In the matter of Cullen Group Australia Pty Ltd (in liq)

[2021] QSC 113

SUPREME COURT OF QUEENSLAND

CITATION:

In the matter of Cullen Group Australia Pty Ltd (in liq) [2021] QSC 113

PARTIES:

CULLEN GROUP AUSTRALIA PTY LTD (IN LIQUIDATION)
ACN 131 442 843
(first applicant)
MICHAEL JOHN CASPANEY IN HIS CAPACITY AS LIQUIDATOR OF CULLEN GROUP AUSTRALIA PTY LTD (IN LIQUIDATION)
ACN 131 442 843
(second applicant)
v
ACTIVE STEEL PTY LTD
ACN 068 669 296

(first respondent)

and Ors as per Schedule 1

FILE NO/S:

BS No 7608 of 2019

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court at Brisbane

DELIVERED ON:

31 May 2021

DELIVERED AT:

Brisbane

HEARING DATE:

10 February 2021

JUDGE:

Martin J

ORDER:

1.   The sixteenth and twenty-sixth respondents have leave to appeal the costs order made on 16 December 2020, otherwise the application is dismissed.

2.   The costs of this application are reserved for determination by the Court of Appeal.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – JUDGMENTS AND ORDERS – AMENDING, VARYING AND SETTING ASIDE JUDGMENTS AND ORDERS – ACTIONS TO REVIEW OR SET ASIDE JUDGMENT OR ORDER – GENERALLY – where the applicants were ordered to pay costs – where the applicants did not appear at the hearing or to receive judgment– whether there is an explanation, reasonable to the circumstances, provided for the applicant’s absence – whether the applicant’s have a material argument which, if heard and decided on its merit, might reasonably affect the determination of the rights and duties of the parties in a way different from that in the impugned order – whether the applicants should be given leave to appeal the costs order made

Corporations Act 2001, s 588FF
Supreme Court of Queensland Act 1991, s 64

Uniform Civil Procedure Rules 1999, r 5, r 667(2)(a), r 681(1)

Allesch v Maunz (2000) 203 CLR 172

In the matter of Cullen Group Australia Pty Ltd (in liq) [2020] QSC 367

Oshlack v Richmond River Council (1998) 193 CLR 72

In the matter of Bias Boating Pty Limited (Receivers and Managers Appointed) (in liquidation) (2019) 135 ACSR 27

Robertson Street Properties Pty Ltd v RPM Promotions Pty Ltd [2005] QCA 389

COUNSEL:

S Monks for the applicant/sixteenth respondent
P O’Brien for the applicant/twenty-sixth respondent

L Copley for the respondents/applicants

SOLICITORS:

Patane Lawyers for the applicant/sixteenth respondent

Thomson Geer for the applicant/twenty-sixth respondent

Taylor David Lawyers for the respondents/applicants

1. Cullen Group Australia Pty Ltd (in liquidation) (“Cullen”) and Michael Caspaney (Cullen’s liquidator) commenced proceedings against 29 respondents in which they sought, under s 588FF of the Corporations Act 2001, the recovery of unfair preferences conferred on them by Cullen. On the application of Cullen and Mr Caspaney[1] an order was made that a preliminary question – whether Cullen was insolvent at the relevant time – be determined separately from the rest of the proceedings.

   [1]I will refer to Cullen and Mr Caspaney as “Cullen” in these reasons.

2. At the hearing of the application on 8 December 2020 Cullen, and the first, third and fifth respondents appeared. I told those present that I would make an order in terms of the application and deliver my reasons later. I then heard argument on costs.

3. On 16 December 2020, I delivered my reasons for finding that Cullen Group Australia Pty Ltd was insolvent on and from 23 June 2016 to 22 December 2016. And I made orders for costs.[2]

   [2]In the matter of Cullen Group Australia Pty Ltd (in liq) [2020] QSC 367.

4. An order was made that a number of identified respondents, including the sixteenth (“Lyndons”) and twenty-sixth (“Stair Lock”) respondents, pay Cullen’s costs of determining the preliminary question.

5. Neither Lyndons nor Stair Lock appeared at the hearing or to receive judgment.  Each of them now applies:

   (a)to have the costs order against them set aside,

   (b)alternatively, that each have leave to appeal the costs order, and

   (c)that Cullen pay their costs of this application on an indemnity basis.

