1 This order shall dispose of the appeal No. 34 of 2008 filed under section 33 of the Securities and Exchange Commission of Pakistan ("SECP") Act, 1997 by M/s United Industries Limited & another (the "Appellants") against the Order of the Executive Director (Registration) ("E.D") dated September 3, 2008.
2. The facts leading -to the case are that Mian Waciar-ud-din and three others (the "Respondents") who jointly own 49% of _the total shareholdings of M/s United Industries Limited (the "Company") filed an application under section 234A of the Companies Ordinance 1984 (the "Ordinance"), for ordering of special audit by appointment of auditors, to carry out detailed scrutiny of the affairs of the Company.
3. That the Appellant No 2 along with his associates (the "Muggo Group") jointly owns 51% of the shareholding of the Company have been accused by the Respondents of jointly and severally:
(i) depriving the Respondents of the due return on their investment;
(ii) siphoning off the funds of the Company to their own benefit;
(iii) independently running the entire business of the Company without involvement of the Respondents;
(iv) conducting the affairs of the Company in unlawful and fraudulent manner, oppressive to the interest of other directors/shareholders and in contravention to the Memorandum and Articles of Association of the Company; preventing the directors/shareholders consisting of the Respondents and their associates (the "Waciar Group") from performing their duties as directors / shareholders; carrying on a parallel business of manufacturing and sale, similar to that of the Company's products under various names; charging the whole cost of production from the accounts of the Company in respect of the parallel business of manufacturing and sale similar to that of company's products, which was /is also obvious from the excessive cost of production being shown in the Company's records; maintaining separate books of accounts and bank accounts, without the knowledge of the directors/shareholders including the Respondents; operating secret accounts of the Company business in the names of M/s Hamza Traders and M/s Husnain Traders with Habib Bank Limited, F.D.A Branch, Faisalabad and for opening of these accounts, using National Identity Card of Mr. Arif Bhatti, Data Processing Manager of the Company;
(x) transacting purchase of raw material and sales of products through the accounts in the names of M/s Hamza Traders and M/s Husnain by Appellant No 2 and his brother Mr. Jahangir Muggo (one of the directors of the Company under the fictitious signatures of Mr. Arif Bhatti); Charging the full cost of production and sales to the Company bank accounts while depositing half of the revenues generated by the Company in its accounts and depositing the balance in M/s Hamza Traders and M/s Hussain Traders accounts resulting in massive under reporting of the profits of the company and fraudulently pocketing the profits; exaggerating the various costs- reflected in the books of the Company, in particular, the purchase cost of raw material, packing material and chemicals, which were over invoiced in order to illegally siphon out funds from the accounts of the Company resulting in unexplained increase in Appellant No 2 and his brother's personal wealth; evading different government taxes to the tune of billions of rupees during the last 7 years due to the fraudulent business methods employed by the Muggo group; depriving the Wagar Group of dividends despite the handsome profits and reserves shown in the balance sheets of the Company; charging the utility bills amounting to millions of rupees for the residences of Appellant No 2s' mother, brother, and his two houses from the account of the Company; purchasing vehicles worth millions of rupees, the details of which are mentioned below, for his personal as well as his family member's use, as reflected in all the balance sheets of the Company, without getting approval of the board of directors, causing an additional liability on account of 20% mark up and maintenance: {{TABLE}} Years Cost of vehicles Purchased 1993-94 1,691,500.00 1994-95 3,336,621.00 1995-96 1,449,615.00 1996-97 3,682,872.00 " 1997-98 2,642,939.00 1998-99 1,165%509.00 1,144,180.00 1999-00 2000-01 518,286.00 2001-02 6,714,049.00 2002-03 1,825,744.00 2003-04 476,562.00 2004-05 NET TOTAL 24,647,877.00 {{TABLE}}
(xvii) illicitly hiding, by nearly 50% the Company's production as is evident from the consumption of fuel and power. Comparison of the cost incurred on fuel and power between the Company and Unilever Pakistan Limited, on per ton basis has been provided in the application as follows: {{TABLE}} Financial Year The Company Unilever 2001-02 Rs. 2,176 Rs. 1,127 2002-03 Rs. 2,156 Rs. 1,169 2003-04 Rs. 1,848 Rs. 875 {{TABLE}} (xviii) embezzling on account of utilization of gas in industrial undertaking of the Company; doubling of production and sales of Ghee & Oil and sale of laundry soaps by 400%, on deployment of the Security Guards at the factory premises of the Company; siphoning off the funds of the Company on account of advertising and promotional activities; siphoning off the funds of the Company in the guise of raw and packing material;
(xix) committing fraud in connivance with Mr. Arif Bhatti, Data Processing Manager and Mr. M. R.
