In the matter of Keybridge Capital Limited (No 3)

[2025] NSWSC 423

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Keybridge Capital Limited (No 3) [2025] NSWSC 423

Hearing dates:

On the papers; submissions received 28 April 2025 and 1 May 2025

Date of orders:

2 May 2025

Decision date:

02 May 2025

Jurisdiction:

Equity - Corporations List

Before:

Nixon J

Decision:

(1) The Third, Fourth and Sixth Defendants pay the Plaintiffs’ costs of the proceeding, as agreed or assessed, on the ordinary basis.

(2) There be no order as to costs between the Plaintiffs and the First and Second Defendants.

(3) The Second Defendant is not entitled to rely on or otherwise be indemnified under the statutory indemnity created by s 443D of the Corporations Act 2001 (Cth) (and the related lien under s 443F), or any contractual, equitable or general law right of indemnity, recoupment, lien or otherwise, out of the First Defendant’s property, with respect to 15% of his costs (including legal costs, expenses and remuneration) of and incidental to this proceeding.

(4) The Third, Fourth and Sixth Defendants pay the costs of the Fifth Defendant’s application on 8 April 2025 to set aside the Notice to Produce issued to the Fifth Defendant on 6 April 2025, as agreed or assessed, on the ordinary basis.

(5) Save as to the orders above, there otherwise be no order as to costs as between the parties to the proceeding, and Yowie Group Ltd, with the intent that each party (and Yowie Group Ltd) bear its or his own costs of the proceeding.

Catchwords:

COSTS – party/party costs – where the Plaintiffs had substantial success in the proceeding – whether there should be apportionment of costs in respect of any issue on which the Plaintiffs failed – whether the Second Defendant acted unreasonably in defending the litigation and in failing to adopt a position of neutrality – whether the Court should make orders denying or restricting the Second Defendant’s entitlement to be indemnified from the First Defendant’s property in respect of the costs of the proceeding – whether the costs of the Fifth Defendant, who filed a submitting appearance, should be met by the other defendants

Legislation Cited:

Corporations Act 2001 (Cth) ss 249F, 440D, 443D, 443F, 447A, 447C

Insolvency Practice Schedule (Corporations) s 90-15

Uniform Civil Procedure Rules 2005 (NSW) r 42.1

Cases Cited:

Access Training Group Ltd v Jane [2024] NSWCA 204

Adelaide Brighton Cement Limited v Concrete Supply Pty Ltd (subject to deed of company arrangement) (No 6) [2020] FCA 928

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

Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219

Gould v Vaggelas (1985) 157 CLR 215 at 229; [1985] HCA 75

Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd (No 2) [2024] NSWCA 274

Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71

Re Bluechain Pty Ltd (admin apptd) (No 3) [2021] VSC 420

Re Condor BlancoMines Limited (No 2) [2016] NSWSC 1304

Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140

Sanderson v Blyth Theatre Co [1903] 2 KB 533

Silvia v Brodyn Pty Ltd [2007] NSWCA 55

Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd (in liq) [2023] FCAFC 119

Sved v Council of the Municipality of Woollahra (1998) NSW Con R 55-852

Tonna v Mendonca (No 2) [2020] NSWSC 306

Category:

Principal judgment

Parties:

WAM Active Limited (First Plaintiff)
Geoffrey James Wilson (Second Plaintiff)
Jesse Michael Hamilton (Third Plaintiff)
Martyn McCathie (Fourth Plaintiff)

Keybridge Capital Limited (Administrator Appointed) (First Defendant)
Gideon Isaac Rathner (Second Defendant)
Nicholas Francis John Bolton (Third Defendant)
John Dean Patton (Fourth Defendant)
Frank Antony Catalano (Fifth Defendant)
Richard Michael Dukes (Sixth Defendant)
Sulieman Ahmad Sulieman Ravell (Seventh Defendant)

Yowie Group Limited (Interested Party)

Representation:

Counsel:
D Krochmalik (Plaintiffs)
G Gee (First and Second Defendants)
A Byrne with A Osborn Brodie (Third, Fourth and Sixth Defendants)

Solicitors:
Mills Oakley (Plaintiffs)
Tisher Liner FC Law (First and Second Defendants)
Hamilton Locke (Third, Fourth and Sixth Defendants)
Arnold Bloch Leibler (Fifth Defendant)

File Number(s):

2025/00054507

Publication restriction:

Nil

JUDGMENT

1. I have previously delivered reasons for judgment in this matter:

1. on 21 March 2025: In the matter of Keybridge Capital Limited [2025] NSWSC 240 (the March Judgment); and

2. on 14 April 2025: In the matter of Keybridge Capital Limited (No 2) [2025] NSWSC 354 (the April Judgment).

3. This judgment assumes familiarity with each of the March Judgment and the April Judgment, and adopts defined terms used in those judgments.

2. In the March Judgment, I determined that at the Section 249F Meeting on 10 February 2025, the members of the First Defendant, Keybridge Capital Limited, resolved that Mr Bolton, Mr Patton and Mr Dukes (but not Mr Catalano) be removed as directors of Keybridge, and resolved that Mr Wilson, Mr Hamilton, Mr McCathie and Mr Ravell be appointed as directors of Keybridge. I made declarations to that effect.

3. In the March Judgment, I also determined that, subject to the resolution of certain outstanding issues which had been raised by the Administrator of Keybridge, Mr Rathner, regarding a Bridge Funding Facility offered by WAM Active Limited, this facility would provide a basis to conclude that Keybridge is solvent and, therefore, a basis to conclude that the administration of Keybridge should be brought to an end. I stood over the proceeding for a short period in order to allow an opportunity for these outstanding issues to be resolved between WAM and the Administrator.

