In the matter of Pacific Steelfixing Pty Ltd (No 2)

[2021] NSWSC 1129

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of Pacific Steelfixing Pty Ltd (No 2) [2021] NSWSC 1129

Hearing dates:

On the papers

Date of orders:

6 September 2021

Decision date:

06 September 2021

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

Order that that defendant’s costs of these proceedings be paid personally by the first plaintiff, in an amount to be agreed or assessed; order that the defendant pay its own costs of the preparation of the report of Mr Nigel Markey dated 20 June 2020.

Catchwords:

COSTS – general rule that costs follow the event – where the liquidator instigated the proceedings and was unsuccessful – costs order against the liquidator personally

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Evidence Act 1995 (NSW), s 79

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

In the matter of Pacific Steelfixing Pty Ltd [2021] NSWSC 655

Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin (No 2) [2021] NSWCA 98

Silvia v Brodyn Pty Ltd (2007) 25 ACLC 385; [2007] NSWCA 55

Category:

Costs

Parties:

Daniel Frisken as Liquidator of Pacific Steelfixing Pty Ltd (in Liquidation) ACN 621 306 296 (First Plaintiff)
Pacific Steelfixing Pty Ltd (In Liquidation) ACN 621 306 296 (Second Plaintiff)
Deputy Commissioner of Taxation (Defendant)

Representation:

Counsel:
Mr J Parrish (First and Second Plaintiffs)
Ms K Petch (Defendant)

Solicitors:
Marsdens Law Group (First and Second Plaintiffs)
McInnes Wilson Lawyers (Defendant)

File Number(s):

2019/343822

Publication restriction:

N/A

Judgment

Introduction

1. These reasons concern the costs of these proceedings. On 9 June 2021, I published reasons for judgment dismissing the plaintiffs’ claim under s 588FF(1)(a) of the Corporations Act 2001 (Cth) on the basis that the plaintiffs had failed to establish that the defendant had received more from the relevant payments than it would receive if the payments were set aside and the defendant were to prove as an unsecured creditor in the winding up of the second plaintiff. Had it been necessary to do so, I would have found on the balance of probabilities that the second plaintiff was insolvent at the time the relevant payments were made to the defendant: In the matter of Pacific Steelfixing Pty Ltd [2021] NSWSC 655 (the principal judgment).

2. The question of the costs of the proceedings was reserved to be determined on the papers after receiving written submissions from the parties. The plaintiffs provided written submissions on 21 June 2021 and the defendant provided written submissions on 25 June 2021.

3. These reasons assume familiarity with the principal judgment. Terms used in these reasons have the same meanings as in the principal judgment.

4. The plaintiffs contend that they should only be ordered to pay fifty per cent of the defendant’s costs assessed on the ordinary basis, reflecting that the plaintiffs were “ultimately successful on” the insolvency issue, which the plaintiffs describe as “the central issue in dispute”.

5. The defendant contends that the Court should make the following orders in relation to costs:

“1. Order that that defendant’s costs of these proceedings (including the defendant’s submissions on costs made on 25 June 2021), as agreed or assessed, be paid personally by the first plaintiff.

2. No order as to costs against the second plaintiff.”

6. The first plaintiff is the liquidator of the second plaintiff. The defendant does not seek any order precluding the first plaintiff from being indemnified for the costs out of the assets of the second plaintiff.

7. The plaintiffs’ solicitors advised my Associate on 5 July 2021 that the plaintiffs did not wish to make any submissions in response to the orders sought by the defendant.

8. For the reasons that follow, I have determined that the appropriate exercise of the discretion under s 98 of the Civil Procedure Act 2005 (NSW) in all the circumstances of this case is to order that the defendant’s costs of the proceedings (including the defendant’s submissions on costs made on 25 June 2021, but excluding the defendant’s costs of the report of Mr Nigel Markey dated 20 June 2020), be paid personally by the first plaintiff in such amount as is agreed or assessed.

