In the matter of Blaze Firewood & Sons Pty Ltd (in liq)
[2022] VSC 91
•28 February 2022
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2020 04172
| STEPHEN ROBERT DIXON in his capacity as liquidator and deed administrator of BLAZE FIREWOOD & SONS PTY LTD (in liquidation) (subject to a deed of company arrangement) (ACN 624 081 483) & ANOR (according to the attached schedule) | Plaintiffs |
| v | |
| RENEE TARZIA & ORS (according to the attached schedule) | Defendants |
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JUDGE: | ATTIWILL J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 4 February 2022 |
DATE OF RULING: | 28 February 2022 |
CASE MAY BE CITED AS: | In the matter of Blaze Firewood & Sons Pty Ltd (in liq) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 91 |
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COSTS – Application by plaintiffs for costs - Supreme Court Act 1986 (Vic) s 24(1) – Exercise of discretion - Relief obtained by consent – No adjudication on the merits - Whether first defendant effectively surrendered or capitulated – Whether special or unusual features exist to justify costs order in favour of the plaintiffs on an indemnity basis - Costs awarded to the plaintiffs on a standard basis.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr Omar El-Hissi (solicitor) | NOH Legal |
| For the First Defendant | In person | - |
HIS HONOUR:
INTRODUCTION
The issue for determination is what order should be made in relation to the costs of the plaintiffs’ amended summons filed 23 August 2021 (‘amended summons’).
The plaintiffs submitted that the first defendant should pay their costs of the amended summons taxed on an indemnity basis, alternatively on a standard basis, in default of agreement.
The first defendant submitted that each party should bear their own costs of the amended summons, or alternatively, that the first defendant should pay the plaintiffs’ costs of the amended summons taxed on a standard basis, in default of agreement.
Both parties agreed that the proceeding should otherwise be dismissed.
The plaintiffs relied upon submissions dated 30 November 2021 and 1 February 2022 and the following affidavits:
(a) Mr El-Hissi, the plaintiffs’ solicitor, sworn 2 July 2021, 12 July 2021, 8 September 2021 and 14 December 2021; and
(b) Mr Dixon, the first plaintiff, sworn 21 April 2021, 5 July 2021, 12 July 2021, 21 August 2021, 27 August 2021 and 1 February 2022.
The first defendant relied upon submissions dated 14 October 2021 and 4 December 2021 and affidavits of the first defendant affirmed 12 July 2021, 14 October 2021, 3 December 2021 and 24 January 2022.
Mr El-Hissi and the first defendant made oral submissions at the hearing of the application.
BACKGROUND
The plaintiffs are the liquidators of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (‘Blaze’) and All Burn Firewood Pty Ltd (in liquidation) (ACN 623 990 134) (‘All Burn’).[1] The first defendant was at all material times the sole director of Blaze and All Burn.[2] Blaze conducted a firewood supply business.
[1]See plaintiffs’ submissions dated 30 November 2021, [1].
[2]First defendant’s affidavit affirmed 25 June 2021, [1].
On 5 November 2020, the plaintiffs filed an originating process in which they sought, inter alia, the following relief against the first defendant:
2.Pursuant to the Court’s inherent jurisdiction, an order that by 4:00 pm on the date of service of this Order on the Defendant, the Defendant transfer all funds standing to the credit in the Bank of Melbourne Bank Account BSB 139 879 Account Number 479 686 138 to:
Account Name: Blaze Firewood & Sons Pty Ltd (in liquidation)
BSB: 183 334
Account Number: 258 650 001
3. Pursuant to the Court’s inherent jurisdiction, a direction to the Defendant to direct all debtors/customers of the Companies to pay any amounts due to:
Account Name: Blaze Firewood & Sons Pty Ltd (in liquidation)
BSB: 183 334
Account Number: 258 650 001
On 9 November 2020, McDonald J made orders substantially in the form sought in the originating process.
On 12 May 2021, the plaintiffs filed an amended originating process in which they sought, inter alia, the termination of a Deed of Company Arrangement of Blaze and All Burn (‘the DOCA’) and the following relief:
Pursuant to the Court’s inherent jurisdiction, an order that by 4:00 pm one (1) business day after the date of service of this Order on the First Defendant, the First Defendant deliver to the Plaintiffs at Level 1, 255 Mary Street, Richmond, Victoria 3121 copies of all books, records and documents in her possession and/or control in relation to each of the following companies:
(a)Blaze Firewood & Sons Pty Ltd (in liquidation) (A.C.N. 624 081 483)
(b) All Burn Firewood Pty Ltd (in liquidation) (A.C.N. 623 990 134)
(Companies)
On 9 July 2021, the Court terminated the DOCA and also, inter alia, ordered:
By 4:00 pm one (1) business day after the date of service of this Order on the first defendant, the first defendant deliver to the plaintiffs at Level 1, 255 Mary Street, Richmond, Victoria 3121 copies of all books, records and documents in her possession and/or control in relation to each of the Companies [ie the second and third defendants].
On 12 July 2021, the plaintiffs filed a summons in which they sought an order for punishment of the first defendant for contempt of Court and various other orders.
On 12 July 2021, the Court heard the plaintiffs’ summons and made orders, inter alia, extending the date for compliance with the orders made on 9 July 2021 concerning the delivery of the books and records. The date for compliance was extended to 10:00am on 14 July 2021. The Court made other orders for the delivery up of possession of premises and items of stock, plant and equipment. The plaintiffs’ summons was otherwise adjourned to a date to be fixed. At the hearing before the Court on that day, the first defendant, by her solicitor, also undertook as follows:
The first defendant, by her solicitor, undertakes:
i. to provide copies of all books, records and documents in her possession and/or control in relation to Blaze Firewood & Sons Australia Pty Ltd to the plaintiffs at 3 Gipps Court, Epping, Victoria by 10:00 am on 14 July 2021; and
ii. not to dispose of, encumber or in any way diminish the value of the stock, plant and equipment of the second and third defendants.
The first defendant says that she did not give instructions to her solicitor to give the undertaking concerning Blaze Firewood & Sons Australia Pty Ltd (‘Blaze Australia’).[3] The first defendant is the sole director of Blaze Australia.[4] The first defendant’s solicitor informed Riordan J of its existence on 12 July 2021, describing it as the ‘new entity’.[5]
[3]First defendant’s affidavit affirmed 3 December 2021, [6].
[4]First defendant’s affidavit affirmed 14 October 2021. [9].
[5]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Riordan J, 12 July 2021) 13.14-15 (Mr Phillips).
On 14 July 2021, the first defendant provided to the plaintiffs a USB drive containing documents of Blaze and Blaze Australia. The first defendant gave evidence:[6]
That USB contained the full MYOB file for Blaze Firewood & Sons Pty Ltd (in liq) ('Blaze Firewood') and Blaze Australia as at that date. It also contained invoices, supplier records and other documents I was required to provide in accordance with the undertaking. At that time, I believed that I had fulfilled my obligations.
[6]First defendant’s affidavit affirmed 3 December 2021, [7].
Mr Dixon reviewed the contents of the USB device with another person and formed a view that the books and records provided by the first defendant were inadequate.[7]
[7]Mr Dixon’s affidavit sworn 21 August 2021, [14]-[16].
Between 12 July 2021 and about early August 2021, Mr Dixon engaged in discussions with the first defendant and other interested parties in relation to the sale of the business and assets as a going concern.[8]
[8]Ibid [26].
On 20 July 2021, the plaintiffs sent a letter to the first defendant noting that the documents provided were insufficient and missing ‘pertinent’ documents. The letter also set out a list of categories of documents to be provided.[9]
[9]Ibid [19]. See also exhibit ‘SRD 63-64’ to Mr Dixon’s affidavit sworn 21 August 2021.
On 21 July 2021, the first defendant provided further documents to the plaintiffs at a meeting. The first defendant gave evidence:[10]
I provided Mr Dixon with updated documents during that meeting, including transaction listings for the bank accounts relating to Blaze Australia, showing the accounts had $0 and no transactions recorded. I also provided him other documents, including subcontractor invoices and timesheets. During that meeting:
(a)we discussed the sale of the assets of the companies in liquidation;
(b)Mr Dixon said words to the effect that if I did not buy the assets and did not put my house up as security, I would lose it anyway because I would not have any income; and
(c)Mr Dixon also said words to the effect that he wanted me to trade Blaze Australia and that he wanted to seek four weeks' worth of sales.