   The applicable rule

6. Each applicant applies, for the preliminary relief, under r 667(2)(a) of the Uniform Civil Procedure Rules 1999 (“the Rules”) which provides:

   “The court may set aside an order at any time if -

   (a)the order was made in the absence of a party …”

7. That the order was made in the absence of Lyndons and Stair Lock is not in dispute.

8. In Allesch v Maunz[3], Kirby J summarised the tests which should be applied in an application of this sort:

   “[48]   … the two criteria that have for a very long time been viewed as critical to an affirmative decision to set aside a judicial order made in default of the appearance of a party. These are:

   (1)that an explanation, reasonable to the circumstances, is provided for the party's absence or other default; and

   (2)that the party in default has a material argument which, if heard and decided on its merits, might reasonably affect the determination of the rights and duties of the parties in a way different from that in the impugned order.”

   [3](2000) 203 CLR 172.

   The history of the application

9. In order to understand the arguments advanced in this matter, it is necessary to set out some of the history of the matter, in particular, the directions which were made and the correspondence which passed between the parties.

19 July 2019

Originating application filed in which Cullen sought:

(a)     a declaration that identified payments were unfair preferences,

(b)     an order for the recovery of unfair preferences conferred on the respondents by Cullen, and

(c)     costs.

21 August 2019

Directions were made by Bowskill J. They included:

(a)     that the question of Cullen Group Australia’s solvency be determined as a preliminary issue,

(b)     a series of procedural directions about filing material relevant to the preliminary issue,

(c)     that any respondent who did not wish to actively participate in the directions associated with preparation for determination of the preliminary issue could, by 30 September 2019, give written notice to the applicants’ solicitors of:

(i)     their admission of the preliminary question, or

(ii)     that they would abide the order of the court on the preliminary question (save as to any question of costs).

(d)     that any respondent who opted out from participating or otherwise agreed to abide the order of the court was excused from attending or complying with any obligation by reason of these proceedings or these orders.

(e)     any respondent which intended to rely upon an expert report as to the preliminary question had to file and serve it by 30 November 2019.

(f)     Each respondent that did not take issue with the preliminary question, was, by 30 November 2019, to give written notice to Cullen’s solicitors of:

(i)     their admission of the preliminary question, or

(ii)     that they would abide the order of the court on the preliminary question (save as to any question of costs).

(g)     Any respondent that gave notice in accordance with the directions could, unless it had admitted the preliminary question, appear at the hearing and make submissions in respect of the preliminary question.

27 November 2019

Cullen’s solicitor wrote to all the respondents saying, among other things:

“1.1     Paragraph 15 of the order provides that, by 30 November 2019, each respondent, that does not take issue with the preliminary question of insolvency, give written notice to our office of:

(a)   their admission of the preliminary question; or

(b)   that they abide by the order of the court.

1.2     We are not aware of your client’s position as to the preliminary question of insolvency.

1.3     If on 20 November 2019, your client nominates to abide by the order of the court on the preliminary question (save as to any question of costs), your client will be, in effect, putting our clients to proof on the preliminary question.

2.1     As to the issue of costs, if our clients are successful on the preliminary question, our clients will be seeking orders that any respondents who did not admit the preliminary question, being those who did not actively participate and chose to abide by the order of the court and those who deny the preliminary question, pay our clients’ costs relating to the preliminary question.

2.2     Our clients will rely upon the decision of Justice Black In the matter of Bias Boating Pty Limited (Receivers and Managers Appointed) (in liquidation), wherein his Honour made costs orders against creditors who adopted a neutral position and put the liquidator to proof on the question of insolvency in a preference action. This included costs orders against those respondents who chose not to appear on hearing of the preliminary question.”

5 November 2020

Cullen’s solicitors wrote to Lyndons’ solicitors. In the letter they noted that Lyndons had given notice on 11 March 2020 that it would not contest the preliminary question and would abide the determination of the court in that respect. Notice was given of the intention to seek an order for a preliminary question to be listed and the evidence in support was provided. Cullen’s solicitors wrote to Stair Lock’s solicitors. In the letter they noted that Stair Lock had not provided notice of its intention “to either admit, dispute or elect to abide the order of the Court, regarding the preliminary question.”

