New South Wales Supreme Court CITATION : Wily v Terra Cresta Business Solutions Pty Ltd (No 2) [2006] NSWSC 1102 HEARING DATE(S) : 10/10/06 JUDGMENT DATE : 19 October 2006 JURISDICTION : Equity Division JUDGMENT OF : Young CJ in Eq DECISION : Defendants to pay 80% of the plaintiff's costs of the expedited hearing. Costs of the interlocutory hearing and costs of the cross claim and all future costs are reserved. CATCHWORDS : COSTS [553]- Costs follow the event- Plaintiff substantially successful at expedited hearing- However substantial part of case abandoned just prior to trial- Interlocutory hearing obviated by court fixing early hearing date- Evidence prepared for interlocutory hearing not relevant to expedited hearing but relevant to cross claim- Cross claim not heard at expedited hearing- Costs of interlocutory hearing and costs of cross claim and all future costs to be reserved- Otherwise defendants to pay 80% of plaintiff's costs. Andrew Hugh Jenner Wily in his capacity as Liquidator of Business Australia Capital Mortgage Pty Ltd and Business Australia Capital Finance Pty Ltd (P) PARTIES : Terra Cresta Business Solutions Pty Ltd (D1) Richard Albarran and Geoffrey McDonald (D2) FILE NUMBER(S) : SC 4200/06 COUNSEL : T S Hale SC (P) J E O'Sullivan (D) SOLICITORS : M D Nikolaidis & Co (P) Etienne Lawyers (D) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION YOUNG CJ in EQ Thursday 19 October 2006 4200/06 – WILY v TERRA CRESTA BUSINESS SOLUTIONS PTY LTD (NO 2) JUDGMENT 1 HIS HONOUR: I gave judgment in this matter on 21 September 2006. 2 The proceedings were commenced by summons on 10 August 2006. The initial summons sought declarations that the first defendant was not entitled to appoint receivers to Business Australia Capital Mortgage Pty Ltd (BACM) or Business Australia Capital Finance Pty Ltd (BACF) and an order that the defendants be restrained from taking any steps in relation to or incidental to certain Federal Court proceedings. 3 On 14 August 2006 the summons was amended to seek declarations that charges allegedly given by BACM and BACF were each void and for a declaration that the charge granted by BACM had been satisfied in addition to the orders previously sought. 4 On 17 August 2006 the plaintiff filed a statement of claim setting out the material facts on which he relied for the orders in the amended summons. 5 The defendants filed a cross claim and later amended the cross claim. The cross claim raised questions as to whether the liquidator should be removed and as to the propriety of entering into arrangements with a litigation funder. The proceedings on the cross claim were not expedited when Brereton J expedited the main questions in the suit and I declined to hear the cross claim because it would extend the time allotted for the expedited hearing. 6 I commenced the hearing on 18 September. There were two main issues: (a) whether the charges in favour of the first defendant by BACM and BACF were valid; and (b) if valid, how much was owing under them. 7 The statement of claim was further amended to remove other matters but this only occurred just before judgment was given on 21 September though the matters were forecast at the beginning of the hearing. 8 Up until the hearing commenced, the plaintiff had alleged that the BACF charge was void. He abandoned this at the hearing so that the only question involving BACF was the amount due under the charge. 9 As to BACM, I held the charge invalid because BACM was insolvent at the time it gave the charge and that was within six months of the commencement of the winding up. 10 The plaintiff, accordingly, won the case so far as BACM is concerned. 11 So far as BACF is concerned, the question was how much was due. The evidence was presented in a most unsatisfactory way, particularly by the defendants. Much of the material they would wish me to consider was presented in an inadmissible form. However, it appeared that the bulk of the claim was that another company, Numsbar Pty Ltd, had advanced a considerable sum of money to BACF on short term loan at a very high rate of interest. There was some suggestion and some material to back up the suggestion, that the books of the various enterprises were then written to record a repayment of the short term finance, a granting of longer term finance by Numsbar and a repayment by Numsbar of monies advanced by the first defendant. However, there was also some suggestion that the way the transaction was finalised was by Numsbar assigning its debt to the first defendant. At [44] and [69] to [71] of the judgment I suggested whilst it was contemplated that there was to be an assignment of the debt, this never happened. 12 The liquidator asked for a declaration that no more than $300,000 was owing. I was uncomfortable in making such a declaration because it seemed to me that I just did not have the material to be confident in so certifying. The making of a declaration is a discretionary matter and I did not consider in justice it would be appropriate to make the declaration. What I did was advise the liquidator that he could assume that the debt was $177,000 unless further evidence was presented to him. What I was intending was that the defendants would take the hint, and if it were possible, they would present the liquidator with material to show that there was a proper assignment or there was a repayment of the Numsbar debt and the creation of a new debt in favour of the first defendant. In fact neither of these things have happened. The excuse proffered by the defendants is that they do not have access to the books and records. The liquidator denies this, but I did not determine the matter, merely making sure that for the future the books and records would be inspected if the receivers wanted to look at them. 13 The situation at the trial in September was that: (1) The plaintiff won on the issue of the void charge with BACM. (2) The plaintiff won on the issue of insolvency and it was Mr O'Sullivan's cross-examination on this issue that occupied most of the hearing time. (3) Neither side presented enough material for me to determine the second question beyond a small portion of it. (4) The plaintiff succeeded on the issue as to whether Mr Salmon's certificate was conclusive. 14 It was suggested that one way of dealing with costs was to make an order that the costs re BACM be paid by the defendants and the costs of the BACF by the plaintiff. However, I agree with Mr O'Sullivan that this would cause expensive complications before the costs assessor. It is better to reflect any limited success of the defendants in discounting the plaintiff's costs. 15 The great bulk of the time was taken up on the question of insolvency. The plaintiff won on this issue. He won on the issue of the voidness of the charge of BACM. He won on the issue that the certificate of Mr Salmon was not conclusive and it seems to me, accordingly, that he should get the bulk of his costs. However, the issue as to the validity of the BACF charge was only abandoned at the last moment. 16 So far as the costs of the 18, 19 and 21 September are concerned, in my view the proper order for costs is that the defendants pay 80% of the plaintiff's costs. Mr Hale SC asks for an order for costs against all defendants and I do not remember Mr O'Sullivan saying anything against this, and indeed, there was probably nothing he could say. 17 So far as the remaining costs are concerned, to date these comprise the costs of the cross claim and the costs of the interlocutory hearings before Palmer J together with the work that was done in connection with the interlocutory hearing and cross claim. This will include the preparation of a whole lot of affidavits which were not read before me. 18 Mr O'Sullivan puts it that the interlocutory hearings before Palmer J were abandoned by the plaintiff. Mr Hale puts it that the interlocutory relief became unnecessary when Brereton J expedited the main proceedings and fixed an early hearing date. Mr Hale also says that the material produced for the interlocutory hearing will be relevant for the cross claim if it is ever brought on. I say "if it is ever brought on" because it seems to me as a matter of practicalities, in the now changed circumstances, that any order made by the court on the cross claim would be of academic interest only. However, whether that be so or not can await another day. For the present it is appropriate that the costs of the interlocutory hearing before Palmer J and the costs of the cross claim and all future costs be reserved. 19 I note that the matter is now in my list for Thursday 2 November 2006 at 9.30 am for mention so that its future conduct can be plotted. ************************* 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.