Knox v Nile

[2022] NSWSC 638

Supreme Court

New South Wales

Medium Neutral Citation:

Knox v Nile & Ors [2022] NSWSC 638

Hearing dates:

13 May 2022

Decision date:

23 May 2022

Jurisdiction:

Equity - Corporations List

Before:

Black J

Decision:

Orders made as to costs. The liquidator to have liberty to apply in respect of his remuneration as the liquidator of the Fifth Defendant.

Catchwords:

COSTS — Party/Party — General rule that costs follow the event — where an incorporated association was wound up on the just and equitable ground — where a party appeared under rule 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) — where various issues were agitated in proceedings, many of which were not determined — whether and against whom should any party be entitled to an order for costs

CORPORATIONS — Winding up — Liquidators — Receivers and managers — Voluntary administrators — Remuneration — where association progressed through voluntary administration, receivership and liquidation — whether the Court should approve the remuneration of the administrator and court-appointed receiver

Legislation Cited:

- Civil Procedure Act 2005 (NSW), s 98

- Insolvency Practice Schedule (Corporations), Div 60 Subdiv B

- Supreme Court (Corporations) Rules 1999 (NSW), r 2.13

Cases Cited:

- Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194

- Commonwealth of Australia v Gretton [2008] NSWCA 117

- Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34

- Hebbel Constructions Pty Ltd v Bitar Pty Ltd (2021) 153 ACSR 500; [2021] NSWSC 810

- Ide v Ide (2004) 184 FLR 44; (2004) 50 ACSR 324; [2004] NSWSC 751

- Knox v Nile & Ors [2022] NSWSC 195

- Knox v Nile & Ors [2022] NSWSC 229

- McNamara v San [2010] NSWSC 809

- Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120

- Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84

- Re Aberdeen All Farm Pty Ltd (in liq) [2020] NSWSC 770

- Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540

- Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229

- Re Boart Longyear Ltd (No 3) [2017] NSWSC 1227

- Re Cardinal Group Pty Ltd (in liq) and Cardinal Project Services Pty Ltd (in liq) (Lump Sum Costs) [2018] NSWSC 895

- Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292

- Re Metal Storm Ltd [2015] NSWSC 1699

- Re Minister for Immigration & Ethic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6

- Re Sakr Nominees Pty Ltd [2017] NSWSC 668

- Re Say Enterprises Pty Ltd [2018] NSWSC 396

- Re Sunnyside Bettoni Pty Ltd (No 2) [2020] NSWSC 1886

- Re Wine National Pty Ltd [2016] NSWSC 4

- Royds v Royds, Re Caloola Holdings Pty Ltd (in liq) [2017] FCA 731

- Templeton v Australian Securities and Investments Commission (2016) 108 ACSR 545

Category:

Costs

Parties:

Charles Robert Bray Knox (Plaintiff)
Fred Nile (First Defendant)
Silvana Nile (Second Defendant)
Annie Wright (Third Defendant)
Christian Democratic Party (Fred Nile Group) Incorporated (Fifth Defendant)

Representation:

Counsel:
T Hall (Solicitor – Plaintiff)
R Howard (Solicitor - First – Second Defendants)
R Balzola (Solicitor – Third Defendant)
J Brown (Solicitor – Former voluntary administrator, former receiver and liquidator)
J Green (Solicitor – Interested Party)

Solicitors:
Hall Partners (Plaintiff)
Owen Hodge Lawyers (First and Second Defendants)
Robert Balzola & Associates (Third Defendant)
Matthews Folbigg (Former voluntary administrator, former receiver and liquidator)
Gibson Howlin Lawyers (Interested Party)

File Number(s):

2020/270818

Judgment

1. I deal with the costs of long-running proceedings in this judgment. By way of background, the Plaintiff, Mr Knox, initially sought relief in respect of the affairs of the Fifth Defendant (“Association”) which was a political organisation incorporated under the Associations Incorporation Act 2009 (NSW) and was associated with the First-Third Defendants, Reverend Nile, Mrs Nile and Ms Wright and other persons. Other interlocutory applications were then brought by the several individual Defendants, Mr Knox and later by an intervening party, Mr Collins, and the ongoing disputes relating to the Association continued despite an agreement formed at an earlier mediation, a subsequent meeting of the Association, consent orders made by Henry J on 12 May 2021 (“May Consent Orders”) and the appointment of a receiver to conduct an election of office bearers in the Association. The existing disputes were not resolved by a hearing over several days before Rein J in November and December 2021.

2. New disputes as to the conduct of the election emerged in the course of a further two day hearing before me on 22-23 February 2022, which was directed to the question whether the Association should be wound up in insolvency or on the just and equitable ground, inter alia, by reason of the ongoing disputes and the costs incurred in the proceedings. Mr Knox sought such an order at that hearing and the individual Defendants resisted that order and, at times, contended that the proceedings should be dismissed without a determination on the merits of the remaining issues in dispute. Mr Condon, the receiver appointed to the Association by the May Consent Orders and now the liquidator to the Association, was represented at that hearing and Mr Collins was also heard at that hearing.

3. In my judgment delivered on 1 March 2022 (Knox v Nile & Ors [2022] NSWSC 195), I held that the Association should be wound up, and summarised the position (at [89]) as follows:

“The ongoing hostilities between the parties and persons associated with the Association in various capacities have continued since the Receiver’s appointment and it seems to me that the costs which have been incurred and will continue to be incurred in the receivership and the actual and potential claims for costs of these proceedings will likely dissipate the Association’s assets, in substantial part, before the proceedings are resolved so that its political purposes could not then be achieved. I am satisfied that these matters, combined with the lack of any apparent hope of resolution of the internal disputes within the Association in the foreseeable future and the inconsistency between the use of the Association’s resources for those costs and its specified purposes supports a winding up order. This is, of course, a question of degree and the proceedings are unusual because of the scale of the costs incurred; the fact that several attempts to narrow them (including the mediation and the May Consent Orders) have failed; the multiplication of interlocutory applications, the determination of which will likely not return the Association to functionality; and the fact that, as will emerge below, the differences between the parties and interested parties appear to be widening rather than narrowing.”

