Coming clean: Woolworths fined $9 million for participating in detergent price-fixing

21 June, 2016

Liquidators are encouraged to seek advice or directions from the Court as to the discharge of their responsibilities. But who bears the costs of such proceedings, of the liquidator and of any contradictor involved? In the recent decision of McDermott and Potts in their capacities as joint and several liquidators of Lonnex Pty Ltd (in liq) (No 2) [2019] VSCA 62, the Victorian Court of Appeal confirmed the principles that apply in relation to determining how the costs should be borne of (a) an application by a liquidator for advice or directions, and (b) an appeal by a liquidator from a refusal to give judicial advice or directions.


The applicants, Messrs McDermott and Potts, are the joint and several liquidators of Lonnex Pty Ltd (Lonnex).

The liquidators caused Lonnex to commence a proceeding against Lonnex & Millennium Management Holdings Pty Ltd. Following a mediation, the liquidators made applications under sections 477(2B) and 511 of the Corporations Act for orders directing that they are justified in compromising the proceeding and approving their entry into terms of settlement accordingly. An associate judge refused that application (note that s 511 was repealed on 1 March 2017 and has been replaced by s 90-15 of the Insolvency Practice Schedule (Corporations) (IPS)).

The liquidators sought leave to appeal, principally on the basis that the associate judge’s exercise of discretion miscarried. The Federal Commissioner of Taxation (the Commissioner), being the largest creditor in the liquidation, appeared in opposition to the liquidators’ application both before the associate judge and in the Court of Appeal.

The Court of Appeal determined that leave to appeal should be granted, but the liquidators’ appeal should be dismissed. At the handing down of judgment, directions were made for the filing of written submissions on the question of costs at first instance (the associate judge having reserved the same) and of the appeal.

Costs at first instance

The Court of Appeal observed that in relation to applications for directions, “it must be borne in mind that it is generally desirable that liquidators, like trustees, should use the resources of the court to seek directions as to the discharge of their responsibilities”. Further, the question of indemnity (from the assets of the company) in respect of the costs incurred by a liquidator “is determined by deciding whether the liability to costs was properly, in the sense of reasonably and honestly, incurred”.

In light of these principles, and taking into account the absence of any opposition by the Commissioner or any suggestion that the applications to the associate judge were improperly brought, the Court of Appeal had little difficulty concluding that there should be an order that the liquidators’ costs of the proceeding at first instance be paid out of the assets of Lonnex.

Having regard to “the desirability of a legally represented contradictor being involved, where appropriate”, the Court of Appeal similarly concluded that the Commissioner should have his costs of the proceedings at first instance out of the assets of the company.

Costs of appeal

The liquidators submitted that the same approach taken in relation to cases at first instance should be applied to the costs of the appeal. In this regard, they emphasised that the Commissioner had not submitted that the appeal was brought improperly, for an ulterior purpose or dishonestly, or that it was obviously misconceived.

The Court of Appeal did not accept this argument and confirmed that although trustees and liquidators are entitled to their costs of getting the guidance of the court in cases of difficulty out of the estate, they appeal at their own risk, and ordinarily must take the usual consequences. In general, therefore, the correct approach is that “a liquidator who appeals unsuccessfully from a determination of a court upon an application for directions ought to pay both the liquidator’s own costs and those of the successful party personally”. Further, the Court of Appeal could see no reason in the present case to depart from this ordinary rule. In particular, the case did not involve any controversy as to legal principle – rather, the principal basis of the appeal was that the associate judge’s exercise of discretion miscarried.

The second question was whether and to what extent the liquidators were entitled to recoup their own costs of the appeal, or those of the Commissioner that they are ordered to pay, from the estate.