4. In the April Judgment, I addressed the issues which remained in dispute regarding the Bridge Funding Facility, concluded that Keybridge was solvent, and ordered that the administration of Keybridge be brought to an end with immediate effect. I stayed this order for a period of two days so as to allow an opportunity for the Defendants to approach the Court of Appeal (and the Court of Appeal has subsequently stayed this order until 4.00pm on 8 May 2025, being the day when the appeal will be heard).

5. At the time of delivering the April Judgment, I directed the parties to serve their proposed orders in respect of costs, and, if such orders could not be agreed, to provide submissions on the matters which remained in dispute.

6. No orders as to costs have been agreed. The parties have confirmed that they are content for all questions of costs to be determined on the papers.

7. It is convenient to address the issues in dispute by reference to:

1. first, the position as between the Plaintiffs and the Third, Fourth and Sixth Defendants (Mr Bolton, Mr Patton and Mr Dukes);

2. secondly, the position as between the Plaintiffs and the First and Second Defendants (Keybridge and the Administrator); and

3. thirdly, the position as between the Fifth Defendant (Mr Catalano) and the other Defendants.

8. No order as to costs was sought by the Plaintiff against the Seventh Defendant (Mr Ravell), who filed a submitting appearance, or against Yowie Group Limited, which was given leave to be heard at the April Hearing. Nor did Mr Ravell or Yowie seek any costs order in their favour.

Costs as between Plaintiffs and Mr Bolton, Mr Patton and Mr Dukes

Relevant Principles

9. The starting point is the general rule in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), namely, that if the Court makes any order as to costs, the Court is to order that the costs follow the event, unless it appears to the Court that some other order should be made as to the whole or any part of the costs.

10. The "event" typically refers to the event of the claim or counterclaim, as the case may be, and may be understood as referring to the practical result of a particular claim: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15] (Ward, Emmett and Gleeson JJA).

11. Generally, a successful party should have the whole of its costs of the proceedings, including costs on an issue on which it has failed. However, in an appropriate case, a costs order may be formulated to reflect the degree of success on distinct issues. Relevant circumstances in which apportionment across different issues has been said to be appropriate include where a successful party has, in respect of one or more issues, unfairly, improperly or unnecessarily increased costs; where the bulk of the time has been taken on an issue on which the unsuccessful party has succeeded; or where a particular issue or group of issues is clearly dominant or separable: see Access Training Group Ltd v Jane [2024] NSWCA 204 at [190]-[191] (Ward P, Payne JA agreeing).

12. The phrase “dominant or separable” should not be applied as if it were a statutory test and involves two concepts, each of which should be treated flexibly: Michael Hill Jeweller (Australia) Pty Ltd v Gispac Pty Ltd (No 2) [2024] NSWCA 274 at [20] (Bell CJ, Payne JA, Basten AJA).

13. A separable issue can relate to any disputed question of fact or law before a Court on which a party fails, notwithstanding that they are otherwise successful in terms of the ultimate outcome of the matter: BostikAustralia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38] (Beazley, Ipp and Basten JJA). Where there is a mixed outcome in a proceeding, the question of apportionment is very much a matter of discretion and mathematical precision is illusory. The exercise of the discretion depends on matters of impression and evaluation: ibid.

Plaintiffs’ submissions

14. The Plaintiffs submitted that there were two broad issues raised for determination in the proceedings, namely:

1. whether, at the Section 249F Meeting, Mr Bolton, Mr Patton and Mr Dukes were removed as directors of the Keybridge and Mr Wilson, Mr Hamilton, Mr McCathie and Mr Ravell were appointed as directors of Keybridge; and

2. whether the administration of Keybridge should be terminated.

15. The Plaintiffs submitted that they succeeded on each of these issues, and obtained the outcomes sought by them in the proceeding (namely, declarations regarding the change in the Board’s composition and an order bringing the administration to an end); that Mr Bolton, Mr Patton and Mr Dukes actively and unsuccessfully opposed each of those outcomes; and that, accordingly, each of Mr Bolton, Mr Patton and Mr Dukes should pay the Plaintiffs’ costs of the proceedings.

16. Alternatively, the Plaintiffs submitted that Mr Patton should pay the Plaintiffs’ costs of the proceedings, and that Mr Bolton and Mr Dukes should also be liable for costs from 1 April 2025 onwards (being, in effect, the Plaintiffs’ costs of those issues which were determined in the April Judgment), with there otherwise being no order as to costs as between the Plaintiffs and Mr Bolton and Mr Dukes.

Submissions of Mr Patton, Mr Bolton and Mr Dukes

17. Mr Patton:

1. accepted that he should pay the Plaintiffs’ costs of the proceeding up to 31 March 2025 (but only in so far as those costs relate to the Plaintiffs’ claims that the adjournment of the Section 249F Meeting was invalid) and from 1 to 14 April 2025; and

2. sought an order that the Plaintiffs pay his costs of the proceeding up to 31 March 2025, so far as those costs relate to the Plaintiffs’ claim that the appointment of the Administrator was invalid.

18. Mr Patton submitted that this form of orders was appropriate, given that, in the March Judgment, the Plaintiffs succeeded in establishing their claim regarding the adjournment of the Section 249F Meeting, but failed to establish their claim regarding the appointment of the Administrator.

