Gordon v Glowberth Pty Ltd (No 2)

[2024] NSWSC 263

Supreme Court

New South Wales

Medium Neutral Citation:

Gordon v Glowberth Pty Ltd (No 2) [2024] NSWSC 263

Hearing dates:

On the papers, submissions dated 5 March 2024

Date of orders:

15 March 2024

Decision date:

15 March 2024

Jurisdiction:

Equity - Duty List

Before:

McGrath J (in chambers)

Decision:

Existing freezing orders discharged, new freezing orders made and order for costs in the cause

Catchwords:

CIVIL PROCEDURE — interim preservation — freezing orders — form of freezing orders to give effect to principal judgment — HELD — orders proposed by plaintiff in standard form granted

COSTS — party/party — mixed outcome — general rule that costs follow the event — application of the rule and discretion — discretion to award indemnity costs — where no unreasonable conduct or delinquency on the plaintiff’s part — where the overall practical result favoured the plaintiff — HELD — order that costs be costs in the cause

Legislation Cited:

Civil Procedure Act 2005 (NSW)

Practice Note SC Gen 14

Uniform Civil Procedure Rules 2005 (NSW)

Cases Cited:

Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304

Cappello v HomeBuilding Pty Ltd [2023] NSWCA 109

Chandrasekaran v Western Sydney Local Health District (t/as Westmead Hospital) (No 2) [2024] NSWCA 21

Croc’s FranchisingPty Ltd v Alamdo Holdings Pty Ltd (No 3) [2023] NSWCA 316

Gordon v Glowberth Pty Ltd [2024] NSWSC 104

Category:

Costs

Parties:

Jerry Gordon (Plaintiff)
Glowberth Pty Ltd (First Defendant)
Official Trustee in Bankruptcy (Second Defendant)

Representation:

Counsel:
CD Wood SC with VN Misra (Plaintiff)
D Allen (First Defendant)
CD McMeniman (Second Defendant)

Solicitors:
Laliotis Xuereb Lawyers (Plaintiff)
Avondale Lawyers (First Defendant)
Australian Government Solicitor (Second Defendant)

File Number(s):

2023/300351

Publication restriction:

Nil

JUDGMENT

INTRODUCTION

1. This judgment deals with the two remaining issues to be decided arising from the determinations I made in Gordon v Glowberth Pty Ltd [2024] NSWSC 104 (Principal Judgment), in circumstances where the parties are unable to agree on proposed short minutes of order to give effect to the Principal Judgment. Those two issues are the new form of freezing orders to be made against Glowberth Pty Ltd and the question of costs.

2. This judgment assumes familiarity with the Principal Judgment. Shorthand and defined terms used in the Principal Judgment are used in this judgment.

3. I begin with a brief summary of my conclusions in the Principal Judgment before turning to consider the submissions of Mr Gordon, Glowberth and the Official Trustee in Bankruptcy as well as the applicable legal principles and my conclusions on the application of those principles to the issues that remain in dispute.

PRINCIPAL JUDGMENT

4. At the hearing before me on 7 December 2023, Glowberth applied to discharge the ex parte freezing orders that were made by me as duty judge on 20 September 2023 in favour of Mr Gordon, and which were subsequently varied and extended by consent and without admission by me on 22 September 2023 (Original Freezing Orders) (Principal Judgment at [1]).

5. Due to Mr Gordon’s failure to disclose facts material to the making of the Original Freezing Orders — namely, his bankrupt status from on or around 2 July 2015, which was and is of central relevance to the substantive proceedings between the parties — I determined that the Original Freezing Orders should be discharged (Principal Judgment [33]–[34]).

6. On Mr Gordon’s oral application during the hearing for new freezing orders in the same terms as the Original Freezing Orders (Principal Judgment [31], [35]), Glowberth raised numerous issues going to the question of whether such orders should be made afresh (Principal Judgment [37]–[85]). I found against Glowberth on all of those issues, save for the amendment sought to remove from the new freezing orders the $2,000 per week restriction for the payment of legal costs, and in its place the insertion of an allowance for the payment of reasonable legal costs (Principal Judgment [86]–[87]).

