D a Starke Pty Ltd v Yard - [2020] SASC 3

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Civil)
D A STARKE PTY LTD v YARD & ANOR
[2020] SASC 3
Judgment of Judge Bochner a Master of the Supreme Court
16 January 2020
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA
Application by the defendants to set aside 5 allocaturs.
Held: Application dismissed.
D A Starke Pty Ltd v Yard & Anor [2012] SASC 19; Ong v Lottwo Pty Ltd (2013) 116 SASR 280; Commonwealth v Davis Samuel Pty Ltd (No 5) (2008) 164 ACTR 1; Emanuel v Australian Securities Commission (1997) 188 CLR 114; Allanson v Midland Credit (1977) 16 ALR 43; Bratovic v SMB Argentinian Bar and Grill Pty Ltd & Ors [2005] SASC 431; Jones v Dunkel (1958) 101 CLR 298, considered.

D A STARKE PTY LTD v YARD & ANOR
[2020] SASC 3

By FND 110, filed on 7 May 2019, the defendants seek to have 5 allocaturs set aside. These allocaturs were entered on 2 January 2018, following orders made on 18 December 2017. The defendants’ application to have them set aside was filed some 16 months after they were entered.
Background – the Victorian proceedings
Alfred Yard and his son, Trevor Yard were partners, along with Alfred’s wife Gladys, and Trevor’s wife, Lorraine, in a farming business. The property on which the partnership farmed was held by a company, Yardoo Pty Ltd. Without meaning any disrespect thereby, throughout these reasons, I will refer to the individuals by their first names, and to the company as Yardoo.
The shareholders and directors of Yardoo were Alfred, Trevor, Gladys and Lorraine.
In the late 1990’s, David Starke (“Mr Starke”) was instructed by Alfred, Trevor, Gladys and Yardoo to act for them in litigation brought by Lorraine, following the breakdown of her marriage with Trevor. Mr Starke operated his legal practice through the entity, D A Starke Pty Ltd, the plaintiff in this matter. I will refer to Mr Starke and D A Starke Pty Ltd jointly as “Mr Starke”.
Initially, Lorraine issued proceedings in the Family Court of Australia. She then issued proceedings in this Court, seeking an injunction to prevent Yardoo from disposing of its assets, and for pre-action discovery. These applications were dismissed. She then filed an application for oppression. This action was transferred to the Supreme Court of Victoria.
Alfred issued proceedings in the Supreme Court of Victoria, claiming that Yardoo held property on trust for him. He also alleged that certain property held by Trevor, Gladys and Lorraine was also held on trust for him.
I understand that Lorraine’s oppression claim and Alfred’s trust claims were heard concurrently. The defendants in Lorraine’s action were Alfred, Trevor, Gladys and Yardoo. In Alfred’s action, the defendants were Lorraine, Trevor, Gladys and Yardoo, although Trevor, Gladys and Yardoo did not contest his claims. The trial commenced in July 2004 and was completed in April 2005. Judgment was delivered in March 2006. The trial judge ordered the winding up of the partnership and Yardoo, and appointed a receiver to the partnership, and a liquidator to Yardoo.
Again instructing Mr Starke, Alfred, Gladys, Trevor and Yardoo appealed. On appeal, the orders made by the trial judge were varied, in that Yardoo was permitted to purchase Lorraine’s share in its equity in lieu of its liquidation.
Throughout the trial and the appeal, Mr Starke retained Mr Gregory Andrew Stevens (“Mr Stevens”) as counsel. Mr Stevens is the interested party in this matter.
Yardoo, Alfred, Trevor and Gladys paid Mr Starke’s and Mr Stevens’ fees only up to the commencement of trial. They alleged that Mr Starke and Mr Stevens agreed to do the trial for a fixed fee, and undertook the appeal on a contingency basis.
Background – Mr Starke’s claim against Alfred and Yardoo
On 3 June 2009, Mr Starke commenced these proceedings against Alfred and Yardoo, alleging non-payment of his and Mr Stevens’ fees. Gladys and Trevor were not named as defendants, despite Mr Starke’s pleading that he was instructed by both Alfred and Trevor[1] and that he acted on the instructions of Alfred and Trevor between 2000 and 2007, which instructions included the retention of counsel.[2] Mr Starke also pleaded that he was instructed by Trevor in relation to water licences in about May 2005, and that Trevor has failed to pay his fees in relation to that engagement.[3] The quantum of fees that Mr Starke alleged Alfred and Yardoo owed him fell just short of $500,000, plus interest. I do not know why Trevor was not named as a defendant in the action.
[1] FDN 1 at [6].
[2] FDN 1 at [7] – [8].
[3] FDN 1 at [15].
I note that on 17 February 2010, two interim allocaturs were issued. The first was in the sum of $22,201 and was directed towards Yardoo.[4] The second, directed towards Alfred, was in the sum of $72,092.96.[5] This amount was subsequently amended to $70,092.96.[6]
[4]    FDN 11.
[5]    FDN 12.
[6]    FDN 16.
On 7 September 2011, a cross action by counterclaim was filed.[7] This document is somewhat confusing. It appears to have been filed by Trevor, on behalf of Yardoo, alleging negligence by Mr Starke in his advice to Yardoo. It appears to seek damages for losses suffered by the directors of Yardoo, Alfred, Trevor and Gladys. The cross action was amended by a second cross action which was filed on 16 April 2012, by solicitors on behalf of Yardoo and Alfred. This document pleaded negligence by Mr Starke in relation to a particular aspect of the management of the appeal. The plaintiffs by cross action were Alfred and Yardoo.
[7] FDN 44.
I understand that Gladys died some time before the commencement of the trial in this action, although I do not know whether her death occurred before or after Mr Starke issued his claim.
The trial of Mr Starke’s claim against Alfred and Yardoo was held in October 2011, before Kourakis J as he then was. The counterclaim was not heard at the same time as it had been filed so close to trial. Judgment (“the Kourakis judgment”) was delivered on 13 February 2012.[8] His Honour made the following findings:
·Mr Starke was retained by Yardoo, Alfred, Trevor and Gladys;[9]
·…the engagement of Mr Starke by both Yardoo and Alfred Yard, in itself, carried with it only an obligation to pay for that part of the work performed to advance their respective interests. A separate engagement of the same legal practitioner by two parties in the same litigation does not, of itself, make each of them liable for the costs of the order. It requires the costs to be apportioned between them.[10]
·I am not satisfied that there is a sufficient basis upon which to find an agreement that Yardoo would pay Alfred Yard’s costs. Alfred Yard remains liable for his proportion of Mr Starke’s fees. The quantification of the liability of the only defendants to this action, Alfred Yard and Yardoo, will require an apportionment between all of Mr Starke’s clients. I expect that very few, if any, costs will be allocated to Gladys Yard but a significant proportion may fall on Trevor Yard.[11]
·There is an element of unreality about the point taken as to Yardoo’s limited liability for Mr Starke’s fees. To the extent that Alfred Yard remains a shareholder of Yardoo, the assets of Yardoo will at least indirectly remain available to satisfy the costs payable by him. Hopefully, an arrangement will be reached consensually between Mr Starke and the Yards which will avoid the painstaking and costly exercise of apportioning costs between the parties. The apportionment exercise is likely to be expensive in itself, and will be a cost which will ultimately be borne by the defendants.[12]
[8] [2012] SASC 19.
[9] [2012] SASC 19 at [21].
[10] [2012] SASC 19 at [21].
[11] [2012] SASC 19 at [31].
[12] [2012] SASC 19 at [32].
He concluded:
I give judgment for the plaintiff against both defendants for his fees and disbursements of the trial before Justice Cummins, the application to extend the stay order made by Justice Cummins and the settlement. The quantum of those fees is to be determined after an apportionment between all of Mr Starke’s clients.[13]
[13] [2012] SASC 19 at [88].
Background – the conduct of the matter post judgment
On 27 March 2012, the file was referred back into the Master’s list, before Judge Withers. At the same time, the defendants were given leave to join Alfred as a plaintiff to the counterclaim, and to amend the counterclaim by 17 April 2012. This resulted in the filing of the second cross action, which I referred to in [13] hereof.
On 7 June 2012, Judge Withers varied freezing orders over the property held by Alfred and Yardoo. In his remarks, he noted that Trevor was now the sole director of Yardoo. I do not know when Alfred, Gladys or Lorraine ceased to be directors (although I note that by this time Gladys was deceased, and it can be assumed that Lorraine ceased to be a director at the time of her marriage breakdown with Trevor).
At a directions hearing on 27 September 2012, Judge Withers noted that Mr Starke had admitted liability on the counterclaim with damages to be agreed or assessed. The matter was adjourned to allow the parties to agree the quantum of the costs owed by Alfred and Yardoo to Mr Starke, and to negotiate in respect of the damages on the counterclaim.
Alfred became bankrupt on 4 December 2012. Mr Mellos of Grant Thornton was appointed the trustee of his bankrupt estate. It is not clear when Judge Withers became aware of this fact. I note that on 24 January 2013, Mr Langsford is recorded as appearing for both defendants. At a directions hearing on 4 April 2013, Mr Bourne is recorded as appearing for both Alfred and Yardoo. At this time, Judge Withers noted:
I am going to direct a further settlement conference in this matter as it seems to me the parties should endeavour to agree at least lump sum costs before consideration is given to who it is that is responsible for those costs.[14]
[14] Record of outcome dated 4 April 2013.
It appears that no objection was made by Mr Bourne on behalf of Alfred and Yardoo to this proposal. I note that as Trevor was the sole director of Yardoo, it is assumed that he was, or should have been aware, of this development.
At a directions hearing on 30 July 2013, it is noted:
The Trustee in Bankruptcy of Alfred Yard has now just been identified and the solicitor for the defendant needs to confirm instructions in relation to Mr Yard.[15]
[15] Record of outcome dated 30 July 2013.
I do not know if this is when the Court first became aware of the sequestration made against Alfred’s bankrupt estate.
Mr Bourne continued to act for Alfred and Yardoo until July 2017. It must be assumed that this was on the instructions of Mr Mellos as Alfred’s trustee and Trevor as sole director of Yardoo. There is no indication that he advised the Court at any time that he no longer acted for Alfred. His notice of acting was filed some months after the sequestration order was made and no subsequent notice was ever filed. On 26 July 2017, John Sheahan and Ian Lock of Sheahan Lock Partners replaced Mr Mellos as Alfred’s trustee.
Background – the contempt proceedings
On 6 September 2013, Mr Starke filed an application seeking orders that Alfred, Trevor and Margaret Simms be charged with contempt.[16] Ms Simms at that time held a power of attorney for Alfred. The basis for this allegation is that Alfred had transferred to Trevor his share in Yardoo, in breach of various undertakings given to and orders made by the Court.
[16] FDN 60.
Mr Starke’s supporting affidavit exhibited an ASIC search for Yardoo. This showed that as at 1 August 2013, Trevor was the sole director and shareholder of Yardoo.[17]
[17] FDN 60 at DAS-4.
The contempt action was resolved on 27 May 2014 by Alfred and Trevor agreeing to reconvey the share to Alfred. The following costs order was made:
The defendants be jointly and severally liable for the costs of and incidental to the contempt proceedings to be taxed or agreed, such costs to include the costs of issue and service of the summons against margaret Sims, on a party-party basis.[18]
[18] Record of outcome dated 27 May 2014.
Background – the parties
There has been confusion throughout as to who are the correct parties to this action.