19. Mr Bolton accepted that he should pay the Plaintiffs’ costs of the proceeding from 1 to 14 April 2025, but contended that the Plaintiffs should pay his costs of the proceeding up to 31 March 2025 because:

1. the Plaintiffs’ claim in respect of the Section 249F Meeting was a claim regarding the conduct of the Chairperson, Mr Patton, and not a claim regarding Mr Bolton’s conduct; and

2. the Plaintiffs’ claim that the Administrator was not appointed for a proper purpose did not succeed.

20. Mr Dukes sought an order that the Plaintiffs pay his costs of the proceeding (or, alternatively, his costs up to the delivery of the March Judgment) on an indemnity basis. Mr Dukes submitted that this form of order was appropriate because no claims of misconduct were made against him; the Plaintiffs had, “in error”, sought certain relief against Mr Dukes; and, if he had not erroneously been sued for such relief, he would likely have filed a submitting appearance, to the extent that he was a necessary and proper party.

Determination

21. This proceeding was commenced by an Originating Process filed on 11 February 2025. Leaving aside costs, the final relief sought was as follows:

“5   Declare that:

a. on 10 February 2025 at 4:30pm, the members of Keybridge validly held a meeting (the Meeting) convened in accordance with s 249F of the Corporations Act;

b. at the Meeting, the members of Keybridge resolved that Messrs Bolton, Patton and Dukes be removed as directors of Keybridge and Mr Geoffrey James Wilson (Mr Wilson), Second Plaintiff, Mr Jesse Michael Hamilton (Mr Hamilton), Third Plaintiff, Mr Martyn McCathie (Mr McCathie), Fourth Plaintiff and Mr Ravell, Seventh Defendant, be appointed as directors of Keybridge; and

c. on and following the Meeting on 10 February 2025, the directors of Keybridge were, and are:

i. Mr Catalano

ii. Mr Wilson

iii. Mr Hamilton

iv. Mr McCathie

v. Mr Ravell

6 Order that, pursuant to sections 447A or 447C of the Corporations Act, the administration of Keybridge following the purported appointment of Mr Rathner as the administrator of Keybridge on 9 February 2025, is void, invalid and of no effect.

7 In the alternative to prayer 6, order that pursuant to s 447A of the Corporations Act, the administration of Keybridge is to end immediately.

8   Order that each of Messrs Patton, Bolton and Dukes, jointly and severally, be liable to indemnify Keybridge for the costs, expenses and remuneration of Mr Rathner in his role, or purported role, as the administrator of Keybridge (including any remuneration incurred on a quantum meruit basis).”

22. The Plaintiffs did not file any statement of claim, but did hand up in Court on the first return date (13 February 2025) a document headed “Plaintiffs’ issues or contentions”. This document identified the propositions which the Plaintiffs sought to establish as the basis for the relief claimed:

“Purported adjournment of Section 249F Meeting

(1) Mr Patton, as the initial chair of the meeting, had no power to adjourn the Section 249F Meeting sine die.

(2) Mr Patton’s purported adjournment was not in good faith for a proper purpose.

(3) By reason of (1) or (2) above, the purported adjournment was invalid, the meeting proceeded and the Court should declare that the results are as have been declared by Mr Hamilton.

Purported appointment of Mr Rathner as Administrator

(4) The board of Keybridge did not properly and genuinely form the opinion that Keybridge was insolvent or was likely to become insolvent at some future time.

(5) The board of Keybridge purportedly appointed the voluntary administrator, Mr Rathner, for an improper purpose.

(6) Even if the appointment of the voluntary administrator was valid, the Court should order that the administration is to end under s 447A of the Act.”

23. As set out above, those propositions were grouped into two categories, namely, propositions relating to the Section 249F Meeting, and propositions relating to appointment of the Administrator and the continuation of the voluntary administration of Keybridge. The parties’ addressed their submissions by reference to the issues set out above.

24. Issues (1)-(3) were advanced by the Plaintiffs in support of the declaratory relief sought in prayer 5 of the Originating Process. Each of Mr Patton, Mr Bolton and Mr Dukes was (like each of Mr Catalano and Mr Ravell) a necessary party in respect of this relief. However, whereas each of Mr Catalano and Mr Ravell filed a submitting appearance, each of Mr Patton, Mr Bolton and Mr Dukes actively opposed the declaratory relief sought by the Plaintiffs, and in that regard each (unsuccessfully) advanced submissions in respect of Issues (1)-(3) above.

25. Issues (4)-(6) were advanced by the Plaintiffs in support of, respectively, the relief sought in prayers 6 and 7 of the Originating Process. By those prayers, the Plaintiffs sought orders, by either of two means, to terminate the administration of Keybridge.

26. As regards Issue (4), the Plaintiffs acknowledged, in opening written submissions in reply, that the material before the Keybridge Board on 9 February 2025, which was exhibited to the Defendants’ affidavits, “provided a basis for believing that Keybridge may have been insolvent”.

27. While the Plaintiffs were unsuccessful in respect of Issue (5), they were successful in respect of Issue (6). Accordingly, I determined that the Plaintiffs were not entitled to the relief sought in prayer 6 of the Originating Process, but were entitled to the relief that was sought, in the alternative, in prayer 7 of the Originating Process.

28. Each of Mr Bolton, Mr Patton and Mr Dukes actively opposed both the relief sought in prayer 6 and the relief sought, in the alternative, in prayer 7 of the Originating Process; and each advanced submissions in respect of Issues (5) and (6).

29. I do not consider that Issue (5) (or the relief sought in prayer 6), in respect of which the Plaintiffs failed, was a clearly dominant or separable issue, or that the Court should exercise its discretion to apportion costs in respect of this issue.

