Supreme Court New South Wales Medium Neutral Citation: Ramsay & Anor v Featherston Resources Limited & Ors [2013] NSWSC 1923 Hearing dates: 9 December 2013 Decision date: 10 December 2013 Jurisdiction: Equity Division - Corporations List Before: Black J Decision: Interim orders set aside. Plaintiffs to pay the costs of the defendants and receivers of and incidental to the application on an indemnity basis. Catchwords: CORPORATIONS - management and administration - application for appointment of a receiver - where receiver appointed by interlocutory orders made ex parte - whether jurisdictional requirements of s 1323 Corporations Act 2001 (Cth) were satisfied. PROCEDURE - judgments and orders - application to set aside orders made appointing - where orders made in the absence of a party - whether the Court's discretion properly exercised. PROCEDURE - costs - departing from the general rule - order for costs on indemnity basis - whether the conduct of the application was unreasonable. Legislation Cited: - Australian Securities and Investments Commission Act 2001 (Cth) - Civil Procedure Act 2005 (NSW) ss 56, 98 - Corporations Act 2001 (Cth) ss 1323, 1323(1)(a), 133(1)(b), 1323(1)(c), 1323(1)(h), 1323(4), Pt 2F.1A - Supreme Court Act 1970 (NSW) ss 66, 67 - Supreme Court (Corporations) Rules 1999 (NSW) r 2.13 - Uniform Civil Procedure Rules 2005 (NSW) rr 36.15, 36.16, 42.2 Cases Cited: - Australian Securities and Investments Commission; Re Richstar Enterprises Pty Ltd (No 5) [2006] FCA 684; (2006) 58 ACSR 6 - Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 - Colgate Palmolive Co v Cussons (1993) 46 FCR 225 - Commonwealth v ABC 2 Group Pty Ltd [2008] NSWSC 1383; (2008) 69 ACSR 228 - Corporate Affairs Commission v Lombard International Pty Ltd (1987) 5 ACLC 269 - Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547; (1984) 9 ACLR 371 - Goumas v McIntosh [2012] NSWSC 713 - Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 - Lahoud v Lahoud [2006] NSWSC 126 - Liverpool City Council v Estephen [2009] NSWCA 161 - Nationwide News Pty Ltd v Samalot Enterprise Pty Ltd (1986) 5 NSWLR 227 - Ng v Chong [2010] NSWSC 127 Category: Interlocutory applications Parties: David Ramsay (First Plaintiff) Glenn Tetley (Second Plaintiff) Featherston Resources Limited (First Defendant) Adveco Fertilisers Pty Limited (Second Defendant) Envirofocus Limited (Third Defendant) Representation: Counsel: C. Botsman (Plaintiffs) A.G. Martin (First and Second Defendants) D.K. Ratnam (Solicitor - proposed Fourth Defendant) J.S. Emmett (Receivers) Solicitors: Ashcrofts (Plaintiffs) E.Law Legal Services (First and Second Defendants) HWL Ebsworths (Proposed Fourth Defendant) McCabes (Receivers) File Number(s): 2013/364099 Judgment - Revised 16 December 2013 1By Originating Process filed on 3 December 2013, the Plaintiffs, Mr David Ramsay and Mr Glenn Tetley, applied under s 1323 of the Corporations Act 2001 (Cth), ss 66 and 67 of the Supreme Court Act 1970 (NSW) and the Court's inherent jurisdiction for the appointment of a receiver or receiver and manager of the property of the first defendant, Featherston Resources Ltd ("FRL"). The Plaintiffs also originally sought "freezing orders" but it is common ground that no such orders were made by the Court on 3 December 2013. Certain other orders were made which are not relevant to this application. 2Section 1323 of the Corporations Act relevantly authorises the Court to make certain orders where an investigation is being carried out under the Australian Securities and Investments Commission Act 2001 (Cth) or Corporations Act in relation to a person's act or omission that contravenes or may constitute a contravention of the Act, or a Court proceeding has begun against the person under the Act, and the Court consider it necessary or desirable to do so for the purpose of protecting the interests of a relevant person. The orders that may be made by the Court under s 1323(1)(h) include an order appointing a receiver or receiver and manager over the property or part of the property of a body corporate, having such powers as the Court orders. Sections 66 and 67 of the Supreme Court Act provide for the Court, at any stage of proceedings, to grant interlocutory relief. In particular, s 67 of the Supreme Court Act provides that the Court may, at any stage of proceedings, appoint a receiver by interlocutory order in any case in which it appears to the Court to be just or convenient to do so. 3On 3 December 2013, the duty judge made orders with effect up to and including 6 December 2013 on the basis that there would then be a further hearing in respect of those orders before the Court, and on terms that expressly reserved the ability for anyone served with or notified of the orders to apply to set them aside. The operation of those orders were subsequently extended to 9 December 2013, when an application to set them aside brought by FRL and an associated entity, Adveco Fertilisers Pty Limited ("AFPL") was heard before me, and were further extended to 10 December 2013 at 10am pending the delivery of my judgment in respect of that application. The orders made by the duty judge on that interim basis included orders appointing receivers and managers to the property of FRL and AFPL and for the receiver to take immediate possession of specified documents. 