Jamshed Bhutta, Company Secretary/General Manager (F&A), which is reflected from the balance sheet of the Company, for the year ending 2005, that showed net profit of Rs.6,856,342/- in comparison to figures reported in the balance sheet for the year 2004 where the net profit was of Rs.73,322,115/- and for the year 2003 where the net profit was Rs. 78,877,205/- ; making of fictitious entries regarding chemicals consumption; declaring the production capacity of the plant to be less than 50%; increase in selling and distribution expenses per ton without any justification;
(xxi) failure to hold meetings of the board of directors before 2005 and holding meetings thereafter which failed to address the agenda items proposed by Waciar Group; fabrication of the minutes of the meetings of the board of directors/shareholders and failure to provide copies of the minutes of the meetings to the Waciar Group; failure to call the AGM for the approval of accounts for the year ending 30.06.2005; nor providing to the Waciar Group the profit and loss accounts from June 2005 onwards; fabrication of minutes of meeting for the elections of Chief Executive; (xxiii) fictitiously passing special resolution dated 25/05/2003 for increase in authorized capital from 50 million to 100 million;
(xxiv) changing the registered office of the Company on 02/05/2006, from Flat No. 411- 4th Floor, Eden Heights, Gulberg, Lahore to 9-B Upper Mall Scheme, Lahore without approval of the Respondents;
(xxv) keeping the books of account in violation of section 230 of the Ordinance by not keeping them in the registered office and allowing other directors/shareholders to inspect them;
(xxvi) appointing the auditor, without the approval of the board of directors/shareholders, despite the clear directives of the Lahore High Court, Lahore, ( the "Court").
The details of the above mentioned complaints have been elaborated in the application seeking a special audit.
4. On receiving the Respondents application for a special audit the Additional Registrar concerned of the CRO vide letter dated 29-8-2007 recommended ordering of special audit and appointment of auditor to carry out detailed scrutiny of the affairs of the Company, under section 234-A of the Ordinance.
5. After examination of the application for a special audit and the report of the Additional Registrar concerned, notice dated 8-10-2007 was issued to the Appellants by the ED to show cause within fourteen days, as to why an auditor to carry out the special audit and detailed scrutiny of the affairs of the Company may not be appointed under section 234-A of the Ordinance.
6. The Appellants in their response to the show cause notice stated that: it prior to filing of the application under sections 234-A of the Ordinance, before the Commission, a petition under section 305 read with section 309 and 290 of the Ordinance, on the same allegation, bearing C.O. No.35/2006, seeking the winding up of the Company and other directions from the Court had been filed by the Respondents; ii) after the filing of the said petition, numerous miscellaneous applications have been filed in the Court which are also based on the same allegations, that form the subject matter of the application for a special audit, and seek special audit and appointment of auditors to carry out detailed scrutiny of the affairs of the Company; iii) C.M. No.430/2007 has been specially filed in the Court contending that the audit of the company should not be conducted by the auditors of the Company i. e. M/s Saeed Mathani Mushtaq & Company, Chartered Accountants and instead the audit should be carried out by a reputable firm of Chartered Accountants to be appointed by the Court. This in fact amounts to seeking an order for special audit as any audit by a Chartered Accountant not appointed by the Company under section 252 of the Ordinance, would amount to be a special audit; iv) it is obvious that the reasons for seeking a special audit and a detailed scrutiny of the affairs of the company are the same which form the basis for the petition filed in the Court. The Court is hearing the final arguments on the main petition. The counsel for the Respondents has completed his arguments and the counsel for the other group of shareholders of the Company is making his submissions before the Court; v) in view of the pendency of the petition before the Court, the application for a special audit on the same allegations is not maintainable and the same is liableto be dismissed; vi) in the case of an adverse order passed by the Commission the same can be impugned in appeal before the Court under Section 34 of the Securities & Exchange Commission of Pakistan Act,1997 the "Act") . Thus the Court is the appellate forum against any adjudication by the Commission. Consequently the Commission cannot record any findings contrary to that of the Court and to avoid any conflict of judgment in view of the fact that the question of audit by a firm other than the auditors of the Company is already the subject mater of adjudication before the Court, the application for a special audit is not maintainable under the law; the Court has appointed a Local Commission to check and verify the record of the Company and prepare a complete inventory, who has taken into his custody the record of the Company and the Company has no access to the records and therefore cannot provide it to the special auditor , if appointed; the audit of the company has not been completed till date on account of lack of co-ordination between the Chartered Accountants and the Local Commission. This is duly reflected in the order dated 18.05.2007 passed by the Court, therefore the parawise reply to the allegations in the show cause notice cannot be given in detail without examination of the record; ix) in case the contention of the Appellants that the application under section 234-A of the Ordinance is not maintainable (in view of the pendency of the petition before the Court) does not find favor, then the Appellants may seek the indulgence of the Commission to permit the Appellants to file a petition in the Court to enable the Company to have access to the record of the Company so as to enable it to file the parawise reply to the application for a special audit.