30. The Plaintiffs sought orders bringing the administration of Keybridge to an end by two alternative routes, contending that the Administrator’s appointment was invalid or alternatively that, even if it was valid, the Court should order that the administration end with immediate effect. The Plaintiffs succeeded in achieving their desired outcome by the second alternative route.

31. Each of Mr Bolton, Mr Patton and Mr Dukes actively (and unsuccessfully) opposed any orders that the administration come to an end. That is in contrast to Mr Catalano, who filed a submitting appearance.

32. Further, much of the evidence filed in respect of the first alternative was relevant to the second alternative. For example, in determining that the administration of Keybridge should be terminated with immediate effect (Issue 6), I took into account evidence regarding the financial position of Keybridge and evidence regarding the Administrator’s conflict of interest, which was relevant to the Issues (4) and (5): see, for example, April Judgment at [157]-[161], [210]-[213], [216]).

33. In addition, much of the evidence that was relevant to Issues (4) and (5) was also relevant to Issues (1)-(3), in respect of which the Plaintiffs were successful. For example, the factual background upon which the Plaintiffs relied in contending that Mr Patton and Mr Bolton were acting for an improper purpose in resolving to appoint the Administrator on 9 February 2025 largely overlapped with the factual background on which they relied in contending that Mr Patton was acting for an improper purpose in purporting to adjourn the Section 249F Meeting.

34. Mr Dukes’ contention that he was entitled to indemnity costs depended on the following exchange at the March Hearing in respect of the claims advanced against him:

“[SENIOR COUNSEL FOR THE PLAINTIFFS]: I've skipped over this, the claim against Mr Dukes. With respect to Mr Broadfoot, there appears to be a misconception about why Mr Dukes is a defendant. Mr Dukes was a necessary party to the relief--

HIS HONOUR: I understand. But separately, for example, there is the prayer saying that he be liable to indemnify Keybridge for the costs of the--

[SENIOR COUNSEL FOR THE PLAINTIFFS]: I accept that. That's not a matter for today.

HIS HONOUR: No, no.

[SENIOR COUNSEL FOR THE PLAINTIFFS]: But I accept that. But the reason he was a party is that he was a necessary party.

HIS HONOUR: I understand that.

[SENIOR COUNSEL FOR THE PLAINTIFFS]: He retained the same legal team and ran the same defence as his co-defendants Mr Patton and Mr Bolton. The so-called claim against Mr Dukes, that stands or falls on the validity of the adjournment.

… The reason why we say Mr Duke was joined –

HIS HONOUR: Because you say he ceased to be a director and you seek that finding?

[SENIOR COUNSEL FOR THE PLAINTIFFS]: That’s right. He was not a necessary party to the relief in the relation to the appointment of an administrator. Since he is a party, he has an interest and he’s entitled to be heard on it, but he was not a necessary party for that.

HIS HONOUR: Except that you did seek the costs of the administration.

[SENIOR COUNSEL FOR THE PLAINTIFFS]: I absolutely accept that. …”

35. Mr Dukes submitted that this exchange indicated that the Plaintiffs had sought relief against him “in error”, and that this amounted to “unreasonable conduct of the proceedings, justifying an award [of costs] on the indemnity basis”.

36. I do not accept this submission. In the above exchange, Senior Counsel for the Plaintiffs did not make any acknowledgement to the effect that the relief sought in the Originating Process was sought against Mr Dukes “in error”. Instead, he indicated that the question of the liability of the Director Defendants for any remuneration or expenses of the Administrator (prayer 8) was an issue for determination at a later stage of the proceeding, after the determination of whether the Plaintiffs were entitled to the declaratory relief sought in respect of the Section 249F Meeting (prayer 5) and were entitled (on either of the two alternative bases set out in prayers 6 and 7) to orders bringing the administration to an end. That was consistent with the position that the Plaintiffs adopted in their opening written submissions:

“The Court should deal with consequential matters, such as the costs of the voluntary administration and costs of these proceedings, after judgment on the substantive issues set out above has been delivered.”

37. Mr Dukes conceded in his submissions on costs that he was a necessary and proper party to the proceeding.

38. Having been joined as a necessary and proper party, Mr Dukes did not file a submitting appearance, but instead elected, at each of the March Hearing and the April Hearing, to oppose, actively and unsuccessfully, both the declaratory relief sought in prayer 5 and the orders sought in prayers 6 and 7 (on alternative bases) to bring the administration to an end. There is no reason why costs should not follow the event.

39. Accordingly, I will order that each of Mr Bolton, Mr Patton and Mr Dukes pay the Plaintiffs’ costs of the proceeding as agreed or assessed, on the ordinary basis.

Costs as between Plaintiffs and the Administrator

Relevant Principles

40. In addition to the general principles set out at paragraphs [9]-[13] above, the following principles are relevant where proceedings are brought against an external administrator and a company in administration.

41. In Silvia v Brodyn Pty Ltd [2007] NSWCA 55, Hodgson JA (with whom Ipp and Basten JJA agreed) observed that:

1. if proceedings brought against a liquidator are successful, “generally a costs order will be made in such a way that the liquidator does not incur any personal liability” (at [52]);

2. this result “may be achieved by ordering that the company in liquidation pay the costs (if the company is also a defendant), or by ordering that the liquidator’s liability for costs be limited to the amount of assets of the company available for that purpose” (at [53]);

3. however, “if the liquidator has acted unreasonably in defending the litigation, the liquidator may be made personally liable” (at [54]); and

4. “[g]enerally, the same principles apply to administrators as to liquidators” (at [55]).