4FRL and AFPL seek orders under rules 36.15 and 36.16 of the Uniform Civil Procedure Rules 2005 (NSW) or alternatively in the Court's inherent jurisdiction that the orders in respect of the appointment of the receivers and managers be set aside. Rule 36.15 allows an order to be set aside if it was made irregularly, illegally or against good faith. Rule 36.16 allows a judgment or order to be set aside or varied if it was given or made in the absence of the party. The orders in this case were made in the absence of relevant parties, since FRL and AFPL were not present when the orders were made and, indeed, had not been given notice of the application for those orders. The parties' evidence 5The Plaintiffs relied, in support of the application to appoint receivers and managers and again in resisting any order that the appointment be set aside, on an affidavit of their solicitor Mr Peter Ashcroft dated 3 December 2013. Mr Ashcroft's affidavit sets out the nature of FRL's business and noted that, although FRL is incorporated in New Zealand, it is a registered foreign company under the Corporations Act and its primary corporate office is in Sydney. Mr Ashcroft notes that the First Plaintiff, Mr David Ramsay, is the former chief executive officer of FRL; that his employment was terminated in September 2013; and that he claims employment-related benefits and damages, costs and interests in respect of the termination of his employment. The Second Plaintiff, Mr Glenn Tetley, is a shareholder who holds 250,000 ordinary shares in FRL, which is about 0.26 percent of the company's issued shares. Mr Ashcroft also refers to an affidavit of Mr Percival, also a shareholder in FRL and a director of another entity, Goldsearch Limited, that is seeking to acquire FRL or its assets. 6Mr Ashcroft identifies a complaint that two of FRL's current directors, Messrs Goodacre and Kember, are associated with an entity, FRCN Pty Limited ("FRCN") to which FRL has issued convertible notes and contends that the issue of those convertible notes was a "major transaction" for which shareholder was required under FRL's constitution. Mr Ashcroft also points to other conduct said to be consistent with oppression. I note, however, a matter which will have some significance below, that no proceedings in respect of oppression have been commenced. Mr Ashcroft also identifies matters said to give rise to urgency in the application for the appointment of the receivers and expresses the view that: "If [FRL's] property is not preserved in the period that it takes to appoint a receiver who is independent of the current directors and directed to act in the best interests of all shareholders, Mr Ramsay's claim may be rendered moot as may the potential claim of Mr Tetley and the other shareholders against [FRL] for oppressive conduct." 7The Plaintiffs also rely on Mr Ramsay's affidavit dated 3 December 2013. Mr Ramsay refers to dealings between a corporate advisory firm, Driftwood Capital, FCRN, FRL and also to Mr Ramsay's involvement with FRL in the period of between 1 July 2013 when he was appointed as its chief executive officer and late September 2013 when his employment was terminated. His evidence is that the holders in respect of the convertible notes issued by FRL included interests associated with FRL's former chief executive officer, Ms Weston, and with two of its current directors, Messrs Goodacre and Kember to whom I have referred above. Mr Ramsay also points to the circumstances surrounding the removal of Mr Watts as executive chairman of FRL and expresses a concern that unless receivers are appointed, FRL may not be able to meet any judgment in which he obtains. 