4. I indicated, in paragraph 107 of that judgment, the orders that I proposed to make which included a winding up order, the appointment of Mr Condon as liquidator, a stay of the winding up to 29 March 2022 and orders to allow the determination of any remaining issues in the proceedings, but allowed the parties an opportunity to make submissions as to the matter.

5. By my further judgment delivered on 8 March 2022 (Knox v Nile & Ors [2022] NSWSC 229) , I dealt with the submissions then made by the parties and made orders, including a winding up order which was stayed to 29 March 2022, against the contingency that the parties could reach agreement which would avoid the need for a winding up of the Association, and made orders to bring the remaining issues to hearing as follows:

“5.   The parties and interested persons advise all parties and the Associate to Black J which remaining applications are pressed by them and file and serve all further evidence and their submissions in respect of all remaining issues in the proceedings by 4pm on 16 March 2022, no further evidence to be relied on if filed and served after that date without leave.

6.   The parties and interested persons file and serve all further evidence and their submissions in reply by 4pm on 6 April 2022, no further evidence in reply to be relied on if filed and served after that date without leave.

7.   All remaining issues in the proceedings be listed for hearing before Black J on 13 May 2022.”

6. No party has identified any substantive issues that remain to be determined, and I will make an order that each of the remaining Notices of Motion in the proceedings, which have not previously been determined, be dismissed. The only remaining issue is that of costs.

Applicable principles

7. In dealing with the questions of costs, I bear in mind that the Court has power to make an order as to costs under s 98 of the Civil Procedure Act 2005 (NSW) and the discretion under that section is ordinarily exercised so that “costs follow the event”, under r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121] , Hodgson JA (with whom Mason P agreed) observed that:

“… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.”

8. That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] .

9. I also bear in mind that, in Re Minister for Immigration & Ethic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6, McHugh J in turn observed that:

“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.”

10. This well-established principle has been applied in many cases, including Metro Chatswood Pty Ltd v CRI Chatswood Pty Ltd [2007] NSWSC 1120 at [35] and McNamara v San [2010] NSWSC 809 at [12]. It is relevant here because there has been no determination on the merits of many issues raised by the parties which did not go to the appointment of the receiver or the winding up.

11. In respect of Mr Collins who was heard under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW) (“Corporations Rules”) rather than being joined as party to the proceedings, I also bear in mind the principles that I summarised in Re Boart Longyear Ltd (No 3) [2017] NSWSC 1227 at [4] as follows:

“I should first refer to the principles that generally apply in respect of an application for costs by a person who is heard in proceedings without becoming party to them, under r 2.13 of the Supreme Court (Corporations) Rules, although those general principles were not addressed in BLY’s and the Snowside companies’ submissions. In Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681 at [20], Barrett J observed that the Court had power to make an order against a party to proceedings in favour of non-parties, but also noted that a person who is granted leave to be heard without becoming party under r 2.13(1) of the Supreme Court (Corporations) Rules chooses a course that involves limited costs exposure to it and can have little expectation of being awarded costs, and that such an award, if appropriate, would be “extraordinary and exceptional” and require “some very special factor outside the ordinary and expected course of events and engendering a justifiable expectation of compensation in the mind of the non-party”. In Pan Pharmaceuticals, Barrett J held that such special factors were not present. On the other hand, in Re HIH Casualty and General Insurance Ltd [2006] NSWSC 6, Barrett J observed that parties there heard under r 2.13 made separate submissions that were highly relevant to the task of the Court in reaching its decision and special and unusual circumstances therefore warranted a costs order in the particular circumstances, although his Honour considered that only one set of costs should be ordered in the particular circumstances. I adopted the same approach in Re Gia Firenze Investments Pty Ltd [2013] NSWSC 99.

12. I also recognise the concern expressed by the Court of Appeal in Nichols v NFS Agribusiness Pty Ltd (2018) 97 NSWLR 681; [2018] NSWCA 84 as to the risk that litigation will “feed on itself”, including in respect of claims for costs”. That concern was recently emphasised by Leeming JA, sitting in the Corporations List, in Re Sunnyside Bettoni Pty Ltd (No 2) [2020] NSWSC 1886 at [13]ff.

The Plaintiff’s claim to costs

13. Mr Knox read numerous affidavits directed to the allegations which he had made in the proceedings, which were admitted with a limiting order under s 136 of the Evidence Act 1995 (NSW) as proof of those allegations rather than proof of the fact, where the latter would not be determined in a costs application. These included his affidavits dated 29 September 2020, 2 October 2020, 15 March 2021 and 15 November 2021, and the affidavits of Mr Schubert dated 5 October 2020 and Mr Banks dated 17 October 2020. He also tendered Mr Collins’ affidavits dated 21 October 2020 and 4 November 2020 (Ex P1) on the same basis. By submissions made on 16 March 2022, the Plaintiff, Mr Knox, indicated that he sought an order that his costs of the proceedings be paid by the individual Defendants, relevantly, Reverend Knox and Mrs Knox and Ms Wright or by the Association. He submits that his costs are “in some respects akin to costs in the winding up”. There is some force in that analogy, in respect of the proceedings from mid-2021, although he had previously raised several other issues to the conduct of the Association’s affairs in the proceedings. Those other issues have not been determined on their merits.

