Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1448

New South Wales Supreme Court

CITATION : Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1448

HEARING DATE(S) : 02/12/09

JUDGMENT DATE : 18 December 2009

JURISDICTION : Equity Division Corporations List

JUDGMENT OF : Barrett J

DECISION : Order that the plaintiffs pay the defendant's costs of and incidental to the hearing of the matters determined by the judgment of 13 November 2009.

CATCHWORDS : PROCEDURE - costs - where court determines on administrator's application that his remuneration fixed by two out of three resolutions of creditors should be reviewed by the court - company's application for order precluding increase in remuneration unsuccessful - review to be undertaken subsequently - whether costs of that determination should be costs in the cause or awarded to successful administrator

CATEGORY : Consequential orders

CASES CITED : Floruit Holdings Pty Ltd v Sebastian Builders & Developers Pty Ltd [2009] NSWCA 411 Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222

Paul's Retail Pty Ltd - First Plaintiff PARTIES : Paul Andrew Dwyer - Second Plaintiff John Maxwell Morgan - Defendant

FILE NUMBER(S) : SC 6211/08

Mr M A Ashhurst SC - Plaintiffs COUNSEL : Mr S M Golledge - Defendant

SOLICITORS : W Lawyers - Plaintiffs Blake Dawson - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

FRIDAY 18 DECEMBER 2009

6211/08 PAUL'S RETAIL PTY LIMITED & ANOR v JOHN MAXWELL MORGAN

JUDGMENT

1 I am dealing with the question of costs following my judgment of 13 November 2009: Paul's Retail Pty Ltd v Morgan [2009] NSWSC 1222. 2 The plaintiffs' position is that one of two orders should be made, viz: (a) that the costs of the applications heard on 16 and 22 October 2009 be reserved pending the outcome of any review conducted by the Registrar; or (b) that one-third of the defendant's costs of the applications heard on 16 and 22 October 2009 be the defendant's costs in the cause. 3 The defendant's position is that there should be two orders: (a) that the plaintiffs pay the defendant's costs of the proceedings on the usual basis; and (b) the defendant have liberty to apply following completion of the review of remuneration by the Registrar for an order that costs incurred after 22 September 2009 be assessed on the indemnity basis. 4 The central question determined by the judgment of 13 November 2009 was whether there should be a review by the court of remuneration fixed by each of three resolutions of creditors passed on 1 April 2008. 5 The decision was that remuneration determined by the first resolution should not be reviewed by the court, that remuneration determined by the second resolution should be reviewed by the court and that remuneration determined by the third resolution should be reviewed by the court. 6 A great deal of the evidence and argument centred upon the question whether the defendant was precluded by contract or estoppel from seeking a review of remuneration. That question was determined favourably to the defendant. 7 The plaintiffs make the point that the proceedings have not yet concluded. The two reviews the court has ordered have yet to be undertaken. They further say that the court's decision with respect to costs cannot sensibly be made until the final result of the two reviews ordered is known. 8 The defendant's central contention is that he succeeded, on the whole, on the issues litigated up to and including the hearing on 22 October 2009 and determined by the judgment of 13 November 2009; and that the critical issue then in contention was the availability of the review process. Furthermore, the defendant says, it was the plaintiffs' raising of the contract and estoppel matters that turned what might have been a relatively summary proceeding into a fully contested trial. 9 I acknowledge that there is, as it were, "more to come", in that the reviews the court has ordered are yet to be undertaken. But the reality is, in my view, that a substantial preliminary issue has been fully determined. Although there was no order for the determination of a separate question, that is, in substance, what has happened. Without entering at all upon an inquiry into whether the remuneration determined by the second and third resolutions of the creditors is reasonable – that being the question to be addressed upon a review of remuneration by the court – the court dealt fully and finally with all the issues that had to be determined before it could be known whether the question of the reasonableness of remuneration would ever need to be addressed. 10 There is therefore a strong analogy with a case in which it is formally ordered that a particular question be determined before all other issues. The proper approach, as I see it, is therefore the approach recently taken by the Court of Appeal in Floruit Holdings Pty Ltd v Sebastian Builders & Developers Pty Ltd [2009] NSWCA 411. That was a case in which the District Court had ordered the preliminary determination of a separate question. The District Court gave an affirmative answer to that question. One party appealed. The Court of Appeal allowed the appeal and substituted a negative answer. The question of costs at first instance arose for consideration by the appeal court. The successful appellants argued that they should have their costs of the determination of the separate question. The unsuccessful respondent submitted that those costs should be the appellants' costs in the cause because the matter was ongoing in the District Court. 11 The Court of Appeal ordered that the respondent pay the appellants' costs of and incidental to the hearing of the separate question in the District Court. The basis for the making of this order was explained in these terms at [7] by Bergin CJ in Eq (with whom Allsop P and Young JA agreed): "The fact that the appellants may not be successful in the main case in the District Court, by reason of a failure to prove causation or for any other reason, does not in my view disentitle them to their costs of the hearing in relation to the separate question, which was a discrete issue. The appellants should have their costs of the hearing of the separate question in the District Court. The appellants were successful in the appeal and costs should follow the event." 12 The same outcome is warranted here. I do not think that this conclusion is affected by the fact that the defendant succeeded in obtaining reviews on two aspects but failed on the third. I say this because the argument and the hearing were devoted almost wholly to issues on which the defendant succeeded, even though that did not result in a decision favourable to him on one of the three reviews sought. 13 The order of the court with respect to costs is: Order that the plaintiffs pay the defendant's costs of and incidental to the hearing of the matters determined by the judgment of 13 November 2009. 14 I should add two things. 15 First, I do not consider it appropriate to reserve to the defendant liberty to apply, after the reviews are completed, for an order that the costs so ordered be assessed on the indemnity basis. The result of the reviews, whatever it may be, will not indicate any unreasonable approach by anyone to the matters determined by the judgment of 13 November 2009; and this will be so regardless of the relativity of the eventual outcome of the review to the defendant's pre-trial offer. 16 Second, each party must be regarded as fully entitled to make further applications with respect to costs once the outcome of the reviews is known, including, if thought fit, an application for assessment on the indemnity basis. **********