8The Plaintiffs also rely on Mr Tetley's affidavit dated 3 December 2013. Mr Tetley, as noted above, has a shareholding in FRL and his family company appears to have been contracted for a period to procure sale contracts or finance for FRL. He refers to a conversation with one of FRL's directors who is also a note holder in which, on his evidence, that director suggested that the director would be better off if FRL could not repay the notes; that conversation is in turn disputed by that director. Mr Tetley criticises FRL's failure to take up certain opportunities offered to it and the circumstances of the issue of the notes by FRL. The Plaintiffs also rely on an affidavit of Mr Percival, who is not one of the Plaintiffs in the proceedings, but is also a shareholder in FRL and a director of Goldsearch, which has made a conditional offer to buy FRL, apparently conditional "on numerous matters", including due diligence and approval of any agreement by Goldsearch's directors and shareholders. Mr Percival also expresses concerns as to the conduct of FRL's board and seeks the appointment of receivers. 9The Plaintiffs also read a further affidavit of Mr Ashcroft dealing, inter alia, with an application to amend the Originating Process to add FRCN as the Fourth Defendant and add orders restraining FRCN from dealing with the convertible note that is the subject of the Convertible Note Deed between FRCN and FRL and its associated entities. That application was deferred pending the determination of the application to set aside the orders appointing the receivers and ultimately not pressed. FRCN was represented during the hearing, although it was not party to the proceedings, and it did not press an application for leave to be heard under rule 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) and neither led evidence nor made submissions in respect of the hearing. 10FRL and AFPL in turn relied on affidavits of Messrs Andrew Prothero, Simon Kember, Tim Goodacre, Miles Sterick and James Mollison dated 7 December 2013. Mr Prothero gave evidence of sale orders and other transactions and potential transactions of FRL which have or may have failed by reason of the appointment of the receivers and also of steps taken by the receivers to freeze FRL's bank accounts and their advice that wages to the relatively small number of employees of FRL's New Zealand operation would not be paid. Mr Kember's evidence is directed to the circumstances in which FRL's board is said to have formed the view that the issue of the convertible notes was not a "major transaction" requiring shareholder approval under FRL's constitution. The character of the board minute recording that view, which is annexed to his affidavit, was subject to some criticism but it is not necessary or possible to reach any conclusion as to that matter for the purposes of this application. Mr Goodacre gives evidence of an investment of $27,418 in the trust established by FRCN to hold convertible notes in FRL and denies a statement attributable to him by Mr Tetley that he would be advantaged by a failure to repay the convertible notes by FRL. Mr Sterick and Mr Mollison are persons associated with Driftwood Capital, and Mr Mollison is currently interim chief executive officer of FRL, and they refer to dealings with, inter alia, Goldsearch and with Mr Ramsay in respect of a potential corporate transaction, including a meeting with Mr Ramsay immediately prior to the application for the appointment of receivers to FRL. 11FRL and ARPL also rely, on the application to set aside the orders, on an affidavit of their solicitor Mr John Hunt dated 7 December 2013 which indicates that, on his searches, no proceedings have been brought against FRL other than these proceedings seeking the appointment of a receiver and proceedings 2013/317729 brought by Mr Ramsay against FRL, in respect of his claim for unfair dismissal, which Mr Hunt notes is not a claim brought under the Corporations Act. 12Finally, Mr Brent Kijurina, who was appointed as receiver and manager by the interim orders previously made by the Court, sets out the steps which have been taken since that appointment. There was ultimately no criticism by any party of those steps, although there was a disputed question as to whether the receivers and managers had terminated the employment of certain staff of FRL as distinct from merely indicating that their wages would not be paid in the next payment period. 13There are, it is clear, very substantial issues in dispute in this matter with each of the Plaintiffs on the one hand and FRL (or its directors) on the other with each alleging improper conduct on the part of the other. It is not possible to resolve questions of that kind on any final basis in this application, particularly without cross-examination, nor is it necessary to do so to determine this application. The jurisdiction to appoint the receivers 14The orders made on an interim basis for the appointment of a receiver on 3 December were made ex parte and without notice to FRL and AFPL and, in those circumstances, the Court at least has power to set them aside under UCPR rule 36.16 in an appropriate case. The application for the appointment of receivers was, in the Originating Process, sought under s 1323 of the Corporations Act but also under s 67 of the Supreme Court Act and the Court's inherent jurisdiction, although it appears that submissions before the duty judge focussed substantially, and possibly exclusively, on the Court's jurisdiction under s 1323 of the Corporations Act and the Plaintiffs successfully resisted giving an undertaking as to damages on that occasion by reference to s 1323(4) of the Act to which I will refer below. 