I clarify this now.
When Mr Starke issued this proceeding, the only plaintiff was D A Starke Pty Ltd. The defendants were Alfred Jeffery Yard and Yardoo Pty Ltd.
When Yardoo filed its cross action, initially the only plaintiff by cross action was Yardoo. Alfred was joined as a plaintiff by way of the filing of the second cross action on 16 April 2012, after the conclusion of the trial of Mr Starke’s action.
Ms Simms, Alfred and Trevor were all summonsed for contempt. Neither Ms Simms nor Trevor was formally joined as a defendant to this action.
Trevor has never been a party to this action, either as a defendant to the primary claim, or as a plaintiff on the counterclaim.
On 1 December 2017, Mr Christie filed a notice of address for service on behalf of Trevor, naming him as the third defendant. I do not know why this was accepted for filing by the registry. I note that Mr Christie appeared at one directions hearing on 5 December 2017. There was no further appearance on behalf of Trevor until Mr Marsh appeared on his behalf on 21 June 2019. On 18 July 2019, I gave Trevor leave to intervene in these proceedings, consistent with my understanding (then held and now confirmed) that he was not a party to the action.
While Trevor has never personally been a party to this action, it is important to note that he has been the sole director of Yardoo since at least June 2012, when this fact was noted by Judge Withers, and a joint director since the issue of this proceeding in 2009. It must, therefore, be assumed that he has been, or ought to have been, cognisant with the progress of this matter throughout.
Mr Stevens was joined as an interested party, when the defendant required separate adjudication of his costs.
The allocaturs
On 6 August 2014, Mr Cogan on behalf of Mr Starke, filed an itemised schedule of costs.[19] This schedule, FDN 79, dealt with the costs incurred in respect of the Victorian proceedings. The schedule included the fees of Mr Stevens. On 10 August 2015, a response was filed.[20] While a number of more general items were disputed, in the main the items disputed related either to counsel fees or to attendances upon counsel. On 28 January 2016, I ordered that Mr Starke serve an itemised schedule of counsel fees by 25 February 2016, with a response to be provided by 18 March 2016. The time to file these documents was subsequently extended.
[19] FDN 79.
[20] FDN 80
On 1 March 2016, Mr Starke filed the following schedules of costs:
·FDN 83 – additional costs incurred between about April 2002 and about July 20017;
·FDN 84 – costs relating to the trial before Kourakis J;
·FDN 85 – costs relating to the contempt proceedings; and
·FDN 86 – itemised schedule of Mr Stevens’ costs.
On 28 April 2016, I ordered Alfred and Yardoo to file their responses to these schedules within five weeks.
At the next directions hearing, on 9 June 2016, the matter was adjourned to allow the costs consultants for the parties to consult. At this time, the defendants had not filed their responses. Further adjournments were granted on 25 July 2016 and 8 August 2016 to allow Mr Bourne to obtain instructions from Alfred and Yardoo. On 6 September 2016, the parties advised that Alfred and Yardoo sought further particulars. Mr Bourne sought a further three weeks to provide his clients’ response to FDN 79, 83, 84, 85, and 86. At this time, I indicated that if the parties had not reached a resolution on the next occasion, the matter would be listed for adjudication.
On 5 October 2016, I ordered the defendants to file and serve their responses within 7 days and listed the adjudication to commence on 21 October 2016. On 21 October 2016, Mr Starke consented to an adjournment of the adjudication to 5 December 2016. The defendants had not yet filed their responses. I extended the time for them to do so to 25 November 2016. I ordered that an interim allocatur be issued in the sum of $100,000 against the second defendant. No issue was raised by Mr Bourne as to the appropriateness of the allocatur being addressed to Yardoo (although he opposed its issue generally).
On 2 December 2016, the adjudication was further adjourned to commence on 28 February 2017. I extended the time for Alfred and Yardoo to file their responses to 27 January 2017.
On 21 April 2017, a second schedule, FDN 94, was filed on behalf of Mr Stevens.
On 16 May 2017, I ordered Alfred and Yardoo to file notices of dispute by 30 June 2017. I listed FDN 79, 83, 84, 85, 86, and 94 for adjudication commencing on 10 July 2017. I indicated that FDN 94 would be dealt with first.
On 10 July 2017, Alfred and Yardoo had not filed their notices of dispute to any of the schedules of costs. They were not ready to proceed to adjudication. After hearing argument from Mr Starke on behalf of D A Starke Pty Ltd, Mr Cogan on behalf of Mr Stevens and Mr Bourne on behalf of Alfred and Yardoo, I ordered that pursuant to Rule 273(2) of the Supreme Court Civil Rules 2006, all of the undisputed items in the schedules were taken to be admitted in full.
The matter was further adjourned on 14 July 2017 and 28 July 2017 to allow the parties to have discussions.
On 25 August 2017, Mr Cogan appeared on behalf of Mr Starke and Mr Stevens. There was no appearance for Yardoo. Mr Oliver Sheahan appeared for the first time on behalf of the Alfred’s trustee in bankruptcy. It was indicated that an application had been filed in the Federal Court of Australia, seeking the winding up of Yardoo for failure to respond to a statutory demand.
On 4 October 2017, Mr Cogan appeared on behalf of Mr Starke and Mr Stevens. He advised the Court that the liquidator of Yardoo and Alfred’s trustee required time to obtain further information.
On 5 December 2017, Mr Cogan appeared for Mr Starke and Mr Stevens. Mr Oliver Sheahan appeared for Alfred’s trustee and Yardoo’s liquidator. Mr Christie appeared for Trevor. I was advised that the trustee and the liquidator were keen to progress this matter as proofs of debt had not yet been lodged by Mr Starke. It was noted that the question of apportionment remained outstanding. I note that the record of outcome incorrectly notes that the question of apportionment was between the plaintiff and the first and second defendant, instead of between the first and second defendants.
On 18 December 2017, 5 allocaturs were issued. I noted that the trustee and liquidator did not oppose the orders being made. What happened at this directions hearing will be discussed further in due course.
As to the allocaturs themselves:
·In respect of FDN 79, 83, 94 and 97, Alfred was ordered to pay the sum of $216,313.87, inclusive of interest to 4 December 2012;
·In respect of FDN 79, 83, 94, and 97, Yardoo was ordered to pay $600,144.87 inclusive of interest to 6 September 2017;
·In respect of FDN 84 and 85, Alfred was ordered to pay Mr Starke the sum of $68,884.02 inclusive of interest to 4 December 2012;
·In respect of FDN 84, Yardoo was ordered to pay Mr Starke the sum of $51,296.15 inclusive of interest to 6 September 2017; and
·In respect of FDN 85, Trevor and Ms Sims were ordered to pay Mr Starke $40,943.55, inclusive of interest to 18 December 2017.
Except in regard to FDN 85, the apportionment between Alfred and Yardoo was on the basis of 30% to Alfred and 70% to Yardoo. There was no apportionment of any amount to Gladys (or her estate) or Trevor.

Between 18 December 2017 and 28 March 2019, the parties continued to negotiate as to the costs of the adjudication process itself. All outstanding issues were listed for argument on 3 May 2019.
On 3 May 2019, Mr Gretsas appeared on behalf of Alfred’s trustee. Mr Duggan QC appeared for the liquidator. They indicated for the first time that they intended to file an application to set aside the allocaturs issued on 18 December 2017. Mr Marsh appeared on behalf of Trevor for the first time on 18 July 2019, Trevor having been given leave to intervene on that day.
The hearing of the application to set aside the allocaturs
The hearing of the application to set aside the allocaturs commenced on 14 August 2019, and continued over four days. Mr Lock, one of the liquidators of Yardoo gave evidence, as did Mrs Fiona Stevens, who represented Mr Stevens during the negotiations in relation to the allocaturs. Mr Starke was represented by Mr Maik, Alfred was represented by Mr Gretsas, Yardoo was represented by Mr Duggan QC, Mr Stevens was represented by Mr Ross-Smith and Trevor was represented by Mr Marsh.
The fundamental position of the liquidators is that the allocaturs should be set aside for two reasons: the first, that leave had not been sought to proceed against the bankrupt estate of Alfred and against Yardoo in liquidation, contrary to the provisions of the Bankruptcy Act 1966 and Corporations Act 2001; and the second, that the orders in the Kourakis judgment were not complied with, in that apportionment should have been determined prior to quantum, and the costs should have been taxed, not agreed. The liquidators submitted that they did not consent to the apportionment in the allocaturs, nor was the question of leave pursuant to the Bankruptcy Act and the Corporations Act raised prior to the issue of the allocaturs.
The evidence
The liquidators relied on the affidavit of Justin Matthew Sharman sworn on 2 May 2019,[21] and that of Ian Russell Lock worn on 17 July 2019.[22]
[21] D1.
[22] D2.
The salient points raised by Mr Sharman are that:
·The liquidators retired as Alfred’s trustee in bankruptcy on 12 April 2019, with Gregg Johnson of BCR Advisory taking their place.[23]
·The liquidators considered that the allocaturs should be set aside because leave had not been sought under s 471B of the Corporations Act at the time they were entered.
·The allocaturs were entered without the liquidators forming a position on their merits.
·The allocaturs did not reflect the position set out in the Kourakis judgment.
·The interest calculations are contrary to the provisions of s 114 of the Supreme Court Act 1935 (SA).
·The allocaturs included sums for GST where the plaintiff is entitled to an input tax credit.[24]
[23] D1 at [7.1] – [7.2].
[24] D1 at [9].
Mr Sharman exhibited a letter from Ms Natasha Riach on behalf of Trevor to Mr Starke, dated 5 June 2018. In this letter, Ms Riach outlines her instructions as to the chronology of the matter, that at the directions hearing on 18 December 2017, Yardoo was represented by Mr Oliver Sheahan, and that the liquidators did not oppose the orders being made, or request that the matter be listed for formal adjudication. It went on to outline Trevor’s concerns, which included the process undertaken to reach the quantum of the fees owed, the failure to seek leave to proceed, and that the apportionment does not reflect the intention of the Kourakis judgment. Ms Riach stated:
Mr Lock has informed us that, despite the breach of Section 471B of the Act, he does not propose to apply to set aside the orders. He has informed us that he considers any further steps in that regard ought property be taken by Trevor. He has indicated that if Trevor applies, the liquidators will adopt a neutral approach in respect of any such application.[25]
[25] D1 at 107.
Mr Sharman’s affidavit also exhibited correspondence from Ms Riach to Mr Lock, which confirmed Ms Riach’s understanding of what was said at a meeting between her and Mr Lock on 28 May 2018. Ms Riach said:
3.1You did not oppose the allocaturs entered by the Court on 18 December 2017 because of the extensive history of the proceedings in which representatives of the company had put substantial submissions. You did not accept that it was appropriate to characterise the allocaturs as having been obtained by default.
3.2While you did not recall any discussion of the requirement for leave pursuant to Section 471B of the Corporations Act 2001 it does not concern you now that there appears not to have been any grant of leave nor that the allocaturs were made apparently in contravention of the Act.
3.3In your view, it is not appropriate for you now to investigate the proof further nor obtain specialise advice, even at a summary level, in respect of the claims for costs, and that you are conformable with the amount claimed despite the matters raised in our earlier letter.
3.4You would not make any application to Court to challenge the Allocaturs.
3.5It was therefore your intention to admit the proof in full for the purposes of an interim dividend subject to a minor correction as to the interest component.