42. These principles were referred to, and applied, by Barrett AJA in Re Condor Blanco Mines Limited (No 2) [2016] NSWSC 1304, upon which both the Plaintiffs and the Administrator relied. His Honour observed (at [9]-[11]) that, where an external administrator is confronted with an application seeking orders which would result in his or her removal (such as was the case here), “the appropriate course” is not to “be partisan” or to “become involved in arguing the merits for or against the making” of such orders, but instead “to adopt a stance of essential neutrality which assists the court, particularly by the volunteering of relevant facts”, and “to leave it to the court to decide the matter on its merits”. His Honour further noted that: “If it is alleged in the proceedings that a liquidator is guilty of misconduct, the landscape is different” (at [11], fn 6).

43. Section 443D of the Corporations Act 2001 (Cth) (Act) relevantly provides as follows:

The administrator of a company under administration is entitled to be indemnified out of the company’s property … for:

…

(aa)   any other debts or liabilities incurred, or damages or losses sustained, in good faith and without negligence, by the administrator in the performance or exercise, or purported performance or exercise, of any of his or her functions or powers as administrator; …

44. Section 90-15 of the Insolvency Practice Schedule (Corporations) relevantly provides as follows:

“Court may make orders

(1) The Court may make such orders as it thinks fit in relation to the external administration of a company.

…

Examples of orders that may be made

(3) Without limiting subsection (1), those orders may include any one or more of the following:

…

(d) an order in relation to the costs of an action (including court action) taken by … another person in relation to the external administration of the company;

…

Costs orders

(5) Without limiting subsection (1), an order mentioned in paragraph (3)(d) in relation to the costs of an action may include an order that:

(a) the external administrator … is personally liable for some or all of those costs; and

(b) the external administrator … is not entitled to be reimbursed by the company … in relation to some or all of those costs.”

45. In Sino Group International Limited v Toddler Kindy Gymbaroo Pty Ltd (in liq) [2023] FCAFC 119 at [63], the Full Court of the Federal Court (Farrell, Cheeseman and Feutrill JJ) held that section 90-15 gives the Court a broad discretion to make an order which impacts an external administrator’s right of indemnity and in particular a discretion to order that the external administrator is not entitled to be reimbursed by the company in relation to the costs of a proceeding in relation to the external administration of the company (at [63], [67]). The Full Court quoted (at [68]), with approval, the following observations of Delany J in Re Bluechain Pty Ltd (admin apptd) (No 3) [2021] VSC 420 at [54], [59] and [61]:

“[54]… The power in s 90–15(1) is a very broad power to make such orders as the court thinks fit. Section 90–15(3) provides expressly that orders may be made in relation to the costs of an action taken by an administrator or of another person in relation to the external administration. Section 90–15(5) of the Act confers express and specific power to order an administrator to be personally liable for costs and that the administrator not be reimbursed by the company in relation to all or some of those costs.

…

[59] However, the language of ss 90–15(3)(d) and 90–15(5) of the IPS goes beyond indemnity for adverse costs orders against administrators. It includes power to order that administrators are not entitled to be reimbursed by the company or its creditors in relation to ‘some or all of those costs’; ‘those costs’ being a reference to ‘an order in relation to the costs of an action’.

…

[61] Sections 90–15(3)(d) and 90–15(5) of the IPS do not give guidance as to the circumstances in which an order depriving an administrator of the right of indemnity might appropriately be made. Clearly the Court has a broad discretion, to be exercised judicially, in the same way that the Court is bound to act when exercising the costs discretion in s 24 of the SCA and in the Rules.”

46. Importantly, the Full Court in Sino Group held (at [85(1)]) that: “Section 90–15 of the IPS does not require findings of impropriety or of the failure to take reasonable care on the part of an external administrator in order that the power under ss 90–15(3)(d) and 90–15(5) be exercised.”

47. In Adelaide Brighton Cement Limited v Concrete Supply Pty Ltd (subject to deed of company arrangement) (No 6) [2020] FCA 928, which was referred to with approval in Sino Group, Besanko J observed as follows (at [166]):

“It may be accepted that deed administrators have a duty to assist the Court and that may involve putting information before the Court and incurring costs in doing so. Those costs reasonably and properly incurred may be recovered by the deed administrators under their right of indemnity. Critically, what is reasonable assistance depends on the circumstances of the case. If in doubt as to what is reasonable assistance in any particular case, the deed administrators may make a formal application under s 90–15(3)(a) of Sch 2 of the Corporations Act for directions. In this case, the deed administrators went well beyond what could be considered reasonable assistance on any view.”

Plaintiffs’ submissions

48. The Plaintiffs contended that the Court should make the following orders:

1. that Keybridge and the Administrator pay the Plaintiffs’ costs of the proceedings;

2. in the alternative to (1), that Keybridge and the Administrator pay the Plaintiffs’ costs of the Interlocutory Process dated 21 February 2025 (February IP), and otherwise there be no order as to costs between the Plaintiffs and Keybridge and the Administrator;

3. that the Administrator is not entitled to rely on or otherwise be indemnified under the statutory indemnity created by s 443D of the Act (and the related lien under s 443F of the Act), or any contractual, equitable or general law right of indemnity, recoupment, lien or otherwise, out of Keybridge’s property, with respect to:

1. his costs (including legal costs, expenses and remuneration) of and incidental to the proceeding; and

2. any liability for costs that he is ordered to pay to the Plaintiffs in accordance with (1) or (2) above;

4. in the alternative to (3), an order limiting the Administrator’s right of indemnity in respect of a proportionate amount of the costs referred to in paragraphs 3(a) and (b) above.

49. The proposed order in paragraph (3) above is, in substance, similar to orders made in each of Sino Group and Bluechain.

