Case: Expile Pty Limited v Jabb's Excavations Pty Limited (2004) 22 ACLC 667
Outcome: referred to
Whilst costs normally follow the event the award of costs is almost invariably in the discretion of the court (see s 43(2) of the Federal Court of Australia Act 1976 (Cth) and Order 62 r15 of the Federal Court Rules . See also Expile Pty Limited v Jabb's Excavations Pty Limited ('Expile') (2004) 22 ACLC 667 at 675 [33]). 24 In the foregoing circumstances the plaintiff instituted the current proceedings on 21 April 2006 with a view to securing the right to vote at the adjourned meeting of creditors on 23 June 2006 for an amount in excess of $1.4m. 25 By an amended originating process filed in Court on 11 May 2006 the plaintiff sought, inter alia, a declaration that the administrator's rejection or partial rejection of the plaintiff's proof of debt 'made on 7 April 2006' was invalid, an order that the plaintiff's proof of debt be admitted in full or, alternatively, an order that the administrator's rejection of the plaintiff's proof of debt be modified or varied so as to allow the plaintiff's proof of debt in whole or in part as the court may deem appropriate. 74 In FAI Workers Compensation (NSW) Limited v Philkor Builders Pty Limited ('Philkor') (1996) 20 ACSR 592, Young J, as his Honour then was, held that the prospect of a plaintiff securing an entitlement to costs in winding up proceedings under the Corporations Law did not enable such a plaintiff to contend that a contingent debt was payable by the company to the plaintiff in circumstances where, before a winding up order was made, the company was placed in administration and a deed of company arrangement was thereafter executed following a resolution of the majority of creditors of the company that it should do so. Such resolution had not been supported by the plaintiff. This decision is quite unexceptional and has no real bearing on the resolution of the issues in the present case. As his Honour said at 597: 'As under s 466 there is a personal obligation to bear one's own costs of a winding up petition until the winding up order is made and then a statutory right to get costs which commences as at that day, it does not appear to me that a claim for costs before the order is made can be classed as a contingent debt.' (see also Expile at 673-5 and McDonald at 474-5) 75 After referring to Philcor and Expile Barrett J said in respect of the costs of winding up proceedings in McDonald at 474-5 [45]-[46]: '... The preferable analysis ... is that it is the state of insolvency found by the court to exist that forms the basis of the winding up order. The applicant's debt is the source of the applicant's standing to seek a winding up order. That debt may also cause a presumption of insolvency to apply via the statutory demand process provided for in Div 2 of Pt 5.4 for the purposes of the winding up application. But even then, it is the court's positive decision that insolvency exists, rather than the particular circumstance of non-payment of the applicant's debt, that forms the basis for the exercise of the jurisdiction to make a winding up order.' 88 In Expile at 675, Palmer J distinguished claims for costs against a company arising incidentally to a claim for damages or other relief against wrongdoing from costs incurred in an application to wind a company up for insolvency. His Honour found it unnecessary to explore the nature of a costs claim against a company arising incidentally to a claim for damages or other relief against wrongdoing. However he did observe that substantive claims depend upon the existence of legal rights, whilst awards of costs are always in the discretion of the Court, even though the way in which the discretion will be exercised will be fairly predictable in most cases. 89 Palmer J addressed what was meant by 'future claims' and 'contingent claims' in s 553(1) of the Act. At 675 [37] his Honour said: 'A future claim is distinguishable from a contingent claim in that, while both are founded on an obligation existing as at the commencement of the winding up ... a future claim will arise at some time thereafter while a contingent claim may arise. A typical example of a future claim is a claim for rent which will become due in the future under a lease which is in existence at the commencement of the winding up.' (emphasis in original)