3.6In your view any challenge to the proof was a matter for our client to undertake, which he could primarily do by appealing your adjudication.[26]
[26] D1 at 112-113.
In D2, Mr Lock deposed to the fact that he was not aware of the issues of apportionment, interest and quantum in this matter, before his appointment as the trustee of Alfred’s bankrupt estate in July 2017.[27] He said he was present at the directions hearing on 18 December 2017 and has no recollection of Mrs Stevens raising the question of the need to obtain leave to proceed. He denied that Mr Oliver Sheahan told the Court that leave to proceed was not required as the application was not opposed.[28] He said that Mr Oliver Sheahan, on behalf of the liquidators, informed the Court that the liquidators neither opposed not consented to the entry of orders proposed by Mr Stevens and Mr Starke.[29] He further took issue with a number of matters raised by Mrs Stevens in her affidavit sworn on 20 June 2019, in relation to a meeting held on 8 November 2017.
[27] D2 at [3.1].
[28] D2 at [4.1] – [4.3].
[29] D2 at [14.2].
Mr Lock further deposed to what occurred at a meeting with Mrs Stevens on 13 December 2017. Specifically, he said that he did not propose the apportionment of 70:30 between the company and the bankrupt estate. He said that he did not consider the question apportionment in the context of the Kourakis judgment. He said:
I was influenced in my thinking by the prolonged nature of the related dispute prior to my appointment and the fact that people who I considered to be prudent and reputable legal practitioners (including specialist costs consultants) appeared to have been involved at all times.[30]
[30] D2 at [7.2] - [7.3].
In relation to the question of interest, Mr Lock said that he did not understand that there was an issue about the date from when interest would commence, until he received correspondence from Trevor’s lawyer in May 2018.[31]
[31] D2 at [19].
Mr Lock exhibited to his affidavit, an affidavit that he caused to be filed in the Federal Court in relation to an application for leave to proceed against Alfred’s bankrupt estate.[32] He deposed in that affidavit:
I believed, and based on my discussions with Mr John Sheahan I understand that he also believed, that, as the entry of the Allocaturs was effectively formalising a costs order made by Chief Justice Kourakis prior to the bankruptcy of Mr Alfred Yard (Alfred) and the liquidation of the Company, leave to proceed against both insolvent estates was not required.
We did not seek legal advice or reconsider this position until the issue was raised with us by Fisher Jeffries, solicitors acting for Mr Trevor Yard (Trevor), in their letter of 23 May 2018…[33]
[32] D2 at 27.
[33] D2 at 28.
Mr Lock deposed that neither he nor Mr John Sheahan instructed Mr Bourne to act for Trevor’s estate and that he was unable to locate evidence to show that Mr Bourne was instructed by the previous trustee.[34]
[34] D2 at 32.
Mr Lock was cross-examined. In the course of his cross-examination, Mr Lock confirmed that while he was the principal on the files, Mr Oliver Sheahan had the day to day carriage of the liquidation and the bankruptcy.
In relation to the directions hearing on 18 December 2017, Mr Lock said that he did not recall being provided with a copy of the draft orders before the hearing.[35] He then qualified this answer, and said, in relation to being provided with the details of the interest calculations:
The only recollection I have of details of the calculation was the proposed allocaturs that we received the day before the 18^th hearing. So yes, so we did receive a calculation the day before.[36]
[35] T26.23.
[36] T32.6-9.
He then said the following:
My view of interest - my understanding of interest payable on the costs allocatur was that it was a matter of - I understood - a matter of legal fact as to when it would commence from, and it was a simple mechanic calculation as to how it would be calculated at what rates up until the date of the allocatur. So I didn't go through and consider the calculation of the interest that had been provided in that allocatur, I assumed that it had been done correctly because it was being done by Tim Cogan and other professional solicitors.[37]
[37] T32.23-32.
Later in his evidence, he reiterated his position in relation to the interest component of the claim:
Well, as I told her Honour earlier, my understanding of interest, rightly or wrongly, was that it was a matter of fact as to when interest would be claimable from and therefore I wouldn't have asked anyone to explain to me the basis on which interest was starting at a certain date.[38]
[38] T39.19-24.
As to the question of apportionment, Mr Lock said that the apportionment was proposed by Mr Starke and that he did not object to it.[39] He specifically denied the proposition that the apportionment of 70:30 was proposed by him, albeit agreeing that those percentages were discussed between himself and Mrs Stevens at the meeting on 13 December 2017.[40] As to his agreement to that apportionment, he said:
I think it would be going a bit far to say agreed but it was - she had said that that was the apportionment which they proposed to use and my attitude was, I know least about all of this but the people that have been involved with it, if that's the apportionment that they say is appropriate and the court is happy to make that order then I'm happy to abide that order. So it was agreed to the extent that that's what was going to be provided to the court and I wasn't going to oppose it.[41]
[39] T33.7-9.
[40] T40.6-17.
[41] T40.21-29.
The report to creditors of the bankrupt estate of Alfred[42] was put to Mr Lock. The report is dated 9 April 2018. Mr Lock said that Mr Oliver Sheahan had drafted the report and that he, Mr Lock, had checked it.[43] When asked to explain the passage:
The bankrupt and Yardoo had, prior to our appointment, defaulted in objecting to the bills (notwithstanding that they were both legally represented) and, accordingly, allocaturs issued in respect of each such bill. We did, however, carefully scrutinise the detail of each allocatur before it was issued.[44]
[42] P4 at 194.
[43] T44.24-27.
[44] P4 at 201.
Mr Lock said that this scrutiny did not include the interest component.[45] He also agreed that he did not scrutinise the question of apportionment.[46]
[45] T45.34.
[46] T46.9.
In re-examination, he modified his position further. He said that the use of the word “allocatur” in the report was incorrect and that “bills of cost” should have been used.[47] He went on to say:
The report should have referred to the scrutiny of the bills of costs and the scrutiny encompassed. I then find items which had been duplicated in a number of the bills of costs, so they had to come out, and a number of items where an amount was claimed which had already been paid. So the end result of the scrutiny was that the claims came down quite significantly from what they had been previously.[48]
[47] T62.12-14.
[48] T63.37-64.6.
Mr Ross-Smith also put to Mr Lock the second report to creditors in the Yardoo liquidation. In particular, he put the following passage to Mr Lock:
The larger allocatur relates to various bills of costs filed in connection with the earlier Victorian proceedings. These costs were apportioned, with our consent, between the Company and the bankrupt estate on a 70:30 basis, based on what was, at that time, our understanding of the most appropriate allocation.[49]
[49] P4 at 239.
In relation to the use of the word “consent”, Mr Lock said:
Well, it's obviously - the use of the word consent is a liberal usage; that's technically - our position is that we neither consented nor opposed but colloquially I can understand why a person drafting this used the word consent.[50]
[50] T47.5-9.
In relation to his role in reaching the final apportionment, Mr Lock said:
It's not really - it wasn't really us. We had no part in - there seems to be an impression that we were negotiating an apportionment; all we ever wanted to do was for Starke to tell us what apportionment he wanted to apply so that we could get final allocators made and we could then apply those apportionments in finalising the administration. It wasn't a case of us negotiating an apportionment; that's simply not - it's just not feasible. You know, I've got - I'm a trustee and bankruptcy and the liquidator; I can't possibly be negotiating a figure because I'm - I'd be negotiating against myself which would be an obvious conflict whereas abiding an outcome of the court order is certainly in my view a very different proposition and not a conflict, simply abiding the outcome of the court and this is in circumstances where, you know, we - I've got no basis to know what apportionment there should be. I had no involvement with how Starke ran his action previously. It's simply not feasible that I would come along and try and negotiate an apportionment. I've got no knowledge of what the apportionment should be.[51]
[51] T47.19-48.2.
Later, he said:
We wanted apportionment to be resolved but it certainly wasn’t a case of us making the apportionment. That’s just nonsensical.[52]
[52] T60.11-14.
An email from Mr Oliver Sheahan to Mr Starke, Mr Stevens and Mrs Stevens, dated 12 September 2017, was put to Mr Lock. In relation to the sentence:
We have not given this matter due consideration as yet, but will formally write to David in due course proposing terms of an appropriate resolution.[53]
[53] P4 at 18.
Mr Lock denied that it was his intention to propose the terms of a resolution to Mr Starke and Mr Stevens; rather:
I think what this is talking about is a way to get the final allocaturs entered, not how to determine the final allocaturs.[54]
[54] T50.27-30.
Mr Maik put to Mr Lock the following paragraph of the affidavit he filed in the Federal Court:
I believed, and based on my discussions with Mr John Sheahan I understand that he also believed, that, as the entry of the Allocaturs was effectively formalising a costs order made by Chief Justice Kourakis prior to the bankruptcy of Mr Alfred Jeffery Yard (Alfred) and the liquidation of the Company, leave to proceed against both insolvent estates was not required.[55]
[55] D2 at 28.
When asked if he agreed with this statement, the following exchange occurred:
A.Not really. It says here that I believed that leave wasn't required. I think I don't think I turned my mind to whether leave was required or not.
Q.Just so that I understand. So you're saying what you said - that part of your affidavit wasn't correct.
A. Yes.[56]
[56] T59.15-20.
Mr Stevens relied on the affidavits of Fiona Margaret Stevens sworn on 20 June 2019[57] and 9 August 2019.[58]
[57] P4.
[58] P5.
Mrs Stevens deposed that there was no inconsistency between the orders in the Kourakis judgment, and the adjudication process which occurred in this matter. The defendants had participated in the adjudication process since at least 5 August 2014 without objection.[59] She said that the liquidators advised that they did not require an application pursuant to s 471B of the Corporations Act, and this position was announced to the Court by Mr Oliver Sheahan on 18 December 2017.[60]
[59] P4 at [7.2].
[60] P4 at [7.4].
Bourne Lawyers, who were acting for both Alfred’s bankrupt estate and for Yardoo had been on notice since 3 May 2017 that Mr Starke and Mr Stevens would seek interest on costs and disbursements from no later than 30 July 2007. This was communicated to Mr Bourne by Mr Stevens in a letter dated 3 May 2017, which letter was exhibited to her affidavit.[61]
[61] P4 at [9] – [10].
Mrs Stevens outlined various meetings held with Mr Lock and Mr Oliver Sheahan, and email correspondence passing between them. She said that she met with them on 15 August 2017, after their appointment as Alfred’s trustee, but before Yardoo was wound up to provide them with general information about “the Defendants, their assets and any likely creditors in addition to the Plaintiff.”[62]
[62] P4 at [21].
Between September 2017 and November 2017, a considerable amount of email correspondence passed between the liquidators, Mrs Stevens, Mr Cogan, Mr Starke and Mr Stevens on the questions of apportionment and interest. In relation to a meeting held on 8 November 2017 between Mr Cogan, Mr Lock, Mr Oliver Sheahan and Mrs Stevens, Mrs Stevens said:
I was being pressed by Sheahan Lock in their joint capacities as Alfred’s Trustees and Liquidators to provide the calculation of an amount upon which they could make an apportionment and adjudication. However, it was also apparent that Mr Lock trusted Mr Cogan and me to make the relevant calculations.[63]
[63] P4 at [31].
Further emails were exchanged between the parties during November and December 2017. A further meeting was held between Mrs Stevens, Mr Lock and Mr Oliver Sheahan on 13 December 2017. Mrs Stevens deposed:
…Mr Lock said words to the effect of “We propose an apportionment of Alfred Yard 30% and Yardoo 70%.