10 November 2020

11 November 2020

Lyndons’ solicitors confirmed that Lyndons had “no objection to the orders being sought”, would abide the order of the court on the preliminary question and would not appear at the hearing.

Stair Lock’s solicitors responded to the letter of 5 November: “Our client instructed its former solicitors to notify your firm that it would abide the Court’s decision of the issue of insolvency in or a about July 2019. Having made enquiries, it is unclear as to whether this was conveyed to you by those solicitors. Irrespective, our client’s position remains unchanged.”

12 November 2020

The time by which the respondents could elect to admit insolvency or abide the order of the Court was extended to 13 November 2020. Cullen was directed to file and serve any submissions on the preliminary question by 1 December 2020.

1 December 2020

Cullen’s solicitors wrote to all respondents. The letter enclosed the submissions upon which they intended to rely at the hearing of the preliminary issue.

The submissions did not contain any reference to costs.

The letter went on:

“As foreshadowed in our correspondence of 5 November 2020, we also enclose draft ‘programming’ orders which the Applicants intend to seek at the hearing in the event they are successful on the matter of the preliminary question.

…

Given the number of respondents and to assist the Court’s management of the proceeding, please inform us by no later than 4.00pm on 4 December 2020, as to the following:

(a)      Whether your client consents to the proposed order;

(b)      If not, please identify those orders or directions which your client opposes and the reasons for opposition. ”

The proposed orders were:

“(a)    The Applicants are to file and serve any Statement of Claim on the Respondents by 29 December 2020.

(b)   The Respondents are to file and serve any Notice of Intention to Defend and Defence by 1 February 2021.

(c)   The proceeding be listed for directions in the week commencing 7 February 2021.

(d)   to apply.

(e)   Costs reserved.”

3 December 2020

Stair Lock’s solicitors responded to the letter of 1 December to this effect:”[if the decision is favourable to your client] then in our view the timetable you have proposed is insufficient having regard to the time of year …”

8 December 2020

The preliminary question was heard.

16 December 2020

The preliminary question was resolved and orders were made with respect to the costs of the preliminary question.

1. The events relevant to this application may be summarised in this way:

   (a)In August 2019 an order was made which allowed any respondent to give notice to the applicants that they would abide the order of the court on the preliminary question (save as to any question of costs).

   (b)In November 2019 Cullen notified all respondents that they would seek costs against any respondent who did not admit the preliminary question but chose to abide by the order of the court.

   (c)In November 2020 Lyndons and Stair Lock notified the applicants that each would abide the order of the court on the preliminary question.

   (d)In December 2020 Cullen provided all respondents with a copy of their submissions on the preliminary question and told them that they would seek certain orders and directions if they were successful on the matter of the preliminary question. One of the orders that they said they would seek was “Costs reserved”.

   What explanation has been offered by the parties seeking to set aside the costs order?

2. Both Lyndons and Stair Lock relied upon the letter and draft order sent to them by Cullen shortly before the hearing of the preliminary issue. Cullen proposed that it would seek those orders if it were to be successful on the preliminary question. One of those proposed orders was that costs would be reserved. That was consistent with the absence of any submissions on the issue of costs. Therefore, both Lyndons and Stair Lock say, there was no need for them to appear as they would not suffer any detriment if costs were to be reserved. They also say, and this was not challenged, that had they understood that the matter of costs would be considered or determined at the hearing, then they would have appeared.

3. Cullen argued that the parties were aware of the hearing date and, on the basis of the November 2019 letter, that costs would be sought against them.

4. Cullen sought to categorise the draft orders as “programming orders” which did not amount to a departure from the position set out in the November 2019 letter. This, it was argued, was of importance given that none of the parties had taken issue with the position on costs which was made clear in that letter.

5. The analysis of these arguments must commence with the original orders. Pursuant to the orders of August 2019 Lyndons and Stair Lock gave notice that “they would abide the order of the court on the preliminary question (save as to any question of costs)”. This is not an unusual form of order. It allows a party to stand by so that other parties which are concerned about the relief sought may contest that. It does not, though, mean that a party which will abide the order of the court can safely play no part in the proceedings. Ordinarily, such a party should proceed on the basis that there would be a hearing, the particular issue would be determined, and there would be a determination (after argument) of the costs order.