14. Mr Knox pointed out that he had sought relief in the proceedings, including restraints on the individual Defendants from acting as though they were members of the State Board of the Association and dealing with the Association’s accounts ; orders in respect of the Association’s finances and access to its books; an order that the Association’s management “remain under” the direction of a caretaker board; and declarations as to whether individual Defendants held offices with the Association. He submits that the making of a winding up order amounts, in substance, to success in respect of those orders. I do not accept that submission. The questions raised by those orders have not been determined. What has instead been determined is that the manner in which the Association’s affairs were conducted is such that it should be wound up, not least because of the continuing deadlock in its management and the continuing litigation.

15. I recognise that Mr Knox sought relief including the appointment of a receiver of the Association to conduct an election, which was ordered by Henry J although that election was not successfully conducted. I also recognise that Mr Knox did not initiate the application for the winding up order, although he, with explicit reluctance, supported the making of that order at the hearing before me in February 2022. That order was made where the parties were neither able to bring any order or proper governance to the Association’s affairs of the Association, or to bring the proceedings to a resolution in a way that would not erode the Association’s remaining assets.

16. Mr Knox also points to the fact that the individual Defendants had filed no Defence to the Statement of Claim and no evidence in the proceedings, notwithstanding that they had been ordered to do so, and he contends that also breached an agreement reached between the parties as to the convening of the November 2020 annual general meeting of the Association. The former is a relevant matter, so far as any of the Defendants may seek orders for costs in the proceedings. The latter allegation has not been determined on is merits. Mr Knox also refers to observations in an earlier judgment of Henry J leading to the appointment of Mr Condon as receiver and manager of the Association, with the intent (which was not achieved) that a further meeting of members of the Association would be convened, and to Mr Condon’s evidence as to the issues that were in dispute between the parties. The merits of those issues have also not been determined, and it not appropriate that they now be determined, in order to address a question of costs. Mr Knox also seeks to have the Court reach findings as to the extent to which Reverend Nile and Mrs Nile, by affidavits in the proceedings, genuinely sought to resolve the issues. I have addressed the approach taken by Reverend Nile and Mrs Nile in their evidence, in the earlier judgment, and it is otherwise not necessary or appropriate to address that question further, again where the Court has not reached findings on the merits.

17. Reverend Nile and Mrs Nile respond to Mr Knox’s claim for costs against them by pointing out that he has not obtained orders of any substance against them. That submission is plainly correct, so far as it is directed to disputes between those individuals inter se. They submit, on that basis, they should not be ordered to pay Mr Knox’s costs. They point to the fact that the proceedings involved allegations as to the Association’s governance and, I add, more precisely as to the conduct of the Association’s affairs. They point out that I reached no finding in respect of the allegation of oppression in my earlier judgment, although I found that the Association was properly wound up on the just and equitable ground.

18. By his submissions in reply dated 4 May 2022, Mr Condon indicated that he addressed the question of costs claimed by other parties against the Association, in order to protect its assets, where any surplus proceeds realised would be distributed in accordance with s 65 of the Associations Incorporation Act and in accordance with the Association’s constitution. He noted that Mr Knox appears to seek a costs order in respect of all costs incurred by him, and submits such an order should not be made against the Association. He submits, with substantial force, that the Association should not be required to pay costs referable to Mr Knox’s allegations of misconduct on the part of the individual Defendants, to the extent that Mr Knox alleged that they acted improperly as officers of the Association. Mr Condon also takes issue with Mr Knox’s attempt to characterise his costs as analogous to the costs sought in a winding up order, where the matters in issue in the proceedings and the scale of the proceedings were not confined to those which would ordinarily arise in an application for a winding up order, whether in insolvency or on the just and equitable ground. Mr Condon also draws attention to the position expressed by both Mr Knox and the individual Defendants in respect of Notices of Motion heard before Rein J on 10 November 2021, that they would not seek to have their costs paid by the Association, although I accept that position was expressed at a time the parties hoped that the Association would continue in existence.

13. In reply submissions, Mr Knox responded to the liquidator’s submissions, and acknowledged that the costs he claimed were not “a direct comparative to costs in a winding up”, but submits that the winding up of a corporation is a relevant comparison. He submits that the position as to costs that he expressed before Rein J was directed to the position where it was hoped that the Association would survive and is no longer applicable. He submits that he has had a degree of success in the proceedings, at least so far as he had sought an order for the appointment of a receiver, and that order was made by Henry J, and he submits that the winding up order “became an inevitable consequence as a result of the Defendants’ conduct”. I accept that order was the necessary consequence of the continuing deadlock and disorder in the Associations’ affairs, although no finding has been made on the merits as to whether the Defendants primarily, or the parties collectively, contributed to that result.

14. On balance, it seems to me that Mr Knox had a degree of success in the proceedings, in respect of the order for the appointment of a receiver made by Henry J. I bear in mind that all parties had indicated before Rein J on 10 November 2021 that they would not press an application for costs in respect of the motions before Rein J, where his Honour had rightly questioned the utility of dealing with the motions if they did so, given the evidence of the Association’s financial position. While Mr Knox contends that circumstances have now changed, as I noted above, I am not persuaded that I should disregard that position, particularly where Mr Collins has accepted in his costs application that he is bound by it. Mr Knox also supported the making of a winding up order , although he did not initiate it. While that does not warrant an order that his costs generally be paid by the Association, or an order that his costs be paid by the individual Defendants where the issues between them have not been determined on their merits, it warrants a limited costs order that the Association pay Mr Knox’s costs of his application for the appointment of a receiver and of the winding up, excluding any costs referable to the hearings before Rein J, as agreed or as assessed. Mr Brown, who appeared for the liquidator of the Association, fairly indicated that he could say nothing against that limited order.