7. Hearing in the show cause proceedings were held on 2-11-2007, however no order was passed as powers under section 234-A of the Ordinance, were not delegated to the then Commissioner. The power was subsequently delegated to the Commissioner (CLD) vide SRO No 420 (I) 2008 dated 5- 5-2008. The then Commissioner (CLD) passed the order on 12-5-2008 appointing Imran Farooq Mian, FCA of M/s Ferguson & Co, for conducting special audit in terms of section 234A of the Ordinance. The order was later amended vide corrigendum order dated 11-6-2008, appointing M/s Ferguson & Co instead of Imran Farooq Mian and certain changes were made in terms of reference. Being aggrieved by both the orders, the Appellants filed two appeals; appeal No 15 of 2008 and 20 of 2008 before the Appellate Bench (the "Bench") of the Commission.
8 The above mentioned appeals were disposed off by the Bench on 9-7-08 after the parties agreed that they have no objection if the application filed by the Respondents under section 234A of the Ordinance is treated as pending before the Commissioner (CLD) for fresh hearing and order.
Moreover, the parties agreed that the Commissioner (CLD) could proceed on the basis of show cause notice already issued and the reply thereto already filed. The then Commissioner (CLD) was also requested by the Bench to hear the parties the earliest and pass the appropriate order in accordance with law.
9. Pursuant to the order of the Bench, the case was fixed for hearing by the Commissioner (CLD) on 28-7-2008, but unfortunately he died in a tragic accident on 20-7-2008. The powers to adjudicate the cases under section 234-A of the Ordinance was thereafter delegated to E.D vide SRO No. 839 (1)/2008 dated 11-8-2008.
10. The case was fixed before the E.D on 19-8-2008. The Appellants counsel argued the case and submitted an application, alleging new grounds for dismissal of application filed under section 234A of the Ordinance. The Respondents counsel filed reply to the aforesaid application. The E.D after considering the show cause notice, reply to the show cause notice, the application filed by the Appellants counsel, its reply and in light of the arguments advanced by the parties passed an order dated September 3, 2008 (the "Impugned Order") appointing M/s A. F. Ferguson and Company, Chartered Accountants, as auditor to carry out the special audit and detailed scrutiny of the affairs of the Company under section 234-A of the Ordinance.
1. The Appellants aggrieved by the Impugned Order have preferred the instant appeal. Counsel for the Appellants made the following submissions:
(i) That the E.D had no jurisdiction to pass the Impugned Order as the Appellate Bench in its order dated 07-07-2008 remanded the case to the Commissioner (CLD) and therefore E.D had no authority to hear the appeal. When asked by the Bench to explain whether any prejudice was caused to him as result of matter having being heard by the ED, he stated that the E.D in the earlier round had heard the case, therefore the Appellants case has been prejudiced as the Impugned Order was passed by him. Moreover, Commissioner (CLD) is a higher authority than the E.D and therefore, the Appellant was denied an opportunity to address his grievance before a higher authority.
