A recent illustration of the operation of the Graywinter principle can be seen in the decision of the Victorian Court of Appeal in Malec Holdings Pty Ltd v Scotts Agencies Pty Ltd (in liq). In that case, the company’s supporting affidavit filed and served within the 21 day period required by s 459G(3) of the Corporations Act 2001 (Cth) alleged overcharging by the creditor to raise a genuine dispute or an offsetting claim. The allegation of overcharging was made on a very specific basis and there was precise quantification of the alleged offsetting claim. After the expiration of the 21 day period, another affidavit was filed and served which alleged overcharging on a different basis and for a larger amount. Although the company claimed that no new ground not included in the supporting affidavit had been raised, the Victorian Court of Appeal held that the Graywinter principle precluded the company from relying on the overcharging ground in the later affidavit because it differed in character and type from that which had been raised in the supporting affidavit. The fact that both grounds raised the broad issue of overcharging was regarded as insufficient to satisfy the Graywinter principle. Read further about the case here.
Graywinter principle found to preclude reliance upon a ground first raised after the 21 day period
Full Federal Court calls for investigation by the legislature of arrangements involving the same litigation funder being on both sides of the record
In a recent decision (Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2), the Full Court of the Federal Court of Australia (Gilmour, Perram and Beach JJ) observed that the same litigation funder was on both sides of the record and commented that “[t]he desirability of permitting such arrangements is something which warrants investigation by the legislature.”
Tamaya Resources Limited (in liq) (“Tamaya”) had appealed from a decision of a judge of the Federal Court to refuse leave to amend pleadings in two proceedings and the call for investigation was made in the course of the Full Federal Court giving its reasons for making orders to dismiss those appeals.
The two proceedings, one referred to as the “Deloitte Proceeding” and the other referred to as the “New Directors Proceeding”, are part of four related suits involving Tamaya which collapsed in 2008. Those proceedings, along with a third proceeding referred to as the “Original Directors Proceeding” are listed for final hearing in May 2016 and involve efforts by the liquidator of Tamaya to recover losses allegedly suffered by Tamaya as a result of various transactions:
- The Original Directors Proceeding, brought against various former directors of Tamaya, concerns the acquisition by Tamaya, through another company, of a Soviet era gold mine in Southern Armenia. It is alleged that the characteristics of the mine were such that it would have been virtually impossible for a company of Tamaya’s size to turn the mine into a commercially viable venture and that, accordingly, the acquisition had proceeded without adequate due diligence.
- The Deloitte Proceeding and the New Directors Proceeding, subsequently commenced against Tamaya’s auditors and certain former directors of Tamaya respectively, involve allegations that Tamaya’s audited financial statements for the year ended 2007 did not comply with relevant accounting standards, were not free from material misstatement and did not give a true and fair view of Tamaya’s financial position and performance as at 31 December 2007.
The fourth suit is a class action commenced in relation to the 2007 financial statements by shareholders of Tamaya. That action has been brought against Tamaya, some of its former directors and Tamaya’s auditors. It claims, amongst other things, that, but for the misstatements allegedly contained in the 2007 financial statements, the shareholders would not have acquired their shares at all or, if they had acquired them, that the market price of the shares at the time of acquisition would have been lower in a market which had been correctly informed of Tamaya’s position. The class action requires the leave of the court to proceed and a decision on an application for leave to proceed is currently reserved before a judge of the Federal Court.
The Full Federal Court observed that at some point the liquidators of Tamaya had entered into a litigation funding arrangement with International Litigation Partners No 2 Ltd. The Full Court further observed that the shareholder class action was also being funded by International Litigation Partners No 2 Ltd. It was in this context that the Full Court noted that the same litigation funder was on both sides of the record and said that the desirability of permitting such arrangements warranted investigation by the legislature.
High Court upholds the practice of parties making agreed or other penalty submissions in civil penalty proceedings
The High Court of Australia in Commonwealth of Australia v Director, Fair Work Building Industry Inspectorate; Construction, Forestry, Mining and Energy Union v Director, Fair Work Building Industry Inspectorate has unanimously held that Barbaro v The Queen does not apply to civil penalty proceedings and a court is not precluded from receiving and, if appropriate, accepting an agreed or other civil penalty submission.
The High Court’s decision, which overturns a ruling by the Full Court of the Federal Court of Australia, is an emphatic endorsement of the longstanding practice in civil penalty proceedings of parties making joint submissions to the court as to the terms and quantum of the penalty that should be imposed on the wrongdoer and the court imposing the agreed penalty if it considers it to be appropriate in the circumstances. Read further about the case here.
General principles relevant to the question of costs in unsuccessful family provision applications
In New South Wales, the court is given a wide discretion as to the award of costs in family provision applications brought under Ch 3 of the Succession Act 2006 (NSW). In exercising the discretion in cases in which the plaintiff’s application has been dismissed, many judges of the Supreme Court of New South Wales are now guided by a number of general principles which Hallen AsJ (as his Honour then was) in Harkness v Harkness (No 2) identified as relevant to the question of costs in unsuccessful family provision applications.
It is clear from these general principles that the current practice of the Supreme Court in such cases is to apply the usual rule as to costs that the unsuccessful plaintiff pay the costs of the successful defendant. While the Court may depart from the usual rule in a particular case, it should not be assumed that it will do so.
A legal practitioner acting for a potential plaintiff in a family provision application should be familiar with these general principles and ensure that the potential plaintiff is properly advised of the risk as to costs in the event that he/ she is unsuccessful in the application. Read further about the general principles here.
The oppression remedy in Pt 2F.1 – membership contests should be resolved prior to, and separately from, oppression proceedings
Part 2F.1 (ss 232-235) of the Corporations Act 2001 (Cth) provides a number of remedies where the affairs of a company are being conducted in an oppressive manner. Where oppressive conduct is made out, the Court may make any order that it considers appropriate including an order that the company be wound up. Those who may apply for an order from the Court in relation to a company are a member of the company and certain others.
In Rodda v Lifestyle Loans Vic Pty Ltd, the plaintiff commenced oppression proceedings alleging that he was a member of the company but his membership was disputed and his name did not appear on the company’s register of members. The Supreme Court of Victoria held that membership was a jurisdictional requirement and that membership contests needed to be resolved prior to, and separately from, oppression proceedings because such proceedings presupposed uncontested membership. Read about the case here.
