Fanniesab v Futistasera (Costs)
[2017] VSC 58
•22 February 2017
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S CI 2014 6634
| FANNIESAB PTY LTD (ACN 120 335 195) | Plaintiff |
| v | |
| FUTISTASERA PTY LTD (ACN 120 336 192) | Defendant |
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JUDGE: | Digby J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | Decision made “on the papers” |
DATE OF JUDGMENT: | 22 February 2017 |
CASE MAY BE CITED AS: | Fanniesab v Futistasera (Costs) |
MEDIUM NEUTRAL CITATION: | [2017] VSC 58 |
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COSTS – Access to money in court – Final Order – Applications for costs – Application of moneys paid into Court as security for costs – Indemnity costs – Liquidator’s costs – Reserve Costs – Orders sought for access to the records of the insolvent defendant – Costs awarded to the plaintiff/respondent – payable by third party.
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Written Submissions: | Counsel | Solicitors |
| For the Plaintiff/Respondent | Mr M Clarke | M P Lanza Lawyers |
| For the Defendant/Appellant | Madgwicks Lawyers | |
| For the Liquidator | Mr J P Snow |
HIS HONOUR:
Background
On 24 June 2016, judgment was handed down in Fanniesab Pty Ltd v Futistasera Pty Ltd[1] (‘Reasons’).[2] In summary, that judgment dismissed the appeal brought by the defendant against the orders of an Associate Justice winding up the defendant in insolvency under the provisions of the Corporations Act and resulted in the following orders -
1.The defendant’s Appeal from the orders of the Associate Justice Efthim made 21 May 2015 be dismissed.
2.The stay of the order of Associate Justice Efthim made 21 May 2016, ordered by Justice Robson on 10 June 2016 [3], is lifted from 5.00pm on 24 June 2016.
[1][2016] VSC 359.
[2]In this costs ruling, for convenience, the same terms and abbreviations used in Fanniesab Pty Ltd v Futistasera Pty Ltd [2016] VSC 359 are adopted in these reasons.
Due to the unavailability of Counsel in the matter on 24 June 2016 and the solicitors for the parties not being in a position to deal with the question of costs, that question and associated issues were reserved. Both the plaintiff/respondent (Fanniesab) and the defendant/appellant (Futistasera) agreed to costs and related issues being dealt with “on the papers” following the provision of written submissions by the parties.[3] Subsequently Fanniesab, Futistasera, and also the Liquidator, put on written submissions as to costs and related matters.
[3]The parties and the Liquidator’s Written Submissions: Fanniesab, 22 July 2016 and 11 August 2016; Futistasera, 2 August 2016 and 11 August 2016; Liquidator, 8 August 2016.
Fanniesab’s submission on costs
Fanniesab seeks the following orders:
(1) The appeal of the appellant/defendant (“appellant”) filed on 11 June 2015 and amended by leave be dismissed;
(2) Costs of and incidental to the appeal (including reserved costs), on an indemnity basis, alternatively on a standard basis;
(3) The sum of $10,000 paid by Frances Marie Inturrisi as security in respect of the costs of the respondent of the appeal, in accordance with the Order made by Justice Robson on 15 May 2015, be released to Mario Lanza, solicitor for the respondent, Fanniesab Pty Ltd and Anna Maddalena;
(4) The respondent’s costs be paid by Frances Marie Inturrisi, director of Futistasera;
(5) The stay of the Order of the Associate Judge of 21 May 2016, ordered by Justice Robson on 10 June 2016, is from 24 June 2016 at an end;
(6) The Defendant be ordered to provide within 14 days to the plaintiff “records of all expenditure and debts” of the defendant during 21 May 2015 to present.
It is to be noted that:
(i) the order sought in [3(1)] above was made on 24 June 2016;
(ii) by its submissions Fanniesab seeks to have the sum referred to in [3(3)] above credited towards the costs otherwise payable by Futistasera;
(iii) The order sought in [3(5)] above was made on 24 June 2016.