…despite a potential conflict of interest, I considered that the final rate of apportionment was a matter for Messrs John Sheahan and Lock.[64]
[64] P4 at [39] – [40].
She then deposed:
At the conclusion of the meeting on 13 December 2017 Mr Lock and Mr Oliver Sheahan agreed that I would calculate the amounts of the proposed final allocators taking into account duplicated costs, a 70:30 apportionment, interest and GST. I raised the question of whether the Court’s leave to proceed was required in order for final allocaturs to issue. Mr Lock replied in words to the effect of: “The Liquidators and Trustees will not oppose the Court granting leave to issue allocaturs.”[65]
[65] P4 at [42].
Mrs Stevens deposed to the contents of the notes that she made during the meeting on 13 December 2017:
On 15 December 2017 I sent an email to Messrs Cogan, Starke, and Stevens concerning issues arising from my meeting with Mr Lock and Mr Oliver Sheahan on 13 December 2017. In my email, I noted as a contemporaneous record that “3.The liquidator & trustee propose apportionment as 30% Alfred Yard 70% Yardoo P/L. 4. The liquidator and trustee will not oppose the court granting leave to issue allocaturs.”[66]
[66] P4 at [46].
A copy of the email referred to was exhibited to her affidavit. The notes themselves are exhibited to Mrs Stevens’ second affidavit.[67] The notes made by Mr Oliver Sheahan at that meeting are also exhibited to her second affidavit.[68]
[67] P5 at FMS22.
[68] P5 at FMS23.
Mrs Stevens agreed that Mr Lock and Mr Oliver Sheahan relied on Mr Cogan and her to calculate the amounts of the final allocaturs.[69]
[69] P4 at [51].
In relation to the need to seek leave to proceed against Yardoo, Mrs Stevens deposed:
At the Directions Hearing on 18 December 2017, Mr Oliver Sheahan appeared on behalf of the Liquidators and Trustees. Mr Lock was seated at the bar table with Mr Oliver Sheahan. Mr Starke appeared on behalf of the Plaintiff, and I appeared on behalf of Mr Stevens. I was seated alongside Mr Starke. The Plaintiff sought Final Orders for the recalculated amounts, inclusive of interest and GST on the basis that the amount was apportioned 30% to be paid from Alfred’s bankrupt estate and 70% by Yardoo.
Notwithstanding my conversation with Mr Lock and Mr Oliver Sheahan before the hearing, I considered it prudent to seek leave in so far as it may have been required. While Judge Bochner was dictating comments and orders granting the final allocaturs I rose from bar table and applied for leave to proceed under section 471B of the Corporations Act. Mr Oliver Sheahan responded that leave was not necessary as the liquidators do not oppose the application. Her Honour looked at me, quizzically. My presence at bar table next to Mr Starke is not noted on the Court record.[70]
[70] P4 at [54]-[55].

A large volume of material was exhibited to Mrs Stevens’ affidavit. While some of that material has already been referred to, it is important to mention the following documents:
·A Report to Creditors in the Yardoo liquidation, prepared by Sheahan Lock Partners and dated 19 December 2017 (“the Yardoo report”).[71] The Yardoo report recorded that the only secured creditor was Rural Bank Ltd, and that the unsecured creditors were Mr Starke, Deceased Estate of B R Yard, and Judith Lorraine Yard.[72] In relation to the allocaturs, the Yardoo report contained the following passage:
[71] P4 at 157.
[72] P4 at 164.
Alfred and the Company had, prior to our appointment, defaulted in objecting to the bills (notwithstanding that they were both legally represented) and, as such, in the absence of any compelling evidence excusing that default, we were unable to object to allocaturs being issued in respect of each such bill.[73]
[73] P4 at 166.
·A report to Creditors in the administration of Alfred’s bankrupt estate, prepared by Sheahan Lock Partners and dated 9 April 2018 (“the Alfred Report”).[74] The Alfred Report recorded no secured creditors, and the only unsecured creditors who have lodged proofs of debt as Mr Starke and the Deputy Commissioner of Taxation. It noted that it was aware that Trevor and Judith Lorraine Yard were also creditors, and that Trevor’s solicitors “have informed us [Trevor] is owed several hundred thousand dollars”.[75] In relation to the allocaturs, the Alfred Report said:
The bankrupt and Yardoo had, prior to our appointment, defaulted in objecting to the bills (notwithstanding that they were both legally represented) and, accordingly, allocaturs issued in respect of each such bill. We did, however, carefully scrutinise the detail of each allocatur before it was issued.[76]
·A second Report to Creditors in the Yardoo liquidation, prepared by Sheahan Lock Partners and dated 20 September 2018 (“the second Yardoo report”).[77] The second Yardoo report now records Trevor as an unsecured creditor. In relation to the allocaturs, the second Yardoo report says:
These costs were apportioned, with our consent, between the Company and the bankrupt estate on a 70:30 basis, based on what was, at that time, our understanding of the most appropriate allocation.
We have since had cause to review the allocaturs and are no longer confident that a 70:30 apportionment is appropriate. We have sought, and are awaiting, formal advice on this issue.[78]
·A second Report to Creditors in the administration of Alfred’s bankrupt estate, prepared by Sheahan Lock Partners and dated 19 March 2019 (“the second Alfred Report”).[79] This report noted that the only other possible unsecured creditor was Trevor, whose solicitor advised that he was owed several hundred thousand dollars; however no particulars had been provided to date.[80] No reference is made to the allocaturs, and Mr Starke is shown as having lodged a proof of debt in the sum of $285,197.89.[81]
[74] P4 at 194.
[75] P4 at 200.
[76] P4 at 201.
[77] P4 at 235.
[78] P4 at 239.
[79] P4 at 295.
[80] P4 at 299.
[81] P4 at 298.
Mrs Stevens was also cross-examined.
In relation to the existence of an agreement between her and the liquidators and trustee in respect of interest, Ms Stevens said:
It was put to the liquidators and trustees by both me and Mr Cogan and as we’ve previously put it to Mr Bourne when he was acting for the defendants that we would be claiming interest for the or no later than 30 July 2007…[82]
[82] T75.13-17.
It was her position that this was accepted by Mr Lock and Mr Oliver Sheahan.[83]
[83] T75.24.
Mrs Stevens was adamant throughout her evidence that her position had always been that the commencement date for interest would be 1 July 2007.[84] She agreed that Mr Lock trusted Mr Cogan and herself, but said:
Mr Lock wasn’t reliant upon me. He could have done the calculations himself.[85]
[84] See for example T77.34-35, T80.31-32, T82.27.
[85] T85.30-31.
In relation to the question of apportionment, Mrs Stevens said:
It wasn’t up to me to make any estimate about apportionment, that was up to the liquidators and trustees.[86]
[86] T88.23-25.
When put to her that she had refused to assist Mr Lock and Mr Oliver Sheahan with apportionment, because Mr Stevens took the view that he should have been paid 100% by Yardoo, Mrs Stevens said:
As to assistance with apportionment I entirely disagree with what you said.[87]
[87] T89.37-90.1.
Mrs Stevens’ position throughout was that it was for the liquidators and trustee to do the apportionment.[88]
[88] See for example T91.33-35.
As to the need to obtain leave to proceed against Yardoo, Mrs Steven’s evidence was that she was aware that leave was required.[89] Her position, however, was that she had been informed by the liquidators that leave was not required because they consented to the orders being made.[90] She says that as at 18 December 2017, she was not aware that the liquidators’ consent was, of itself, insufficient. She says that she did not turn her mind to the need to seek leave, under either the Bankruptcy Act or the Corporations Act, until her meeting with Mr Lock and Mr Oliver Sheahan on 13 December 2017.[91]
[89] T94.20-21.
[90] T94.36-37.
[91] T96.21-23.
Mr Duggan put to Mrs Stevens numerous times that she had not made reference to the need to seek leave pursuant to the Corporations Act during the directions hearing on 18 December 2017. While she agreed that she had not made an application pursuant to the Bankruptcy Act, she was adamant that she had brought to the Court’s attention the need to seek leave pursuant to the Corporations Act, and that Mr Oliver Sheahan had advised the Court that leave was not required because the liquidators consented to the orders being made.[92]
[92] T99.24-37.
Mr Starke relied on the affidavit of Mr Lock filed in the Federal Court proceedings SAD 150/2019[93] and the affidavit of Mr Starke sworn on 13 August 2019.[94] He also sought to tender the affidavit of Mr Starke sworn on 18 July 2019.[95] Mr Duggan objected to its tender on the ground of relevance. Having now had an opportunity to consider the affidavit and its exhibits, I am of the view that it is relevant to the matters before me. The transcript of proceedings before the Federal Court are clearly relevant to the matters before me, and go some way to shedding some light on the parties’ position on that question.
[93] P9.
[94] P12.
[95] MFIP11.
Mr Starke deposed to the events at the directions hearing on 18 December 2017:
I refer to paragraphs 53 to 55 of Mrs Stevens’ affidavit. At the directions hearing on 18 December 2017 Mrs Stevens sat next to me at bar table. The Court Record (exhibit JMS1 to the affidavit of Justin Sharman filed on 2 May 2019) is wrong in so far as it records no appearance for the other party. I note that Court Record for hearing on 10 July 2017 also records no appearance for the other party. The transcript correctly records Mrs Stevens’ appearance for the other party. I assume if there had been transcript on 18 December 2017 that would have recorded Mrs Stevens’ appearance and her oral application for leave to proceed against Yardoo.[96]
[96] P11 at [4].
He also referred to his application in the Federal Court seeking leave nunc pro tunc to proceed against Alfred and Yardoo pursuant to the provisions of the Bankruptcy Act and the Corporations Act respectively.[97]
[97] P11 at [7] – [8].
Mr Starke exhibited to P11 correspondence that he had sent to Alfred’s trustee in bankruptcy in 2013, apprising the trustee of his claim against the bankrupt estate, and the current status of the matter. He also exhibited transcript from two hearings before the Honourable Charlesworth J, on 11 July 2019 and 15 July 2019.[98] I note the following excerpts from the transcript:
·On 11 July 2019, Mr Gretsas told the Court:
On the figures we have, your Honour, we can’t see a difference in what the creditors get regardless of the apportionment because they are creditors in both the bankrupt estate and the liquidation, and, on our figures, we believe they will get a 100 percent dividend subject to one caveat, and that is Mr Trevor Yard has indicate he will lodge a proof of debt in a bankrupt estate but has not done so.[99]
·On 15 July 2019, Mr Gretsas told the Court:
Now, I can say that there would be a disadvantage to creditors if the apportionment was reversed, but we’ve taken the view that the current apportionment is not reflected in terms of what Kourakis J, as he then was, decided… And so our view is it’s not proper for the trustee in bankruptcy to take an opposing stance based on some mathematical advantage. As far as we’re concerned, Kourakis J’s reasons prevail, and that’s the position we’re going to follow, and we agree with the liquidator the apportionment is not correct.[100]
[98] P11 at DAS-1.
[99] P11 at 9.
[100] P11 at 24.
Mr Marsh, on behalf of Trevor, tendered a bundle of invoices from Mr Starke.[101]
[101] D10.