[10]First defendant’s affidavit affirmed 3 December 2021, [11].
On 26 July 2021, the first defendant provided further documents to the plaintiffs. The first defendant gave evidence:[11]
On 26 July 2021, I attended a further meeting with Mr Dixon and Mr Bell. Richard Rorht of Hamilton Murphy and Ms Mahony also attended. During that meeting, I again provided updated documents to Mr Dixon, similar to what I had provided to him on 21 July 2021 . Prior to the meeting, I sent Mr Dixon an email containing further information about Blaze Australia and Blaze Firewood.
[11]Ibid [13].
On 13 August 2021, the plaintiffs took possession of the business premises.[12]
[12]Mr Dixon’s affidavit sworn 21 August 2021, [27].
On 23 August 2021, the plaintiffs filed the amended summons in which they sought the following relief:
5.The First Defendant deliver to the Plaintiffs copies of all books and records and documents in her possession and/or control in relation to:
a. Blaze Firewood & Sons Australia Pty Ltd; and
b. the Second and Third Defendants,
including, without limiting the effect of this Order, those books records identified in the letter from the Plaintiffs to the First Defendant dated 20 July 2021 and marked as exhibit SRD 63 to SRD 64 to the affidavit of Stephen Robert Dixon sworn 21 August 2021.
6. The First Defendant pay the plaintiffs’ costs and expenses of this application on an indemnity basis.
7. The costs and expenses of this application otherwise be the costs in the liquidation of the Second and Third Defendants pursuant to Section 556(1)(b) of the Corporations Act 2001 (Cth).
8. Such further and other Orders as this Honourable Court deems appropriate.
This relief constituted the whole of the relief sought by the plaintiffs in the proceeding from that time.
On 23 August 2021, the first defendant’s solicitor filed a notice of solicitor ceasing to act. The first defendant appeared in person at the directions hearing on 23 August 2021. The first defendant stated that the undertaking provided by her solicitor on 14 July 2021 was given against her will. She also stated that there were no other books and records of Blaze Australia, Blaze or All Burn in her control or possession that she had not given to the plaintiffs.
She also stated:[13]
So Your Honour, I think this is quite unfair, this whole process and proceedings that have been happening, because as I said, I have complied, I've done what I've needed to do, and I have tried my hardest in this, with what I have of the limited, um, funds that I have and to be able to look after my children. And I have been very honest with everything, and transparent, so I do ask that you give me a little bit of time to be able to work through this, to work out where I go from here.
[13]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Attiwill J, 21 August 2021) 14.2-10 (Ms Tarzia) (emphasis added).
On 23 August 2021, the Court, inter alia, listed the amended summons for hearing on 8 September 2021 and made orders for the filing of affidavits and submissions.
On 24 August 2021, the first defendant provided further documents to the plaintiffs. The first defendant gave evidence:[14]
On 24 August 2021, I provided a bank transaction listing as requested by Mr EI-Hissi on behalf of Mr Dixon. I also re-sent the MYOB file via Google Drive for Blaze Australia and for Blaze Firewood. A copy of that email is at exhibit 'SRD-55' of Mr Dixon's affidavit sworn 27 August 2021.
[14]First defendant’s affidavit affirmed 3 December 2021, [16].
On 8 September 2021, at the hearing of the amended summons, the Court gave leave to a Mr Ogden to act as the first defendant’s McKenzie friend. The Court was also provided with a confidential report of a psychologist provided by the first defendant concerning her health. That report was provided to the counsel and solicitor for the plaintiffs subject to a confidentiality order. The Court ordered the plaintiffs to file and serve a list of the documents they sought from the first defendant, and otherwise adjourned the hearing of the amended summons to 11 October 2021. The Court acknowledges the assistance that Mr Ogden provided to the first defendant in this proceeding.
On 13 September 2021, the plaintiffs filed and served a list of the documents that they sought from the first defendant pursuant to the amended summons. It set out 22 categories of documents, some of which contained sub-categories.
On 6 October 2021, the Court, on its own motion, made orders that included directions to the Supreme Court of Victoria’s Self-Represented Litigants Coordinator to lodge a request with the Victorian Bar Pro Bono Assistance Scheme for assistance to the first defendant.
On 7 October 2021, a Mr Christopher Fitzgerald, counsel of the Victorian Bar, informed the Court that he had accepted a referral to assist the first defendant. The Court acknowledges the substantial assistance that Mr Fitzgerald provided to the first defendant in this proceeding. His assistance has contributed to the administration of justice in this State.
On 8 October 2021, the Court made orders, inter alia, adjourning the hearing of the amended summons to 18 October 2021.
On 14 October 2021, the first defendant sent a letter and attachment to the plaintiffs. The first defendant stated in the letter, inter alia:[15]
I refer to the list of documents filed by your client on 13 September 2021. My response to those categories are set out in the schedule attached.
To my understanding, your client has most of the information sought in MYOB and in other material I have previously provided to him. If your client does still want me to provide the documents requested, there will be a significant doubling-up of information.
The documents now sought - in addition to what has previously been requested – is primarily in hard-copy (particularly material that is in response to categories 12 to 22). I do not have access to facilities to easily scan and email most of what is sought. Please let me know what arrangements your client proposes for this material to be delivered (e.g., does your client want this material to be scanned and emailed, and if so, what timeframe could be accommodated?).
[15]Exhibit ‘RT-2’ to the first defendant’s affidavit affirmed 14 October 2021. See also the first defendant’s affidavit affirmed 14 October 2021, [7].
In the attachment to the letter titled ‘Schedule - Responses to documents requested’, the first defendant noted with respect to a number of documents requested that she had those documents and could make them available for inspection.[16]
[16]Exhibit ‘RT-2’ to the first defendant’s affidavit affirmed 14 October 2021, ‘Schedule - Responses to documents requested’.
The first defendant gave evidence:[17]
[17]First defendant’s affidavit affirmed 14 October 2021, [4]-[11].
4. I have reviewed the list of documents dated 13 September 2021.
5. A large amount of the documents sought contain information that is reflected on MYOB. I provided the plaintiffs with access to MYOB on 14 July 2021. Now shown to me and marked as 'RT-1' are copies of a text message exchange between me and an agent of the liquidator dated 14 July 202 l.
6. Throughout the course of this proceeding, I have endeavoured to provide the plaintiffs with access to information through MYOB. I also provided the liquidator with further documents that had been requested in early September 2021.
7. Shortly before swearing this affidavit, I sent a letter to the plaintiffs' solicitors responding to the documents requested in the list of documents. Now shown to me and marked as 'RT-2' are copies of that letter and the cover email.
8. I was unable to scan and email what I have in my possession to the plaintiffs' solicitors before swearing this affidavit. I have invited the plaintiffs' solicitor to contact me to make arrangements for the material to be delivered.
9. I am currently a director of Blaze Firewood & Sons Australia Pty Ltd, although that company is not trading. I am otherwise currently unemployed and am the primary carer of my two children. I am attending Food Bank to get through each week and am under significant financial strain. I have very few supports and am not legally trained.
10. The administrations and liquidation process, and this proceeding, have caused me significant stress. It has followed a lengthy and acrimonious family law proceeding between me and my ex-husband which ended in December 2020.
11. In early September 2021, my psychologist instructed me that I needed to take steps to look after my mental health. He instructed me to not take any phone calls or emails to give me time to recover. I am still struggling with my mental health and am doing the best that I can, in the circumstances, to cooperate with the liquidator.
On 15 October 2021, the first defendant filed submissions which stated, inter alia:[18]
[18]First defendant’s outline of submissions dated 14 October 2021, [2]-[4] (citations omitted).