Fanniesab submits that Mrs Frances Marie Inturrisi (Mrs Inturrisi), the sole Director at all material times of Futistasera, should be ordered to pay Fanniesab’s costs (including reserve costs) of the appeal on the following grounds:[4]
[4]Fanniesab does not submit that Mrs Inturrisi and Futistasera should both be jointly and severally liable for Fanniesab’s costs.
(a) Mrs Inturrisi was in fact the applicant in the subject appeal, and was granted leave on 28 May 2015 pursuant to s 471A(1A)(d) of the Corporations Act to cause Futistasera to commence an appeal against the judgment of the Associate Judge given on 21 May 2015;
(b) Mrs Inturrisi undertook “not to use any moneys of the defendant in the prosecution by her of the appeal” and was granted leave based on this undertaking;
(c) the Court’s power under s 24 of Supreme Court Act 1968 (Vic) to determine by whom and to what extent costs are to be paid enables the Court to make a costs order against a non-party;
(d) should Mrs Inturrisi be regarded as a “non-party”, then Fanniesab relies upon Knight v FP Special Assets Ltd[5], in which Mason CJ and Deane J said as follows, in regard to the jurisdiction to order non-parties to pay costs:
[5](1992) 174 CLR 178, 192-193.
Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long established categories of case in which equity recognised that it may be appropriate for such an order to be made.
For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made (citations omitted);
(e) in the present case, Fanniesab submits that:
(iv) Futistasera is a “man of straw” that is, an insolvent company;
(v) Mrs Inturrisi played an active part in the conduct of the appeal both formally and by undertaking;
(vi) Mrs Inturrisi has an interest in the subject of the litigation and stood to benefit as licensee of the brothel and beneficiary of the trading trust; and
(vii) the interests of justice require that an Order be made in circumstances where Futistasera is insolvent.
Fanniesab also submits that the desire of Robson J not to burden Futistasera with the cost of the appeal should similarly apply to costs awarded against Futistasera. Security was provided by Mrs Inturrisi as a condition of the grant of a stay. It would be unjust for the creditors of Futistasera, who did not approve or support the bringing of the unsuccessful appeal, to be made to bear (indirectly) the costs of the appeal, if an order was made only against Futistasera.
Finally, Fanniesab contends that in this instance an order should be made for indemnity costs because of the conduct of Mrs Inturrisi in relying upon Futistasera’s history of making payments of rent (or interest) on the brothel premises when seeking leave to appeal, and then, Fanniesab submits, causing Futistasera to fail to make such payments once leave for the appeal was granted.[6]
[6]Affidavit of Anna Maddalena, 9 June 2016.
By its submissions, on 24 June 2016, Fanniesab also sought an order requiring Futistasera to provide (within 14 days) to Fanniesab “records of all expenditure and debts” of Futistasera since 21 May 2015. In “Other Matters”, of the Orders of Robson J on 28 May 2015, his Honour earlier ordered –
Frances Inturrisi undertook to the Court by her Counsel:
(1)For such period as the stay of the winding up operates, to only expend moneys and incur debts on behalf of the defendant in the ordinary course of its business, and maintain records of all expenditure and debts and preserve all other records of the defendant;
(2)Not to use any moneys of the defendant in the prosecution by her of the appeal against the judgment of Efthim AsJ given on 21 May 2015 (without prejudice to her rights to seek reimbursement from the defendant if the appeal is successful).
Futistasera’s submission on costs
Futistasera seeks the following orders:
(1) The sum of $10,000 paid by Frances Marie Inturrisi (Mrs Inturrisi) pursuant to Order 5 of the Order made by Justice Robson on 28 May 2015 should be released to the Defendant and its Liquidator;
(2) The costs of the hearing before Justice Robson on 25 May 2015 and 28 May 2015 be paid by the Respondent to Mrs Inturrisi on a standard basis;
(3) The costs of the preliminary hearing on 16 September 2015 before Justice Digby be paid by the Respondent to the Appellant on a standard basis; and
(4) The residual costs of and incidental to the appeal, be dealt with on a standard basis.
Futistasera objects to the following Orders sought by Fanniesab:
(1) The Appellant/Defendant be ordered to provide within 14 days to the plaintiff all records of expenditure and debts from the period of 21 May 2015 to present.