As is clear from the cross-examination of Mr Lock and Mrs Stevens and the affidavits relied on by the parties, one of the major issues in contention between them was what occurred at the directions hearing on 18 December 2017. I provided to the parties my recollection of that directions hearing in the following terms:
All right. I think as a matter of fairness I probably should disclose what my recollection is. I recall that Mr Lock was at a number of directions hearings. I do not recall whether he was present at the directions hearing on 17 December. I recall that Mr Sheahan was at the bar table, that he advised me that the liquidator did not oppose the allocaturs. I recall Mrs Stevens raised the issue of whether leave was required. I believe that I said words to the effect that I was of the view that leave was probably required.
Mr Sheahan then stood up and said that as the matter was being dealt with by consent leave was not required. I then gave the quizzical look referred to in Mrs Stevens' affidavit. I think I said to Mr Sheahan if that was his position then that's the approach that we would take. [102]
[102] T129.21-37.
Mr Duggan put to me that I was mistaken as to my recollection and suggested that I may have confused the events of 18 December 2017, with the next directions hearing, held on 15 March 2018. I reject that submission, not least because Mrs Stevens was not present at the directions hearing on 15 March 2018.
The position of Yardoo
In his submissions on behalf of Yardoo, Mr Duggan canvassed four separate topics: the interest component of the allocaturs, the apportionment of the costs, the failure to seek leave to proceed against Yardoo while in liquidation, and the Kourakis judgment.
In relation to the interest component, the objection taken by Yardoo is the start date. Mr Duggan submitted that even a cursory examination of the start date set out in the allocaturs shows that it is unsatisfactory.
He says that it is clear that there was no agreement by the liquidators as to the appropriateness of the start date, and in this regard, pointed to the evidence of Mrs Stevens where she acknowledged that in fact, the liquidators did not respond to the position put by Mrs Stevens and Starke in relation to interest.[103] He submitted that the failure of the liquidators to respond, and their statement that they did not oppose the start date for the interest, should not be taken as consent by them that the start date was appropriate. In light of this, Mr Duggan submits that there is no binding agreement as to the commencement date for interest. The liquidators relied on the advice of Mr Cogan (who was representing Mr Stevens and Mr Starke) as to the appropriate start date, and failed to understand that there was a controversy about that date.
[103] T75.9–76.6.
In relation to apportionment, Mr Duggan submitted that the liquidators were clearly at a disadvantage, as compared to Mr Starke and Mr Stevens when dealing with this question, and in fact trusted Mr Starke and Mr Stevens on this question. He also submitted that Mr Stevens refused to assist them in dealing with the question of apportionment. In particular, he pointed to one of Mrs Stevens’ answers during her cross-examination, where she said:
It wasn’t up to me to make any estimate about apportionment, that was up to the liquidators and trustees.[104]
[104] T88.23-25.
He submitted that this response was inappropriate given the position of disadvantage in which the liquidators found themselves.
Mr Duggan criticised Mr Stevens and Mr Starke for the failure to join Trevor as a party to the proceeding, given the findings in the Kourakis judgment that Trevor was a client of Mr Starke, and that apportionment should occur between all of Mr Starke’s clients. Mr Duggan submitted:
Those two matters, meant, obviously, that Mr Starke was required to join [Trevor][105] to the proceedings.[106]
[105] I note that the transcript reads “Mr Stevens”, however, it is clear from the context that Mr Duggan intended to refer to Trevor.
[106] T136.30-32.
Mr Duggan submitted that by failing to join Trevor as a party, and by dealing with the question of quantum before dealing with the question of apportionment, Mr Stevens and Mr Starke acted directly contrary to the orders and reasoning of Kourakis J. They compounded this error, by refusing to give appropriate assistance to the liquidators.
Kourakis J set out the way in which quantification and apportionment of Mr Starke’s costs were to occur. Firstly, he required that the costs be apportioned between all of Mr Starke’s clients, not just those who were party to this proceeding.[107] Thus, the costs were to be apportioned between Alfred, Trevor, Gladys and Yardoo. Secondly, the quantum of fees was to be determined after apportionment, not before.[108] Thirdly, the fees were to be taxed, and not reached through any other method.[109] As a result, the entire process was flawed. Quantum was dealt with before apportionment; the liability of Gladys and Trevor was not addressed; the costs were not taxed.
[107] [2012] SASC 19 at [31].
[108] [2012] SASC 19 at [88].
[109] [2012] SASC 19 at [88].
In relation to the requirement that leave be sought to proceed against Alfred’s bankrupt estate and Yardoo in liquidation, Mr Duggan submitted that no leave had been sought by Mr Starke to proceed against Yardoo once it went into liquidation, pursuant to s 241 B of the Corporations Act. Further, no leave had been sought to proceed pursuant to the provisions of the Bankruptcy Act, despite the knowledge of Mr Stevens that this was required. As leave had not been sought, the allocaturs should be set aside.
Mr Duggan conceded that leave could be granted, nunc pro tunc, to proceed under both the Bankruptcy Act and the Corporations Act. He said, however, that if there was a serious doubt as to whether a nunc pro tunc order would be made, then the allocaturs should be set aside. In determining whether there was such a serious doubt, he submitted that it is necessary to consider the appropriateness of the orders sought.
In answering this question, it is necessary to take into consideration the interests of the creditors and shareholders of Yardoo, the creditors of Alfred’s bankrupt estate, and any beneficiary of the bankrupt estate in the event of a surplus. Once those interests have been taken into consideration, it is clear that the allocaturs are inappropriate, because, firstly, the process by which they were reached failed to follow that required by the Kourakis judgment, and secondly, because the apportionment is clearly wrong, as is the start date for the interest.
Mr Duggan drew my attention to a number of authorities, including Ong v Lottwo Pty Ltd[110] (Ong), Commonwealth v Davis Samuel Pty Ltd (No 5)[111] (Davis Samuel Pty Ltd) and Emanuel v Australian Securities Commission[112] (Emanuel). In particular, he relied on Emanuel, where Toohey J outlined the history of orders nunc pro tunc, and said:
Thereafter the use of an order nunc pro tunc is well recorded in judicial decisions. In Donne v Lewis, Lord Eldon said:
“the Court will enter a Decree nunc pro tunc, if satisfied from its own official documents, that it is only doing now what it would have done then.”[113]
(Citations omitted)
[110] (2013) 116 SASR 280.
[111] (2008) 164 ACTR 1.
[112] (1997) 188 CLR 114
[113] (1997) 188 CLR 114 at 132.
Mr Duggan submitted that, given the inappropriate nature of the allocaturs sought by Mr Stevens and Mr Starke, it is arguable that leave would not have been granted, if it had been sought prior to their issue. In that circumstance, they should be set aside.
Mr Duggan further relied on Davis Samuel Pty Ltd where Refshauge J outlined the factors to be taken into consideration when deciding whether to grant leave to proceed against a company in liquidation. He submitted that consideration of applications under s 471B of the Corporations Act requires the consideration of a broad range of factors that extend well beyond the consent or otherwise of the liquidator to the action. The interests of the shareholders and creditors must be considered, beyond any consent given by the liquidator.
Once these interests are taken into consideration, Mr Duggan submitted that leave to proceed would not have been granted, because the allocaturs were simply inappropriate.
Mr Duggan submitted that it would be falling into error to take into consideration the non-opposition or consent of the liquidators to the issue of the allocaturs, in determining whether leave should be granted nunc pro tunc to proceed against Yardoo in liquidation. In response to further questions from me, he said:
I think that the real question is whether this matter has been determined on the merits.[114]
[114] T153.20-21.
The following exchange then occurred:
HER HONOUR: Are you saying that because of the cost orders made, the parties couldn't negotiate an outcome?
MR DUGGAN: Well, I say that it's apparent that they haven't negotiated a proper - what happened in this case is that, understandably, trust was placed in Mr Cogan and the plaintiffs on apportionment, and as a consequence of that there was a non-following of Justice Kourakis' decision; and that's another thing that has to be put into this particular mix. The apportionment wasn't followed. Your Honour just has to look at it to see that there's been no merit.
Forget the consent issue as well. I mean, there's consent and there's consent, and that's why we're having this hearing. Your Honour made that point. You've got to look at the quality of how the number was reached. So, that's the ultimate question; is it reasonable for the plaintiffs to hold onto costs order of over $1 million that has interest starting in mid-2007 and apportionment 70/30, 70 against the company; totally unreasonable. When you actually look at how it happened, the explanation for that is just the process miscarried, and there's a victim; it's Trevor. It comes out of Trevor's pocket. This jurisdiction is about rule 242, looking at the justice of the situation. So it's not just about consent. It would be too narrow to couch it in that way.[115]
[115] T153.22-154.9.
It appears that ultimately, the arguments made on behalf of Yardoo rested on the non-compliance with the Kourakis judgment, and the fact that a full taxation of Mr Starke’s and Mr Stevens’ costs did not occur. Yardoo’s position is that this is public interest litigation, and as a result, the interests of the creditors and shareholders of Yardoo must be considered.
Alfred’s position
Mr Gretsas on behalf of Alfred’s trustee made very few submissions. I understood his position to be that he generally supported the position of Yardoo and sought to have the allocaturs set aside on the basis that there had been no real examination of apportionment, and that they did not reflect the Kourakis judgment.
Trevor’s position
Mr Marsh on behalf of Trevor submitted that the supervisory jurisdictions of the Courts, in three separate areas, were invoked in this matter. In respect of bankruptcy, the Federal Court exercised a supervisory jurisdiction; in respect of the Corporations Act, both the Federal Court and the Supreme Court exercised a supervisory jurisdiction; and in respect of solicitors and their fees, the Supreme Court exercised a supervisory jurisdiction. He submitted that the jurisdiction had miscarried in each respect.

In relation to the bankruptcy jurisdiction, Mr Marsh referred to the case of Allanson v Midland Credit,[116] and submitted that a court required a greater degree of satisfaction as to whether to accept a debt, than that required by a trustee when considering a proof of debt. He said that in this case, insufficient rigour had been applied to consideration of apportionment.
[116] (1977) 16 ALR 43.
In relation to the jurisdiction invoked under the Corporations Act, Mr Marsh relied on the case of Ong where the Court said:
The well accepted purpose behind the general prohibition provided for by s 471B is that it is intended to ensure that a company liquidation proceeds in an orderly manner in accordance with the rules governing such liquidations and that creditors should be restricted in their capacity to take steps outside the liquidation process itself which might lead to preferential treatment.[117]
[117] [(2013) 116 SASR 280 at [60].
He further relied on Bratovic v SMB Argentinian Bar and Grill Pty Ltd & Ors,[118] where the Court held that an application pursuant to s 471B must be sought either by an originating process in a new proceeding, or by an interlocutory process in an existing proceeding, and must not be “tacked on” in an existing proceeding.
[118] [2005] SASC 431.
Mr Marsh submitted that in this matter, the apportionment was not reached in an orderly manner. The informality with which the question was approached was inappropriate; it should not have been dealt with by an oral application for leave by Mr Stevens.[119] The seriousness of the question of leave to proceed against a company in liquidation requires a formal application, and by choosing not to seek leave in this way, Mr Starke and Mr Stevens erred to the extent that the allocaturs should be set aside.
[119] I will return to the question of whether and how leave was sought by Stevens in due course.
As to the supervisory jurisdiction of the Court in respect of solicitors’ fees, Mr Marsh submitted that it was not appropriate for the consumers of legal services to be disadvantaged by removing their right to have the costs charged tested through formal taxation, as a result of a mistake. He submitted that the schedules of costs were not unopposed, in that a notice of dispute had been filed, that being FDN 80. Thus, the disputed items should still have been ruled on. Further, he submitted, Mr Bourne’s failure to respond to the other schedules should not be sufficient to allow the entirety of those schedules to be accepted.