7. My ultimate conclusion in the Principal Judgment was as follows:

… I am of the view that the Freezing Orders should be discharged and in their place a new form of freezing orders made, subject to the amendment to the exception for the payment of reasonable legal expenses.

The parties are to provide my Associate with agreed short minutes (which also deal with costs) within 7 days reflecting the reasons above, failing which I will make orders in chambers.

SUBMISSIONS

New freezing orders

8. In written submissions dated 5 March 2024 (Gordon submissions) (to which proposed freezing orders were annexed), Mr Gordon referred to the Principal Judgment at [87], where I noted the need to remove the $2,000 per week limit for legal expenses (which appeared in the Original Freezing Orders). The form of freezing orders proposed by Mr Gordon adopts that amendment, substituting “paying $2,000 a week on your reasonable legal expenses” with “paying your reasonable legal expenses”, but otherwise substantially retains the format and phrasing of the Original Freezing Orders, save for any necessary adjustments to dates, and to reflect the now inter partes nature of the application and the fact that all supporting material has already been filed.

9. In written submissions dated 5 March 2024 (Glowberth submissions), Glowberth indicated that the amendment concerning the payment of legal fees is the only change required, but no draft form of freezing orders in those terms was annexed to the Glowberth submissions.

10. The Official Trustee did not seek to be heard in relation to the form of the new freezing orders.

Costs

11. In the Gordon submissions it was contended that:

1. Glowberth ought to pay Mr Gordon’s costs in respect of both the application to dissolve the Original Freezing Orders (brought by Glowberth) and the application for a fresh freezing order (brought by Mr Gordon), on the basis that notwithstanding the discharge of the Original Freezing Orders, a new freezing order was to be imposed;

2. the ‘practical effect’ of the Principal Judgment is that Glowberth was unsuccessful in the ultimate outcome;

3. if deemed necessary by the court in the exercise of its discretion as to costs, a discount of 50% could be applied to take account of the fact that the Original Freezing Orders were discharged for material non-disclosure; and

4. in the alternative, the appropriate order as to costs in respect of Glowberth’s application to dissolve the Original Freezing Orders and Mr Gordon’s application for fresh freezing orders, having regard to the outcomes of the parties’ respective applications (in which both parties have had some level of success), is that costs be in the cause.

12. In the Glowberth submissions it was contended that:

1. the default rule that costs follow the event dictates that Mr Gordon be required to pay Glowberth’s costs on the application to discharge the Original Freezing Orders;

2. further, it would even be open to the court to make an indemnity costs order against Mr Gordon, given that Mr Gordon’s non-disclosure necessitated the dissolution of the Original Freezing Orders, which was misconduct by Mr Gordon and not corrected by him accepting that the Original Freezing Order should be discharged; and

3. costs in respect of the instanter application for new freezing orders, having been made during the course of oral submissions at the hearing on 7 December 2023 and requiring no additional preparatory work by either party, should attract no order or in the alternative should be costs in the cause.

13. In written submissions dated 5 March 2024, the Official Trustee contended that:

1. no costs order should be made against the Official Trustee; and

2. the costs of the Official Trustee should be reserved, on the basis that its involvement in the substantive proceedings to date has been limited.

LEGAL PRINCIPLES AND CONSIDERATION

Freezing orders

14. The Original Freezing Orders were in the standard form, adhering to the form of order annexed to Practice Note SC Gen 14 (Practice Note).

15. I note that the new freezing orders sought by Mr Gordon and annexed in draft form to the Gordon submissions are in keeping with the form annexed to the Practice Note, with necessary adjustments. I am, moreover, satisfied that those draft orders (with necessary changes to dates, stating that they arise from an inter partes hearing and the change to the legal costs provision) reflect the reasons given and findings made by me in the Principal Judgment.

16. In those circumstances, I am prepared to make freezing orders substantially in the form proposed by Mr Gordon and agreed to, in substance, by Glowberth.

Costs

17. Section 98(1) of the Civil Procedure Act 2005 (NSW) states:

(1) Subject to rules of court and to this or any other Act—

(a)   costs are in the discretion of the court, and

(b)   the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)   the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

18. Rule 42.2 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) provides the relevant starting point when considering whether the court should exercise its discretion to order indemnity costs. That rule states that costs are to be assessed on the ordinary basis unless the court orders or the rules provide otherwise.

