Moreton Resources - Case Update

The Supreme Court of Queensland has considered whether two companies in receivership and their director/shareholder are “third party payers” under the Legal Profession Act 2007 (Qld) (LPA) and thus entitled to seek assessment of legal costs incurred by the receivers and the security trustee.

Moreton Resources Ltd (MRL), an Australian coal mining company, and MRV Metals (MRV) entered voluntary administration in 2020. Darryl Kirk of Cor Cordis was appointed receiver in 2022. Over the course of the receivership, the receiver and the security trustee (Melgear Pty Ltd) had engaged solicitors and incurred costs in litigation, including proceedings brought unsuccessfully by Alexander Elks, who is a director of MRL, the chief executive officer of both MRL and MRV, one of the secured creditors of MRL and MRV, and the ultimate owner of the majority of shares in MRV.

The applicants (Mr Elks, MRL and MRV) sought to have those costs assessed. The preliminary questions before the Court included whether the applicants qualified as third party payers, whether they were permitted to seek assessment of the costs, and whether the Court should order the preparation of further itemised bills.

The Court held that both MRL and MRV were non-associated third party payers because, under the debenture and security trust deeds, they were under a legal obligation to indemnify Melgear for costs (including legal costs) incurred in enforcing security. Even though those costs were ultimately paid out of the sale proceeds of secured assets, the companies remained legally obliged to cover them until discharged. This satisfied the statutory requirement under s 301 of the LPA.

The Court distinguished the position of Mr Elks. Although he was a debenture holder and had indemnity obligations in limited circumstances, none of his property formed part of the charged security, and the relevant costs were already met from sale proceeds. Accordingly, he was only a third party payer in respect of costs that he was personally ordered to pay by court order, but not for other legal costs which the companies might be liable to pay.

On the question of itemised bills, the Court declined to make the directions sought. The evidence showed that the solicitors engaged by the receiver and trustee had already provided proper itemised bills detailing tasks, time, rates, and dates. Since the statutory definition of “itemised bill” had been met, the discretion to order fresh bills was not engaged. Moreover, any detailed task descriptions in those bills attracted legal professional privilege, which had not been waived.

Read the decision HERE.

Professionals involved:

• Scott Malcolmson of Level 24 Chambers (instructed by Sasha Legal) for the applicants, MRL, MRV and Mr Elks

• Will LeMass and Alexander White of Northbank Chambers (instructed by Colin Biggers & Paisley) for the respondents