Costagliola v Autore

Case [2025] FCA 35

FEDERAL COURT OF AUSTRALIA

Costagliola v Autore [2025] FCA 35   

File number(s): NSD 1457 of 2024
Judgment of: WIGNEY J
Date of judgment: 3 February 2025
Catchwords: BANKRUPTCY AND INSOLVENCY – application for freezing order to restrain sale of property – where applicant obtained judgment against the respondent in the District Court – where respondent subsequently went bankrupt and freezing orders were sought against companies allegedly related to the respondent – where orders sought were ambitious and novel as applicant had no personal cause of action or favourable judgment against the related companies – where applicant argued that trustee in bankruptcy had a good arguable case against the companies under Bankruptcy Act 1966 (Cth) ss 139D and 139E – where applicant contends that if the trustee were successful under those provisions, the bankrupt estate would be divisible amongst creditors including the applicant – elements of ss 139D and 139E not satisfied – failure to demonstrate good arguable case –– balance of convenience weighs against making order because of weak arguable case and because trustee unlikely to commence proceedings where no assets or significant liabilities in the bankrupt estate – application dismissed
Legislation:

 Bankruptcy Act 1966 (Cth) ss 5, 5F, 139CA, 139D, 139E, Sch 2

Bankruptcy Amendment Bill 1987 (Cth)

Corporations Act 2001 (Cth) ss 205B, 205D

Federal Court of Australia Act 1976 (Cth) ss 23, 37AF, 37AG

Federal Court Rules 2011 (Cth) rr 7.31, 7.32, 7.33, 7.34, 7.35, 7.36

Cases cited:

 Aravanis (Trustee) v Kapp, in the matter of the Bankrupt Estate of Kapp [2023] FCA 702

Cardile v LED Builders Pty Ltd (1999) 198 CLR 380; [1999] HCA 18

Deputy Commissioner of Taxation v Chemical Trustee Ltd (No 4) [2012] FCA 1064

Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43

Epp v Levy [2001] NSWSC 482

F Hoffman-La Roche AG v Sandoz Pty Ltd [2018] FCA 874

Frigo v Culhaci [1998] NSWCA 88

GlaxoSmithKline Australia Pty Ltd v Reckitt Benckiser Healthcare (UK) Limited [2013] FCAFC 102; (2013) 305 ALR 363

In the matter of HPack Investments Pty Ltd [2020] NSWSC 1638

Jackson v Stirling Industries Ltd (1987) 162 CLR 612

Samsung Electronics Co. Ltd v Apple Inc. [2011] FCAFC 156; (2011) 286 ALR 257

Shercliff v Engadine Acceptance Corporation Pty Ltd [1978] 1 NSWLR 729

Skyworks v 32 Drummoyne Road [2017] NSWSC 343

Warner-Lambert Co LLC v Apotex Pty Ltd [2014] FCAFC 59; (2014) 311 ALR 632

Wentworth v Wentworth (unreported, Supreme Court of New South Wales 12 June 1997)  
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area:  General and Personal Insolvency
Number of paragraphs: 194
Date of hearing: 20 January 2025
Counsel for the Applicant Mr D Meyerowitz-Katz
Solicitor for the Applicant Cadre Moss
Solicitor for the Second Respondent Mr A Hack of Emerson Lewis Lawyers

ORDERS

NSD 1457 of 2024
BETWEEN:

GIUSEPPE COSTAGLIOLA

Applicant
AND:

NEROTUA PTY LTD

Second Respondent

ORDER MADE BY:

WIGNEY J

DATE OF ORDER:

3 FEBRUARY 2025

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AGLC
Costagliola v Autore [2025] FCA 35
Case
[2025] FCA 35
Decision Date

CaseChat Overview and Summary

In the case of Costagliola v Autore, Mr Costagliola sought a freezing order to prevent the sale of certain properties held by Nerotua, a company allegedly connected to the bankrupt respondent, Mr Autore. The application arose out of a judgment obtained by Mr Costagliola against Mr Autore in the District Court, which was not satisfied. The Federal Court was required to determine whether the orders sought by Mr Costagliola should be granted, considering both the merits of the potential claims under the Bankruptcy Act 1966 (Cth) and the balance of convenience.

The court found that Mr Costagliola did not demonstrate that if the trustee in bankruptcy pursued claims under sections 139D and 139E of the Bankruptcy Act against Nerotua, there would be a good arguable case. The elements necessary to satisfy these sections were not met, and there was insufficient evidence to support such a claim at that stage. Furthermore, the court held that the balance of convenience did not favour making the orders, as Mr Costagliola had not shown that he could provide a valuable undertaking as to damages should Nerotua suffer prejudice. The court also noted the likelihood that the trustee would not pursue proceedings against Nerotua due to the lack of assets or significant liabilities in the bankrupt estate.

Accordingly, the court dismissed Mr Costagliola's application. Additionally, the court made a non-publication order concerning certain confidential information contained in an affidavit filed by Mr Autore, to prevent prejudice to the proper administration of justice. This order ensures that sensitive commercial information, such as property valuations and sale communications, is not disclosed publicly.

The final orders included prohibiting the publication of the confidential affidavit and its annexures, declaring the affidavit confidential under the Federal Court Rules 2011, dismissing Mr Costagliola's application for freezing orders, and directing that Mr Costagliola pay Nerotua's costs associated with the application.

Orders

Orders of the court

1. Pursuant to s 37AF of the Federal Court of Australia Act 1976 (Cth), on the ground that it is necessary to prevent prejudice to the proper administration of justice, publication and disclosure of the confidential affidavit of Alessio Autore dated 14 January 2025 and the annexures thereto be prohibited:

(a) other than to the parties to this proceeding, their legal advisers and the trustee of the bankrupt estate of the first respondent and his legal advisers; and

(b) with the exception of information in the affidavit and annexures thereto that is referred to in this judgment.