2.The first defendant relies on an affidavit affirmed 14 October 2021 in response to that application. In short, her position is as follows:
(1) Blaze Australia is not trading;
(2) she is able to provide documents in response to certain categories requested by the plaintiffs. A schedule to her letter dated 14 October 2021 (exhibited to her affidavit as ‘RT-2’) sets out her responses to the categories sought, and what documents she can make available to the plaintiffs. The first defendant requires clarification of certain categories sought;
(3) whilst she is willing to provide the documents in response to the requests, it will take time to do so (given what it sought, and her self-represented status). The first defendant’s position is that it would be appropriate for the parties to discuss the best approach to doing so, with the Court’s guidance;
(4) the Court – and the plaintiffs’ practitioners – are aware of the circumstances that led to the previous hearing of this application being adjourned (and resultant delay in the first defendant responding to the plaintiffs’ request of 13 September 2021); and
(5)for the reasons set out in her affidavit, she resists the indemnity costs order sought by the plaintiffs.
3.Lastly, the first defendant understands that the plaintiffs seek categories of documents in relation Blaze Australia beyond the date of the undertaking given on behalf of the first defendant (14 July 2021). On the face of the plaintiffs’ amended summons and outline of submissions, it is not clear to the first defendant what power, order or otherwise the plaintiffs rely on to seek those documents.
4.The plaintiffs’ amended summons and outline of submissions are silent on this point – this is relevant to the plaintiffs’ entitlement to its requests for categories 1-10 (insofar as those requests concern documents beyond that date). The first defendant can supplement her response to this point in oral submissions if the plaintiffs identify the basis in advance of the hearing.
On 18 October 2021, the Court made orders by consent as follows:
1. By 4:00pm on 22 October 2021, the plaintiffs clarify the first defendant’s queries in relation to the categories of books and records set out in categories 12, 16, 17 and 22 of the plaintiffs’ list of documents filed 13 September 2021 (List).
2. By 4:00pm on 29 October 2021, the first defendant deliver to the plaintiffs’ offices at Level 21, 114 William Street, Melbourne, the books and records set out in categories 1, 5, 8, 9, 10, 15, 17, 18, 21 and 22 of the List.
3. Subject to the plaintiffs clarifying their request in accordance with paragraph 1 of these orders, by 4:00pm on 29 October 2021, the first defendant deliver to the plaintiffs’ offices at Level 21, 114 William Street, Melbourne, the books and records set out in categories 12 and 16 of the List.
4. For the purposes of paragraphs 2 and 3 of these orders, the first defendant’s obligation to deliver any documents responsive to categories 1 and 11 of the List concerning Blaze Firewood & Sons Australia Pty Ltd is limited to the period from the establishment of that entity up to and including 14 July 2021.
5. The hearing of the plaintiffs’ summons filed 23 August 2021 is adjourned to 9:30am on 5 November 2021.
6. Costs reserved.
7. Liberty to apply.
On 31 October 2021, the first defendant provided documents to the plaintiffs. The defendant gave evidence:[19]
17. On 31 October 2021, I sent a Dropbox link to Mr Dixon's solicitors. The link contained documents I considered to be responsive to the categories set down in the list of documents dated 13 September 2021. I am not certain of the exact figure, but from a search of the folder understand that I provided around 1,750 files in total. Now produced and shown to me and marked as 'RT-3' is a copy of my email.
18. On 1 November 2021 , I attended Hamilton Murphy's offices to deliver a USB containing that same material. I delivered the USB to Mr Rohrt.
19. To the best of my knowledge, the documents I provided contained a significant amount of the same information that I had previously provided to Mr Dixon (via MYOB and otherwise).
20. It was a difficult exercise to compile this material. Once I understood what I needed to provide, I collated the material as quickly as I could with the resources available to me.
21. I have not received any request to provide further material since that time.
[19]First defendant’s affidavit affirmed 3 December 2021, [17]-[21].
Mr El-Hissi gave evidence concerning the documents provided as follows:[20]
[20]Mr El-Hissi’s affidavit sworn 14 December 2021, [5]-[8].
5.On 31 October 2021, I received an email from Mr Tarzia with a link to a Dropbox folder containing additional documents which Ms Tarzia has not previously provided to the plaintiff. I have accessed the Dropbox folder through the following link: copy of the emails appears at OEH 1.
6. The Dropbox folder identified at paragraph 5 contained the following documents:
(a) In respect of Blaze Australia:
(i) Delivery dockets for various dates in July 2021 for 114 separate deliveries;
(ii) Delivery run sheets for 130 deliveries;
(iii) Statements from suppliers;
(iv) A number of emails with various customers in relation to orders placed;
(b) In respect of Blaze:
(i) for 7-Eleven (a customer of the business), a significant number of invoices and proofs of delivery for 2020 and 2021;
(ii) for BBQ Galore (a customer of the business), invoices issued for deliveries to Epping and High Point for April and May 2021;
(iii) for BP Australia (a customer of the business), a significant number of invoices and proofs of delivery for 2020 and 2021;
(iv) delivery run sheets for 1 April 2020 to 29 June 2021; and
(v) a significant number of email correspondences with customers in relation to orders placed for the following email accounts:
7. Prior to the documents produced on 31 October 2021 in the Dropbox, the first defendant had not produced:
(a) any delivery dockets and/ or any run sheets in relation to Blaze Australia at all;
(b) emails in relation to either Blaze Australia or Blaze;
(c) the delivery run sheets for 1 April 2020 to 29 June 2021 for Blaze;
(d) the various proofs of delivery contained in the Dropbox folder for those customers identified at paragraph 6(b) of this affidavit; and
(e)a number of the invoices provided in respect of the customers identified at paragraph 6(b) of this affidavit.
8. With the additional documents produced for the first time on 31 October 2021, the liquidator can:
(a) identify and quantify the debtors of the Companies;
(b)issue invoices to customers who have benefited from deliveries made by Blaze Australia for which the Companies may have an equitable interest;
(c) to the extent necessary, proceed to recover any unpaid invoices; and
(d) progress his statutory obligations in relation to the Companies with a view of finalising the liquidations.
In response, the first defendant gave evidence:[21]
[21]First defendant’s affidavit affirmed 24 January 2022, [6]-[7].
6. In response to paragraph 7 of Mr El-Hissi's affidavit, I say as follows:
(a)delivery dockets/run sheets for Blaze Australia: I took these documents to the meeting on 21 July 2021 and showed the pile to Mr Dixon. I said words to the effect that I would use those delivery dockets to prepare invoices but, as I had not yet received new vendor numbers from the relevant customers, I could not do so. Mr Dixon did not ask for copies, but said words to the effect that I should hold onto them in order to prepare the invoices;
(b) emails relating to Blaze Australia/Blaze: Mr Dixon did not specifically request emails in his letter of 20 July 2021 or at any time prior to then. The first time I am aware of Mr Dixon specifically requesting emails was by his list of documents dated 13 September 2021. The majority of emails contained information that was already recorded on MYOB which I had granted Mr Dixon access to (e.g., data from customer orders, remittance advices and supplier invoices).
(c)delivery run sheets from 1 April 2020 to 29 June 2021: the information from all run sheets is reflected on the MYOB file;
(d)proofs of delivery: the information from all proofs of delivery is recorded on the MYOB file; and
(e)invoices: all invoices were accessible to Mr Dixon via MYOB on an ongoing basis from 9 October 2020. When I created the folder of material to share with Mr El-Hissi on 31 October 2021, I provided copies of the invoices that I had downloaded from MYOB.
7. In light of:
(a)the fact that Mr Dixon's firm has had access to the MYOB file since 9 October 2020; and
(b)the significant amount of material provided or made accessible to him from that time,
I do not understand how it is that he can only now take the steps that Mr El-Hissi has deposed to at paragraph 8 of his affidavit.
In response, Mr Dixon gave evidence:[22]
[22]Mr Dixon’s affidavit sworn 1 February 2022, [6].
6. I refer to the Tarzia Affidavit and respond as follows:
(a)I have reviewed again the MYOB records provided by Ms Tarzia and confirm that the MYOB files provided included sales of Blaze up to 27 June 2021. There were no sales recorded in the MYOB for Blaze after 27 June 2021 and there were no sales at all recorded in the MYOB for Blaze Australia.
(b) While the MYOB for Blaze contained limited information pertaining to invoices issued up to 27 June 2021, without the delivery dockets, run sheets and proofs of delivery I am unable to verify the invoices in the MYOB. Furthermore, without those documents, I would also be unable to refute any claim from a customer about non-delivery.