The position of Reverend Nile and Mrs Nile

21. Reverend Nile, Mrs Nile and Ms Wright were represented by the same solicitors, and often by Counsel, during the large part of the proceedings, including the hearing as to whether winding up orders should be made. After delivery of my judgments to which I referred above, and shortly before the stay of the winding up order lapsed, Reverend Nile and Mrs Nile appointed a new solicitor in the proceedings on 24 March 2022; that solicitor then served a Notice of Intention to Cease to Act on 30 March 2022; but he nonetheless continued to act for them in respect of the costs hearing.

22. By an email dated 28 April 2022, the solicitor acting for Reverend Nile and Mrs Nile advised an “amendment” to their costs position, namely that they sought an order that their costs be paid from the assets of the Association. On the day before the hearing, on 12 May 2022, well after the date on which submissions and reply submissions were due, they filed written submissions. They did not seek to support those submissions by evidence. I have regard to those submissions, where the matters raised will not cause prejudice to other parties, who have had the opportunity to respond to them in oral submissions, and I have referred to aspects of those submissions in dealing with other parties’ claims to costs. Reverend Nile and Mrs Nile submit that Mr Knox should pay their costs, or alternatively their costs should be paid by the Association. They submit, without any evidentiary basis, that they have acted “for the purposes of and in the interests of” the Association and its members in the conduct of the proceedings.

23. By his submissions in reply dated 4 May 2022, Mr Condon pointed out that the submission made by Reverend Nile and Mrs Nile that their costs should be paid from the assets of the Association was inconsistent with the position that they put before Rein J, although I have recognised the basis on which that submission was likely put above, and also pointed out that that submission was not supported by either evidence or substantive submissions as to why such an order should be made. Mr Condon is correct as to those matters. Reverend Nile and Mrs Nile did not articulate any reasonable basis, and I can see no reasonable basis, either in the evidence or in the result of the proceedings, for making an order for costs in their favour.

The position of Ms Wright

24. Ms Wright also did not comply with the Court’s orders as to the timing of evidence or submissions for this hearing. She read her affidavits dated 6 December 2021 and 17 February 2022 and Mr Voyias’ affidavit dated 18 February 2022, which were also admitted with a limiting order under s 136 of the Evidence Act as proof of her allegations and not proof of the fact. She did not press an application for leave to read her further, largely inadmissible, affidavit dated 12 May 2022 which was filed and served out of time. In submissions dated 11 May 2022, Mr Balzola, who previously acted for Reverend Nile, Mrs Nile and Ms Wright and now acts only for Ms Wright, referred to the history of the proceedings, which sufficiently emerges from my earlier judgments and the outline which I have set out above. He accepts that it is not necessary to determine any remaining issues in the proceedings other than costs, or any remaining notices of motion, given the winding up order that has now been made in respect of the Association.

25. Ms Wright opposes any order that she be required to pay Mr Knox’s costs, and submits that he has been “unsuccessful” in the proceedings, where he did not obtain the relief sought, although the Court ultimately found that the Association should be wound up. Ms Wright then contends that she was “shut out of” negotiations prior to the winding up order taking effect, when the Reverend Nile and Mrs Nile appointed a new solicitor, separating their defence and their position from Ms Wright. It is not necessary to determine any question as to the dealings between Reverend Nile and Mrs Nile on the one hand and Ms Wright on the other in order to determine any question of costs, both because those costs substantially relate to the period in which those Defendants shared common representation, at least up to the date of my second judgment, and because Ms Wright led no admissible evidence as to those matters. Where I have not found that Mr Knox is entitled to an order for costs against the individual Defendants, no question whether Reverend Nile or Mrs Nile on the one hand, or Ms Wright on the other, or all of them, should bear such an order arises. Ms Wright also submits that the Association should pay her costs, and that Reverend Nile and Mrs Nile should pay her costs from the point at which they appointed a new legal representative.

26. Reverend Nile and Mrs Nile responded to Ms Wright’s submissions, including as to negotiations in the period before the winding up order took effect, and contested the accuracy of those submissions. It is not necessary or appropriate to determine that contest, where (as I noted above) Ms Wright did not press her application for leave to read her affidavit dated 12 May 2022 and Reverend Nile and Mrs Nile led no evidence to support the position they advanced. Reverend Nile and Mrs Nile also advanced a submission, which I need not address given the findings I have reached on other grounds, that the solicitor who previously acted for each of the individual Defendants and now acts only for Ms Wright, is conflicted when seeking to prosecute a claim for costs on behalf of Ms Wright against them.

27. There is no basis for an order that the Association pay Ms Wright’s legal costs, for the same reason that there is no basis for an order that it pay Reverend Nile and Mrs Nile’s costs, and no basis was articulated or shown for any orders as to costs between Reverend Nile, Mrs Nile and Ms Wright inter se. Ms Wright also indicates the anticipated total of her costs. It is not necessary to address that matter, where no order as to costs will be made in her favour.

The position of Mr Collins

28. As I noted above, Mr Collins was heard under r 2.13 of the Corporations Rules at the hearings before Rein J and before me. I have referred above to the circumstances in which a costs order may be made in favour of a person heard on that basis. Mr Collins complied with the Court’s order to indicate his position by 16 March 2022, and indicated that he did not press his Notice of Motion filed 2 November 2021 and did not seek costs in relation to that motion. He accepted that the appropriate order was that that motion be dismissed with no order as to costs, with the intent that each party bear their own costs of that motion, except to the extent that the receiver’s costs were otherwise provided for. He indicated that he did not seek any order in respect of costs of other motions or the hearings before Rein J. Mr Collins only sought his costs of, and incidental to, the appearances before me in respect of the winding up. He made no submission as to the substantive proceedings between Mr Knox and the Defendants, as to which he had not sought leave to intervene.