2. The confidential affidavit of Alessio Autore dated 14 January 2025 is a confidential document for the purposes of r 2.32 of the Federal Court Rules 2011 (Cth).

3. The applicant’s application for freezing orders against the second respondent be dismissed.

4. The applicant pay the second respondent’s costs of and associated with the application.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, I am not persuaded that the orders sought by Mr Costagliola should be made. In my view Mr Costagliola did not demonstrate that, if the Trustee did in due course commence proceedings against Nerotua for relief under s 139D and s 139E of the Bankruptcy Act, he would have a good arguable case, at least on the present state of the evidence. Moreover, even if the Mr Costagliola had been able to demonstrate that the Trustee would have a good arguable case, in my view the balance of convenience would not favour making the orders proposed by Mr Costagliola. CHRONOLOGY OF RELEVANT FACTS The parties each adduced affidavit and documentary evidence. Mr Costagliola relied on affidavit evidence from his solicitor. Nerotua relied on affidavit evidence from Mr Alessio Autore, Mr Autore’s son and one of the current directors of Nerotua. None of the deponents of the affidavits were cross-examined. The documentary evidence relied on by the parties was voluminous, at least for an interlocutory application of this nature. Following is a brief chronological distillation of what appear to be the facts relevant to Mr Costagliola’s application. Mr Autore has been involved in many businesses and business ventures over the years. The Graaf Group website described him as having “30 years’ experience as a business owner and adviser in luxury retail, wholesale, hospitality and concept ventures”. Mr Autore’s LinkedIn page also stated that he worked “across the global retail and wholesale luxury fashion and commercial real estate sectors to bring pioneering retail offerings from concept to launch”. Mr Autore’s business ventures included property development. His LinkedIn page described his business ventures as including “Property Development and Management” and referred to the Graaf Group’s previous acquisition of the retail levels in an iconic building in Sydney and a plan to open a major international luxury goods brand flagship store in that space. Events in 2019 On 29 March 2019, Mr Autore entered into a Consultancy Agreement with Codimark. Codimark was described in that agreement as “a high-end construction services company which offers clients professional design, 3D rendering, fit-out and DA/CC/CDC”. Ms Elizabeth Pearce was a director of Codimark at the time, having been appointed on 1 February 2019. As will be seen, Mr Autore was a director of Codimark between 26 May and 8 December 2024. Ms Pearce is currently the sole director of Codimark and owns all its issued shares. There was evidence which indicated that Ms Pearce was also Mr Autore’s personal assistant. The Consultancy Agreement between Codimark and Mr Autore provided that Mr Autore was to act as an “advisor to the company, offering specialized knowledge in areas such as market analysis, project feasibility, design optimization, financial modelling, and regulatory compliance” so as to “help ensure that projects are profitable, sustainable, and aligned with the company’s objectives”. The services that Mr Autore was to provide Codimark under the agreement included, relevantly: “[a]ct as a bridge between the property development company and external stakeholders, including architects, engineers, contractors, and government authorities”; “[e]nsure projects adhere to local zoning laws, building codes, and environmental regulations”; and “[a]ssist with obtaining necessary permits and licenses”. It can be seen that, broadly speaking, the services that were to be provided by Mr Autore under the consultancy agreement related primarily to property development.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

Fifth, for the reasons that have been given, the orders sought by Mr Costagliola would, if made, potentially prejudice Nerotua and cause it to suffer damage. That is particularly the case if the sale of the Potts Point Premises is prevented or impeded by the orders. Mr Costagliola has given an undertaking as to damages. There is, however, no evidence that Mr Costagliola can give a valuable undertaking in that regard because there is no evidence concerning his financial position. The “inability of a plaintiff to give a valuable undertaking as to damages is a factor which can be taken into account in assessing the balance of convenience and may even by decisive”: Epp v Levy [2001] NSWSC 482 at [31] quoting Hodgson J in Wentworth v Wentworth (unreported, Supreme Court of New South Wales 12 June 1997). I do not go so far as to say that Mr Costagliola is unable to give a valuable undertaking as to damages. There is, however, no evidence that he can. CONCLUSION AND DISPOSITION I am not satisfied that the orders sought by Mr Costagliola should be made. Mr Costagliola has not demonstrated that, if the Trustee did in due course commence proceedings against Nerotua for relief under s 139D and s 139E of the Bankruptcy Act, he would have a good arguable case, at least on the present state of the evidence. I am also not persuaded that the balance of convenience would weigh in favour of making the orders proposed by Mr Costagliola, even if the Mr Costagliola had demonstrated that the Trustee would have a good arguable case. Mr Costagliola’s application must accordingly be dismissed with costs. I should finally note that I propose to make a final non-publication order pursuant to s 37AF of the FCA Act in respect of Alessio’s affidavit dated 14 January 2025 that includes evidence concerning the valuation of the Potts Point Properties and communications between Alessio and the estate agent concerning the sale of the properties. The ground for making that order is that it is necessary to prevent prejudice to the proper administration of justice: s 37AG(1)(a) of the FCA Act. The valuation and the communications are commercially confidential. The publication or dissemination of that information would potentially cause prejudice to Nerotua in respect of the sale of the Potts Point Properties. It was reasonable for Alessio, on behalf of Nerotua, to adduce evidence in respect of that confidential information in opposition to the orders sought by Mr Costagliola. It would be contrary to the proper administration of justice for litigants in the position of Nerotua to be prevented or deterred from adducing evidence that may disclose confidential information.

Ratio Decidendi

Legal Principle Established

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