shall, to the extent that they are not reimbursed pursuant to the said s.466(2), be paid by those of the defendants who were the applicants under the amended interlocutory process filed on 23 December 2005. 2. Order that the costs of the applicants under the interlocutory process filed on 29 March 2005 of and incidental to that interlocutory process be paid by John Vouris, the sole respondent thereto. 3. Order that the costs of David Martin Johnson, the third defendant, being costs up to the entry of the orders affecting him consequent upon the hearing on 15 December 2004, together with costs of his application for costs, be paid by the plaintiffs. ********** 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.