Finally, Mr Marsh submitted that the costs were to be dealt with pursuant to the order of Kourakis J, which carried with it the precondition that apportionment was to occur between all of Mr Starke’s clients, not just those who were parties to this action. As at least half of the retainer related to Alfred’s trust claim, 100% of these costs should have been apportioned to him. The apportionment of 70% to Yardoo was wholly inappropriate when the pleadings and various decisions were taken into consideration. About half of the judgment at first instance in the Victorian Supreme Court related to Alfred’s trust claim; the other half related to Lorraine’s partnership claim. As a result, Yardoo should be responsible only for part of the partnership claim, and not the balance of the costs incurred.
Mr Marsh also submitted that while he accepted that Mr Starke and Mr Stevens had suffered delay in having their costs claims dealt with, their failure to ensure that the processes set out by the various supervisory jurisdictions at play here should lead to the allocaturs being set aside.
Mr Stevens’ position
Mr Ross-Smith commenced by referring to a chronology, which had been handed up at the commencement of the hearing. He relied on it, and I note that no party objected to any aspect of the chronology or Mr Ross-Smith’s reliance on it.
On the basis of the chronology, Mr Ross-Smith rejected the submissions made by the liquidators that Mr Starke and Mr Stevens were responsible for the delay in the resolution of the costs issue. In particular, he noted that Alfred and Yardoo forced Mr Stevens and Mr Starke to undertake a trial as to their entitlement to their fees. They then required a long form bill, and further particulars, in the form of further long form schedules, of the costs incurred. They took an inordinately long time to respond to the schedules, which resulted in the invocation of Rule 273(2). These actions on the part of Alfred and Yardoo have resulted in Mr Starke and Mr Stevens remaining unpaid for work they undertook more than 12 years earlier. Mr Ross-Smith further noted that, despite all of these delays by Alfred and Yardoo, there is still no proposal for any payment by the liquidators or the trustee, in the face of clear indebtedness to Mr Stevens and Mr Starke. It is not a question of whether the debt exists, rather how much is owed, and no offer of even the minimum amount owed has been made.
Mr Ross-Smith also rejected the submission of Mr Duggan that Mr Stevens and Mr Starke took an adversarial approach to the proceedings. He submitted, on the contrary, that it was Alfred and Yardoo who were unreasonably adversarial, by forcing Mr Stevens and Mr Starke to trial, and by requiring long form schedules, separate adjudication of counsel fees and by delaying unreasonably in providing a response to the schedules provided by Mr Stevens and Mr Starke.
Mr Ross-Smith rejected the position put by Mr Duggan, that Mr Stevens and Mr Starke had an obligation to put before the Court the details of the agreement reached between them and the liquidators and trustee. He submitted that the liquidators and trustee are parties to the adjudication, and like all adversarial processes, an adjudication can be resolved by a process of negotiation. Once it is announced to the Court that the parties have reached an agreement, it is not for the Court to look behind the fact of the agreement.
In relation to the representation of the parties during the adjudication process, Mr Ross-Smith submitted that Mr Bourne filed a notice of acting on behalf of Alfred and Yardoo on 3 April 2013, and from that time he acted for Trevor as well as the other parties to the action. He further noted that Mr Bourne had instructed costs consultants. He submitted that there cannot be any suggestion that anything was done without the authority of all of the parties currently appearing before the Court.
In relation to the process set out by Kourakis J, Mr Ross-Smith submitted that regardless of the process envisaged by Kourakis J, the parties agreed to a process and so are bound by that agreement. The parties cannot, years later, seek to abandon that process because it was not that envisaged by the trial judge.
On the questions of apportionment and interest, Mr Ross-Smith again referred to the chronology, and said that this shows that there was engagement between Mr Stevens and Mr Starke on the one hand, and the liquidators and the trustee on the other on the question of apportionment and the interest calculations. The conduct of the liquidators and the trustee was the engaging in this negotiation, arriving at an agreed apportionment, and then receiving details of interest calculations and agreeing to them. This conduct constitutes a binding agreement. He put to me that Mr Duggan’s submissions as to the lack of agreement is unrealistic in the circumstances. He also submitted that the liquidators’ submission that Mr Stevens was unhelpful on the one hand, and the submission that the suggested apportionment of 70:30 came from Mr Stevens, are inconsistent with each other.
Mr Ross-Smith submitted that, if the liquidators and trustee did not have sufficient information to make decisions on interest and apportionment, they had an obligation to inform Mrs Stevens of this during the period of the negotiations, and also to advise the Court of this fact at the hearing on 18 December 2017. There was a clear obligation on the liquidators to advise the Court that they required more information and time to reach a considered position on the questions of apportionment and interest, if that was the case. They did not do this.
In relation to the question of what occurred at the directions hearing on 18 December 2017, Mr Ross-Smith submitted that I was entitled to rely on my own memory of events as well as the affidavit of Mrs Stevens and her oral evidence on the topic. Further, he submitted that I should take into consideration the second Yardoo report, in which they told the creditors of Yardoo that they consented to the apportionment of 70:30. It is now inappropriate for the liquidators to take a different position on this question.
Mr Ross-Smith submitted that where the evidence of Mrs Stevens conflicted with that of Mr Lock, I should prefer Mrs Stevens’. There are three areas where their evidence is in conflict. The first relates to the meeting that was held on 13 December 2017. Mr Ross-Smith’s submission was that I should prefer Mrs Stevens’ evidence, because she made notes during the course of that meeting, and referred to those notes to refresh her memory during the course of her evidence. By contrast, Mr Lock did not make notes, and was relying entirely on his memory when giving his evidence. Mr Ross-Smith further submitted that Mr Oliver Sheahan, who was also present at that meeting, was not called to give evidence, and that I should draw an adverse inference in relation to that failure.
The second area where their evidence diverged was whether Mr Oliver Sheahan, on behalf of the liquidators, consented to the orders made on 18 December 2017. Mr Ross-Smith put to me that I should rely on my own memory of what occurred on that day, that I should rely on the evidence of Mrs Stevens, as she made notes during the course of the directions hearing, and that I should not rely on the evidence of Mr Lock, as he did not make any notes of what occurred, but relied only on his memory. Mr Ross-Smith further submitted that I should draw an adverse inference in relation to the fact that Mr Oliver Sheahan did not provide an affidavit as to his recollection of what occurred, despite the fact that he represented Mr Lock at the hearing.
The third area where there was a significant difference between the evidence of Mr Lock and Mrs Stevens was in relation to whether the question of the need to seek leave to proceed against Yardoo in liquidation was raised. Again, Mr Ross-Smith suggested that I should rely on my own memory of what occurred, and I should rely on the evidence of Mrs Stevens as it is unlikely that she would either be mistaken about the matter, or be deliberately untruthful. He again submitted that I should draw an inference from the fact that Mr Oliver Sheahan did not give evidence about this topic. Mr Ross-Smith invited me to reject Mr Duggan’s submission that the question of leave was raised at the next directions hearing on 15 March 2018, rather than on 18 December 2017, because Mrs Stevens did not attend that directions hearing.
In relation to Mr Oliver Sheahan, Mr Ross-Smith noted that he was the staff member at Mr Lock’s office who had the day to day conduct of the Yardoo file, was present at the meeting on 13 December 2017 and at the directions hearing on 18 December 2017, and took notes of his attendances.
As to the orders that the liquidators and the trustee say should be made in lieu of those that they seek to have set aside, Mr Ross-Smith submitted that I had been provided with very little assistance from them in that regard. They have provided no evidence of what the proper apportionment and interest calculations should be.
As to the need to seek leave to proceed against Alfred’s bankrupt estate and Yardoo in liquidation, Mr Ross-Smith submitted that the liquidator and the trustee have an obligation to raise this issue. He submitted that it is not appropriate for them to remain silent, and then to take the point at a later date and claim a procedural irregularity. He noted that the issue of Alfred’s bankruptcy had been raised before the Court on a number of occasions from 30 July 2013 onwards; to allege now that it is an irregularity which should be used against Mr Stevens and Mr Starke is to distort the reality of the situation. This is an issue that should have been raised by the trustee and Yardoo many years ago if they wished to take the point.
Mr Ross-Smith further relied on the evidence of Mr Lock, found at [6] of P9, Mr Lock’s affidavit sworn on 15 July 2019. Mr Lock said:
I believed, and based on my discussion with Mr John Sheahan I understand that he also believed, that, as the entry of the Allocaturs was effectively formalising a costs order made by Chief Justice Kourakis prior to the bankruptcy of Mr Alfred Jeffery Yard (Alfred) and the liquidation of the Company, leave to proceed against both insolvent estates was not required.
Further, Mr Ross-Smith noted that the liquidator had advised the Federal Court that he will not oppose the granting of leave, and this statement was not qualified in any way. He submitted that in circumstances where the interest calculations and apportionment are at the least not opposed, and more likely consented to, it is extremely unlikely that leave would not have been granted.
Mr Ross-Smith submitted that, over time, the liquidators’ position had changed. To demonstrate this point, he handed up a document which set out in tabular form the various submissions made on behalf of the liquidators between 2 May 2019 and 16 August 2019, in the Federal Court and this Court. He also referred to the evidence of Mr Sharman at Exhibit JMS7 to D1. The exhibit referred to is a letter from Fisher Jeffries, solicitors for Trevor, to Mr Lock dated 5 June 2018, in which Trevor’s solicitor sets out various statements made by Mr Lock at a meeting on 28 May 2018. These include a statement that Mr Lock did not oppose the entry of the allocaturs, and did not accept that they had been obtained by default and a further statement that he was not concerned that there appears not to have been any grant of leave or that the allocaturs were issued in apparent contravention of the Corporations Act.
He then referred to a number of statements made by Mr Duggan for the liquidators in the Federal Court, in which a very different approach was indicated.
Mr Ross-Smith rejected Mr Duggan’s submission that apportionment and interest would be dealt with quickly and inexpensively, in the event that I set aside the allocaturs. Given the history of the matter, he suggested that this would seem unlikely.
He also rejected the submission that there would be no prejudice to Mr Starke and Mr Stevens should the allocaturs be set aside. He pointed to the fees of the liquidator which would be incurred, the increased delay and expense caused by the addition of other parties, such as Trevor, and the further delay to Mr Stevens in having accounts, currently more than twelve years old, paid.
Mr Starke’s position
Mr Maik, on behalf of Mr Starke, submitted that interest on the fees owed to Mr Starke and Mr Stevens should be calculated from 30 July 2007, because agreement was reached between them, Alfred and Yardoo that a property would be sold and the proceeds of sale would be applied towards payment of the outstanding fees. Consent orders for the sale of this property were made on 27 July 2007. Alfred and Yardoo, however, defaulted on that agreement, and the property was not sold until October 2018, when it was sold by the liquidators. Thus, the date from which interest should accrue is calculated from the date in the agreement between the parties, despite the default by the defendants, rather than by virtue of the provisions of the Rules. Mr Maik noted that the liquidators did not challenge the existence of that agreement.