(c)I agree that I met with Ms Tarzia on 21 July 2021 and 26 July 2021. Those meetings focused on Ms Tarzia's attempts to purchase the business, plant and equipment of Blaze and All Burn so that she could continue to carry on the business. Ms Tarzia did not provide me with any books and records during those meetings.
(d)On 25 July 2021 and again on 26 July 2021, I emailed Ms Tarzia and requested debtor and delivery information that she had previously agreed to provide me with. A copy of the email appears at exhibit SRD 1. Until 31 October 2021 when Ms Tarzia shared the Dropbox folder, those records, amongst others, were not provided to me.
(e)At all times Ms Tarzia maintained that the sales generated by Blaze Australia were inconsequential. I refer to exhibit SRD 65 to my Fifth Affidavit filed in this proceeding. Based on the number of delivery dockets provided in the Dropbox on 31 October 2021 (130 separate delivery dockets), I believe the sales made by Blaze Australia were significantly higher than what was previously conveyed by Ms Tarzia and may be in the vicinity of $38,956.70 after quantifying the cost price of the orders reflected in the delivery dockets. A copy of my costing analysis appears at exhibit SRD 9.
(f) With reference to my letter to Ms Tarzia dated 20 July 2021, I note that the letter was not intended to be an exhaustive list of the books and records sought on behalf of Blaze, All Burn and Blaze Australia and was certainly not intended to limit the scope of what constitutes books and records of a company. In fact, the letter states "I note that the Court Order is not limited to the documents listed above and therefore it is your responsibility to ensure that all books and records in your possession pertaining to Blaze Firewood & Sons (Australia) Pty Ltd and the Companies are delivered to my office." If Ms Tarzia was uncertain as to what constituted books and records of a company, the matter could have been clarified by her lawyer or alternatively myself or members of my staff.
I make the following findings concerning the documents that the plaintiffs submit had not been provided by the first defendant until they were provided on 31 October 2021:
(a) Delivery dockets and run sheets for Blaze Australia were provided for the first time to the plaintiffs on 31 October 2021.[23] The first defendant had offered to provide these earlier on 21 July 2021 but had been told to retain them to prepare invoices.[24] They were then requested again by the plaintiffs on 13 September 2021.[25] I accept the first defendant’s evidence that she showed these documents to Mr Dixon at a meeting on 21 July 2021 and that he said words to the effect that she should hold onto them in order to prepare invoices. This was not disputed by Mr Dixon.[26]
[23]Mr El-Hissi’s affidavit sworn 14 December 2021, [6(a)(i)-(ii)], [7(a)].
[24]First defendant’s affidavit affirmed 24 January 2022, [6(a)].
[25]Plaintiffs’ list of documents filed 13 September 2021.
[26]See Mr Dixon’s affidavit sworn 1 February 2022, [6(c)-(d)].
I am not satisfied that Mr Dixon subsequently requested delivery dockets and run sheets for Blaze Australia in his emails to the first defendant dated 25 and 26 July 2021. The email of 25 July 2021 states: ‘As discussed previously and in our meeting with David Bell, you have not provided the debtor and delivery information as agreed’.[27] I find that the meeting referred to was the meeting on 21 July 2021.[28] The email of 26 July 2021 refers to the ‘the information as requested’.[29] In those circumstances, I am not satisfied that the ‘debtor and delivery information as agreed’ concerned the delivery dockets and run sheets for Blaze Australia as Mr Dixon had told the first defendant on 21 July 2021 to hold onto these documents to prepare the invoices.
[27]Exhibit ‘SRD-1’ to Mr Dixon’s affidavit sworn 1 February 2022.
[28]See first defendant’s affidavit affirmed 3 December 2021, [11].
[29]Exhibit ‘SRD-1’ to Mr Dixon’s affidavit sworn 1 February 2022.
(b) A number of invoices of Blaze for the years 2020 and 2021 were provided on 31 October 2021. I accept the first defendant’s evidence that these invoices were available on MYOB. [30] This was not disputed by Mr Dixon. He gave evidence that there were no invoices on MYOB for Blaze after 27 June 2021.[31] However, there is no evidence that any of the invoices for Blaze provided by the first defendant on 31 October 2021 were dated post 27 June 2021.[32]
[30]Mr El-Hissi’s affidavit sworn 14 December 2021, [6(b)(i)-(iii)], [7(e)]; first defendant’s affidavit affirmed 24 January 2022, [6(e)].
[31]Mr Dixon’s affidavit sworn 1 February 2022, [6(a)-(b)].
[32]Mr El-Hissi’s affidavit sworn 14 December 2021, [6(b)(i)-(iii)].
(c) A number of run sheets of Blaze were provided for the first time on 31 October 2021.[33] The first defendant does not deny that these documents were only provided on 31 October 2021 but says that ‘the information from all run sheets is reflected on the MYOB file.’[34] These were expressly referred to in the plaintiffs’ letter to the first defendant dated 20 July 2021.[35]
(d) A number of proofs of delivery for Blaze were provided for the first time on 31 October 2021.[36] The first defendant does not deny that these documents were only provided on 31 October 2021 but says that ‘the information from all proofs of delivery is recorded on the MYOB file.’[37]
(e) A number of emails of Blaze Australia with customers in relation to orders and a significant number of emails of Blaze with customers in relation to orders were provided for the first time on 31 October 2021.[38] The first defendant does not deny that these documents were only provided on 31 October 2021 but says that they were only requested on 13 September 2021 and that the ‘majority of emails contained information that was already recorded on MYOB’.[39] Emails for Blaze Australia were expressly referred to in the plaintiffs’ letter to the first defendant dated 20 July 2021.[40] Further, I also refer to the order made by the Court on 9 July 2021 and the undertaking provided on behalf of the first defendant on 12 July 2021.[41]
[33]Ibid [6(b)(iv)], [7(c)]; first defendant’s affidavit affirmed 24 January 2022, [6(c)].
[34]First defendant’s affidavit affirmed 24 January, [6(c)] (emphasis added).
[35]Exhibit ‘SRD-63’ to Mr Dixon’s affidavit sworn 21 August 2021.
[36]Mr El-Hissi’s affidavit sworn 14 December 2021, [6(b)(i), (iii)], [(7(d)].
[37]First defendant’s affidavit affirmed 24 January 2022, [6(d)] (emphasis added).
[38]Mr El-Hissi’s affidavit sworn 14 December 2021, [6(a)(iv)], [6(b)(v)], [7(b)].
[39]First defendant’s affidavit affirmed 24 January 2022, [6(b)].
[40]Exhibit ‘SRD-63’ to Mr Dixon’s affidavit sworn 21 August 2021.
[41]See above [12]-[14].
The hearing of the amended summons listed for 5 November 2021 was adjourned to 19 November 2021, with the first defendant’s consent.
On 19 November 2021, the Court made orders for the filing of affidavits and submissions with respect to any application relating to the costs of the amended summons. This was the only issue in dispute between the parties at that time.
The first defendant also gave evidence:[42]
22. I was unrepresented in this proceeding for the most part from around mid-July 2021 to mid-October 2021. I could not afford to pay a lawyer.
23. My mental health declined significantly throughout the year, and particularly from August 2021. The ongoing negotiations and demands for information caused me significant stress. In particular, I had real difficulty managing the threat that I would lose my home if I did not agree to Mr Dixon's proposal
24.In my affidavit dated 14 October 2021, I described my personal circumstances at that time. Those circumstances have not changed.
[42]First defendant’s affidavit affirmed 3 December 2021, [22]-[24].
Mr Dixon also gave evidence:[43]
28.Renee's failure to provide the books and records has significantly hindered my role as liquidator and caused me to incur substantial costs and expenses, both internally, and externally in terms of legal fees to continue to conduct this proceeding.
29. I am unable to determine the income and expenses of the business. I am unable to determine the extent of the debtors nor am I able to collect those debtors. I am unable to conclude on the extent of the creditors of the Companies.