6. In this case, the material which supported the substantive order sought was compelling and unchallenged. Some respondents, who had given notice that they would abide the order, appeared at the hearing for the purpose of making submissions as to the appropriate form of costs order.

7. In the absence of any other notice, a respondent would have been well advised to appear at the hearing if only for the purpose of ensuring that an adverse costs order would not be made.

8. In this case, notice had been given in the letter of November 2019 that an order for costs would be sought and the basis upon which it would be sought. Thus, had nothing further on that point been said then the respondents were on notice and should have appeared to protect their interests. There was, though, something further said.

9. The correspondence of December 2020, the attached submissions, and the draft order changed the position with respect to costs. A fair reading of those documents could lead to the reasonable understanding that Cullen would only seek an order that the costs be reserved. It was argued for Cullen that the draft order needed to be looked at in context,  that the order dealt with programming matters only, and that it did not deal with the costs associated with a successful outcome on the substantive matter. I do not accept that.

10. The draft orders were provided on the basis that they would be sought if Cullen were to be successful on the preliminary issue. I am not able to identify what costs were to be reserved if they were not the costs of the application as it concerned the preliminary issue. The mere making of directions does not incur costs and the respondents were entitled to assume that the draft orders were those which would be sought if an order were made that Cullen had been insolvent at the relevant time.

11. The explanation given by Lyndons and Stair Lock is reasonable in the circumstances. The fact that other parties did appear at the hearing does not mandate a different conclusion. It was reasonably open to Lyndons and Stair Lock to form the view which they did.

    Do the parties have “a material argument which, if heard and decided on its merits, might reasonably affect the determination of the rights and duties of the parties in a way different from that in the impugned order”?

12. It was argued for Lyndons that it was in the same position as a defendant who, having been served with a statement of claim, chose not to appear at a trial. A plaintiff in those circumstances can only obtain against the defendant such judgment as was strictly supported by its pleadings.[4] In other words, a plaintiff is confined to the relief sought in its pleadings and may not obtain greater or wider orders in the absence of a defendant. There is some similarity between that general statement of principle and a position where one party leads another party to believe that a particular order will be sought but goes on to obtain a different order.

    [4]Robertson Street Properties Pty Ltd v RPM Promotions Pty Ltd [2005] QCA 389 at [38] per Keane JA, with whom McMurdo P and McPherson JA agreed.

13. I do not regard the conduct of Cullen as being “disentitling” or misconduct in the sense used by McHugh J in Oshlack v Richmond River Council[5]. The draft order relied upon by Lyndons and Stair Lock constitutes a representation rather than a pleading.

    [5](1998) 193 CLR 72 at 97-98 [69].

14. The “material argument” which must be advanced assumes that the relevant parties had an opportunity to meet the argument by Cullen that it should have a favourable costs order. It does not assist Lyndons and Stair Lock to rely upon the representation in the December 2020 correspondence as to the particular costs order at this point. That representation was the reason for them not appearing at the hearing. This part of the test requires that they could have advanced an argument which might have led to a different order being made. In other words, this limb of the test assumes that an argument would have taken place had Lyndons and Stair Lock appeared at the hearing. Had they done so, there would, no doubt, have been argument about the terms of the draft order. But, just as a pleading may be amended when all parties are present at a hearing, so could Cullen have argued that their position should always have been understood as it was expressed in the November 2019 letter.

15. When the question of costs was raised at the original hearing Cullen relied upon the reasoning of Black J in In the matter of Bias Boating Pty Limited (Receivers and Managers Appointed) (in liquidation)[6]. I considered the reasoning in that case in the decision I gave in December last year. On that occasion there were three parties who argued the question of costs. With respect to two of them, I ordered that the costs of determining the preliminary question be the applicants’ costs in the cause because those two respondents had admitted insolvency in accordance with the regime established by the order of Bowskill J. I ordered that the other party pay the costs because it had made no election and was content to abide the order of the court.

    [6](2019) 135 ACSR 27 (“Bias Boating”).