29. Mr Knox indicated that he did not oppose Mr Collins’ claim for costs and did not contest the proposition that Mr Collins “contributed positively to the debate”. The liquidator also indicated that he neither opposed or consented to Mr Collins’ application, and that it was a matter for the Court. The liquidator fairly drew attention to, and Mr Collins fairly accepted, that all parties had indicated before Rein J on 10 November 2021 that they would not press an application for costs in respect of the motions before Rein J, where his Honour had rightly questioned the utility of dealing with the motions if they did so, given the evidence of the Association’s financial position. As I noted above, Mr Collins fairly treats himself as bound by that indication, and does not seek the costs of that motion or any costs that he had incurred in respect of other motions, and his claim for costs is limited to his appearances in the subsequent applications before me, which were outside the scope of the concession made before Rein J. Mr Collins submits, and I accept, that the issues determined in the Corporations List, after Rein J had referred the question of the Association’s solvency to that List, were distinct from those previously raised before Rein J and by the motions previously filed in the proceedings.

30. Mr Green, who appeared for Mr Collins, submits, and I accept, that Mr Collins’ submissions on the winding up of the Association were put effectively, and from a neutral standpoint. He submits, and I also accept, that Mr Collins’ intervention was for the benefit of members generally. It will be apparent from a review of my earlier judgment that I gained considerable assistance from the submissions made on Mr Collins’ behalf, although the constructive approach which he adopted was ultimately not sufficient to avert the winding up of the Association, given the attitude of other parties and the failings in its governance. Mr Green also points to the benefit to the Court of receiving a “non-partisan submission put from the perspective of a member of the Association” who had no personal interest in the outcome, as distinct from his interest as a member. I accept that submissions from that perspective also had utility. I also bear in mind that, as I noted above, costs are only ordered in respect of a party appearing under r 2.13 of the Corporations Rules in limited circumstances. I am satisfied that Mr Collins’ involvement and his submissions in the proceedings were of sufficient assistance to the Court to warrant an order for costs in his favour, which I will make.

31. Mr Collins indicated his willingness to accept a fixed costs order, in an amount of $23,500, representing 70% of his solicitor/client costs. The applicable principles were summarised by Gleeson JA in Re Cardinal Group Pty Ltd (in liq) and Cardinal Project Services Pty Ltd (in liq) (Lump Sum Costs) [2018] NSWSC 895 as follows:

“The Court has a wide discretion to award costs under s 98(1) of the Civil Procedure Act 2005 (NSW). Under s 98(4), the Court has power to fix the costs of the successful party as a specified gross sum. That power is broad and may be exercised whenever the circumstances warrant it: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [21] (in respect of a predecessor statutory provision); Hamod v NSW [2011] NSWCA 375 at [813]; Penson v Titan National Pty Ltd (No 3) [2015] NSWCA 121 at [4] –[6] .

It has been said that it may be appropriate to fix costs in a gross sum in very short and relatively simple matters where the mechanism provides a more convenient alternative to assessment. The rationale is that where the quantum of costs in issue is a very modest sum, it is appropriate that the Court exercise its power to fix costs in a gross sum so as to avoid the potential for unnecessary expense and delay associated with the process of assessment: Bobb v Wombat Securities Pty Ltd (No 2) [2013] NSWSC 863 at [6]; Re Palladium Consulting Pty Ltd [2013] NSWSC 92 at [14]; [2016] NSWSC 903 at [33] .

As explained by Brereton J in Re Niruzzi Pty Ltd [2012] NSWSC 773 at [5] , a case involving proceedings in the Corporations List to set aside a statutory demand:

… it is highly desirable that questions of costs be resolved expeditiously and without recourse to the process of assessment by a costs assessor, incurring, as it does, additional costs and delay.

As to quantification of a lump sum costs order, the Court is not required to undertake a line-by-line analysis of the costs claimed (as that would be inconsistent with the rationale behind the lump sum costs order process). Rather, the Court should take a broad-brush approach in a way that may involve an impressionistic discount of the costs actually incurred, which is estimated to take into account the contingencies that would be relevant in any formal costs assessment: Harrison v Schipp at [22]; Re Aquaqueen International Pty Ltd [2015] NSWSC 500 at [19]; Russo v Russo (No 4) [2016] NSWSC 1133 at [5].”

32. Mr Collins led limited evidence to support the quantification of the amount claimed, but it is proportionate to his involvement and the discount applied is consistent with that which has often been applied in gross sum costs orders, and there is an advantage to the liquidation in avoiding the additional costs of an assessment. On balance, I will make the gross sum costs order sought by Mr Collins on that basis.

The administrator’s and receiver’s claim for remuneration and disbursements

33. By an Amended Notice filed on 13 May 2022, by leave, Mr Condon, who was originally the voluntary administrator appointed to the Association, subsequently its Court-appointed receiver and now its liquidator, seeks an order that he be paid the amount of $87,043.34 inclusive of GST and disbursements on account of his remuneration for acting as administrator of the Association for the period from 9 April 2021 to 12 May 2021, and that he be paid the amount of $386,610.96 inclusive of GST and disbursements, on account of his remuneration for acting as a Court receiver for the period from 13 May 2021 to 29 March 2022. In the course of the hearing Mr Condon recalculated those amounts so that they refer only to costs and not disbursements, and now seeks remuneration of $40,401 exclusive of GST and disbursements in respect of the voluntary administration and remuneration of $189,294.50 exclusive of GST and disbursements in respect of his appointment as receiver. Mr Brown, who appeared for Mr Condon, indicated this would complete his claim for remuneration for these appointments, although a further claim for remuneration will be made in respect of his appointment as liquidator of the Association from 30 March 2022. It is only necessary for me to deal with the question of remuneration payable to Mr Condon, which represents a proportion of these amounts, where an insolvency practitioner does not ordinarily require the Court’s approval for the payment of reasonable costs and disbursements. Before doing so I should first refer to the applicable principles.