30. At present, due to Renee's non-compliance, I have incurred legal costs and disbursements in excess of $40,000. I have also not been able to make any distributions to creditors. My professional fees and expenses remain largely unpaid. I am unable to provide any meaningful update to the creditors of the Companies as I cannot complete my usual investigation and enquiries into the affairs of the Companies without having access to the books and records. I am also unable to determine whether there are any breaches of the Act, or, transactions that may be voidable against me, as liquidator of the Companies.
31. Renee has demonstrated wilful disregard for various orders made by this Court. That disregard coupled with my statutory obligations to complete various tasks and investigations, has resulted in the costs of the liquidation being significantly higher than otherwise would be the case.
[43]Mr Dixon’s affidavit sworn 21 August 2021, [28]-[31].
APPLICABLE LAW
Pursuant to s 24(1) of the Supreme Court Act 1986 (Vic), the costs of and incidental to the amended summons are 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. This is a wide discretion. It must be exercised judicially.
In Kevin Hughes Investments Pty Ltd v Ebert Unit Developments Pty Ltd,[44] Connock J stated:
15Principles relevant to the exercise of the Court’s discretion in relation to costs have been addressed in many cases and are well known, aspects of which I recently addressed in Weatherbeeta Limited v Hammersmith Nominees (No 2). In the present case there was no material dispute regarding any relevant matters of principle, and having regard to the particular costs issues that fall to be determined in this case it is convenient and sufficient to refer briefly to the following.
16It is well settled that a guiding principle by which the Court’s discretion as to costs is to be exercised is that the successful party is generally entitled to costs, which was a point recently emphasised by the High Court in Northern Territory v Sangare (Sangare) as follows:
[24]It is well established that the power to award costs is a discretionary power, but that it is a power that must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. While the width of the discretion ‘cannot be narrowed by a legal rule devised by the court to control its exercise’, the formulation of principles according to which the discretion should be exercised does not ‘constitute a fetter upon the discretion not intended by the legislature’. Rather, the formulation of principles to guide the exercise of the discretion avoids arbitrariness and serves the need for consistency that is an essential aspect of the exercise of judicial power.
[25] A guiding principle by reference to which the discretion is to be exercised – indeed, ‘one of the most, if not the most, important’ principle – is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome. For example, a successful defendant may be refused its costs on the ground that its conduct induced the plaintiff to believe that he or she had a good cause of action. But in the present case, there was nothing of this kind in the conduct of the appellant in relation to the litigation that might have weighed against the exercise of the discretion in its favour. There was no suggestion of any conduct on the part of the appellant, whether by unreasonable delay or a want of the cooperation required of litigants to ensure the ‘just resolution of the real issues in civil proceedings with minimum delay and expense’, that might have been taken into account to justify refusing the appellant an order for its costs.
[44][2020] VSC 167, [15]-[19] (citations omitted).
17 In Chen v Chan (No 2), the Court of Appeal observed as follows:
Relevant principles
[10]The contentions of the parties raise a number of questions relevant to costs orders on appeal. The principles relevant to these questions can be summarised as follows:
(1) The general rule is that costs should follow the event. Absent disqualifying conduct, the successful party should recover its costs even where it has not succeeded on all heads of claim.
(2) The Rules of Court permit significant flexibility in determining questions of costs. In particular, the court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.
(3) Where there is a multiplicity of issues and mixed success has been enjoyed by the parties, a court may take a pragmatic approach in framing the order for costs, taking into consideration the success (or lack of success) of the parties on an issues basis. Generally, if such an order is made, it is reflected in the successful party being awarded a proportion of its costs but not the full amount.
(4) A court may, when fixing costs in a claim where there has been mixed success, take into account complications which it considers will arise in the taxation of costs, as part of its consideration of the overall interests of justice.
(5)Where a court determines to make an order apportioning costs, then it does so primarily as ‘a matter of impression and evaluation,’ rather than with arithmetical precision, having considered the importance of the matters upon which the parties have been successful or unsuccessful, the time occupied and the ambit of the submissions made, as well as any other relevant matter.
(6)Where a number of parties have had the same representation, there is a ‘rule of thumb’ as to the apportionment of costs, namely that, where some of those parties have been successful and others have not, each successful party is only entitled to his or her proportion of the costs incurred on behalf of all, plus the costs, if any, incurred exclusively on his or her behalf. The primary issue for determination in such a case is that of fairness as between the parties, having regard to the manner in which the trial, or appeal, has been conducted.
(7)Usually, an order for costs will be made on a party/party basis. But an order for costs on a solicitor/client or indemnity basis may be made where special or unusual circumstances have been demonstrated, for example, by establishing misconduct in the proceeding, that the proceeding was brought for an ulterior purpose, or that it was patently unreasonable to institute, or maintain, the proceeding. Special circumstances may also include the making of an allegation of fraud which is not proved.
18 In Diakou v Rouse, the Court of Appeal observed that:
[48] Section 24(1) of the Supreme Court Act 1986 confers on the Supreme Court a wide discretion in deciding questions of costs. However, that discretion must be exercised judicially, by reference only to considerations relevant to its exercise and upon facts connected with or leading up to the litigation. There are well-established principles that provide guidance for the exercise of the discretion and avoid it being exercised in an arbitrary or inconsistent manner.
[49] One such well-established principle is that costs usually follow the event, that is, that the unsuccessful party is usually ordered to pay the successful party’s costs. Recently, in Northern Territory v Sangare, the High Court said the following about that principle:
…
[50] Consistent with this principle, where the outcome of the proceeding is such that it cannot be said that one party has been successful and the other has been unsuccessful, it may be appropriate that there be no order as to costs. That is also the case in a proceeding where its subject matter or the relief sought are such that neither party can be said to have succeeded. However, the conduct of one of the parties in relation to the litigation may be such as to warrant an order for costs being made against that party.
19 As was recently observed by the Court of Appeal in Yue’e Zhao v Suzhou Haishun Investment Management Co Ltd, where there has been no adjudication on the merits of a claim additional considerations arise:
[9]The parties agree that the general rule to be applied in circumstances such as the present is that stated by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin in the following terms:
…It will be necessary to return in a little more detail to the facts of the case, but it is first necessary to state the principles which govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means.
In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action….
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried. This is perhaps the best explanation of the unreported decision of Pincus J in The South East Queensland Electricity Board v Australian Telecommunications Commission where his Honour ordered the respondent to pay 80 per cent of the applicant’s taxed costs even though his Honour found that both parties had acted reasonably in respect of the litigation. But such cases are likely to be rare.
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. This approach has been adopted in a large number of cases.
[10] In Nichols v NFS Agribusiness Pty Ltd, the New South Wales Court of Appeal applied the principles stated in Lai Qin, as explained in later cases, and allowed an appeal against a trial judge’s decision to award costs. In the course of reviewing the authorities following Lai Qin, Payne JA (Basten and Meagher JJA agreeing) accepted that, absent any consideration of the merits of the proceeding, costs may be ordered where there is a capitulation by one party — in the sense that it ‘effectively surrenders to the other’. In his Honour’s view, this approach is consistent with the judgment of McHugh J in Lai Qin. Payne JA referred to the dissenting judgment of Sackville AJA in Muhibbah Engineering (M) BHD v Trust Co Ltd, and to the reference by Sackville AJA in that decision to the following statement by Burchett J in ONE.TEL Ltd v Deputy Commissioner of Taxation:
It is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs.
[11] In Nichols, Payne JA considered that, in Muhibbah Engineering:
Sackville AJA was explaining that when in Lai Qin McHugh J described a case where the party seeking costs “in effect, has succeeded in obtaining the relief sought in the proceedings”, his Honour was referring to a case where one party, after litigating for some time, effectively surrenders to the other.
[12]In fact, the quoted words which Payne JA attributes to McHugh J in Lai Qin do not appear in McHugh J’s judgment. They are a quote from Sackville AJA’s judgment in Muhibbah Engineering. However, the principles stated by McHugh J in Lai Qin were, in his words, intended to ‘govern an application for costs when a party elects not to pursue an action because he or she has achieved the relief sought in the action either by settlement or by extra-curial means’. We accept as a general principle that where a party litigates for some time and then acts so as to effectively surrender or capitulate to the other, that will usually be a strong ground to award costs against the party who has surrendered or capitulated. But each case will depend on its own facts.