1. I respectfully agree with Black J where he said that orders for separate questions as to insolvency are often made in preference proceedings as they are consistent with the expeditious resolution of the real issues in dispute. All the parties in this matter were provided with the evidence which I found to be compelling as to the insolvency of Cullen. Each party had the ability to recognise that and to admit the insolvency and, as occurred with the third and fifth respondents, avoid an order for costs at this time. It is not an answer to the question which I must consider now for a respondent to say that, had it known in December last year that Cullen would seek costs, then it would have considered whether or not to admit the insolvency. That was the point of the orders made in November 2019. The timetable was established for the parties to consider that very matter. The relevant dates were extended in order that such consideration could take place upon receipt of the relevant material.

2. In Bias Boating, Black J ordered that the defendants who had not admitted the insolvency pay the costs of the separate question. His reasoning was based upon the general rule that costs follow the event – a rule which is incorporated in r 681(1) of the Rules. That rule provides that the costs of the proceedings are in the discretion of the Court but follow the event unless otherwise ordered.

3. These proceedings were entirely orthodox and consistent with the overriding purpose of the rules of court – “to facilitate the just and expeditious resolution of the real issues in civil proceedings at a minimum of expense.”[7] As Black J observed, orders for separate questions as to insolvency are often made in preference proceedings for reasons similar to those expressed in r 5.[8]

   [7]Uniform Civil Procedure Rules 1999 (Qld), r 5.

   [8]Bias Boating at 33-34 [23].

4. Cullen was required to engage in the application because some of the respondents would not, in the face of compelling evidence, admit the relevant insolvency. The situation which followed from that was envisaged in the orders made by Bowskill J where it was made clear that the question of costs remained on foot if the respondent only agreed to abide the order of the court. The reasoning of Black J is persuasive on this matter and I respectfully adopt. It follows, then, that the orders made for costs will not be disturbed and the application by Lyndon and Stair Lock is dismissed.

   Leave to appeal

5. Lyndons and Stair Lock also seek leave to appeal the costs order. Leave is required by s 64 of the Supreme Court of Queensland Act 1991 which provides that an appeal only in relation to costs lies to the Court of Appeal from a judgment or order of the court in the Trial Division only by leave of the judge who gave the judgment or made the order, or, if that judge is not available, another judge of the court in the Trial Division.

6. The matters raised by Lyndons and Stair Lock were not without substance. Cullen does not argue against leave being granted.

   Order

7. The sixteenth and twenty-sixth respondents have leave to appeal the costs order made on 16 December 2020, otherwise the application is dismissed.

8. The costs of this application are reserved for determination by the Court of Appeal.

   Schedule 1

1st Respondent	Active Steel Pty Ltd ACN 068 669 296
2nd Respondent	Bryan A Horstman & Sharyn L Obst t/a Blue Diamond Constructions ABN 43 460 977 417
3rd Respondent	BBC Painting and Rendering Pty Ltd ACN 119 248 752
4th Respondent	Border Joinery Pty Ltd ACN 103 236 237
5th Respondent	Concretor Solutions Pty Ltd ACN 153 752 428
7th Respondent	Direct Painting Services Pty Ltd ACN 141 728 109
8th Respondent	Dynamic Bradview Roofing Pty Ltd ACN 161 333 991
10th Respondent	Finch Earthmoving Pty Ltd ACN 604 829 905
12th Respondent	Faranu Pty Ltd ACN 002 573 391
14th Respondent	Innov8 Pools & Landscapes Pty Ltd ACN 164 145 279
16th Respondent	Lyndons Pty Ltd ACN 010 583 721
17th Respondent	Michael Shale as Trustee of MPM Contracting Unit Trust
18th Respondent	Paul William Davis as Trustee of MPM Contracting Unit Trust
19th Respondent	Matthew Davis as Trustee of MPM Contracting Unit Trust
20th Respondent	O’Neill Electrical Industries Pty Ltd ACN 114 164 108
21st Respondent	Penfolds Projects Pty Ltd ACN 091 451 311
22nd Respondent	Powerspec Pty Ltd ACN 165 425 450
23rd Respondent	Professional Builders Cleaning Pty Ltd ACN 603 564 674
24th Respondent	Roberts Construction and Design Pty Ltd ACN 169 260 020
26th Respondent	Stair Lock Pty Ltd ACN 611 507 254
27th Respondent	Summit Roofing Holdings Pty Ltd ACN 093 535 178
28th Respondent	Superior Concrete Testing Pty Ltd ACN 118 392 797
29th Respondent	Williams Group Australia Pty Ltd ACN 128 744 990