As to apportionment, it is Mr Starke’s position that the liquidators and trustee proposed the apportionment of 70:30. In this regard, he relied on the notes made by Mr Oliver Sheahan at the meeting with Mrs Stevens on 13 December 2017,[120] and on the statement made by the liquidators in the Alfred report, which read:
We did, however, carefully scrutinise the detail of each allocatur before it was issued…these costs were apportioned, with our consent between the Company and the bankrupt estate on a 70:30 basis, based on what was, at that time, our understanding of the most appropriate allocation.[121]
[120] P5 at FMS-22 and FMS-23.
[121] P4 at 201-239.
Thus, he says that the liquidators and trustee consented to the apportionment, and cannot now resile from that agreement.
As for the need to apply for leave to proceed under the Bankruptcy Act and the Corporations Act, Mr Maik noted that Mr Starke has applied for the requisite leave in the Federal Court, seeking that the orders be made nunc pro tunc. He further adopted the submissions made on behalf of Mr Stevens and said that I should have regard to my own recollection of the directions hearing on 18 December 2017, and find that Mrs Stevens raised the question of leave at that time, and that Mr Oliver Sheahan advised the Court that leave was not required.
As to the alleged non-compliance with the Kourakis judgment, Mr Maik pointed to the degree of unreality in the issue of Yardoo’s limited liability, where he said:
To the extent that Alfred Yard remains a shareholder of Yardoo, the assets of Yardoo will at least indirectly remain available to satisfy the costs payable by him.[122]
[122] [2012] SASC 19 at [32].
He further noted that at no time did the liquidators, the trustee or the other parties consider that a line by line determination of apportionment was required, and pointed to an email from Mr Lock dated 5 December 2017, where he said:
As I indicated to Fiona this morning, all we’re really interested in is making sure that there is no duplication in the costs claimed. To that end, I have suggested that it might be helpful for Fiona and Oliver to sit down together, as soon as practicable, to go through various bills and make sure we’re all on the same page. I am hopeful that everything can be resolved within the next ten days. It should then be a simple matter to calculate interest and agree apportionment, with a view to getting final orders on Monday 18 December 2017.[123]
[123] Email dated 5 December 2017, referred to in the Plaintiff’s submissions at [54] and handed up in Court.
Finally, he noted that Kourakis J had encouraged the parties to negotiate an outcome, rather that require a full taxation; thus, there can be no suggestion that the way that this matter was ultimately resolved was in any way contrary to the Kourakis judgment.
Mr Maik submitted that it would not be appropriate to set aside the allocaturs. Mr Duggan’s submission that the final allocaturs were issued without the consent of the liquidators cannot be accepted in light of the evidence.
Mr Duggan in reply
Without canvassing all of the issues dealt with by Mr Duggan in reply, it is important to deal with one submissions, which responded to Mr Ross-Smith’s submission that an adverse inference should be drawn from the failure of Mr Oliver-Sheahan to give evidence. Mr Duggan said the following:
In circumstances where Mr Lock was present at all of the key meetings, not calling Oliver Sheahan could only at the most amount to not calling a corroborative witness; so, in those circumstances, quite unlike a scenario where Oliver Sheahan was the only witness who was present at a meeting or a discussion, but once again that concept was underdeveloped. It could be said that the same would apply to Greg Stevens, why wasn't he called as well. My submission is there is very little scope for drawing adverse inferences in relation to this matter.[124]
[124] T219.33-220.5.
Consideration
There is a significant dispute between the parties as to a range of factual matters. Where the evidence of Mrs Stevens conflicts with that of Mr Lock, I prefer Mrs Stevens’. There are two reasons for this.
The first reason I prefer Mrs Stevens’ evidence is because she made contemporaneous notes of the meetings and other attendances in relation to which she gave evidence. For example, she made a file note of her attendance at the meeting on 13 December 2017, at which the question of apportionment was discussed, which note clearly records the apportionment of 70:30 between Yardoo and Alfred’s estate. She also wrote to Mr Cogan two days later, on 15 December 2017, at which time she reported:
The liquidator and trustee propose apportionment as 30% Alfred Yard 70% Yardoo P/L.[125]
[125] D6.

I have no reason not to believe that, combined, these two pieces of evidence do not accurately reflect what occurred at the meeting. In particular, I note that Mrs Stevens reported to Mr Cogan that the liquidator and trustee had proposed the percentages used in the final allocaturs, before the question of who suggested that apportionment became an issue in contention between the parties. If it had been she who had made that proposal, there is no reason why she would not have said so, as at 15 December 2017. There is also no reason why she would lie about that fact, at a time when it was not in dispute between the parties.
Further, Mrs Stevens’ file note and email relating to this conference are not refuted in any way by the file note created by Mr Oliver Sheahan.[126] That note also clearly records an apportionment of 70:30. While it does not record who proposed these percentages, it does not suggest that they were not proposed by the liquidators or otherwise opposed or questioned by the liquidators.
[126] P5 at FMS23.
Secondly, in the course of his evidence, Mr Lock resiled from many previous statements that he had made, including statements made on oath.
For example, he initially said that he did not recall being provided with a copy of the draft allocaturs prior to the hearing on 18 December 2017.[127] On further questioning, however, he acknowledged that he received the draft allocaturs the day before the hearing.[128] Mr Lock sought to distance himself from the statement made in the Alfred report as to the scrutiny of the allocaturs.[129] Mr Lock also sought to distance himself from the statement made in the second Yardoo report that the costs were apportioned with his consent.[130] He then sought to resile from a paragraph of the affidavit that he swore for the purpose of the Federal Court proceedings, in relation to whether he considered that leave was required and now said that that paragraph was not correct.[131] He also sought to distance himself from correspondence written by Mr Oliver Sheahan,[132] where Mr Oliver Sheahan wrote:
We…will formally write to David in due course proposing terms of an appropriate resolution.[133]
[127] T26.23.
[128] T32.6-9.
[129] T45.32-46.9.
[130] T47.5-9.
[131] T59.15-20.
[132] T50.27-30.
[133] P4 at 18.
Whether these changes in Mr Lock’s position were caused by failures of memory, or a desire to minimise the liquidator’s involvement in what had become a contentious issue, or by some other cause, they do not give me any comfort that Mr Lock’s recollection of the events surrounding the issue of the allocaturs can be relied on.
I am particularly concerned about Mr Lock’s rejection of his sworn statement in his Federal Court affidavit. That affidavit was sworn by Mr Lock on 15 July 2019, only four weeks before he gave evidence in this matter. He gave no explanation as to how the error occurred in his Federal Court affidavit, and why his view had changed in the period between the two statements given on oath.
I do not draw an adverse inference in relation to the failure to lead any evidence from Mr Oliver Sheahan. I note Mr Duggan’s submission that, as Mr Lock was present at all of the key meetings with Mr Oliver Sheahan, Mr Oliver Sheahan would at the most amount to a corroborative witness. While I consider that it may have been helpful to hear from Mr Oliver Sheahan on the issues in contention, I do not consider this omission is such that it requires a Jones v Dunkel[134] type inference to be drawn.
[134] (1958) 101 CLR 298.
I will deal with the issues in contention in turn.
The allocaturs should be set aside because of the failure to follow the process set out in the Kourakis judgment
I do not consider that the failure to follow the process set out in the Kourakis judgment is a valid ground for setting aside the allocaturs.
I do not consider that the Kourakis judgment provided a template for the calculation of costs, which could not be varied. Indeed, I am not convinced that it has the meaning ascribed to it by the liquidators and the trustee.
Kourakis J said:
I give judgment for the plaintiff against both defendants for his fees and disbursements of the trial before justice Cummins, the application to extend the stay order made by Justice Cummins and the settlement. The quantum of those fees is to be determined after an apportionment between all of Mr Starke’s clients.[135]
[135] [2012] SASC 19 at [8].
This could mean that apportionment was to be determined before any calculation of quantum had occurred, as pressed by the liquidators and trustee. Or, it could mean that the quantum of those fees to be attributed to each defendant is to be determined after an apportionment between all of Mr Starke’s clients. Each interpretation is reasonable.
Regardless of the interpretation put on that final paragraph of the Kourakis judgment, to suggest that no other process must be followed is nonsensical. It is not unusual for orders to be made, but for parties ultimately to finalise their dispute in a way different to that set out in the formal court orders. One only needs to consider the situation where, following the filing of an appeal, the parties resolve the matter without the need to hear the appeal. The proposition put by the liquidators would mean that any such resolution would be invalid and liable to be set aside, because it did not comply with the original orders of the court, and despite the agreement of all of the parties.
The Kourakis judgment, itself, gives an indication that there was an intention that the parties should seek to negotiate a resolution to the question of costs. Kourakis J said:
Hopefully, an arrangement will be reached consensually between Mr Starke and the Yard which will avoid the pain staking and costly exercise of apportioning costs between the parties.[136]
[136] [2012] SASC 19 at [32].
It is clear from this that Kourakis J did not expect the parties to engage in an item by item inquiry as to apportionment if it could be avoided.
Additionally, the parties themselves agreed the method by which costs would be dealt with. On 4 April 2013, the following remarks were recorded on the record of outcome of a directions hearing held that day:
I am going to direct a further settlement conference in this matter as it seems to me the parties should endeavour to agree at least lump sum costs before consideration is given to who it is that is responsible for those costs.[137]
[137] Record of outcome 4 April 2013.
No objection was made by Mr Bourne on behalf of the Alfred and Yardoo that this process did not comply with the orders in the Kourakis judgment. For more than four years from that date, the parties proceeded on the basis that overall quantum would be determined first, after which apportionment would be addressed. It is clear that this process was undertaken with the consent of Alfred and Yardoo, in that they were represented throughout, they sought various adjournments to allow them to respond, and further particulars in relation to the various schedules provided by Mr Starke. They attended settlement conferences. It is now too late to complain that a different process should have been followed.
What of the failure to include Gladys, or her estate, and Trevor in the apportionment process? In my view, this was entirely a matter for Yardoo and Alfred, once Mr Starke elected not to join them to the proceedings. Yardoo and Alfred could also have joined them at any time and did not do so.
It is pertinent at this point to make some comment on the involvement of Trevor in this matter. I consider that the position taken by Trevor, particularly in the correspondence from Fisher Jeffries to Mr Starke[138] is disingenuous. Trevor was the sole director and major shareholder of Yardoo from some time in 2012 until the winding up order was made in September 2017. He should have been intimately connected with the conduct of the proceedings, and well aware of its progress. He should have been aware that, when the order pursuant to Rule 273(2) was made, the matter was adjourned to allow the parties to consider what items had been disputed, and what had been admitted in full. That was the time to consider the items disputed in FDN 80, and to negotiate in relation to those, or to seek formal adjudication on those items. I further note that the items disputed by FDN 80 were largely superseded by the schedules itemising Mr Stevens’ costs, to which no notice of objection had been filed. The time should have also been used by the parties to determine any offsetting costs orders which might affect the quantum of Mr Starke’s and Mr Stevens’ claims.
[138] D1 at 103.
Even once the control of Yardoo was taken out of Trevor’s hands by the winding up, Trevor’s obligation to assist the liquidators should have ensured that all outstanding issues of quantum and apportionment were brought to their attention. At this point, he should have advised the liquidators that it was not appropriate to apportion the costs only between Yardoo and Alfred. For Trevor to suggest now that he was not aware of the events surrounding this matter is beyond belief, unless he was not carrying out, appropriately, his duties as sole director of Yardoo. If that is the case, then he is not in a position to complain now about the outcome.