34. Division 60 Subdiv B of the Insolvency Practice Schedule (Corporations) (“IPSC”) permits an external administrator (including a voluntary administrator) to claim remuneration determined, inter alia, by the Court. In determining the amount of that remuneration, the Court must have regard to the matters specified in IPSC s 60–12, and I summarised relevant matters in Re Sakr Nominees Pty Ltd [2017] NSWSC 668 at [23]ff, there dealing with a liquidator’s remuneration, as follows:

“A liquidator is entitled to reasonable remuneration for his or her services and the liquidator bears the onus of establishing that the amount of remuneration they seek is fair and reasonable and, in determining a liquidator’s reasonable remuneration, the Court will have regard to the factors specified in s 473(10) of the Corporations Act, to which I refer further below. The Court must bring an independent mind to bear on the question whether the remuneration sought by a liquidator is fair and reasonable; the liquidator must lead evidence in sufficient detail that the Court can determine that question; and the Court will generally need to be provided with an account in itemised form, setting out at least the details of the work done; the persons who did the work; the time taken to perform the work; the remuneration claimed; and, to the extent relevant, the expenses incurred by the liquidator: Venetian Nominees Pty Ltd v Conlan (1998) 20 WAR 96 at 102–103. Proportionality is an important matter in considering the question of whether remuneration is reasonable, and the “value” of a liquidator’s work can include the benefit of resolving the position of creditors and beneficiaries; the benefit to the community of not permitting assets to remain unproductively in the hands of a defunct company for a long period; and can include work that was required to be done, although it did not result in a return to creditors: Thackray v Gunns Plantations Ltd [2011] VSC 380; (2011) 85 ACSR 144 at [64]; Macks v Maka [2015] SASC 200; (2015) 110 ACSR 279 at [52]–[66]; Warner, Re GTL Tradeup Pty Ltd (in liq) [2015] FCA 323; (2015) 104 ACSR 633 at [70]–[71]; Templeton v Australian Securities and Investments Commission [2015] FCAFC 137; (2015) 108 ACSR 545 .

Most decisions in both State Supreme Courts and in the Federal Court of Australia have applied time costing as at least the starting point for a calculation of remuneration, although those decisions also emphasise the need for proportionality between the cost of the work done and the value of the services provided: Venetian Nominees Pty Ltd v Conlan above; Templeton v Australian Securities and Investments Commission above; Warner, Re GTL Tradeup Pty Ltd (in liq) above. There has been a degree of concern as to time-based remuneration, over a considerable period, although it must be accepted that remuneration on that basis is now more common. I reviewed the relevant authorities, including the observations of Finkelstein J in Re Korda; Re Stockford Ltd [2004] FCA 1682; (2004) 140 FCR 424, and subsequent decisions in this Court echoing the same concern, in Re Idylic Solutions Pty Ltd atf Super Save Superannuation Fund [2016] NSWSC 1292; (2016) 115 ACSR 581 at [27]–[50] and Gleeson JA has similarly viewed those cases in Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 at [38] ff. Several recent decisions, of which the previous decision of Brereton J in this case was one, have emphasised the significance of the percentage that a liquidator’s remuneration bears to the level of asset realisations achieved, and applied percentages of recoveries where time-based calculations would have led to unreasonable results: Re AAA Financial Intelligence Ltd (in liq) (No 2) [2014] NSWSC 1270; Re Gramarkerr Pty Ltd [2014] NSWSC 1299; Re Gramarkerr Pty Ltd (No 2) [2014] NSWSC 1405; Re Independent Contractor Services (Aust) Pty Ltd (in liq) (No 2) [2016] NSWSC 106; (2016) 305 FLR 222; Re Sakr Nominees Pty Ltd above. A percentage of realisations can also be used as a test of whether remuneration claims brought by a liquidator on a time costing basis are reasonable: Re Clout (in his capacity as liquidator of Mainz Developments Pty Ltd) (in liq) [2016] NSWSC 1146; (2016) 115 ACSR 459; Re Idylic Solutions Pty Ltd atf Super Save Superannuation Fund above.

In Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr above, Bathurst CJ (with whom the other members of the Court of Appeal agreed) observed (at [54]) that the onus is on a liquidator to establish that the remuneration claimed is reasonable, and it is the Court’s function to determine that remuneration by considering the material provided to it and bringing an independent mind to bear on the relevant issues; that many of the factors specified in s 473(10) of the Corporations Act have the concept of proportionality as an underlying theme, and that concept is an important consideration in determining whether remuneration is reasonable, so that the work done must be proportionate to the difficulty and importance of the task in the context in which it needs to be performed (at [55]); and that the fact that work does not increase the funds available for distribution to creditors or contributories does not mean that the liquidator is not entitled to be remunerated for it, where it was reasonable to carry out that work and the amount charged is reasonable (at [57]–[58]). The Court of Appeal’s decision in Sanderson, as liquidator of Sakr Nominees Pty Ltd (in liq) v Sakr above does not prefer any of the particular approaches to remuneration to which I have referred above to any other of those approaches and, in particular, does not require a time-based approach to remuneration to be adopted in preference to percentage-based approach to remuneration. Whether time-based remuneration or a percentage of recoveries is appropriate in a particular case will depend, in part, on the basis on which the liquidator puts his or her application for remuneration; in part, on the view taken by any persons who oppose the remuneration application; and, in part, the view taken by the Court.”

35. The Court must apply an independent mind to whether the remuneration sought relates to necessary work which was properly performed and consider the proportionality between the remuneration claimed and the benefit received by creditors in relation to the work, although it is not the Court’s function to undertake a line-by-line review of the narratives in the time schedules, but to review the evidence in a broad way to satisfy itself that it supports the other evidence that is led: Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) [2017] NSWSC 540 at [48]; Re Aberdeen All Farm Pty Ltd (in liq) [2020] NSWSC 770 at [36].