In Ugly Tribe Co Pty Ltd v Sikola & Ors,[45] Harper J said:
[45][2001] VSC 189, [7]-[12] (citations omitted).
7 In seeking costs on an indemnity basis, the first defendant is asking the Court to depart from its usual course. Special circumstances must be present to justify such a departure. These include:
(i) The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(ii) The making of an irrelevant allegation of fraud.
(iii) Conduct which causes loss of time to the Court and to other parties.
(iv) The commencement or continuation of proceedings for an ulterior motive.
(v) Conduct which amounts to a contempt of court.
(vi) The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
(vii)The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.
8The categories of special circumstances are not closed. The cases must not, therefore, be read “in an endeavour to establish a set of inflexible guidelines which should thereafter be determinative of the manner in which the Court’s discretion is to be exercised [for this] would be to fetter the Court’s discretion”.
9 At the same time, the courts should, I think, be astute to avoid a wilderness of single instances. Even worse would be the creation of different regimes in different courts, especially as between the Federal Court and a State Supreme Court. This would encourage the undesirable practice of forum shopping, as well as the almost equally undesirable spectre of frequent post-trial applications for costs to be awarded on some special basis (i.e. on other than the usual party and party basis).
10 According to Winneke, P. in Spencer’s case (at 147):
“It is well recognised that there is occurring an ever increasing gap between party/party costs and those actually incurred … This … has continued … notwithstanding expressions of view by individual Judges that it is capable, in today’s circumstances, of working injustice: see, for example, per Rogers, J. (as he then was) in Qantas Airways Ltd. V. Billingham Corp. The practice is designed to reflect a compromise between the interests of successful and unsuccessful litigants. As Handley, JA. Observed in Cachia v. Hanes the practice is also adopted to provide an ‘important spur to settlement’. Sheppard, J. in Colgate-Palmolive Co. v. Cussons Pty. Ltd. (1993) 46 F.C.R. 225 at 233 restated the practice and pointed out:
‘This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation … or a decision of an intermediate court of appeal or of the High Court would be required to alter it’."
11The compromise about which Winneke, P. spoke is perhaps justifiable on the basis that potential litigants must not be unnecessarily discouraged from bringing their disputes to the courts. After all success can seldom be guaranteed, if only because – where the facts are in dispute, as they generally are – it is seldom possible to predict with certainty what findings of fact will be made. In these circumstances, an honest plaintiff or defendant might be discouraged from bringing or defending a claim were an adverse result to be followed by an order that the losing party indemnify, or go close to providing an indemnity to, the successful party against the latter's costs.
12 The position changes where a litigant acts dishonestly in the litigation, or where the rights and privileges of a litigant are flouted or abused. Then, the rationale for refusing to order that the losing party indemnify an opposite party against that party's costs is less compelling. Indeed, costs are more frequently if not invariably awarded on an indemnity or like basis (such as that of solicitor/client) where findings of dishonesty or serious misconduct have been made against the party ordered to pay.
In PCRZ Investments Pty Ltd v National Golf Holdings Ltd & Anor,[46] Chernov JA said:
Moreover, the circumstances which the authorities seem to suggest enliven the discretion to award solicitor and client costs, are not present here. It is true that the categories of such circumstances are not closed. Nevertheless, the authorities indicate that, generally, the ordinary cost rule should only be departed from where the losing party has misconducted itself in relation to the proceeding or where the institution of the proceeding was plainly unreasonable, or where the proceeding was issued for an ulterior or collateral purpose.
[46][2002] VSCA 24, [36] (Callaway and Buchanan JJA agreeing) (citations omitted).
SUBMISSIONS
The plaintiffs submitted that the first defendant has not complied with paragraph 1 of the orders made by the Court on 12 July 2021, or the undertaking provided by the first defendant’s solicitor to the Court on the same date.[47] They also submitted that the failure to comply is established by, amongst other things, a number of matters.[48] These submissions are set out in paragraphs 4 and 5 of a section titled ‘Breach of Orders and Undertaking’ in their submissions dated 30 November 2021. I note that paragraphs 4 and 5 are simply a repeat of their submissions dated 25 August 2021. That is, paragraphs 4 and 5 set out the matters as at that time. This was confirmed at the adjourned hearing of this application on 15 December 2021.[49]
[47]Plaintiffs’ submissions dated 30 November 2021, [4].
[48]Ibid [5].
[49]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Attiwill J, 15 December 2021) 10.1-30.
The plaintiffs submitted that the first defendant informed the Court on 23 August 2021 that there were no books and records in her possession that she had not already provided to the plaintiffs.[50] The plaintiffs submitted that by the first defendant’s affidavit affirmed 14 October 2021 and submissions dated 14 October 2021, the first defendant had effectively admitted that she had additional books and records in her possession or control that she had not provided to the plaintiffs.[51]
[50]Plaintiff’s submissions dated 30 November 2021, [7].
[51]Ibid [8].
The plaintiffs submitted that since 14 October 2021, the parties have cooperated best as they can to avoid unnecessary appearances and costs.[52] The plaintiffs submitted that the consequences for the companies’ liquidations were significant. Debts were not able to be determined until production was finally made on 31 October 2021 by a file sharing system, Dropbox. Fees continued to be incurred, detracting from the pool available for creditors.[53]
[52]Ibid [9].
[53]Ibid [10].
The plaintiffs also submitted:[54]
[54]Ibid [14].
The plaintiff’s position is that this case is one which has the necessary special or unusual feature that justifies the making of an indemnity costs order insofar as the amended summons filed 23 August 2021. In summary, the uncontested facts are that:
a.In June 2021, Tarzia established Blaze Australia and commenced trading what in effect was the business of Blaze, through Blaze Australia. It was a calculated attempt to divert the business of Blaze and All Burn to Blaze Australia.
b. On 9 July 2021, Attiwill J made Orders for the production of books and records of Blaze and All Burn. Tarzia did not comply.
c. On 12 July 2021, Riordan J made Orders for the production of books and records of Blaze, All Burn and Blaze Australia. Tarzia only partially complied.
d. On 12 July 2021, Tarzia gave an undertaking to this Court to provide the books and records of Blaze, All Burn and Blaze Australia by 14 July 2021. She did not comply with that undertaking.
e. On 23 August 2021, Tarzia told this Court that she had already provided the plaintiffs with all the books and records of each of Blaze, All Burn and Blaze Australia. This was clearly incorrect given the admission of additional books and records in her affidavit sworn 14 October 2021 and subsequent production of those books and records on 31 October 2021.
f. At no stage has Tarzia raised any basis for resisting production. Rather, what occurred is simply ongoing non-compliance and a conscious effort to take over the business of Blaze and All Burn by the newly established entity, Blaze Australia.
g. It is solely by reason of Tarzia’s ongoing non-compliance with multiple Orders of this Court, and, breach of her undertaking given to Riordan J, that the plaintiffs were forced to issue the amended summons filed 23 August 2021.
h. The plaintiff is a liquidator with statutory obligations to creditors. The costs incurred by reason of Tarzia’s conduct do not only affect the liquidator, but, the creditors of the companies and undermine the liquidation process. The liquidator has made numerous attempts to engage with Tarzia to avoid this litigation. Unfortunately, compliance was not achieved until very late in the proceeding. The costs could have been avoided had Tarzia complied with her statutory obligations (as director of the companies in liquidation) and previous Orders made by this Court.
The plaintiffs submitted in the alternative that the first defendant should pay their costs on a standard basis, to be taxed in default of agreement.[55]
[55]Ibid [15].
The plaintiffs further submitted as follows:[56]
[56]Plaintiffs’ submissions dated 1 February 2022, [2]-[3] (citations omitted).
2.Essentially, Tarzia seeks to submit that she has complied with the previous Orders of this Court and the Undertaking given to the Court on 12 July 2021 on the basis that she either actually provided, or, offered to provide documents subsequently provided electronically on 31 October 2021. Tarzia otherwise states, the documents she did not provide previously were not necessary as the information was contained in the invoices that were recorded in the MYOB files previously provided.