(2) The Respondent’s costs be paid by Mrs Inturrisi.
Payment of $10,000
Futistasera submits that Mrs Inturrisi applied for orders, including for orders in terms of Orders (1) and (5) of the Orders made on 28 May 2015, in her capacity as Director and Contributory of Futistasera. Mrs Inturrisi’s application was successful and the relief sought was granted by Robson J.
Futistasera’s submissions point out that Order (5) of the Orders of Robson J made on 28 May 2015 required that Mrs Inturrisi provide security in the sum of $10,000 in respect of the costs of the appeal and the costs of the Defendant of the appeal. At the hearing before Robson J, Futistasera asserts that his Honour qualified the purpose of the security order, so that “if any costs are missing from the company, the liquidator will be able to get them back”.[7]
[7]T72.22-27.
Futistasera submits that it was not the intention of Robson J that the security be paid to Fanniesab and this has been appropriately reflected in his Honour’s Orders dated 28 May 2015.
Futistasera submits that should Fanniesab seek a variation of these Orders a separate application should instead be issued by Fanniesab.
Costs to be paid by Fanniesab to Mrs Inturrisi
Futistasera submits that because Mrs Inturrisi was successful in obtaining certain Orders sought in her interlocutory application, the costs of and incidental to the hearings on 25 May 2015 and 28 May 2015 should be paid by Fanniesab on a standard basis to Mrs Inturrisi personally.
Further, Futistasera submits that until the Orders of Robson J were made on 28 May 2015 Mrs Inturrisi had no alternative but to issue the interlocutory application in her personal capacity, and seek the leave of the Court to allow Futistasera to issue the Appeal. For this reason, it is submitted that costs should be paid to Mrs Inturrisi in her personal capacity on a standard basis given she was the applicant of the interlocutory application.
Costs to be paid by Fanniesab to Futistasera
Futistasera notes that pursuant to Order (2) of Robson J’s Orders on 28 May 2015, leave was granted for Futistasera to issue the appeal proceedings in its own right. Futistasera submits that it was from 28 May 2015 when Futistasera was granted standing in the proceeding that it was therefore able to have costs orders made for and against Futistasera.
Futistasera submits that the costs of, and incidental to the preliminary hearing before Digby J on 16 September 2015 should be paid by Fanniesab to Futistasera on a standard basis, given that Futistasera was successful in obtaining leave to file the Anderson Report pursuant to Rule 77.06.9(2)(a).
Non-party costs order
Futistasera contends that any power which the Court possesses to make a cost order against a non-party is ‘exceptional’ and must be treated with ‘considerable caution.’[8]
[8]O’Keefe v Hayes Knight GTO Pty Ltd [2005] FCA 1559 at [24].
Futistasera notes that from 29 May 2015, Futistasera was the corporate entity which issued the current proceedings.
Futistasera also submits that Fanniesab has not applied the correct test in its submissions seeking to attach Mrs Inturrisi with a costs order. It contends that for Fanniesab to succeed in its argument that Mrs Inturrisi be personally liable for any costs order, it would be necessary to allow the ‘corporate veil’ to be pierced.
Futistasera submits that Fanniesab has failed to advance any argument as to why the corporate veil should be pierced, nor has it proffered any evidence (either throughout the trial or in its current submission) that would justify that outcome. Moreover, Futistasera argues that Mrs Inturrisi was successful in obtaining the Orders sought in the initial interlocutory application in the proceeding on 28 May 2015 and in the overall appeal it is Futistasera which has been unsuccessful, not Mrs Inturrisi personally. As such, costs should be awarded against Futistasera and not Mrs Inturrisi personally, if Fanniesab is to be awarded costs.
Futistasera also submits that contrary to Fanniesab’s submissions:
(a) Mrs Inturrisi did not ‘personally’ play an active role in this proceeding, rather any involvement was as a result of her position as sole director of Futistasera;
(b) at the relevant times, Mrs Inturrisi did not gain any benefit as licensee, rather the benefit was conferred to Futistasera;
(c) Futistasera was conducting the subject brothel business, through the license of Mrs Inturrisi; and
(d) the interests of justice do not support the Court making the cost order sought.