19. A summary of the relevant principles relating to the discretion to award costs on an indemnity basis can be found in Cappello v HomeBuilding Pty Ltd [2023] NSWCA 109, a recent decision of the Court of Appeal of this court, in which Mitchelmore JA (with whom Simpson and Meagher JJA agreed) at [46]–[48] stated:

The Court has a discretion to award costs on an ordinary or indemnity basis. Usually costs will follow the event, unless the Court considers that some other order ought to be made: Civil Procedure Act 2005 (NSW), s 98; Uniform Civil Procedure Rules 2005 (NSW), r 42.1; Collier v Country Women’s Association of New South Wales [2018] NSWCA 36 at [116] (“Collier”).

For an order of indemnity costs to be made, the conduct of the party against whom such costs are sought must usually exhibit some special or unusual feature: Collier at [117]. The focus is on the way the litigation was conducted: Mead v Watson [2005] NSWCA 133 at [8]-[9]. For example, the discretion may be enlivened where a party persists in what should have been seen to be a hopeless case, such as where the case was unduly prolonged by groundless contentions: Ferella at [36]; Liverpool City Council v Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan and Ors) [2009] NSWCA 161 at [93] (“Liverpool City Council”). It has also been said that indemnity costs may be awarded where the unsuccessful party’s conduct was unreasonable or delinquent: Amirbeaggi v Matrix Group Co Pty Ltd [2021] NSWCA 21 at [18].

The categories of circumstances in which the discretion may be exercised are not closed: Liverpool City Council at [93]. Ultimately, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on the ordinary basis: Liverpool City Council at [93].

20. For costs awarded on an ordinary basis, the relevant discretion is set out in r 42.1 of the UCPR. This general rule confers a wide discretion, and is in the following terms:

… if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

21. Recently, in Chandrasekaran v Western Sydney Local Health District (t/as Westmead Hospital) (No 2) [2024] NSWCA 21, the Court of Appeal of this court (constituted by Gleeson, Leeming and Adamson JJA) gave an explanation of the normal rule, stating at [11]–[12]:

Costs are in the broad discretion of the Court with the general rule being that they should follow the “event”: Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 42.1. Generally, the “event” refers to the event of the claim and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15].

Underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the Court considers to be the responsibility of each party for the incurring of costs: Commonwealth Bank of Australia v Gretton [2008] NSWCA 117 at [121] (Hodgson JA, Mason P and Beazley JA agreeing).

22. In Croc’s Franchising Pty Ltd v Alamdo Holdings Pty Ltd (No 3) [2023] NSWCA 316, Basten AJA, and Payne and Stern JJA, observed similarly at [7]:

… Under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) the “general rule” is that the court is to order that costs follow the event. The “event” may be characterised in more than one way. Generally the “event” refers to the result of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Sons Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA). …

23. In the present case, I consider that there are two ‘events’ in respect of which costs orders need to be made. Those events are: (i) the discharge of the Original Freezing Orders; and (ii) the imposition of new freezing orders in the terms contended for by Mr Gordon. I note that while the characterisation of these issues as ‘events’ is perhaps not entirely accurate (this being an interlocutory application and the resolution of the substantive dispute having not yet occurred), it is useful for the purposes of structuring my reasoning.

24. In terms of the first event, Glowberth succeeded in its application to dissolve the Original Freezing Orders. In terms of the second event, Mr Gordon succeeded in his instanter application for fresh freezing orders. To use the language adopted in the authorities (see Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], per Beazley, Ipp and Basten JJA; Croc’s Franchising at [7] and [9]), this is in the nature of a “mixed outcome”. But the overall practical result of the events was that new freezing orders in substantially the same terms as the Original Freezing Orders were ordered.

25. Despite the fact of Mr Gordon’s non-disclosure, I do not consider that this is a case involving conduct of Mr Gordon in the proceedings that exhibited some special or unusual feature or was unreasonable or delinquent conduct in the sense described in Capello so as to give rise to an order for indemnity costs. This is particularly so in light of the fact that new freezing orders are to be made.

