In the matter of Rivercorp Pty Ltd

In the Federal Court of Australia, Rivercorp Pty Ltd, a company in liquidation, sought to recover certain tax amounts paid to the Commissioner of Taxation. The liquidator of the company filed a claim against the Commissioner, who subsequently joined the company's sole director as a third party in the proceedings. The matter settled without a hearing, with the liquidator proceeding against the director, who declined to admit the insolvency that was ultimately proven. The liquidator applied for an order that costs be awarded as if the Commissioner had not contested the claim, pursuant to UCPR rule 42.15. The central legal issue was whether the usual rule for costs, which applies when there is no contest by the defendant, should be applied in this scenario where the Commissioner did not contest the claim, but the director, who was joined as a third party, declined to admit insolvency.

The court found that while the Commissioner did not contest the claim, the director's refusal to admit insolvency constituted a contest. However, the court considered that the Commissioner's lack of contest and the liquidator's proof of insolvency, despite the director's refusal, warranted the application of the usual rule. The court concluded that the liquidator's success in proving insolvency, despite the director's refusal to admit it, was a significant factor. It held that the usual rule should apply, and the liquidator was entitled to costs as if the Commissioner had not contested the claim. The court emphasised that the principles for awarding costs in such cases should take into account the nature of the contest, the proof of insolvency, and the conduct of the parties involved.

The court further considered the equitable approach to costs in winding-up cases, noting that the liquidator's role is to recover assets for the benefit of creditors. It held that in this instance, the liquidator's success in proving insolvency, despite the director's refusal, warranted the application of the usual rule. The court awarded the liquidator costs as if the Commissioner had not contested the claim, reflecting the liquidator's success and the lack of contest by the Commissioner. The court's decision underscores the importance of the liquidator's role and the equitable treatment of costs in winding-up proceedings.