In such circumstances Futistasera submitted that the Court should make no cost order against a non-party, but rather require Futistasera to make payment of any costs found to be ordered against it, given it was a party to the proceeding from the date of the Orders of Robson J on 28 May 2015.
Indemnity costs
Futistasera submits that the general rule is that, ordinarily, costs follow the event and costs should be awarded on a standard basis. Indemnity costs may be awarded in special circumstances, Colgate-Palmolive Co v Cussons Pty Ltd.[9] Futistasera submits “there should be some special or unusual feature in the case” to warrant such an order. Here Futistasera contends that there is no conduct or other factual circumstance for which it is responsible which supports an award of indemnity costs in the present proceedings.
[9][1993] FCA 536.
Contrary to Fanniesab’s submissions, Futistasera contends that Mrs Inturrisi has not engaged in conduct which would justify an indemnity cost order against her.
Futistasera submits that, by virtue of Futistasera having succeeded in obtaining the orders it sought at the early stages of the proceeding, save for the final judgment, it is clear that the proceeding was not fraudulent, or otherwise in contempt of the Court or otherwise so unmeritorious as to warrant an order for indemnity costs.
Production of books or records of Futistasera
Futistasera observes in its submissions that the Orders of Robson J on 28 May 2015, do not in terms require or compel Futistasera to produce any books or records to Fanniesab or Ms Maddalena.
Futistasera opposes any Order to provide Fanniesab with “records of all expenditure and debts”, and notes that no adequate reason or factual basis has been advanced by Fanniesab to support such an order.
Futistasera further submits that the Liquidator appointed to administer its affairs is ideally placed to investigate the affairs of the company, including its records of all expenditure and debts. No evidence has been put forward to question the Liquidator’s ability to properly exercise his inherent powers and undertake this exercise if the Liquidator wishes.
Liquidator’s submission on costs
At the hearing on 16 September 2015, Counsel for the Liquidator appeared and stated:
The liquidator takes a neutral position, Your Honour. We would only otherwise wish to be heard at the end of the day on costs. We would only otherwise say if there is anything we can assist the court with, of course we will. Otherwise, with a view to not incurring unnecessary costs, please may I be excused?[10]
[10]T11.12-17.
The Liquidator made the following submissions on costs by written submissions dated 8 August 2016.
The Liquidator points out in his submissions that he appeared on 28 May 2015 at the stay hearing before Robson J. The Liquidator also appeared on 16 September 2015 before Digby J, but only to inform the Court of the Liquidator’s neutral stance in the appeal and his desire to later be heard on the question of costs.
The Liquidator submits that there is no reason why the Court should depart from the orthodox outcome that costs follow the event. The Liquidator has incurred legal costs which have been caused by Futistasera’s unsuccessful appeal. Accordingly, Futistasera, as the losing party, should pay the Liquidator’s costs.
The Liquidator submits that his costs were reasonably incurred. The Liquidator further contends that it was reasonable for the Liquidator to be represented at the 28 May 2015 stay hearing, to assist the Court, if required, having regard to s 482(2) of the Corporations Act which provides that:
On such an application, the Court may, before making an order, direct the liquidator to give a report with respect to a relevant fact or matter.
Further, the Liquidator submits that it was reasonable for the Liquidator to be briefly represented at the outset of the hearing of the defendant’s appeal on 16 September 2015 so as to register his ongoing interest in the proceeding, notably with regard to his costs, but thereafter not to incur further costs by remaining for the hearing of the appeal.
The Liquidator adopts and supports paragraph 2 of Fanniesab’s submissions dated 22 July 2016, namely that Mrs Inturrisi, who sought and was granted leave to cause Futistasera to commence the appeal, should be ordered to personally pay his and Fanniesab’s costs, in lieu of the defendant, which is an insolvent company.
Fanniesab reply submissions
By written submissions in reply dated 10 August 2016, Fanniesab makes the following further submissions.