That in the Impugned Order, special audit for three years i.e., 2005, 2006, and 2007 had been ordered. On the issue of special audit for the years 2006 and 2007, the counsel referred to the order of the Court dated 1-06-2006 and stated that the Local Commission was handed over the books of accounts of the Company on that date and therefore the statutory audit for the year ending 30- 06-2006 and 30-06-2007 could not be conducted. He further stated that the special audit pre- supposes that statutory audit has already been conducted; therefore special audit for the year 2006 and 2007 could not have been ordered unless the statutory audit is conducted.
On the issue of special audit for the year 2005, the counsel stated that section 160-A of the Ordinance requires that if any shareholder has objection to the proceedings of the general meeting, he should raise that objection by making a petition to the court within 30 days of such meeting. Since the Respondents never raised any objection, therefore the resolution passed in the general meetings held on 30-11-2005, in which accounts and the balance sheet of the company as on 30-06-2005 were approved, have attained finality in the eye of law and therefore special audit cannot be ordered.
(iv) Our attention was drawn to Civil Original No 35 of 2006 for winding up of the Company filed by the Respondents before the Court. It was stated that the Respondents in the aforementioned winding up petition and other miscellaneous applications in Civil Original 35 of 2006 have prayed for conducting audit of the company for the last five (5) years, to which Court has not acceded and no order for conducting an audit has so far been passed. In view of the pendency of Civil Original 35 of 2006 no order of special audit could have been passed by the E.D and the application under section 234A of the Ordinance is therefore barred by the principles of res subjudice. That the proceedings before the E.D should be deemed as proceedings before the court.
PLD 1984 Lhr 69 was cited in support of this contention. Our attention was also invited to the definition of "court" in Black's Law Dictionary in further support of the argument. It was further contended that the applications pending in the court for appointment of the auditor which have so far not been accepted by the Court, and therefore by implication would either be deemed dismissed, refused or considered pending in the Court. Therefore the principle of res judicata applies.
(v) That the Court has ample powers to order special audit under section 290 of the Ordinance. The counsel relied on PLD 1994 Karachi 358 and 2000 CLC 364 in support of his contention where it has been held that section 290 of the Ordinance clothes the Court with vast and undefined powers while dealing with prevention and oppression and mismanagement of company affairs. That in the light of the fact that an application under section 290 of the Ordinance is already pending, the ED ought not to have passed an order under section 234A of the Ordinance.
(vi) It was lastly argued that Securities and Exchange Commission of Pakistan (the "SECP") has laid down a requirement in form B, paragraph 8 of SECP Appellate Bench Rules 2003 (the "Rules"), where the appellant ought to declare that the subject matter is not pending before any court as from perusal of para 8 of form B of the schedule, its appears that SECP does not entertain any application, if the subject matter is pending adjudication before any court.
12. On inquiry by the Bench as to why the Appellants failed to respond to the factual aspects of the application for a special audit, the counsel for the Appellants stated that since the record was in the custody of the Local Commission, therefore the Appellants were not able to respond to the application for a special audit.
13. The counsel for the Respondent Mr. Salman Akram Raja in his response to the Appellant counsel's argument stated as follows:
(i) That the E.D was delegated the powers vide notification SRO No. 839 (1)/2008 dated 11-8-2008 to hear the show cause proceedings. The earlier order of the Bench directing the parties to appear before the Commissioner (CLD) cannot deprive an officer of the Commission from exercising his lawful authority under the law. The notification was issued after the order of the Bench and therefore the power exercised by the E.D were lawful. The counsel also pointed out that the Appellants failed to show any prejudice caused to them as result of the hearing having taken place before the E.D.
Regarding the contention that the special audit pre-supposes that statutory audit has been conducted; it was contended that the argument is without merit and if accepted, it, would make the scope of the provision very limited. Further, that section 234A of the Ordinance is attracted with even greater force than otherwise to a situation in which a statutory audit has not been carried out on account of dispute between two groups of shareholders with a resultant deadlock on the board of a company. To restrict the special audit under section 234A of the Ordinance only to re- examination of concluded audit would unduly restrict its scope.
(iii) Regarding the point raised by the Appellants counsel that in terms of section 160A of the Ordinance no objection can be made on the proceedings of the general meeting after expiry of 30 days, it was argued that section 160A of the Ordinance only relates to the deficiencies or irregularities in the issue of notice or conduct of general meeting and has no nexus with the question before the Bench relating to the applicability of section 234A of the Ordinance.