The Commissioner sought an order pursuant to s 45-5 of the IPS that the liquidators have no right of indemnity from the assets of the company in respect of such costs. The Court of Appeal confirmed that in considering whether to make such an order the following principles were applicable:

  • Once it has been found to be appropriate to order a liquidator to pay personally the costs of an appeal they have brought following an unsuccessful request for advice or directions, the costs should ‘ordinarily’ be borne by the liquidator without recourse to the company’s assets.
  • Departure from the ordinary position will be justified where the unsuccessful appellant establishes that the costs were properly incurred, in the sense of honestly and reasonably incurred.
  • That issue is not resolved by considering only whether the appellants acted honestly, or upon advice, in bringing the appeal. Mere bona fides is not the test.

Applying the above principles to the present case, the Court of Appeal noted that all the creditors of the company opposed the course adopted by the liquidators (i.e. the proposed compromise of the proceeding) and that “as a matter of objective fact”, the entry into the compromise would also have been of benefit to the liquidators, even if only collaterally, as it would have secured payment to them of outstanding liabilities and averted the risk of future adverse costs orders. On this basis, the Court of Appeal was not satisfied that the incurring of the costs liabilities in respect of the appeal could be regarded as reasonable.

Accordingly, the Court of Appeal concluded that the appropriate orders were that the liquidators pay the Commissioner’s costs of the appeal and that they have no right of indemnity against the assets of the company in respect of those costs or their own costs of the appeal.

Take home points

  • The court will generally be supportive of liquidators and trustees using the resources of the court to seek directions as to the discharge of their responsibilities particularly in cases of difficulty, such as when a liquidator is faced with a decision whether to compromise a proceeding.
  • The test of whether a liquidator ought be entitled to be indemnified from the assets of the company for their costs incurred in applying to the court for directions “is determined by deciding whether the liability to costs was properly, in the sense of reasonably and honestly, incurred”. This test should not be difficult to satisfy in most ordinary cases (provided, for example, the applications for directions was not made in respect of a comparatively trivial matter).
  • If a liquidator is unsuccessful in his or her application for directions and decides to appeal that decision: (1) the ordinary rule is that they appeal at their own risk and thus ought to pay both their own costs, and those of any successful party, personally if unsuccessful in their appeal; (2) further, such costs should ordinarily be borne by the liquidator without recourse to the company’s assets; (3) the unsuccessful appellant liquidator will be justified in having a right of indemnity in respect of the costs of the appeal where they can establish that the costs were honestly and reasonably incurred.

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Canadian Court elevates thumbs-up emoji to signature status