3.With respect, the plaintiff refutes those claims. The Court should accept the plaintiff’s position for the following reasons:
a.It makes no logical sense for a liquidator, as an officer of this Court, to bring a proceeding seeking production of books and records that have already been provided, or which, were offered to a liquidator but the liquidator chose not to take a copy of those documents.
b. Despite the extensive efforts made by the plaintiff over many months, Tarzia only provided the required books and records on 31 October 2021.
c.It is not controversial, at the very least, that Tarzia has not provided the delivery dockets, run sheets and proofs of delivery until 31 October 2021.
d.Tarzia alleges that on 21 July 2021, during a meeting with the plaintiff, she offered to provide him with copies of delivery dockets and run sheets for Blaze Australia but he did not require them. Yet on 26 July 2021, the plaintiff emailed Tarzia and called for those very same documents. No explanation is given by Tarzia as to why the request made on 26 July 2021 was not complied with.
e.Tarzia’s position that the information from the delivery dockets and run sheets is otherwise contained in the invoices which are in the MYOB files provided for Blaze and Blaze Australia should not be accepted as a satisfactory explanation for not providing those documents. A liquidator tasked with collecting debtors, must have all necessary documentation to satisfy himself of the existence of a genuine debt if enforcement against a debtor is to be undertaken. Without the source documents based on which the invoices were issued, the liquidator cannot possibly be sufficiently satisfied.
f.Tarzia previously expressly noted that she only completed limited trading through Blaze Australia. Yet the electronic files provided via Dropbox on 31 October 2021 reveal at least 130 deliveries were made in the period up to 14 July 2021. Clearly, the trading through Blaze Australia was extensive and certainly much higher than $8,200 as advised by Tarzia in her email to the plaintiff on 21 July 2021.
g.Tarzia, as a director of Blaze, has statutory obligations to maintain proper books and records, and, to assist the liquidator. She is also obligated to provide the liquidator with books and records of the company. If there was any doubt about those obligations at a point in time, surely by the time of making the Orders on 12 July 2021, while legally represented, there could have been no doubt left.
Mr El-Hissi further submitted at the hearing that:
(a) the main category of documents not provided is the delivery information; [57]
[57]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Attiwill J, 4 February 2022) 28.25-28 (Mr El-Hissi).
(b) the plaintiffs had been requesting the delivery information since at least Mr Dixon’s email of 25 July 2021, but this information was not provided until 31 October 2021;[58]
(c) the plaintiffs had been requesting the source documents, including invoices and deliveries, in relation to the MYOB for Blaze, and those documents were not provided until 31 October 2021;[59] and
(d) it cannot be an excuse for non-compliance with orders to say that the plaintiffs have the information on MYOB. A liquidator has to properly investigate matters and be satisfied that debts are genuine, they exist, and there is sufficient documentation to prove a recovery.[60]
[58]Ibid 28.28-29.1 (Mr El-Hissi).
[59]Ibid 41.5-8 (Mr El-Hissi).
[60]Ibid 41.22-42.4 (Mr El-Hissi).
The first defendant submitted that the costs of the amended summons should be borne by the parties. In summary, the first defendant submitted that:
(a) the parties consented to a position rendering determination of the application for production of books and records unnecessary. There was no complete success for the plaintiffs – or conversely, capitulation of the first defendant – in this application. The first defendant requested clarification of certain documents requested and in response, the plaintiffs did not press for their production. The plaintiffs also did not press for production of Blaze Australia’s books and records beyond 14 July 2021;[61]
[61]First defendant’s submissions dated 4 December 2021, [7(1)], part C.2.
(b) there has been no adjudication of the application on the merits and no findings of fact to the effect alleged by the plaintiffs. The plaintiffs assert certain facts are ‘uncontested’ to support an order for their costs on an indemnity basis, when these facts have not been found by the Court or admitted by the first defendant. The Court ought not have regard to substantive allegations where the matter was not determined on its merits;[62]
(c) to an extent, the plaintiffs’ insistence on pressing the application was unreasonable. The plaintiffs pressed their application for production of 22 broad categories of books and records, primarily based on a suspicion that the first defendant was operating a rival entity. If the plaintiffs remained concerned after 14 July 2021 about a possible claim against the first defendant, there were more cost-effective and more reasonable options available to them. The plaintiffs could have filed an application for preliminary discovery in a lower jurisdiction and they could have also confined the categories of documents sought.;[63] and
(d) to the extent that the first defendant’s conduct may be considered unreasonable since July 2021, that conduct is explainable. The first defendant was for the most part unrepresented from around mid-July 2021 to October 2021. The first defendant also gave evidence that her mental health significantly deteriorated from August 2021.[64]
[62]Ibid [7(2)], part C.3.
[63]Ibid [7(3)], part C.4.
[64]Ibid [7(4)], part C.5.
The first defendant further submitted, in summary, at the hearing:[65]
[65]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Attiwill J, 4 February 2022) 5.30-6.1 (Ms Tarzia).
(a) if she had known the reasoning behind the plaintiffs’ request for documents, she could have addressed their concerns earlier;
(b) her previous solicitor, Mr Phillips, gave an undertaking that he was not instructed to give;[66]
[66]Ibid 6.6-10 (Ms Tarzia).
(c) the plaintiffs did not need the delivery dockets, run sheets and proofs of delivery for Blaze as the MYOB contains information from those documents.[67] The liquidators had all that was required to fulfill their needs prior to 31 October 2021;[68]
[67]Ibid 6.30-7.1 (Ms Tarzia).
[68]Ibid 25.1-2 (Ms Tarzia).
(d) Mr Dixon did not subsequently request the delivery dockets and run sheets of Blaze Australia on 25 and 26 July 2021 following their 21 July 2021 meeting, as he did not specify which company he was referring to when requesting debtor and delivery information;[69]
(e) there were documents on the list provided by the plaintiffs on 13 September 2021 that were not previously requested in their letter of 20 July 2021;[70] and
(f) Mr Dixon had not been requesting source documents on an ongoing basis.[71]
[69]Ibid 13.19-20 (Ms Tarzia).
[70]Ibid 42.26-27 (Ms Tarzia).
[71]Ibid 43.7-10 (Ms Tarzia).
The first defendant submitted in the alternative that she should pay the plaintiffs’ costs of the amended summons on the standard basis, to be taxed in default of agreement.[72]
[72]First defendant’s submissions dated 4 December 2021, [19].
ANALYSIS
Having regard to the background and applicable law I have referred to earlier in these reasons, I am of the clear view that the first defendant should pay the plaintiffs’ costs of the amended summons, to be taxed on a standard basis, if not agreed.
The first defendant opposed the plaintiffs’ amended summons then effectively surrendered and capitulated to the plaintiffs. As a result, the plaintiffs incurred costs. I rely upon the following matters.
At the directions hearing on 23 August 2021, the first defendant said that the undertaking to provide documents of Blaze Australia provided by her solicitor on 12 July 2021 was given against her will. She also said that she had given all of the books and records in her control and possession concerning Blaze, All Burn and Blaze Australia to the plaintiffs. She capitulated on both matters.
On 31 October 2021, the first defendant provided:
(a) books and records of Blaze Australia, being the company the subject of the disputed undertaking; and
(b) books and records of Blaze Australia and Blaze she had not previously provided to the plaintiffs.[73]
[73]See above [43(c)-(e)].
It will be readily apparent that I reject the first defendant’s submission that there was no capitulation by her in on the amended summons. It will also be apparent that I reject the first defendant’s submission that there should be no order as to costs.
The first defendant submitted that the plaintiffs did not need certain documents as the information was on MYOB. I accept that some of the information from the documents provided on 31 October 2021 was already on MYOB. However, not all of the information was on MYOB. Further, the plaintiffs were seeking to obtain an order for the delivery up of the actual documents, not just the information on MYOB, and some of those documents were only provided on 31 October 2021.[74] I accept the plaintiffs’ submission that: ‘A liquidator tasked with collecting debtors, must have all necessary documentation to satisfy himself of the existence of a genuine debt if enforcement against a debtor is to be undertaken. Without the source documents based on which the invoices were issued, the liquidator cannot possibly be sufficiently satisfied.’[75]
[74]See above [43(c)-(e)].
[75]See above [57].