50. The Plaintiffs submitted that the order in paragraph (1) above was appropriate in circumstances where the Administrator “did not conduct his defence of the claims in the proceeding with appropriate neutrality” (referring, in particular, to the matters set out at paragraphs [328]-[332] and [343] of the March Judgment), and where the Administrator accepted his role as voluntary administrator of Keybridge in circumstances where he was in a position of actual conflict (referring, in particular, to the matters set out at paragraphs [303]-[327], [332] and [343] of the March Judgment).

51. Alternatively, the Plaintiffs sought the order in paragraph (2) above on the basis that the February IP “was unsuccessfully resisted by Mr Rathner”.

52. The Plaintiffs sought the order in paragraph (3) or alternatively (4) above on the basis that the Administrator “conducted his defence in a partial manner” and “abandoned a position of essential neutrality”, such that all (or most) of the costs of the Administrator and Keybridge “were not reasonably and properly incurred”, which “provides a sufficient basis to deprive [the Administrator] of his right of indemnity”.

Submissions of Keybridge and the Administrator

53. Keybridge and the Administrator contended that:

1. there should be no order as between the Plaintiffs and Keybridge as to the costs of the proceeding;

2. the Plaintiffs should pay the Administrator’s costs of the proceeding or, alternatively, there should be no order as to costs between the Plaintiffs and the Administrator; and

3. the Administrator should be entitled to be indemnified out of Keybridge’s property with respect to:

1. his costs (including legal costs, expenses and remuneration) of and incidental to the proceeding; and

2. any liability for costs that he is ordered to pay to the Plaintiffs.

54. In relation to paragraph (1) above, Keybridge and the Administrator submitted that there should be no order as to costs in circumstances where “Keybridge did not play an active role in the proceedings after leave was granted under s 440D of the Act”, and, in particular, “did not actively defend the proceeding”. It appears to be implicitly acknowledged by this submission that all of the costs incurred in the defence of the proceeding were costs incurred by the Administrator (subject to any right of indemnity from Keybridge’s property), rather than costs incurred by Keybridge.

55. In relation to paragraphs (2) and (3) above, the Administrator submitted that:

1. his conduct in defence of the proceeding which was found to have gone beyond a position of essential neutrality was “not so unreasonable as to warrant” a personal costs order against him; and

2. it was therefore appropriate that the Administrator “have his costs of the proceedings”, and that this should be achieved by an order confirming the Administrator’s indemnity. The Administrator was “entitled to such an indemnity when acting in good faith and without negligence” (citing s 443D(aa) of the Act), and no such claim was made by the Plaintiffs.

56. In relation to the February IP, the Administrator submitted that:

1. there was nothing unreasonable in his defence of the Plaintiffs’ application to restrain him from selling any assets, in circumstances where (as was found) he was validly appointed and had statutory duties to perform, and may have needed to realise assets in order to perform those duties, and

2. the Plaintiffs obtained a more limited form of relief than they sought, “by which a cap of $100,000 was imposed on the administrator’s dealings with the assets of Keybridge”.

Determination

57. I do not consider that there is any basis for an order that the Plaintiffs pay the costs of Keybridge and the Administrator, in circumstances where the Plaintiffs had, as I have outlined above, success in the proceedings, both in respect of the composition of the Board of Keybridge and in respect of terminating the administration of Keybridge.

58. Further, I do not consider that there is a basis for an order that Keybridge pay the Plaintiffs’ costs, in circumstances where Keybridge did not play an active role in the proceeding.

59. The key issues for determination are therefore whether there should be an order that the Administrator pay the Plaintiffs’ costs, on the basis that he “acted unreasonably in defending the litigation” (Silvia v Brodyn at [54]), in particular by acting in a partisan manner and failing to adopt a position of essential neutrality (Condor Blanco at [9]-[11]); and whether, by reason of any such conduct, the Administrator’s right of indemnity from Keybridge’s property should be denied or restricted.

60. I accept the Administrator’s contention that he was not required to adopt a stance of neutrality in respect of criticisms of his own conduct, and that he was entitled to advance submissions regarding the challenges made by the Plaintiffs to his independence. I found that a number of those criticisms were made out (March Judgment, [303]-[332]), but nonetheless rejected the Plaintiffs’ contention that the Administrator had, prior to his appointment, come to some “understanding” with Mr Bolton and/or Mr Patton regarding the conduct of the administration, such that it may be inferred that his appointment was not for a proper purpose (March Judgment, [333]-[344]).

61. While I found that there were certain respects in which the Administrator assisted Mr Bolton and Mr Patton in their defence of the proceedings, and did not adopt a position of neutrality, I also found that such conduct by the Administrator occurred in the period prior to Mr Bolton and Mr Patton obtaining legal representation in the proceeding (see March Judgment at [331], [332], [343]). On 3 March 2025, Cornwalls filed an appearance for Mr Bolton, Mr Patton and Mr Dukes. Following this, I am satisfied that, at each of the March Hearing and the April Hearing, the Administrator adopted an appropriate position of neutrality.

62. As regards the February IP, I accept the Administrator’s submission that it was reasonable for him to resist the Plaintiffs’ application for an order that he be restrained from realising any assets of Keybridge, without first giving 7 days’ notice to WAM, given that it may have been necessary for him to realise some assets in order to meet reasonably necessary expenses of the administration. As a result of the Administrator raising this concern at the hearing of the February IP, I concluded that there should be a carve-out from the restraint sought by the Plaintiffs, so as to permit the Administrator to deal with Keybridge’s property up to an amount of $100,000, in order “to meet reasonably necessary legal or operating expenses in connection with the administration of [Keybridge]”. Accordingly, there was mixed success on the February IP.