26. To reflect the mixed outcome and the overall practical result of the applications (being the imposition of new freezing orders), I am of the view that fairness to the parties of the type described in Chandrasekaran demands that the appropriate order should be costs in the cause for both applications.

27. In relation to the costs of the Official Trustee, I propose to make no order as to costs, with the intention that the Official Trustee bear its own costs in respect of the applications dealt with in the Principal Judgment.

ORDERS

28. For the reasons set out above, I make the following orders:

1. Order discharging order 5 against the first defendant made on 20 September 2023, as extended and varied by order 1 made on 22 September 2023 (Freezing Orders).

2. Orders until further order against the first defendant in the form annexed to these orders and marked “Annexure A”.

3. Order that the costs of the plaintiff and the first defendant in relation to the first defendant’s application to discharge the Freezing Orders and the plaintiff’s application for the orders sought in order 2 above be costs in the cause.

4. No order as to the costs of the second defendant with the intent that the second defendant bear its own costs.

**********

ANNEXURE A

PENAL NOTICE

TO: Glowberth Pty Ltd (ACN 004016577)

IF YOU:

(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU TO ABSTAIN FROM DOING, YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

This is a ‘freezing order’ made against you on 15 March 2024 by Justice McGrath after a hearing at which you were represented and after the Court was given the undertakings set out in Schedule A to this order and read the affidavits listed in Schedule B to this order.

THE COURT ORDERS:

INTRODUCTION

1. The application for this order is made returnable immediately.

2. The time for service of this order is abridged and service is to be effected by 4pm, 18 March 2024.

3. This order has effect until further order of the Court.

4. Anyone served with or notified of this order, including you, may apply to the Court at any time to vary or discharge this order or so much of it as affects the person served or notified.

5. In this order:

(a) ‘applicant’, if there is more than one applicant, includes all the applicants;

(b) ‘you’, where there is more than one of you, includes all of you and includes you if you are a corporation;

(c) 'third party’ means a person other than you and the applicant;

(d) ‘unencumbered value’ means value free of mortgages, charges, liens or other encumbrances; and

(e) if you are ordered to do or not to do something you must do it or not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.

6. If you are ordered to do something, you must do it by yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions.

7. If you are ordered not to do something, you must not do it yourself or through directors, officers, partners, employees, agents or others acting on your behalf or on your instructions or with your encouragement or in any other way.

FREEZING OF ASSETS

8. You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (‘Australian assets’) up to the unencumbered value of AUD$1,363,000 (‘the Relevant Amount’).

9. If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

10. PROVIDED THAT nothing in this freezing order prevents you from completing the sale of the property known as 258 Sackville Ferry Road, Sackville (Lot 233 in DP 752025, or paying to ANZ Bank such amount as is necessary to discharge the mortgage on that property.

11. For the purposes of this order,

(a) your assets include:

i. all your assets, whether or not they are in your name and whether they are solely or co-owned;

ii. any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

iii. the following assets in particular: the proceeds of sale of the property known as 258 Sackville Ferry Road, Sackville (Lot 233 in DP 752025);

(b) the value of your assets is the value of the interest you have individually in your assets.

PROVISION OF INFORMATION

12. Subject to paragraphs 13 and 14, you must:

(a) at or before the further hearing on the return day (or within such further time as the Court may allow) to the best of your ability inform the applicant in writing of all your assets in Australia, giving their value, location and details (including any mortgages, charges or other encumbrances to which they are subject) and the extent of your interest in the assets;

(b) within 10 working days after being served with this order, swear and serve on the applicant an affidavit setting out the above information.

13. This paragraph applies if you are a not a corporation and you wish to object that compliance with paragraph 12 may tend to incriminate you or make you liable to a civil penalty;

(a) You must, at or before the further hearing on the return day (or within such further time as the Court may allow), file a notice of motion applying to revoke the order made under paragraph 12 pursuant to section 87 of the Civil Procedure Act 2005. The notice of motion must be supported by an affidavit which identifies the grounds for making the application;

(b) If you file a notice of motion, you need comply with paragraph 12 only to the extent, if any, that it is possible to do so without disclosure of the material which may tend to prove that you have engaged in culpable conduct; and

(c) If you file a notice of motion, the Court may give directions as to the filing and service of affidavits setting out such matters as you wish to place before the Court in support of your application.