36. The remuneration of a Court-appointed receiver may be approved by the Court which appointed that receiver: Australian Securities and Investments Commission v Lawrenson Light Metal Die Casting Pty Ltd (1999) 33 ACSR 288; [1999] VSC 500. In Ide v Ide (2004) 184 FLR 44; (2004) 50 ACSR 324; [2004] NSWSC 751 at [39]ff, Young CJ in Eq described the Court’s role in determining such an application (omitting authorities) as follows:

“First, the court constituted by a judge, never considers a review of quantum, but only matters of principle.

Secondly … a receiver is entitled to have his costs, charges and expenses properly incurred in the discharge of his ordinary duties, or in the performance of extraordinary services which have been sanctioned by the court.

Thirdly …:

The receiver must justify the reasonableness and prudence of the tasks undertaken for which remuneration is sought, in the same way as he must justify the reasonableness and prudence of incurring disbursements for which he seeks allowance and reimbursement.

Thus, as with a falsification of accounts, the relevant onus is on the receiver.

Fourthly, it must always be remembered that a receiver’s remuneration is not in the same category as costs … The receiver is making application for a fair recompense for what he or she has properly done. The award is in the discretion of the court according to well known guidelines …

Fifthly, the court’s objective is to award a sum or devise a formula which will reasonably compensate the receiver for the time and trouble expended in the execution of his duties and, to some extent, the responsibility he has assumed … the vital question is what is the value to the estate of the work done by the receiver ...

Sixthly, the court will usually work off time sheets created in the receiver’s office provided that they do significantly more than merely detail the total number of hours spent by the receiver and officers of particular grades on his or her staff ….

Seventhly, the court is guided by professional scales of charges … What is important is the broad average or general rate charged by persons of the relevant status and qualifications who carry out the relevant type of work.”

37. In Re Metal Storm Ltd [2015] NSWSC 1699 at [11], I observed that the relevant principles:

“… include the fact that Court appointed receivers are entitled to remuneration, and indeed their entitlement to remuneration is a necessary feature of the Court's ability to appoint insolvency practitioners to such a position. [Counsel there] notes authority that Court appointed receivers are required to have their remuneration approved by the Court before they are permitted to draw payment. There are many examples of cases where that has occurred including, for example, Re Application of Crouch [2005] NSWSC 1122 and Coeclerici Asia (Pte) Ltd v Gujarat NRE Coke Ltd (No 2) [2015] FCA 809. The latter case is useful because it also involved a case where a significant amount of work had to be done by receivers to realise value in shares of which they had been appointed receivers where they had experienced considerable difficulty in selling those shares. In that case, Foster J approved the receivers’ remuneration, observing that he was satisfied they had approached the task entrusted to them with skill and competence and had set out about realising the assets for the benefit of the relevant creditors.”

38. The Court will otherwise assess a receiver’s remuneration in the same way it will assess that of an external administrator: Re Wine National Pty Ltd [2016] NSWSC 4 at [13]; Re Idylic Solutions Pty Ltd as trustee for Super Save Superannuation Fund [2016] NSWSC 1292 at [58]; Re Banksia Securities Ltd (in liq) (recs and mgrs apptd) above at [48]; Re Banksia Securities Limited (in liq) (recs and mgrs apptd) [2018] NSWSC 229; Hebbel Constructions Pty Ltd v Bitar Pty Ltd (2021) 153 ACSR 500; [2021] NSWSC 810 at [26]ff.

39. I proceed on the basis that no Court approval or specific order is necessary in respect of a receiver’s disbursements, in the absence of a challenge, although receivers should scrutinise them to ensure that they are reasonable and properly payable, and the Court has an inherent jurisdiction to review receivers’ disbursements as they are officers of the Court: Re Say Enterprises Pty Ltd [2018] NSWSC 396 at [6]; Hebbel Constructions Pty Ltd v Bitar Pty Ltd above at [36]. No challenge to Mr Condon’s disbursements was identified that warrants the Court’s approval of or any review of them, and Mr Brown did not press an application for their approval. I have regard to the amount claimed for disbursements, including legal costs, in assessing the reasonableness of the remuneration claimed by Mr Condon.

40. Mr Condon relies on his affidavit dated 16 March 2022, the affidavit of his solicitor Mr Brown dated 16 March 2022, his further affidavit dated 11 May 2022 and his solicitor’s further affidavit dated 10 May 2022. I granted leave to rely on the two further affidavits, where they are updating affidavits in respect of costs (and disbursements, to the extent that they are relevant) and it is in all parties’ interests to avoid, so far as is possible, the need for a separate application in respect of remuneration for the period addressed by the further affidavits.

41. In his first affidavit dated 16 March 2022, Mr Condon gives evidence of his experience as a liquidator and trustee in bankruptcy, and the experience of staff who have worked on the matter and their charge-out rates. He sets out the history of his appointment, initially as voluntary administrator of the Association, in an appointment which was subsequently validated by Henry J, and subsequently as receiver and manager of the assets of the Association with the purpose of convening an extraordinary general meeting, which, as I noted above, could not be achieved by reason of the difficulty in identifying the Association’s members and branches and the continuing disputes between the parties and within the Association. He identifies the issues which arose in respect of the Association and its receivership, to which I referred in my earlier judgment. He also sets out the steps which he took as receiver of the Association, including his attempts to identify the valid branches and members of the Association and to maintain control over the Association’s ongoing income and expenditure. He refers to a dispute as to the employment of a staff member of the Association, and its impact on the work required in the receivership. He also refers to issues arising in respect of the proposed extraordinary general meeting which resulted in further applications to the Court, and identifies the assets and creditors of the Association.