Costs associated with of the interlocutory orders granted on 25 May 2015 and 28 May 2015 should be paid to Futistasera in circumstances where Futistasera has ultimately been unsuccessful in this appeal. Costs are usually reserved, or made costs in the cause at the interlocutory stages so that the party who is successful in the proceeding at the end of the day gets their costs. If it were otherwise, costs would be ordered at the time of the granting of the interlocutory injunction.
Futistasera seeks costs in relation to the hearing on 16 September 2015 because it was successful in obtaining leave to file the Anderson Report. It is submitted however by Fanniesab that leave had to be sought by Futistasera to rely upon the Anderson Report and that it should pay costs for seeking to obtain leave because, in the circumstances, it sought and obtained an indulgence similar to obtaining leave to amend a pleading or to file documents out of time. In the same way Fanniesab argues that seeking and obtaining leave to be granted standing to issue the appeal personally was also an indulgence granted to Futistasera.
Fanniesab submits that Mrs Inturrisi’s success in obtaining interlocutory relief should be treated in the usual way, which is to order the reserve costs of an interlocutory application in favour of the party which ultimately succeeds in the proceeding.
Further, Fanniesab submits that the $10,000 security ordered by Robson J was in respect to “the costs of the appeal and the costs of the Defendant of the appeal”.[11] Fanniesab contends that these terms of Robson J’s orders clarify that such security was intended to cover the costs, inter alia, of Fanniesab.
[11]Orders of Robson J, 28 May 2015, [5].
Fanniesab opposes Futistasera’s application for costs of the hearing on 25 May 2015. Fanniesab points out that it was not submitted by Counsel for Mrs Inturrisi on 25 May 2015, or on 28 May 2015, that the adjournment of the further hearing of the subsisting interlocutory application had occurred due to any fault on the part of Fanniesab.
Fanniesab submits that the plaintiff’s application has been dismissed on the merits. The costs of the entire proceeding, including reserved costs, should be paid by Mrs Inturrisi.
Futistasera reply submissions
By written reply submissions dated 11 August 2016, Futistasera makes the following reply submissions.
Futistasera responds to the Liquidator’s submissions as follows:
(a) the costs of the Liquidator should be paid out of the sum of the security for costs ordered by Robson J;
(b) Futistasera does not concede that it was reasonable for the Liquidator to appear on 28 May 2015, based on the above reasons specified in the Liquidator’s submissions;
(c) Futistasera agrees that it was reasonable for the Liquidator to have initially been represented at the hearing on 16 September 2015; and
(d) Futistasera objects with the position taken by the Liquidator insofar as he seeks to argue that Mrs Inturrisi should be personally liable for costs.
Futistasera reiterates its position that the costs of the hearings on 25 May, 28 May and 16 September 2015 should be paid by Fanniesab.
In relation to the two reasons given by the Liquidator as why his legal representation at the hearing on 28 May 2015 was reasonable, Futistasera submits that:
(a) whilst s 482(2) of the Corporations Act does allow the Court to direct the Liquidator to provide a report, this direction may occur without the Liquidator being legally represented and that section does not require the Liquidator to be represented by counsel; and
(b) any response the Liquidator may have been required to provide to paragraph 14 of the Anna Maddalena affidavit sworn 27 May 2015 would ordinarily have been through evidence and does not support or justify a requirement for legal representation by Counsel.
On the above bases, Futistasera submits that the legal costs incurred by the Liquidator on 28 May 2015 were not reasonable. Further, and in the alternative, Futistasera submits that should the Court determine that those costs were reasonable, such costs should be paid out of the security for costs that were ordered by Robson J.
Futistasera objects to the submissions of the Liquidator that Mrs Inturrisi should be ordered to personally pay the costs, given that the Liquidator has previously stated to the Court that he took a neutral position on this issue. At the hearing on 28 May 2015, Counsel for the Liquidator informed the Court that a “neutral law passive stance” had been taken in relation to the proceeding. Futistasera points out that this position was restated at the hearing on 16 September 2015.