63. Having regard to the matters set out above, I have determined that the Administrator should not be ordered to pay the Plaintiffs’ costs of the proceeding or, alternatively, of the February IP. There will accordingly be no order as to costs as between the Plaintiffs and the Administrator.

64. However, in circumstances where I have found that, prior to 3 March 2025, the Administrator:

1. met with Mr Bolton and Mr Patton to discuss the defence of the proceedings,

2. advanced submissions that went beyond a position of essential neutrality on issues which did not relate to his conduct, and

3. instructed his legal representatives to assist defendant directors to prepare affidavit evidence;

65. I do not consider that all of the Administrator’s costs of the proceeding were “reasonably and properly incurred”, and am satisfied there should be a proportionate reduction in his right to be indemnified from Keybridge’s property in respect of those costs, to reflect the extent to which his defence of the proceeding went beyond a position of essential neutrality.

66. The Plaintiffs submitted that the appropriate reduction was “at least 75% of Keybridge and Mr Rathner’s total costs of the proceeding”. I do not consider that a reduction of such an extent is warranted, given that I am satisfied that the Administrator adopted an appropriate position of neutrality from 3 March 2025 onwards, including at each of the March Hearing and the April Hearing. Instead, having regard to the matters set out in paragraph [331] of the March Judgment, I consider that the reduction should be 15%: that is, the Administrator should be entitled to be indemnified from Keybridge’s property with respect to no more than 85% of his costs (including legal costs, expenses and remuneration) of and incidental to the proceeding.

Costs of Mr Catalano

67. Mr Catalano filed a submitting appearance, save as to costs.

68. He sought an order that his costs of the proceeding be paid by the “active defendants” (namely, Keybridge, the Administrator, Mr Bolton, Mr Patton and Mr Dukes). Alternatively, he sought an order that Mr Bolton, Mr Patton and Mr Dukes pay the costs of his application to set aside a Notice to Produce which was issued to him and dated 6 April 2025 (the Catalano NTP). Mr Catalano did not seek any order that the Plaintiffs pay any part of his costs.

69. Mr Bolton, Mr Patton and Mr Dukes accepted that, in respect of the application regarding the Catalano NTP, “the Court will, in the usual way, may an order as to costs”, given that Mr Catalano was successful on that application. However, they, together with Keybridge and the Administrator, submitted that there was no basis for any broader order of costs in Mr Catalano’s favour.

67. In his written submissions, Mr Catalano described the costs order which he sought against the “active defendants” as a “Sanderson order” (after Sanderson v Blyth Theatre Co [1903] 2 KB 533).

68. By such an order, an “unsuccessful” defendant is made liable for the costs of a “successful” defendant. The relevant principles were summarised by Ward CJ in Eq (as her Honour then was) in Tonna v Mendonca (No 2) [2020] NSWSC 306 at [84]-[85]:

1. “the overriding consideration for the exercise of the discretion to make either a Sanderson or Bullock order is whether, as between the contending parties, it is proper or fair to order the particular unsuccessful party to pay the costs involved”;

2. “in determining whether it is fair to make such an order, two issues arise”:

1. first,“it must have been reasonable for the plaintiff to have brought the proceedings against the successful defendant”; and

2. secondly, “there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the successful defendant(s)”.

72. The second requirement has been found to be satisfied where, for example, the unsuccessful defendant has indicated to the plaintiff “in one way or another that it should look to the successful defendant for its remedy”: Roads and Traffic Authority of New South Wales v Palmer (No 2) [2005] NSWCA 140 at [30] per Giles JA (Spigelman CJ and Handley JA agreeing), quoting Sved v Council of the Municipality of Woollahra (1998) NSW Con R 55-852 at 55,605.

73. As explained by Gibbs CJ in Gould v Vaggelas (1985) 157 CLR 215 at 229; [1985] HCA 75 in relation to a Bullock order (with such comments being applied by the Court of Appeal (Spigelman CJ, Beazley and Basten JJA) in relation to a Sanderson order in Nationwide News Pty Ltd v Naidu (No 2) [2008] NSWCA 71 at [20]), the Court should make such an order:

“only if [the Court] considers it just that the costs of the successful defendant should be borne by the unsuccessful defendant, and, if nothing that the unsuccessful defendant has said or done has led the plaintiff to sue the other defendant, who ultimately was held not to be liable, it is difficult to see any reason why the unsuccessful defendant should be required to pay for the plaintiff’s error or overcaution.”

74. As a starting point, it is necessary to consider whether and in what respect, Mr Catalano was a “successful defendant”.

75. The proceeding was commenced on 11 February 2025. On the following day, Mr Catalano filed a submitting appearance. He thereby indicated that he intended to take no active part in the proceeding, and was not permitted to take any step in the proceeding without the leave of the Court (UCPR, r 6.11). The only occasion on which such leave was sought was at the commencement of the April Hearing, when Counsel for Mr Catalano appeared in order to make an application to set aside the Catalano NTP. In particular, Counsel referred to Mr Catalano’s submitting appearance and stated that: “I do not seek to withdraw the submitting appearance but we seek leave to address your Honour in respect of the notice.” At the conclusion of the argument in relation to the Catalano NTP, Counsel then sought to be excused and played no further role.

76. As set out in paragraph [21] above, the only relief sought in respect of Mr Catalano was a declaration that, on and following the Section 249F Meeting on 10 February 2025, Mr Catalano was a director of Keybridge (Prayer 5(c)(i)).

