Billingsley v Napoli, in the matter of Biometric Identity Systems Pty Ltd (administrators appointed) (No 2)

In this matter, the administrators of Biometric Identity Systems Pty Ltd sought an order validating their appointment and an extension of the convening period. Mr Napoli, who had opposed the validating order, applied for an order that the administrators pay his costs of the originating process. The administrators applied for an order that Mr Napoli pay their costs of the originating process and their costs of the interlocutory application. Additionally, Mr Napoli applied for a third-party costs order against the directors of the second plaintiff. The court was required to determine whether Mr Napoli's opposition to the validating order after 28 August 2019 was reasonable, and whether it was appropriate for the administrators to pay his costs incurred after that date. The court also needed to consider whether Mr Napoli's persistence in opposing the validating order resulted in the need for an application to further extend the convening period, and whether Mr Napoli should pay the costs of that application. Finally, the court had to decide whether the directors prompted, supported, steered, or influenced the administrators to continue the proceedings, and if so, whether Mr Napoli was entitled to a third-party costs order against them.

The court held that it was unreasonable for Mr Napoli to pursue his opposition to the validating order after 28 August 2019, as credible evidence had been given by Mr Billingsley that the company was insolvent or likely to be insolvent as at 8 August 2019. The court found that most of the work required in support of the validating order and extension application had been undertaken by 25 September 2019 (when Mr Napoli actually withdrew his opposition), and Mr Napoli's interlocutory application unreasonably prolonged the administrators' involvement in the proceedings. The court rejected Mr Napoli's claim that the administrators should pay his costs of the originating process after 20 September 2019. The court held that Mr Napoli must pay the administrators' costs of the originating process incurred after 28 August 2019 and their costs of the extension application on an indemnity basis. The court dismissed Mr Napoli's interlocutory application with costs. The court also dismissed Mr Napoli's application for a third-party costs order against the directors of the second plaintiff, finding that there was no evidence to suggest that they had prompted, supported, steered, or influenced the administrators to continue the proceedings.

The court made orders that the first plaintiffs' costs of the originating process up to and including 28 August 2019 be costs in the administration of Biometric Identity Systems Pty Ltd. Mr Napoli was ordered to pay the first plaintiffs' costs of the originating process and of the interlocutory application incurred on and from 29 August 2019 on an indemnity basis and in a lump sum of $71,000. Finally, the court dismissed Mr Napoli's interlocutory application with costs.