In June 2023, a Canadian Court in South-West Terminal Ltd v Achter Land and Cattle Ltd, 2023 SKKB 116, held that the "thumbs-up" emoji carried enough weight to constitute acceptance of contractual terms, analogous to that of a "signature", to establish a legally binding contract.   Facts This case involved a contractual dispute between two parties namely South-West Terminal ("SWT"), a grain and crop inputs company; and Achter Land & Cattle Ltd ("ALC"), a farming corporation. SWT sought to purchase several tonnes of flax at a price of $17 per bushel, and in March 2021, Mr Mickleborough, SWT's Farm Marketing Representative, sent a "blast" text message to several sellers indicating this intention. Following this text message, Mr Mickleborough spoke with Mr Achter, owner of ALC, whereby both parties verbally agreed by phone that ALC would supply 86 metric tonnes of flax to SWT at a price of $17 per bushel, in November 2021. After the phone call, Mr Mickleborough applied his ink signature to the contract, took a photo of it on his mobile phone and texted it to Mr Archter with the text message, "please confirm flax contract". Mr Archter responded by texting back a "thumbs-up" emoji, but ultimately did not deliver the 87 metric tonnes of flax as agreed.   Issues The parties did not dispute the facts, but rather, "disagreed as to whether there was a formal meeting of the minds" and intention to enter into a legally binding agreement. The primary issue that the Court was tasked with deciding was whether Mr Achter's use of the thumbs-up emoji carried the same weight as a signature to signify acceptance of the terms of the alleged contract. Mr Mickleborough put forward the argument that the emoji sent by Mr Achter conveyed acceptance of the terms of the agreement, however Mr Achter disagreed arguing that his use of the emoji was his way of confirming receipt of the text message. By way of affidavit, Mr Achter stated "I deny that he accepted the thumbs-up emoji as a digital signature of the incomplete contract"; and "I did not have time to review the Flax agreement and merely wanted to indicate that I did receive his text message." Consensus Ad Idem In deciding this issue, the Court needed to determine whether there had been a "formal meeting of the minds". At paragraph [18], Justice Keene considered the reasonable bystander test: " The court is to look at “how each party’s conduct would appear to a reasonable person in the position of the other party” (Aga at para 35). The test for agreement to a contract for legal purposes is whether the parties have indicated to the outside world, in the form of the objective reasonable bystander, their intention to contract and the terms of such contract (Aga at para 36). The question is not what the parties subjectively had in mind, but rather whether their conduct was such that a reasonable person would conclude that they had intended to be bound (Aga at para 37)."   Justice Keene considered several factors including: The nature of the business relationship, notably that Mr Achter had a long-standing business relationship with SWT going back to at least 2015 when Mr Mickleborough started with SWT; and   The consistency in the manner by which the parties conducted their business by way of verbal conversation either in person or over the phone to come to an agreement on price and volume of grain, which would be followed by Mr Mickleborough drafting a contract and sending it to Mr Achter. Mr Mickleborough stated, "I have done approximately fifteen to twenty contracts with Achter"; and   The fact that the parties had both clearly understood responses by Mr Achter such as "looks good", "ok" or "yup" to mean confirmation of the contract and "not a mere acknowledgment of the receipt of the contract" by Mr Achter.   Judgment At paragraph [36], Keene J said: "I am satisfied on the balance of probabilities that Chris okayed or approved the contract just like he had done before except this time he used a thumbs-up emoji. In my opinion, when considering all of the circumstances that meant approval of the flax contract and not simply that he had received the contract and was going to think about it. In my view a reasonable bystander knowing all of the background would come to the objective understanding that the parties had reached consensus ad item – a meeting of the minds – just like they had done on numerous other occasions." The court satisfied that the use of the thumbs-up emoji paralleled the prior abbreviated texts that the parties had used to confirm agreement ("looks good", "yup" and "ok"). This approach had become the established way the parties conducted their business relationship.   Significance of the Thumbs-Up Emoji Justice Keene acknowledged the significance of a thumbs-up emoji as something analogous to a signature at paragraph [63]: "This court readily acknowledges that a thumbs-up emoji is a non-traditional means to "sign" a document but nevertheless under these circumstances this was a valid way to convey the two purposes of a "signature" – to identify the signator… and… to convey Achter's acceptance of the flax contract." In support of this, Justice Keene cited the definition of the thumbs-up emoji: "used to express assent, approval or encouragement in digital communications, especially in western cultures", confirming that the thumbs-up emoji is an "action in an electronic form" that can be used to allow express acceptance as contemplated under the Canadian Electronic Information and Documents Act 2000. Justice Keene dismissed the concerns raised by the defence that accepting the thumbs up emoji as a sign of agreement would "open the flood gates" to new interpretations of other emojis, such as the 'fist bump' and 'handshake'. Significantly, the Court held, "I agree this case is novel (at least in Skatchewan), but nevertheless this Court cannot (nor should it) attempt to stem the tide of technology and common usage." Ultimately the Court found in favour of SWT, holding that there was a valid contract between the parties and that the defendant breached by failing to deliver the flax. Keene J made a judgment against ALC for damages in the amount of $82,200.21 payable to SWT plus interest.   What does this mean for Australia? This is a Canadian decision meaning that it is not precedent in Australia. However, an Australian court is well within its rights to consider this judgment when dealing with matters that come before it with similar circumstances. This judgment is a reminder that the common law of contract has and will continue to evolve to meet the everchanging realities and challenges of our day-to-day lives. As time has progressed, we have seen the courts transition from sole acceptance of the traditional "wet ink" signature, to electronic signatures. Electronic signatures are legally recognised in Australia and are provided for by the Electronic Transactions Act 1999 and the Electronic Transactions Regulations 2020. Companies are also now able to execute certain documents via electronic means under s 127 of the Corporations Act. We have also seen the rise of electronic platforms such as "DocuSign" used in commercial relationships to facilitate the efficient signing of contracts. Furthermore, this case highlights how courts will interpret the element of "intention" when determining whether a valid contract has been formed, confirming the long-standing principle that it is to be assessed objectively from the perspective of a reasonable and objective bystander who is aware of all the relevant facts. Overall, this is an interesting development for parties engaging in commerce via electronic means and an important reminder to all to be conscious of the fact that contracts have the potential to be agreed to by use of an emoji in today's digital age.