Futistasera submits that the position now being taken by the Liquidator is directly contrary to the ‘neutral’ stance that has consistently been adopted throughout this proceeding. Further, it is submitted by Futistasera that the Liquidator’s submissions should only be considered insofar as they deal with the following issues:
(a) whether the Liquidator should be entitled to security for costs in the amount of $10,000;
(b) whether the costs of the Liquidator having legal representation on 28 May 2015 was appropriate and reasonable; and
(c) provided such costs were reasonable, whether this amount should be recovered from the security for costs awarded by Robson J.
Futistasera submits that the nature and circumstances of the interlocutory applications in this proceeding justifies a departure from the general principle that the costs of interlocutory applications should follow the overall result of the appeal.
Consideration
Fanniesab’s entitlement to costs on a standard basis
Fanniesab is entitled to recover its costs of and incidental to the appeal, including all reserve costs, on a standard basis.
It is evident from the language of s 24(1) of the Supreme Court Act 1986 that the discretion which that section establishes is a very broad one. That section provides:
Costs to be in the discretion of Court
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Fanniesab has succeeded in having Futistasera’s appeal dismissed and costs should follow that event.
In my view there is however no sufficient reason identified by Fanniesab to justify a cost order other than on a standard basis. In my view Fanniesab has not identified any sufficient reason why it should recover costs on a basis other than the standard basis which Fanniesab sought in the alternative for its costs. I am unpersuaded that there were features of Mrs Inturrisi’s conduct in respect of Futistasera’s payment of relevant rent (or interest), or otherwise, which on the untested affidavit evidence before me, provide a proper basis upon which to conclude that special circumstances of a type which would justify an award of indemnity costs against Futistasera or Mrs Inturrisi personally are made out.[12]
[12]Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, Sheppard J at 233, noted the various ways the test has been put, namely, the Court had a general and discretionary power to award costs as between solicitor and client "as and when the justice of the case might so require" … “there should be some special or unusual feature in the case”.
Fanniesab should be awarded its costs of this appeal on a standard basis for the reasons stated above.
Such costs should include the reserved costs of 25 May 2015, 28 May 2015 and 16 September 2015. I consider that in the case of each of these interlocutory hearings the orders made were directed to managing and facilitating the advancement of these proceedings and the reservation of costs in each instance was I consider to enable the costs of and associated with those hearings to be awarded to the ultimately successful party at trial. This was notwithstanding that at such hearings, from time to time, the ultimately unsuccessful party obtained some interlocutory orders sought.
Further, the costs of the interlocutory hearing on 16 September 2015 which resulted in Futistasera obtaining leave to file and evidence it sought to put on was a hearing at which Futistasera sought an indulgence from the court in that regard. Futistasera made its application for leave in a context where it had experienced protracted delays in it filing the expert report which it wished to rely upon.
Liquidator’s Costs
I consider that it was reasonable for the Liquidator to appear at the hearings on 28 May 2015 and 16 September 2016 and to present written submissions so as to ensure that his position in the Liquidation was clear to the Court and in an endeavour to ensure that the Liquidator’s position as to costs was also made clear. Further, I am satisfied in relation to the Liquidator’s involvement at the above hearings that the Liquidator conducted himself appropriately, efficiently, and with a concern to minimise legal costs.
In my view, Futistasera’s argument that the Liquidator should not be permitted to make submissions in support of an order that Mrs Inturrisi to pay the costs of the appeal personally, should be rejected. The attitude of the Liquidator in that regard on 28 May 2015 did not in my view prevent a change in the Liquidator’s position on such issues later in these proceedings. It is not argued against the Liquidator that his conduct amounted at law to a waiver, abandonment or a representation in respect of which Futistasera or Mrs Inturrisi acted to their detriment. Futistasera’s submission on this point is therefore inchoate.
Release of security for costs to Fanniesab
On 28 May 2015 Robson J ordered:
5.By 4pm on 29 May 2015, the applicant, Frances Inturrisi, provide security in the sum of $10,000 in respect of the costs of the appeal and the costs of the Defendant of the appeal, in such form as the Registrar of the Commercial Court directs, failing which the stay in paragraph 3 above be lifted.
Accordingly, his Honour clearly ordered that such security was to be provided “… in respect of the costs of the appeal and the costs of the Defendant of the appeal …”. His Honour also observed during the hearing on 28 May 2015 that “… if any costs are missing from the company, the Liquidator will be able to get them back”, referring to the security of $10,000 which his Honour ordered at that time .[13]
[13]T72.22-27.