77. Although it might be said that Mr Catalano was “successful” in respect of this issue (given that a declaration to this effect was made in the March Judgment), this was not a matter that was the subject of any controversy at the March Hearing. That is because:

1. the Plaintiffs contended that the Section 249F Meeting was not validly adjourned, and the resolutions regarding the composition of the Board were put to the members of Keybridge, but acknowledged that the resolution to remove Mr Catalano was not passed; and

2. the Director Defendants contended that the meeting was validly adjourned, with the result that the resolution to remove Mr Catalano was not put to the members of Keybridge at that meeting.

3. It was therefore common ground that, following the Section 249F Meeting on 10 February 2025 (whether it was adjourned or not), Mr Catalano was a director of Keybridge.

78. As set out in the April Judgment at [114], the Director Defendants did raise, for the first time in closing address at the April Hearing, a contention that Mr Catalano was subsequently removed as a director of Keybridge at the Spill Meeting on 27 February 2025. However, Mr Catalano was given no notice of, or opportunity to respond to, that allegation (and therefore I determined that the Director Defendants should not be permitted to raise the allegation at that stage of the proceeding). Accordingly, Mr Catalano could not have incurred any costs in respect of that allegation.

79. The only issues raised in the “Plaintiff’s issues or contentions” which concerned Mr Catalano (as a member of the Board of Keybridge as at 9 February 2025) were the following:

“(4) The board of Keybridge did not properly and genuinely form the opinion that Keybridge was insolvent or was likely to become insolvent at some future time.

(5) The board of Keybridge purportedly appointed the voluntary administrator, Mr Rathner, for an improper purpose.”

80. In respect of those issues, Mr Catalano did not submit that his position was different from the position of the other members of the Board who resolved to appoint the Administrator (namely, Mr Bolton, Mr Patton and Mr Dukes).

81. As noted above, in respect of these issues:

1. the Plaintiffs accepted, in opening written submissions, that the material before the Keybridge Board on 9 February 2025, which was exhibited to the Defendants’ affidavits, “provided a basis for believing that Keybridge may have been insolvent”; and

2. I rejected the contention that the Board appointed the Administrator for an improper purpose.

82. Mr Catalano accepted in his submissions that “it was reasonable for the Plaintiff to join him as a party to the proceedings”, and did not advance any submission that any conduct on the part of any other defendant caused his joinder.

83. The only matters referred to in Mr Catalano’s submissions as supporting the costs order which he sought were as follows:

1. the proceedings were commenced by the Plaintiffs “on an expedited basis” on 11 February 2025;

2. Mr Catalano formed the view on the following day, prior to having “an opportunity to fully consider his position” in respect of the evidence filed by the Plaintiffs, that it was “in his best interests to enter into a submitting appearance, save as to costs”;

3. Mr Catalano “incurred costs as a result of his solicitors reviewing and considering the material served on his solicitors”, by the Plaintiffs and the various Defendants;

4. Mr Catalano was served with, and incurred costs in complying with, notices to produce issued by the Plaintiff dated 3 and 4 March 2025; and

5. Mr Catalano incurred costs in applying to set aside the Catalano NTP.

84. As regards the last of these matters, Mr Bolton, Mr Patton and Mr Dukes accepted that Mr Catalano should have his costs of the application in respect of the Catalano NTP.

85. Otherwise, the matters set out above do not identify any “conduct” on the part of any of the other Defendants, let alone explain why such “conduct” would “make it fair to impose liability” on the other Defendants for Mr Catalano’s costs (see Tonna at [84]-[85], quoted above).

86. For those reasons, I will make an order in Mr Catalano’s favour in respect of his application to set aside the Catalano NTP, but otherwise Mr Catalano has not established a basis for making any of the other Defendants liable for his costs of the proceeding.

Stay

87. Mr Bolton, Mr Patton and Mr Dukes submitted that, in circumstances where the Court’s order of 14 April 2025 terminating the administration of Keybridge has been stayed until 4pm on 8 May 2025 (being the date upon which an appeal is to be heard), any order as to costs should also be stayed until the same time.

88. I am not satisfied that any such stay is justified. The order which I propose to make against Mr Bolton, Mr Patton and Mr Dukes is that they pay the Plaintiffs’ costs of the proceeding, as agreed or assessed, on the ordinary basis. Depending on the outcome of the appeal, this costs order may be set aside or varied. However, there is no prospect of any step to enforce this order being taken before the appeal is heard and determined, given that any such enforcement would require the quantum of costs to be agreed by Mr Bolton, Mr Patton and Mr Dukes, or otherwise an assessment of costs to occur.

Orders

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

1. The Third, Fourth and Sixth Defendants pay the Plaintiffs’ costs of the proceeding, as agreed or assessed, on the ordinary basis.

2. There be no order as to costs between the Plaintiffs and the First and Second Defendants.

3. The Second Defendant is not entitled to rely on or otherwise be indemnified under the statutory indemnity created by s 443D of the Corporations Act 2001 (Cth) (and the related lien under s 443F), or any contractual, equitable or general law right of indemnity, recoupment, lien or otherwise, out of the First Defendant’s property, with respect to 15% of his costs (including legal costs, expenses and remuneration) of and incidental to this proceeding.

4. The Third, Fourth and Sixth Defendants pay the costs of the Fifth Defendant’s application on 8 April 2025 to set aside the Notice to Produce issued to the Fifth Defendant on 6 April 2025, as agreed or assessed, on the ordinary basis.

5. Save as to the orders above, there otherwise be no order as to costs as between the parties to the proceeding, and Yowie Group Ltd, with the intent that each party (and Yowie Group Ltd) bear its or his own costs of the proceeding.

**********

Decision last updated: 02 May 2025