15I am comfortably satisfied, for reasons that I will set out below, that the orders for the appointment of receivers on an interim basis made on 3 December 2013 should be set aside. First, in my view, the jurisdictional requirements for such an appointment under s 1323 of the Corporations Act were not satisfied. There was, for the purposes of s 1323(1)(a) of the Corporations Act, no investigation being carried out under the Australian Securities and Investments Commission Act or the Corporations Act at the relevant time, so far as the evidence goes. That paragraph refers to an investigation undertaken in the exercise of a statutory power arising under the relevant Act, such as ASIC's power to conduct and investigation under ASIC Act Part 3 Division 1. That power does not extend, on its proper construction, to a person in a private capacity who is not exercising powers under either the Corporations Act or the ASIC Act and is considering or contemplating whether to commence proceedings. Mr Botsman, who appears for the Plaintiffs, submits that there is no reason to treat the two situations differently. I do not agree. First, the language of that paragraph requires that a body who is conducting an investigation under the relevant Acts be treated differently from the person who is not conducting such an investigation under the Act, but in a private capacity. Secondly, that distinction reflects a legislative recognition that a regulatory body exercising statutory powers is properly treated differently from the private party which is merely contemplating whether to commence proceedings. There is no suggestion that the jurisdictional requirement under s 1323(1)(b) of the Act is satisfied. The jurisdictional requirement under s 1323(1)(c) of the Act is also not satisfied, because the wrongful dismissal proceedings commenced by Mr Ramsay are not proceedings under the Corporations Act, and the suggested oppression proceedings have not been commenced. This is sufficient, in itself to require that the appointment of the receivers be set aside, so far as it was supported under s 1323 of the Corporations Act. 16The Plaintiffs also contended that jurisdiction to appoint a receiver is established under s 67 of the Supreme Court Act where Mr Ramsay had brought proceedings for wrongful dismissal and, on his evidence, he apprehends that FRL's directors have a conflict of interest, not disclosed to shareholders of FRL, that threatens the company's future. It should be noted, however, that that apprehension to which Mr Ramsay refers is not the subject of current proceedings, and was, so far as submissions before the duty judge went, a matter which was then the subject of inquiry as to which the Plaintiffs had made no commitment to bring proceedings. 17In submissions before me, the Plaintiffs made submissions at some length as to the conflict alleged to affect Messrs Kember and Goodacre as directors of FRL, in respect of their participation in the convertible notes; they suggested that that participation was funded by capitalising directors fees in advance; and they contended that the transaction was a related party transaction and also a "major transaction" which should have, but had not, received approval under FRL's constitution. Accepting, for the sake of argument, that those matters could be established, they are nonetheless not the subject of present proceedings. It does not seem to me that it would be just and convenient to appoint or continue the appointment of a receiver to support a claim that is not in fact the subject of current proceedings and that may never be brought, given the intrusive character of such an appointment. It is neither necessary nor appropriate, in that situation, to express a view as to the merits of the proceedings which have not been commenced. No attention was given in the parties' submissions to the complexities of the appropriate remedy in such proceedings where, for example, a security will typically will not be set aside unless at least the underlying loan is repaid. Whether the receiver should be authorised to bring proceedings in FRL's name 18The Plaintiffs also submitted, in submissions before me, that a Court appointed