I consider that in light of Robson J’s above orders and observations, the $10,000 security for costs his Honour ordered was intended to be applied, as ultimately found to be appropriate, to securing the costs of any party or person incurring costs in response to Futistasera’s appeal, subject to the Court ordering that such costs be paid, and to secure the Liquidator’s costs, as might be ordered, in relation to these proceedings. Further, for these reasons no separate application need to be made to vary earlier orders dealing with the security sum.
Here I consider that the Liquidator should, as well as Fanniesab, recover his costs of the appeal, including all reserve costs, to the extent I shall specify from the security sum of $10,000 and any additional sum which may have accrued over time on that sum. In my view, it is just and appropriate that the said security sum be paid to the extent of $1,500 to the Liquidator (subject to an order that any costs payable to the Liquidator represent his justifiable legal costs on a standard basis) and the balance to Fanniesab on account of its legal costs in this appeal. This allocation is on the basis that $1,500 is likely to represent adequate party party costs incurred in the matter by the Liquidator, on a standard basis.
Whether Fanniesab’s costs should be paid by Mrs Inturrisi personally
I consider that because of the following special features of this matter Fanniesab, and the Liquidator, should succeed in obtaining an order that Mrs Inturrisi pay Fanniesab and the Liquidator’s costs, personally to the extent that their costs exceed the proportion of the security sum referred to above. The special features of this matter which in my view justify such orders are:
(a) Mrs Inturrisi was in substance the applicant in the subject appeal, and was granted leave on 28 May 2015 pursuant to s 471A(1A)(d) of the Corporations Act to cause Futistasera to commence an appeal against the judgment of an Associate Judge pronounced on 21 May 2015;[14]
[14]Orders of Robson J, 28 May 2015, Other Matters and Order [1].
(b) Mrs Inturrisi personally undertook “not to use any moneys of the defendant in the prosecution by her of the appeal”[15] and was granted leave based on this personal undertaking;
[15]Ibid, Other Matters (2).
(c) Mrs Inturrisi was at all material times the only Director of Futistasera Pty Ltd;
(d) Mrs Inturrisi was the person who put forward the significant first hand affidavit evidence in these proceedings on behalf of Futistasera and further her sworn evidence appears to establish that she, and she alone, was the controlling mind of Futistasera at all material times and that she made the relevant substantive decisions on behalf of the business “Whispers Studio” which she through Futistasera operates;
(e) Further, it was Mrs Inturrisi who held the brothel licence in relation to “Whispers Studio”, and it was Mrs Inturrisi who paid and serviced the loans that had been taken out to establish and operate this business.[16] I note that Sebastian Inturrisi, is from time to time referred to as being involved in the “Whispers Studio” business, however the overwhelming purport of Mrs Inturrisi’s evidence is to the effect that she, at all material times, ran, controlled and made all key decisions for “Whispers Studio” and Fanniesab the company through which she operated that business;
[16]Affidavit of Frances Marie Inturrisi, 25 September 2013, [21], [31]-[34], [48] and [57], Affidavit of Frances Marie Inturrisi, 22 May 2015, [1], [25], [33], [42]-[46] and Expert Report of Sharlene Anderson, AB418 at [4].
(f) Mrs Inturrisi had a personal interest in the subject matter of the litigation and stood to benefit as licensee of the brothel and beneficiary of the trading trust from the outcome which she sought in this proceeding;[17]
[17]Ibid.