Published by Foez Dewan
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Venues NSW ats Kerri Kane: Venues NSW successful in overturning a District Court decision

The McCabes Government team are pleased to have assisted Venues NSW in successfully overturning a District Court decision holding it liable in negligence for injuries sustained by a patron who slipped and fell down a set of steps at a sports stadium; Venues NSW v Kane [2023] NSWCA 192 Principles The NSW Court of Appeal has reaffirmed the principles regarding the interpretation of the matters to be considered under sections5B of the Civil Liability Act 2002 (NSW). There is no obligation in negligence for an occupier to ensure that handrails are applied to all sets of steps in its premises. An occupier will not automatically be liable in negligence if its premises are not compliant with the Building Code of Australia (BCA). Background The plaintiff commenced proceedings in the District Court of NSW against Venues NSW (VNSW) alleging she suffered injuries when she fell down a set of steps at McDonald Jones Stadium in Newcastle on 6 July 2019. The plaintiff attended the Stadium with her husband and friend to watch an NRL rugby league match. It was raining heavily on the day. The plaintiff alleged she slipped and fell while descending a stepped aisle which comprised of concrete steps between rows of seating. The plaintiff sued VNSW in negligence alleging the stepped aisle constituted a "stairwell" under the BCA and therefore ought to have had a handrail. The plaintiff also alleged that the chamfered edge of the steps exceeded the allowed tolerance of 5mm. The Decision at Trial In finding in favour of the plaintiff, Norton DCJ found that: the steps constituted a "stairwell" and therefore were in breach of the BCA due to the absence of a handrail and the presence of a chamfered edge exceeding 5mm in length. even if handrails were not required, the use of them would have been good and reasonable practice given the stadium was open during periods of darkness, inclement weather, and used by a persons of varying levels of physical agility. VNSW ought to have arranged a risk assessment of the entire stadium, particularly the areas which provided access along stepped surfaces. installation of a handrail (or building stairs with the required chamfered edge) would not impose a serious burden on VNSW, even if required on other similar steps. Issues on Appeal VNSW appealed the decision of Norton DCJ. The primary challenge was to the trial judge's finding that VNSW was in breach of its duty of care in failing to install a handrail. In addition, VNSW challenged the findings that the steps met the definition of a 'stairwell' under the BCA as well as the trial judge's assessment of damages. Decision on Appeal The Court of Appeal found that primary judge's finding of breach of duty on the part of VNSW could not stand for multiple reasons, including that it proceeded on an erroneous construction of s5B of the Civil Liability Act 2002 and the obvious nature of the danger presented by the steps. As to the determination of breach of duty, the Court stressed that the trial judge was wrong to proceed on the basis that the Court simply has regard to each of the seven matters raised in ss 5B and 5C of the CLA and then express a conclusion as to breach. Instead, the Court emphasised that s 5B(1)(c) is a gateway, such that a plaintiff who fails to satisfy that provision cannot succeed, with the matters raised in s 5B(2) being mandatory considerations to be borne in mind when determining s 5B(1)(c). 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Published by Leighton Hawkes
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Litigation and Dispute Resolution

Expert evidence – The letter of instruction and involvement of lawyers

The recent decision in New Aim Pty Ltd v Leung [2023] FCAFC 67 (New Aim) has provided some useful guidance in relation to briefing experts in litigation.

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