receiver should be authorised to bring proceedings in FRL's name if it determined that such proceedings were justified in respect of the convertible note. No such relief was sought in the application before the duty judge, although it appears that it may be raised in the Amended Originating Process that the Plaintiffs foreshadowed would be filed after this application is determined. A potential difficulty with that relief is that, at least as a matter of first impression, it is difficult to see why the Court would appoint a receiver to determine whether such proceedings should be brought and to bring them, at the company's cost, when the statutory derivative action regime established under Part 2F.1A of the Corporations Act contemplates that the Court will determine whether it should authorise such proceedings, and where the usual procedure in New South Wales is to require a plaintiff bringing such proceedings to fund the costs of them and to indemnify the company against any costs to which it might be exposed by the proceedings. Other discretionary considerations 19Even if the jurisdiction to appoint a receiver had been established, for the purposes of s 1323 of the Corporations Act, I am also satisfied, having now had the opportunity to hear submissions from FRL and AFPL which was not available to the duty judge in an ex parte application, that such an appointment should not have been made as an exercise of the Court's discretion in the relevant circumstances. First, so far as Mr Ramsay's application is concerned, his affidavit makes clear that he seeks that appointment to preserve FRL's assets against the contingency that he will ultimately obtain judgment in his favour in the wrongful dismissal proceedings. As FRL and AFPL point out, the appointment of a receiver, who would have to remain in place for a considerable period while those proceedings were on foot, goes well beyond what would be required to protect Mr Ramsay's legitimate interests in that situation. In particular, those interests do not extend to preventing any dissipation of the defendant's assets, but only a wrongful dissipation of those assets; compare Goumas v McIntosh [2012] NSWSC 713 at [23], [27]. Similar considerations apply so far as Mr Tetley and any potential oppression proceedings are concerned. 20I should also expand on one further matter to which I had only referred briefly in my oral reasons for judgment. As FPL and AFPL point out, less intrusive remedies were available to preserve the status quo than the appointment of receivers. Had Mr Tetley, who is a shareholder in FRL, sought leave to bring a derivative action in FRL's name, and obtained such leave, an interlocutory injunction could have been granted, if an appropriate undertaking as to damages was given, to restrain the exercise of FRCN's rights. That would, of course, have required that FRCN be joined as party to the proceedings, as the Plaintiffs subsequently foreshadowed they would seek to do in order to obtain such interlocutory relief against it, and that a claim for final relief be articulated against it by a party who had standing to bring that claim, so that any injunctive relief was granted in support of that claim. The fact that less intrusive relief would potentially have been available in properly constituted proceedings is another discretionary factor which tends against the appointment of a receiver where Mr Ramsay was not a contributory of FRL but merely a party bringing proceedings against it and Mr Tetley had not in fact sought leave to bring such proceedings. 21Further, while Mr Botsman relied before the duty judge on s 1323(4) of the Corporations Act, which provides that the Court cannot require an undertaking as to damages as a condition of making an interim order under that section, the absence of such an undertaking is still an important matter in determining such an application: Corporate Affairs Commission v Lombard International Pty Ltd (1987) 5 ACLC 269; Bond Brewing Holdings Ltd v National Australia Bank Ltd (1990) 1 ACSR 445 at 477. Mr Botsman referred to Commonwealth v ABC 2 Group Pty Ltd [2008] NSWSC 1383; (2008) 69 ACSR 228 at [30] to [31], where Barrett J emphasised that the appointment of a receiver can have "drastic, intrusive and invasive" consequences in the case of a company with an established business operating as a growing concern, but distinguished the position where an enterprise was not viable. That proposition does not assist the Plaintiffs here because the evidence demonstrates that, whatever the financial pressures on FRL, it was still making sales (at least prior to the receivers' appointment), it still had funds at bank and there was considerable interest by third parties in its potential acquisition. The risk of loss to FRL, and its contributories from such an appointment was a factor tending strongly against such an appointment, if no undertaking as to damages was given. 