9. It is true that, when the hearing commenced, the insolvency issue was the sole issue in dispute: see principal judgment at [6]. During the course of the three day hearing, the preference issue emerged as a further issue in dispute by reason of evidence that emerged from the first plaintiff’s evidence in cross‑examination and re-examination and from documents produced by third parties in answer to subpoenas issued by the first plaintiff shortly before the final hearing: principal judgment at [7]-[8], [82]-[84]. The plaintiffs bore the onus of proof in relation to both the insolvency issue and the preference issue: principal judgment at [9] and [93]. Failure by the plaintiffs to discharge the onus in relation to either of those issues would result in dismissal of the claim. The claim was dismissed because the plaintiffs failed to discharge the onus in relation to the preference issue: principal judgment at [94]-[99].

10. Having regard to the plaintiffs’ onus in relation to both issues, I do not accept the plaintiffs’ submission that the insolvency issue was “the central issue in dispute”. The insolvency issue and the preference issue were of equal importance, being elements of the question whether the relevant payments were voidable transactions. The significance of the preference issue on the facts of this case emerged during the hearing as a consequence of the incomplete state of the first plaintiff’s investigations into the second plaintiff’s affairs at the time these proceedings were commenced (and even as at the commencement of the final hearing): see principal judgment at [36]-[84]. That does not detract from the importance of the preference issue. In circumstances where the plaintiffs had to establish both insolvency at the time of the relevant transactions and that the transactions were unfair preferences in order to succeed on their claim, I do not consider that the insolvency issue was clearly dominant or separable from the other issues in the proceedings. The insolvency issue did occupy a material amount of time during the trial. In circumstances where the second plaintiff had prepared no financial statements prior to its winding up, and the plaintiffs adduced no expert evidence as to insolvency, it is unsurprising that time was taken in cross-examination and submissions concerning patterns revealed by transactions on the second plaintiff’s bank account and inferences that might be drawn from such patterns. With one qualification, I do not consider that the defendant’s conduct of the trial prolonged the time spent on the insolvency issue in a manner that warrants departure the usual order that costs follow the event: Uniform Civil Procedure Rules 2005 (NSW), r 42.1. The relevant event is the dismissal of the plaintiffs’ claim: Oikos Constructions Pty Ltd t/as Lars Fischer Construction v Ostin (No 2) [2021] NSWCA 98 at [11]-[16] (White JA, Basten and Macfarlan JJA agreeing).

11. The qualification referred to immediately above is that the defendant sought to tender under s 79 of the Evidence Act 1995 (NSW) a report of Mr Nigel Markey in relation to the question whether the second plaintiff was insolvent at the time of the relevant transactions. I rejected the report on the grounds that the opinions stated in it were either irrelevant to facts in issue or inadmissible because they did not comply with the requirements of s 79. In those circumstances, I accept the plaintiffs’ submission that it would be unjust for them to be required to pay the defendant’s costs of the preparation of that report. For that reason, the costs to which the defendant will be entitled under the order that I will make will exclude the costs of Mr Markey’s report. I note that the plaintiffs did not adduce any expert evidence in response to Mr Markey’s report.

12. As the defendant submitted, where a liquidator instigates proceedings, and those proceedings are unsuccessful, then an order for costs will generally be made against the liquidator personally: see Silvia v Brodyn Pty Ltd (2007) 25 ACLC 385; [2007] NSWCA 55 at [48]-[51] (Hodgson JA with whom Ipp and Basten JJA agreed). In my opinion, there is no reason to depart from that general position in this case. As I have already mentioned, the defendant does not submit that the first plaintiff should be deprived of his entitlement to an indemnity out of the assets of the second plaintiff.

13. For those reasons, I make the following order:

1. Order that that defendant’s costs of these proceedings (save for the costs referred to in order 2 below) be paid personally by the first plaintiff, in an amount to be agreed or assessed.

2. Order that the defendant pay its own costs of the preparation of the report of Mr Nigel Markey dated 20 June 2020.

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Decision last updated: 06 September 2021