Regarding the objection of appeal being barred by the principle of res subjudice and res-judicata, it was argued that the exercise of administrative authority in terms of section 234A of the Ordinance cannot be equated with the exercise of judicial power by the court and therefore the principle of res subjudice is not attracted in this case. The principle of res judicata is also not applicable as the issue of appointment of auditor is still pending with the Court. Further, that exercise of administrative authority in term of section 234A of the Ordinance is entirely distinct from the prayer for a judicial order directing scrutiny of the accounts of the company and therefore the applications pending in the court do not bar or restrict action under section 234A of the Ordinance.
(v) On the issue of requirement of form B it was argued that paragraph 8 of the Rules are applicable to proceedings before the Appellate Bench and are not applicable to the proceedings before the E.D. Moreover paragraph 8 does not bar filing of appeal before the Bench, as it is merely a disclosure requirement.
14. Our findings on the issues before us are as follows
(i) The preliminary objection taken by the Appellants on the exercise of powers by the E.D is without any merit. The Appellants have failed to show any prejudice caused to them as result of hearing before the E.D, who was delegated the powers to hear the issues relating to section 234 A of the Ordinance, vide notification No 839 (1)/2008 dated 11-8-08. The E.D in exercise of his lawful authority heard the application under section 234A of the Ordinance. Both the E.D and the Commissioner
(CLD) are on equal footing as regards section 234A of the Ordinance. Additionally, the SRO referred to above was not in the field when the Bench passed the order dated 07-07-08, and at that point in time only the Commissioner (CLD) was vested with the powers to hear applications seeking a special audit. We therefore are firmly of the view that the ED was competent to hear the application for a special audit and no injustice or prejudice was caused to the Appellant as a result. In any case the ED may have heard the case earlier but no determination or orders had been passed by him.
(ii) We have analyzed the scope of section 234A, which was inserted by the Finance Act of 2007, and is reproduced below: 234A. Special Audit.-(1) The Commission may on its own motion, or upon an application made by members holding not less that 20% voting rights in a company, order a special audit of the company and appoint an auditor to carry out detailed scrutiny of the affairs of the company.
The Commission may during the course of the special audit, pass such interim orders and directions as maybe deemed appropriate by the Commission.
On receipt of the special audit report, the commission may issue such directions for immediate compliance to the company and its management as the Commission deems fit.
In case where the special audit has been ordered by the Commission on an application made by the member of the company, one half of the expenses of the special audit shall be borne and paid in advance by such members, and the other half shall be borne by the company.
(5) In case where the special audit has been ordered by the Commission on its own motion, the expenses of the special audit shall be payable by the company.
(6) Where the expenses of the special audit are payable by the company, such expenses in the first instance may be defrayed by the CommIssion, and the company shall be liable to reimburse the Commission in respect of such expenses.
(7) The amount of expenses liable to be paid by the company, the members or any other persons, as the case may be, shall be recoverable as arrears of land revenue.
(8) The provisions of section 255 shall apply mutatis mutandis to the auditor appointed to carry out the special audit of the company under sub-section (1)
The introduction of section 234A of the Ordinance was to equip SECP with a regulatory tool, which could be used at any time to scrutinize the affairs of a company. Special audit may be conducted by SECP on its own motion, or upon an application made by members holding not less that 20% voting rights in a company to carry out detailed scrutiny of the affairs of the company. The Appellants argument that special audit pre-supposes a statutory audit curtails the scope of the special audit to the reexamination of concluded audit. This is clearly not in our view the intent of the legislature. We are of the opinion that a special audit can be held, as and when ordered by the Commission; it may relate to more than one accounting period; it may be a detailed scrutiny of the affairs of a company or limited to a particular financial transaction; it may be conducted by any auditors directed by the Commission and not necessarily by the statutory auditors. We would like to further observe that the report under section 234A of the Ordinance is being sought by the SECP to enable it to look into the veracity of the allegations of the Respondent. As such the order passed by the ED is an administrative and an interim order. Any further order to be passed is dependent on the outcome of the special audit. As such the appeal is also barred under proviso (a) and (d) of section 33 (1) of the Act.