22I recognise that the Plaintiffs now offer such an undertaking and offer to have it operate from the point of time at which the receivers were initially appointed. There is in my view, a question as to the substance of the undertaking, where Mr Ramsay is presently the subject of a bankruptcy notice in respect of the costs of other proceedings and there is no evidence as to Mr Tetley's ability to meet such an undertaking. In any event, the offer of such an undertaking does not sufficiently support the appointment of a receiver where jurisdiction under s 1323 of the Corporations Act is not established and relief is otherwise not justified under s 67 of the Supreme Court Act or in the Court's inherent jurisdiction for the reasons noted above. I will nonetheless accept that undertaking, which may ultimately have some significance for the outcome of the proceedings in other respects. Setting aside of orders 23For these reasons, I am satisfied that orders 9 and 10 made by the Court on 3 December 2013 should be set aside. At one point in the course of submissions, I raised with the parties whether such an order should be stayed for a short period to allow the Plaintiffs an opportunity to seek any interlocutory relief which they may be advised. I have ultimately concluded that that course is not appropriate. First, it is not possible to achieve it by simply staying the orders which I will make, since it would in fact require a further extension of the period of the receivers' appointment in circumstances that I have held that that appointment should, on its merits, be set aside. Second, if events develop in such a way as to require interlocutory relief, the Court has sufficient power to grant it, including on a mandatory basis, in properly constituted proceedings. 24I should add that Mr Emmett, who appeared for the receivers, properly raised the question of their costs in submissions. This is a matter of particularly difficulty, since the costs incurred by receivers are themselves part of the adverse affect which the appointment of a receiver may have upon a company: Corporate Affairs Commission v Smithson [1984] 3 NSWLR 547; (1984) 9 ACLR 371 at 378-379; Australian Securities and Investments Commission; Re Richstar Enterprises Pty Ltd (No 5) [2006] FCA 684; (2006) 58 ACSR 6 at [21]. Mr Emmett contended that an equitable lien available to the receivers would subsist notwithstanding their appointment was set aside: Nationwide News Pty Ltd v Samalot Enterprise Pty Ltd (1986) 5 NSWLR 227 at 230. That submission has the potential difficulty that, if orders on 3 December were in fact made solely on the basis of s 1323 of the Corporations Act, then it may be that such an appointment does not give rise to an entitlement to recover remuneration from the assets of the corporation: Re Richstar Enterprises above at [22]. I do not consider that it is possible for me to express any concluded view as to this issue which was not fully addressed by the submissions of any party other than the receivers. 25It is sufficient that I should note, first, that nothing in this judgment should be taken to deprive the receivers of any equitable lien supporting a right to remuneration which might otherwise exist and, second, that the issue may in any event be addressed by the fact that the Plaintiffs have now offered an undertaking as to damages with effect from the point at which the receivers were appointed, which may be sufficient to address any loss which would otherwise be suffered by the receivers in the relevant circumstances. Costs 26I have now heard the parties as to the costs of this application. I should first note that the receivers attended in the course of the application before the Court yesterday, read an affidavit which provided useful background as to their activities since their appointment, and, through Mr Emmett, made helpful submissions as to relevant principles of law, and particularly as to issues of some complexity in respect of their remuneration. I am satisfied that their appearance before the Court was appropriate, and was of assistance, and that an order for costs should be made in their favour in the proceedings. Mr Botsman, who appeared for the Plaintiffs, did not resist such an order. The position of the Defendants reflects the usual principle that costs should follow the event. 