(g) Futistasera was insolvent at all material times and in particular over the period the bulk of the legal costs in this proceeding were generated. As a result it is highly probable that were cost orders herein to be made against Futistasera, Fanniesab and the Liquidator would be paid little if any of its costs of this appeal by Futistasera;
(h) Furthermore, at least from about 28 May 2015 Mrs Inturrisi’s was aware of the above circumstances matters and appreciated that, absent some special cost order, the appeal which she sought leave to initiate and prosecute, if unsuccessful, would result in Fanniesab, and the Liquidator, being most unlikely to recover their legal costs against Futistasera;
(i) Concomitantly, the creditors of Futistasera, who did not approve or support the bringing of this unsuccessful appeal would, if Mrs Inturrisi was not ordered to bear the costs of this proceeding personally, have to bear those cots, at least indirectly, if an order for costs was made against the insolvent company Futistasera;
(j) Robson J’s desire not to burden the company Futistasera with the cost of the appeal adds weight to it being just, in these circumstances to order Mrs Inturrisi to bear the costs of the successful parties to so order now is consistent with Robson J’s intent to not order Futistasera to pay these costs. Security was provided by Mrs Inturrisi as a condition of the grant of a stay. It would be unjust for the creditors of Futistasera, who did not approve or support the bringing of the unsuccessful appeal, to be made to bear (indirectly) the costs of the appeal, which would probably be the result if an Order was made only against Futistasera;
(k) Finally, Mrs Inturrisi in this proceeding personally seeks to recover costs from Fanniesab.
Accordingly, the interests of justice in this instance require that Mrs Inturrisi be personally liable for Fanniesab’s costs and the Liquidator’s costs of and incidental to this appeal (including all reserve costs), on a standard basis.
I do not consider that by ordering costs to be paid personally by Mrs Inturrisi, in the exercise of my discretion under Order 24 of the Rules of this Court and the Court’s inherent jurisdiction, such orders “pierce the corporate veil”. In my view the particular and special circumstances of this matter referred to in paragraph [66] above amply justify such an order. [18]
[18]Carter & anor v Caason Investments Pty Ltd & ors [2016] VSCA 236, [10]-[13].
Whether Futistasera should be ordered to provide certain records of expenditure and debts
I am unpersuaded that I should order that Futistasera provide records of all expenditure and debts of that company since 21 May 2015.
In what appears to be an endeavour to render such orders as effective as possible and to assist in verifying Futistasera’s compliance with the said undertakings given on 28 May 2015, Robson J also obtained an undertaking from Mrs Inturrisi on behalf of Futistasera, to ensure the maintenance of records of all relevant expenditures and debts and the preservation of all other records.
On 24 June 2016, Futistasera’s appeal, which was directed to overturning the Associate Justice’s orders winding up Futistasera, was dismissed and the orders made on 28 May 2015 staying the liquidation of Futistasera Pty Ltd were lifted.
Subsequent to 24 June 2016 the Liquidator of Futistasera has resumed active control of Futistasera Pty Ltd (In Liquidation). Accordingly, the Liquidator is now in a position to obtain possession of, or have access to, all the financial documents the subject of the undertaking in paragraph [1] of Other Matters in the Orders of Robson J of 28 May 2015.
Therefore, in my view, there is no current need for the Court to make the orders sought by Fanniesab in the terms proposed in paragraph 3(b) above.
The Liquidators’ Costs
For the reasons I have referred to in [66(a)-(k)] above, I shall also order that Mrs Inturrisi also personally pay the legal costs of the Liquidator (including any reserve costs) on a standard basis.
Orders
I order that:
(1) Fanniesab Pty Ltd’s costs, of and incidental to this appeal (including reserved costs), be paid by Frances Marie Inturrisi personally on a standard basis.
(2)The costs of the Liquidator, Richard Trygve Rohrt of Hamilton Murphy, of and incidental to this appeal (including reserved costs), be paid by Frances Marie Inturrisi personally on a standard basis.
(3) The sum of $10,000, and any sum which has accumulated by way of interest thereon, paid by Frances Marie Inturrisi as security in respect of the costs in relation to this appeal, in accordance with the Order made by Justice Robson on 29 May 2015, be released to the Liquidator and Fanniesab Pty Ltd in accordance with these orders.
(4)The said security sum of $10,000, and any accumulated interest in respect thereof, be paid to the extent of $1,500 (or such lesser amount as may be properly claimable in respect of the Liquidator’s legal costs, on a standard basis, in this proceeding), to the Liquidator and to the balance of such security sums, plus any accumulation of interest thereon be paid to Fanniesab Pty Ltd on account of its legal costs.
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