(iii) On the issue of application of section 160 A of the Ordinance, we are of the view that the Appellants counsel appears to have misunderstood the provision of the section which is reproduced below: 160-A. Circumstances in which proceedings of a General Meeting may be declared invalid. - The Court may, on a petition, by members having not less than ten per cent of the voting power in the company, that the proceedings of a general meeting be declared invalid by reason of a material defect or omission in the notice or irregularity in the proceedings of the meeting, which prevented members from using effectively their rights, declare such proceedings or part thereof invalid and direct holding of a fresh general meeting. emphasis added Provided that the petition shall be made within thirty days of the impugned meeting.
The objection of the Appellants counsel that the resolution passed in the general meetings held on 30-11-05, in which accounts and the balance sheet of the company as on 30-6-05 were approved have attained finality in the eye of law, as no objection was raised against the proceedings of the meeting within 30 days required by section 160A also does not find favour with us. We are of the view that failure to raise objection within 30 days does not bar the Respondents from seeking a special audit. The remedy under section 234A is independent and is available to all shareholders, irrespective of whether or not the shareholders have earlier raised an objection on the irregularities in proceedings of the general meeting or not. Moreover, the scope of section 160A of the Ordinance is limited to the deficiencies or irregularities in the issue of notices or proceedings of general meeting and or where the members are prevented from using their rights. As such the arguments of the Appellants counsel to the contrary are unacceptable iv) The objection of the Appellants on the issue of proceedings being res subjudice is not acceptable. The E.D based on the application for conducting a special audit issued and passed an administrative order on hearing the parties. He has directed a special audit to be conducted to enable him to determine whether the application for conducting a special audit had any basis, to enable him to decide how to proceed further. The proceedings conducted by the ED are distinct from the prayer for a judicial order seeking scrutiny of the accounts of a company. The proceedings before the ED are therefore not hit by the principle of res subjudice. Additionally in the absence of any restraining order from the court which we believe ought to have been obtained by the Appellant, the ED rightly proceeded to hear the application under section 234A of the Ordinance.
The argument that the application for special audit made by the Respondent be considered res judicata is also misplaced. The doctrine of res judicata only bars a court from entertaining a dispute between parties, which had already been decided by a court between the same parties.
The applications for conducting audit of the Company by the Respondents are pending in the Court. The applications remain pending till such time they are heard by the Court and finally disposed off through an express order. In the present case these applications have not been disposed off as such they shall be deemed as pending and the proceedings before the E.D are not hit by the principle of res judicata. v) There is no cavil with the contention of the Appellants counsel that the Court has wide powers under section 290 of the Ordinance and in the exercise of such power, it may order an audit if deem fit. However, the legislature in its wisdom has chosen to introduce a special provision in guise of section 234A of the Ordinance, which specifically clothes the SECP with power to order a special audit on its own motion or upon an application by members not holding less than 20% voting rights. Additionally, the specific provision of law i.e 234A of the Ordinance precedes the general provision where applicable; such as the instant case. Accordingly, there is no bar for the SECP to order a special audit considering that no order on the issue of conducting an audit has been passed by the Court under section 290 of the Ordinance. vi) On the issue of requirement of form B paragraph 8 of the Rules, we are of the view that the requirement is only applicable to proceedings before the Bench and not to the proceedings before the E.D. Even otherwise, paragraph 8 is a mere procedural disclosure requirement for appellants filing an appeal before the Bench and the non disclosure would not warrant dismissal of the case.
15. The Appellants along with their written arguments submitted a large number of documents and provided response to the factual allegations leveled in the application for a special audit. This opportunity was available before the hearing in response to application for a special audit and during the hearing, however, the Appellants failed to address what they seek to introduce at this belated stage through the written arguments. The Appellants further appear to be blowing hot and cold, as when the counsel for the Appellants was asked by the Bench what it had to say on the factual allegation leveled in the application for a special audit, we were informed that the Appellants had no records and were therefore not in a position to say anything on the factual aspects, however we find this to be rather strange since the Appellants have gone at length in responding to the allegations leveled in the application seeking a special audit, unfortunately we cannot consider the documents and response on the facts alleged by the Respondents filed after the hearing of this appeal nor can we accept arguments in addition to those advanced during the hearing. Be that as it may, keeping in view the gravity of the allegations leveled, it would be unreasonable for us, not to order a special audit. In any case, auditing of books will not prejudice the Appellant on the contrary it would clear the issues raised by the Respondent.
In view of the foregoing, we hereby uphold the Impugned Order passed by the E.D. The parties to bear their own costs.