In my view, once apportionment was being negotiated between the parties, it was not for Mr Starke or Mr Stevens to raise the question of the liability of Gladys’s estate and Trevor. It was not for Mr Starke or Mr Stevens to question whether there was some agreement between Yardoo, Gladys’ estate and Trevor as to the apportionment between Alfred and Yardoo only. It was open for them to put to Yardoo that the costs should be apportioned between Alfred and Yardoo only; at this point, it was incumbent on Yardoo (whether by the liquidators or by Trevor) to indicate that this was not appropriate.
The events at the directions hearing on 18 December 2017
I accept Mrs Stevens’ account of the directions hearing on 18 December 2017. I find that Mr Oliver Sheahan announced to the Court that the liquidator and trustee did not oppose the allocaturs being entered in respect of the first four, and that they took no position in relation to the final allocatur. I find that Mrs Stevens raised the question of the need to seek leave pursuant to the Corporations Act, and that in response, Mr Oliver Sheahan advised the Court that leave was not required because the liquidators consented to the orders being made.
The allocaturs should be set aside because the apportionment is clearly wrong
I do not consider that this is sufficient ground to set aside the allocaturs. I am prepared to find that at the very least, the liquidators and trustee agreed to the apportionment, and that it is more likely than not that the apportionment was suggested by them.
I prefer the evidence of Mrs Stevens, that the percentages were proposed by either Mr Lock and Mr Oliver Sheahan jointly, or solely by Mr Oliver Sheahan, rather than the evidence of Mr Lock that these percentages were suggested by Mrs Stevens. This accords with the combined file note of Mrs Stevens dated 13 December 2017, and her email to Mr Cogan dated 15 December 2017.
In any event, even if the percentage of 70% to Yardoo and 30% to Alfred had been suggested by Mrs Stevens, I have no doubt that these were agreed by Mr Lock and Mr Oliver Sheahan. This is the obvious conclusion to be drawn from the files notes of Mrs Stevens[139] and Mr Oliver Sheahan.[140] It is also the obvious conclusion to be drawn from Mr Lock’s statement in the second Yardoo report:
These costs were apportioned, with our consent, between the Company and the bankrupt estate on a 70:30 basis, based on what was, at that time, our understanding of the most appropriate allocation.[141]
[139] P11 at FMS22.
[140] P11 at FMS 23.
[141] P4 at 239.
I reject Mr Lock’s attempt to resile from this statement, as an attempt to distance himself from a position which has now become contentious.
I also reject Mr Lock’s attempt to resile from the agreement, where he said:
I think it would be going a bit far to say agreed but it was - she had said that that was the apportionment which they proposed to use and my attitude was, I know least about all of this but the people that have been involved with it, if that's the apportionment that they say is appropriate and the court is happy to make that order then I'm happy to abide that order. So it was agreed to the extent that that's what was going to be provided to the court and I wasn't going to oppose it.[142]
[142] T40.21-29.
I do not see the difference between consenting to an order, and not opposing such an order. I certainly do not consider that a stated position of not opposing an order would put a party in a stronger position in the event that it no longer wished to abide by the orders obtained.
Mr Duggan made serious criticism of Mrs Stevens for failing to assist the liquidator and trustee in dealing with apportionment, and made much of the fact that Mr Lock appeared to trust her and Mr Cogan. He also made much of what he termed the “distinct disadvantage”[143] in which the liquidators and trustee found themselves. This criticism is misplaced.
[143] T136.13.
At all times, Mr Cogan and Mrs Stevens were acting for Mr Starke and Mr Stevens. They had to act in the best interests of Mr Starke and Mr Stevens and no one else. It was not for Mr Cogan or Mrs Stevens to provide advice to the liquidators and trustee as to what was in the best interests of the company and the bankrupt estate. It was for Mr Lock and Mr Sheahan to form a view as to what was in the best interests of the company and the bankrupt estate, either on the basis of their own views, or on the basis of independent advice. But to expect Mr Cogan and Mrs Stevens to act other than in the best interests of Mr Starke and Mr Stevens is fanciful.
If Mr Lock and Mr Sheahan were indeed at a distinct disadvantage, then it was incumbent on them to advise the Court of that disadvantage and seek an adjournment to allow them the time to assess the matter properly and to seek independent advice. In this regard, I refer to a number of statements made by Mr Lock, such as:
[Mr Lock] did not understand that there was a controversy around [the interest calculation] and he relied upon Mr Cogan in relation to the calculation of interest.
Then there’s the question of apportionment. As with interest, a key point about apportionment was the trust which was placed in the plaintiffs in relation apportionment. There’s also a further point about apportionment and that is the obvious disadvantage which the liquidators and trustees faced in terms of being able to determine or divine what the apportionment was.[144]
[144] T134.16-26.
Mr Lock is an experienced liquidator, and no newcomer to litigation. In fact, he gave evidence that he has been a party in litigation in relation to which there have been about 150 published judgments.[145] I do not accept that he trusted Mr Cogan and Mrs Stevens to give him advice that was in the best interests of the liquidator and trustee. No one who has had as much experience in litigation as Mr Lock would expect Mr Cogan and Mrs Stevens to put any position to him that was otherwise than in the best interests of their own clients. Why Mr Lock would expect them to give advice that was in his best interests rather than the best interests of their own clients was never explained. The only conclusion that I can reach, taking into account Mr Lock’s experience as a liquidator and trustee, and his extensive experience as a party to litigation, is that he considered that the apportionment of 70:30, whoever proposed it, was in the best interests of Yardoo and Alfred, as well as in the best interests of Mr Starke and Mr Stevens.
[145] T18.38.
The responsibility to ensure that apportionment and interest were in the best interests of the bankrupt estate and the company in liquidation was the liquidators’ and trustee’s and theirs alone. It was never the responsibility of Mrs Stevens to provide Mr Lock with advice. If he chose to rely on the position that she put in advance of her own client’s interests, then he must live with the consequences of that reliance.
Even if the apportionment is clearly wrong, (which I note has not been determined) this is not a sufficient ground to set aside the allocaturs. The liquidators and trustee consented to the issue of the allocaturs. Their failure to seek a further adjournment to allow them to undertake further investigations or to seek advice does not now taint an agreement into which they entered freely.
The commencement date for interest is clearly wrong
The same reasoning applies to this element as to the question of apportionment. Throughout, Mrs Stevens’ position was that interest should be calculated from 1 July 2007; this in fact was a compromise position for Mr Starke and Mr Stevens, because a number of the accounts which were outstanding became payable some considerable time before that date.
I accept that Bourne Lawyers was on notice of this fact from at least 3 May 2017.[146] I also note that on 13 December 2017, Mrs Stevens provided to Mr Oliver Sheahan a decision on which she relied, in seeking interest from 1 July 2007. It is clear to me that the liquidators and trustee were well aware of Mr Starke’s and Mr Stevens’ position on interest prior to the directions hearing on 18 December 2017. If they had any doubt as to the correctness of that position, then they were obliged to seek an adjournment to allow them time to retain solicitors and obtain advice.
[146] See P4 at [10] and p 2.
The liquidators and trustee allowed the allocaturs to be issued with the interest component about which they now complain, by announcing to the Court that they did not oppose the orders being made. They cannot now absolve themselves of responsibility by claiming that they did not consent to that position. It was open to them to request an adjournment to allow them to investigate and obtain advice on the question of interest; they chose not to do so. They could have made objection to the orders being made; they did not do so.
The failure to seek leave pursuant to the Corporations Act and the Bankruptcy Act
As I have set out above, I find that Mrs Stevens raised the question of the need to seek leave pursuant to the Corporations Act at the directions hearing on 18 December 2017, and that Mr Oliver Sheahan advised the Court that leave was not required because the liquidators consented to the orders being sought.
It is clear that this advice is incorrect, and that leave is required regardless of the attitude of the liquidators. Leave is also required under the Bankruptcy Act, and I note that no leave was ever sought, despite Alfred’s bankruptcy commencing in December 2012.
It may simply be that it was overlooked.
In any event, I do not think that it makes much difference. This is because, to quantify the costs to be paid by Yardoo, the costs to be paid by Alfred must also be quantified. Whether or not Alfred’s bankrupt estate was an active party to the adjudication of costs, the overall quantum needed to be determined, and then apportioned between Alfred, Yardoo, Trevor and Gladys.
I accept Mr Duggan’s submission that, in determining whether the allocaturs should be set aside because of the failure to seek leave, I must consider whether there was a serious doubt whether leave nunc pro tunc would be granted.
Taking into account the interests of the creditors of Yardoo and Alfred, and the shareholders of Yardoo, I do not consider that there is a serious doubt that leave nunc pro tunc would be granted. If leave had been sought formally on 18 December 2017, the salient facts to take into consideration would be:
·The only creditors of Yardoo are Rural Bank Ltd, Mr Starke, the deceased estate of B R Yard, and Judith Lorraine Yard. Trevor had indicated that he is a creditor but has not put in a proof of debt, nor has he provided any details of the debt. Thus, the only unrelated creditors are Rural Bank and Mr Starke.
·The only creditors of Alfred are Mr Starke and the Deputy Commissioner of Taxation. Trevor and Judith Lorraine Yard have indicated that they are also creditors but have not put in a proof of debt. Trevor has not provided any particulars of his debt.
·The only shareholders of Yardoo are Alfred and Trevor.
·The only director of Yardoo is Trevor.
·Yardoo is solvent.
·The liquidators and trustee are experienced insolvency practitioners, with a long history of involvement in litigation.
·The liquidators and trustee had an opportunity to obtain independent advice in relation to the orders sought, if they wished to do so.
·Trevor has been, or at least should have been, actively involved in this proceeding since its inception and thus should be fully apprised of the matters before the Court.
·An agreement has been reached through negotiation. It is not for the Court to go behind the agreement in circumstances where the parties are experienced litigators (despite not being legally qualified) and have had the opportunity to seek independent advice.

In my view, Mr Duggan’s submission that leave to proceed would not have been granted because the allocaturs were inappropriate does not address the reality of the situation. Once parties decide to resolve a matter by agreement, it is not for the Court to consider whether the orders sought are inappropriate, unless there is a suggestion of incapacity, undue influence, duress or the like. Parties are at liberty to resolve proceedings on any basis they like, regardless of the Court’s view of the matter. Parties may decide to settle a matter on terms less favourable than they might have received at trial, in order to avoid having to give evidence, to avoid the costs and delay associated with trial, because they consider the risks associated with trial too great, or for any other reason. The Court will not refuse to make the orders sought because it considers that a different outcome might have been achieved at trial, or because there was no hearing on the merits.
In my view, it is relevant that, other than Mr Starke, the major creditor of both Alfred and Yardoo is said to be Trevor. I say “said to be Trevor” because, as far as I am aware, he is yet to lodge a proof of debt, or to provide any particulars of the alleged debts. In these circumstances, I am not convinced that he has any interest to take into consideration at this time. It can be concluded, therefore, that the allocaturs are in the interests of the major creditor of Alfred and Yardoo.
As to whether the allocaturs directed to Yardoo are in the interests of Trevor as a shareholder, it is difficult to find that they are not. This is on the basis that both the Court, and Mr Starke and Mr Stevens are entitled to assume that he has been actively involved in this proceeding throughout, either as Yardoo’s sole director, or through assistance to the liquidators as required by the Corporations Act.
In my view, it is highly unlikely that leave nunc pro tunc would not have been granted, if an application for leave had been heard on 18 December 2017.
Conclusion
1FDN 110 must be dismissed.
2I will hear the parties on the question of costs.