42. Mr Condon also refers to the manner in which records of time spent by his staff have been maintained, and to his review of work in progress and time records to ensure that time has been recorded against the appropriate matter and truly relates to either the administration or receivership of the Association, and to the information which is maintained in time recording records as to the nature of tasks undertaken. He refers to the separation of time ledgers into category, including the administration generally, aspects of the administration relating to the proceedings, the receivership generally, aspects of the receivership relating to the proceedings and hearings before Rein J, and subsequent hearings before me from 8 December 2021. I have had regard to the time entries which are recorded in the time ledgers, as exhibited to Mr Condon’s first affidavit. Mr Condon expresses the view that the time spent by his staff members in respect of the administration and the receivership fairly reflected the work required to be done, that work was performed in an efficient and timely manner, and that the hourly rates of staff members were reasonable, having regard to their experience and the hourly charge-out rates of other firms. While that evidence is not conclusive, it is desirable that an insolvency practitioner address those matters in an application of this kind. Mr Condon also expresses the view that the amount claimed is fair and reasonable, and there is evidence that he has significantly discounted the time recorded and the costs claimed.

43. Mr Condon’s evidence is that the matter was not a straightforward one, and the Court’s several judgments amply demonstrate that matter. He refers to additional work which will be required to finalise the receivership of the Association and to conclude the liquidation, on the assumption that there will not be further protracted litigation. He anticipates that surplus funds will be available following a liquidation of the Association, subject to the parties’ claim for costs in these proceedings which I have addressed above. Mr Condon’s first affidavit addressed his costs incurred up to 14 March 2022. By his second affidavit dated 11 May 2022, Mr Condon addressed work done in the receivership up to 29 March 2022, when the winding up orders took effect, and addressed the total remuneration claimed for the receivership including the additional work undertaken in that month.

44. By his first affidavit dated 16 March 2022, the solicitor acting for Mr Condon, Mr Brown, refers to legal work done in respect of the administration and receivership of the Association. It is not necessary to address that affidavit further, where I do not propose to make orders in respect of legal costs incurred, which are properly addressed by the administrator and the receiver as a disbursement and do not require approval by the Court. Mr Brown’s further affidavit dated 10 May 2022 addressed additional work undertaken by his firm, as solicitors for Mr Condon, in that further period, but that is again to be treated as a disbursement rather than as an aspect of Mr Condon’s remuneration requiring the Court’s approval. As I noted above, it is not necessary for the Court to approve the legal costs incurred by Mr Condon. However, I have had regard to them in considering the amount of remuneration that he claims. I am satisfied that the legal costs that Mr Condon has incurred, although substantial, do not give rise to any reason to think that his claim for remuneration is unreasonable.

45. In submissions, Mr Brown refers to the case law indicating the approach taken to the remuneration of a voluntary administrator, Court-appointed receiver or liquidator, and recognises the importance of proportionality. He also points out, as the Full Court of the Federal Court recognised in Templeton v Australian Securities and Investments Commission (2016) 108 ACSR 545, that some work will be required of insolvency administrators or receivers although its benefit may be unclear, and that whether work was reasonably undertaken is to be assessed at the time it was done rather than by reference to its outcome. He also submits, and I accept, that courts now regularly accept time costing in respect of an insolvency practitioner’s remuneration, although the case law has been alert to the potential difficulties with that approach. Mr Brown in turn refers to Mr Condon’s explanation of the work that he and his staff have done in respect of his role as voluntary administrator and subsequently as receiver of the Association, and submits that the Court should be satisfied that the work done fell within the scope of the respective appointments and was reasonably necessary to achieve the purpose of that appointment. He submits that the hourly rates claimed are reasonable, and I accept that proposition, having regard to market rates and the experience of Mr Condon and his staff. I also recognise that there appears to have been an appropriate allocation of work between Mr Condon and other members of his staff.

46. Mr Balzola submits that any order for remuneration of the administrator or receiver should be made on the basis that the amount be “as agreed or assessed”. That misunderstands the basis on which the remuneration of an insolvency practitioner is determined or on which an insolvency practitioner may reach his or her own determination as to the costs payable to his or her legal representatives and other disbursements.

47. I am satisfied that, in the relatively complex circumstances that had to be addressed by Mr Condon as voluntary administrator and Court-appointed receiver, which involved continuing litigation and disputes as to the identity of the Associations membership and branches, the remuneration he claims is reasonable, the work done by Mr Condon and his staff was reasonably undertaken, and the rates charged and distribution of work between staff was reasonable. The amounts claimed for his remuneration as voluntary administrator and receiver should therefore be approved.

Orders

48. For these reasons, I make the following orders:

1. The motions dated 30 September 2021, 13 October 2021, 2 November 2021, and all other claims made by any party in the proceedings, be dismissed.

2. The costs of the Plaintiff in respect of the appointment of the receiver and the winding up, excluding any costs referable to the hearings before Rein J, be paid out of the assets of the Fifth Defendant as agreed or as assessed.

3. The costs of Mr Collins of and incidental to the matters listed before Black J be paid out of the assets of the Fifth Defendant, quantified on a gross sum basis as $23,500.

4. There be no order as to the costs of the First – Third Defendants in the proceedings, with the intent that each of them bear their own costs.

5. Mr Condon’s remuneration for acting as voluntary administrator of the Association for the period from 9 April 2021 to 12 May 2021 be approved in the amount of $40,401 exclusive of GST and disbursements.

6. Mr Condon’s remuneration for acting as a Court-appointed receiver to the Fifth Defendant for the period from 13 May 2021 to 29 March 2022 be approved in the amount of $189,294.50 exclusive of GST and disbursements.

7. The reasonable costs and expenses of the proceedings of Mr Condon be paid from the assets of the Fifth Defendant.

8. Reserve liberty to Mr Condon as the liquidator of the Fifth Defendant to apply in respect of his remuneration in that capacity.

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Decision last updated: 24 May 2022