The first defendant submitted that she sought clarification with respect to certain documents the plaintiffs requested and that in response, the plaintiffs did not press production for production of all of the documents the subject of their list dated 13 September 2021. In my view, this is not significant having regard to the fact that she provided:
(a) books and records of Blaze Australia, being the company the subject of the disputed undertaking; and
(b) books and records of Blaze Australia and Blaze she had not previously provided to the plaintiffs.[76]
[76]See above [43(c)-(e)].
I also reject the first defendant’s submission that there were documents on the list filed by the plaintiffs on 13 September 2021 that were not listed in the plaintiff’s letter to her dated 20 July 2021. The letter dated 20 July 2021 was not expressed to be limited to specific categories of documents. It referred to the Court’s orders made on 9 July 2021 and then set out set out a number of categories of documents. Importantly it also stated ‘I note that the Court Order is not limited to the documents listed above and therefore it is your responsibility to ensure all books and records in your possession pertaining to Blaze Firewood (Australia) Pty Ltd and the Companies are delivered to my office.’[77]
[77]Exhibit ‘SRD-63-64’ to Mr Dixon’s affidavit sworn 21 August 2021.
The first defendant submitted that the plaintiffs did not press for production of the books and records of Blaze Australia beyond 14 July 2021. The first defendant told the Court on 23 August 2021 that her solicitor acted against her will in giving the undertaking concerning the documents of Blaze Australia. She provided documents of Blaze Australia to the plaintiffs. In this context, I do not consider it significant that she did not provide documents of Blaze Australia beyond 14 July 2021.
The first defendant submitted that had she known the reasoning behind the plaintiffs’ request for documents she could have addressed the plaintiffs’ concerns earlier. I do not accept this submission. Mr Dixon set out the reasoning why the plaintiffs required the books and records in his affidavit sworn 21 August 2021.[78] This was shortly prior to the filing of the amended summons. Further, the first defendant’s submission on this matter is contradicted by her continuing submission that the plaintiffs’ did not need the delivery dockets, run sheets and proofs of delivery for Blaze as the information was on MYOB.
[78]See above [47].
I also reject the first defendants’ submission that the plaintiffs acted unreasonably.
First, I reject the first defendant’s submission that the plaintiffs pressed their application for production of 22 broad categories of books and records ‘primarily’ based upon a suspicion that the first defendant was operating a rival entity (i.e. Blaze Australia). I note that 11 of the 22 categories identified in the plaintiffs’ list of documents dated 13 September 2021 related to the second and third defendants. The other 11 categories related to the new entity (ie Blaze Australia), and the first defendant by her solicitor had given an undertaking to the Court to provide documents with respect to it by 14 July 2021.
Second, I also reject the first defendant’s submission that the plaintiffs could have filed an application for preliminary discovery in a lower jurisdiction. The plaintiffs were entitled to the books and records of the second and third defendants. The first defendant had also provided the undertaking to the Court concerning Blaze Australia. Further, commencement of a further proceeding in a different court would have led to a multiplicity of proceedings, further costs and possible delays.
Third, I also reject the first defendant’s submission that the plaintiffs should have confined the categories. The first defendant has not identified in what respect the plaintiffs should have confined the categories. Further, the plaintiffs did confine the categories. They filed the list of categories of documents on 13 September 2021.
It will be apparent that I also reject the plaintiffs’ application for indemnity costs. I am not satisfied that, as the plaintiffs submitted, ‘this case is one which has the necessary special or unusual feature that justifies the making of an indemnity costs order’.[79]
[79]See above [55].
First, I reject the plaintiffs’ characterisation of the first defendant’s non-compliance with orders and the undertaking as being based upon ‘a conscious effort to take over the business of Blaze and All Burn by the newly established entity, Blaze Australia’.[80] I am not satisfied, based on the present material, that her non-compliance was based upon this alleged ‘conscious effort’. First, I accept the first defendant’s submission that the Court has not made any findings of fact concerning, inter alia, the establishment and operation of Blaze Australia. Secondly, the first defendant did not conceal Blaze Australia from the plaintiffs. For example, her solicitor informed Riordan J of its existence on 12 July 2021, describing it as the ‘new entity’.[81] The first defendant also sent an email to the plaintiffs on 26 July 2021 in which she stated, inter alia: ‘… I am awaiting a new vendor number as Phillips [her then solicitor] told me to get this for the new Company so that invoices could be raised’.[82]
[80]Ibid (emphasis added).
[81]Transcript of Proceeding, In the matter of Blaze Firewood & Sons Pty Ltd (in liquidation) (ACN 624 081 483) (Supreme Court of Victoria, S ECI 2020 04172, Riordan J, 12 July 2021) 13.14-15 (Mr Phillips).
[82]Exhibit ‘SRD-1’ to Mr Dixon’s affidavit sworn 1 February 2022.
Secondly, I reject the plaintiffs’ submission that at no stage has the first defendant raised any basis for resisting production. She did raise issues of clarification concerning the plaintiffs’ requests. The first defendant also raised grounds for resisting production of documents on the basis, inter alia, that there were no such documents in her control or possession, or that she had already provided them.[83]
[83]See, eg, exhibit ‘RT-2’ to the first defendant’s affidavit affirmed 14 October 2021, ‘Schedule - Responses to documents requested’.
Thirdly, there is evidence that the first defendant has experienced personal difficulties, including health difficulties, since at least July 2021 as follows:
(a) she had no legal representation in the period from mid-July 2021 until about mid-October 2021 (apart from the limited assistance of a McKenzie friend). She also did receive advice from an accountant and an insolvency practitioner;[84] and
(b) the first defendant’s mental health declined significantly in 2021, and particularly from August 2021.[85]
[84]First defendant’s affidavit affirmed 3 December 2021, [9], [15].
[85]Ibid [23]-[24].
I am satisfied that these personal difficulties contributed to her delay, at least to some extent, in providing documents to the plaintiffs.
I accept that the plaintiffs sought to engage with the first defendant on numerous occasions and that ‘compliance was not achieved until very late in the proceeding’.[86] However, given the other matters I have addressed in these reasons, I am not satisfied that this is a reason to allow the plaintiffs’ application for indemnity costs. Further, as acknowledged by the plaintiffs, compliance was ultimately achieved and it was achieved by cooperation between the parties.
[86]Plaintiffs’ submissions dated 30 November 2021, [14(h)].
CONCLUSION AND ORDERS
For the reasons I have given, I am of the clear view that the first defendant should pay the plaintiffs’ costs of the plaintiffs’ amended summons filed 23 August 2021, to be taxed on a standard basis, if not agreed. Both parties agreed that the proceeding should otherwise be dismissed.
In my preliminary view, subject to any further submission any party may wish to make, the first defendant should also pay the plaintiffs’ costs of their application for costs of the plaintiffs’ amended summons filed 23 August 2021, to be taxed on standard basis, if not agreed.
Any party wishing to make any submission on the question of the costs of this application for costs should notify my chambers of that in writing by 4:00pm on 4 March 2022. In the absence of such notification, I will make the following orders:
(a) The first defendant pay the plaintiffs’ costs of the plaintiffs’ amended summons filed 23 August 2021, to be taxed on a standard basis, if not agreed.
(b) The first defendant pay the plaintiffs’ costs of their application for costs of the plaintiffs’ amended summons filed 23 August 2021, to be taxed on a standard basis, if not agreed.
(c) The proceeding is otherwise dismissed.
SCHEDULE OF PARTIES
| STEPHEN ROBERT DIXON in his capacity as liquidator and deed administrator of BLAZE FIREWOOD & SONS PTY LTD (in Liquidation) (subject to a deed of company arrangement) (ACN 624 081 483) | First Plaintiff |
| STEPHEN ROBERT DIXON in his capacity as liquidator and deed administrator of ALL BURN FIREWOOD PTY LTD (in Liquidation) (subject to a deed of company arrangement) (ACN 623 990 134) | Second Plaintiff |
| -and- | |
| RENEE TARZIA | First Defendant |
| BLAZE FIREWOOD & SONS PTY LTD (in Liquidation) (subject to a deed of company arrangement) (ACN 624 081 483) | Second Defendant |
| ALL BURN FIREWOOD PTY LTD (in Liquidation) (subject to a deed of company arrangement) (ACN 623 990 134) | Third Defendant |