14. This paragraph applies if you are a corporation and all of the persons who are able to comply with paragraph 12 on your behalf and with whom you have been able to communicate, wish to object that compliance may tend to incriminate them respectively or make them respectively liable to a civil penalty;

(a) You must, at or before the further hearing on the return day (or within such further time as the Court may allow), notify the applicant in writing that all of the persons referred to above wish to take such objection and identify the extent of the objection;

(b) If you give such notice, you need comply with paragraph 12 only to the extent, if any, that it is possible to do so without disclosure of the material in respect of which the objection is taken; and

(c) If you give such notice, the Court may give directions as to the filing and service of affidavits setting out such matters as you wish to place before the Court in support of your application.

EXCEPTIONS TO THIS ORDER

15. This order does not prohibit you from:

(a) paying ordinary living expenses;

(b) paying your reasonable legal expenses;

(c) dealing with or disposing of any of your assets in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and

(d) in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicant, if possible, at least two working days written notice of the particulars of the obligation.

16. You and the applicant may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicant or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicant and you, and the Court may order that the exceptions are varied accordingly.

17. This order will cease to have effect if you:

(a) pay the sum of $1,363,000 into Court; or

(b) pay that sum into a joint bank account in the name of your solicitor and the solicitor for the applicant as agreed in writing between them; or

(c) provide security in that sum by a method agreed in writing with the applicant to be held subject to the order of the Court.

18. Any such payment and any such security will not provide the applicant with any priority over your other creditors in the event of your insolvency.

19. If this order ceases to have effect pursuant (a), you must as soon as practicable file with the Court and serve on the applicant notice of that fact.

COSTS

20. The costs of this application are dealt with in a separate minute of order.

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

21. Set off by banks
This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order.

22. Bank withdrawals by the respondent
No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order.

Schedule A

UNDERTAKINGS GIVEN TO THE COURT BY THE APPLICANT

(1) The applicant undertakes to submit to such order (if any) as the Court may consider to be just for the payment of compensation (to be assessed by the Court or as it may direct) to any person (whether or not a party) affected by the operation of the order.

(2) As soon as practicable, the applicant will file and serve upon the respondent copies of this order.

(3) As soon as practicable, the applicant will cause anyone notified of this order to be given a copy of it.

(4) The applicant will pay the reasonable costs of anyone other than the respondent which have been incurred as a result of this order, including the costs of finding out whether that person holds any of the respondent’s assets.

(5) If this order ceases to have effect, the applicant will promptly take all reasonable steps to inform in writing anyone who has been notified of this order, or who he has reasonable grounds for supposing may act upon this order, that it has ceased to have effect.

(6) The applicant will not, without leave of the Court, use any information obtained as a result of this order for the purpose of any civil or criminal proceedings, either in or outside Australia, other than this proceeding.

(7) The applicant will not, without leave of the Court, seek to enforce this order in any country outside Australia or seek in any country outside Australia an order of a similar nature or an order conferring a charge or other security against the respondent or the respondent’s assets.

Schedule B 

AFFIDAVITS RELIED ON

Name of Deponent: Jerry Gordon
Date affidavit made: 20 September 2023

Name of Deponent: Tony Barber
Date affidavit made: 20 September 2023

Name of Deponent: Djimi Barber
Date affidavit made: 20 September 2023

Name of Deponent: George Laliotis

Date affidavits made: 1 November 2023 and 16 November 2023

NAME AND ADDRESS OF APPLICANT'S LEGAL REPRESENTATIVES

The applicant’s legal representatives are:

Name:        George Laliotis

Email:        [email protected]

Address:      Suite 2, Level 1, 1 Clarke Street, Earlwood NSW 2206

Address for service:   Suite 2, Level 1, 1 Clarke Street, Earlwood NSW 2206

Office Hours:      9:00am – 5:30pm, Monday to Friday

Decision last updated: 15 March 2024