27There remains a question as to whether any order for costs made in favour of the Defendants and the receivers should be made on an ordinary or indemnity basis. Mr Botsman contended that this was not a case where the Plaintiffs had no basis for their claims and might, on one view, be a matter where the Plaintiffs adopted an inappropriate process, by seeking the appointment of receivers, rather than by seeking interlocutory relief. There are at least some matters in the evidence before the Court which are capable of giving rise to concern. Nonetheless, it seems to me that the difficulties which have arisen in this matter, and which may ultimately impose significant costs upon both the Defendants and, possibly, the receivers, are in substantial part the result of the fact that an application was made, on an ex parte basis and without notice to the Respondents, for the appointment of receivers on an interim basis, so that the duty judge did not have the opportunity to hear submissions from the Defendants. 28Section 98 of the Civil Procedure Act 2005 (NSW) relevantly provides that, subject to the rules of the Court and to the Civil Procedure Act and any other Act, costs are in the Court's discretion and the Court may order that costs are to be awarded on the ordinary basis or an indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules in turn states the general rule that costs payable to a person are to be assessed on an ordinary basis. It is not necessary to repeat the principles applicable to an order for indemnity costs at length. Those principles were summarised by Sheppard J in Colgate Palmolive Co v Cussons (1993) 46 FCR 225, in a passage that is repeatedly applied in this and other Courts, including in Lahoud v Lahoud [2006] NSWSC 126 and Ng v Chong [2010] NSWSC 127 at [18]. Indemnity costs are not a punishment for a party which persists with a case which turns out to fail, but serve the purpose of compensating the other party for costs incurred, in circumstances that a normal costs order would not fully compensate that other party for such costs, and where the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of those costs: Hamod v State of New South Wales [2002] FCAFC 97; (2002) 188 ALR 659 at [20]. In Liverpool City Council v Estephen [2009] NSWCA 161 at [100] Giles JA noted that s 56 of the Civil Procedure Act adds emphasis to the occasion to depart from costs from an ordinary basis where a failure to properly conduct proceedings has caused costs to be incurred unnecessarily, but does not override the need for a rational connection between the reason for that departure and the extent of that departure. 29In the present case, I accept that there may be matters raised by the evidence in the proceedings which would warrant, on one view, interlocutory relief in an appropriate case, supported by an undertaking as to damages, if proceedings had been commenced which articulated the relevant issues as to which complaint is made. Nonetheless, it seems to me that the application for the appointment of receivers on an interim basis involved the real difficulty that, by proceeding on an ex parte basis, by not taking the opportunities for lesser remedies raised in submissions and by not giving notice to the Defendants which may have allowed the issues to be fully ventilated before the Court on 3 December, the circumstances which have arisen in this case came to exist. There is, in my view, sufficient in those matters for it to be said that the conduct of the application was unreasonable, so far as the Plaintiffs are concerned, and sufficiently so as to warrant that the Defendants and the receivers should be compensated on an indemnity basis for the costs to which they have been exposed. Mr Botsman also raised the possibility of a stay of the order for costs. I am not satisfied that such a stay should be granted and I do not grant such a stay. I am also satisfied, having regard to the reasons I have already given, that the circumstances warrant an order that costs be assessed forthwith on the basis that this is a discrete issue which would not be affected by subsequent developments in the proceedings. Orders 30I therefore make the following orders: 1. Note the undertaking as to damages given by the Plaintiffs, with effect from the appointment of the receivers made on 3 December 2013. 2. Orders 9 and 10 made by the Court on 3 December 2013 be set aside. 3. The Plaintiffs pay the costs of the Defendants and of the receivers of and incidental to the application heard before me on 9 December 2013 on an indemnity basis. 4. To the extent necessary, the Defendants and the receivers have leave to proceed to assess and enforce their costs forthwith. 5. The proceedings be stood over for further directions in the Corporations List on 10 February 2014. ********** 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. Decision last updated: 14 January 2014