Krejci, in the matter of Sydney Exotic Aquariums Casula Pty Ltd (in liq) (No 2)
[2025] FCA 211
•18 March 2025
FEDERAL COURT OF AUSTRALIA
Krejci, in the matter of Sydney Exotic Aquariums Casula Pty Ltd (in liq) (No 2) [2025] FCA 211
File number(s): NSD 1287 of 2024 Judgment of: PERRY J Date of judgment: 18 March 2025 Catchwords: COSTS – examinee failed to attend Court in answer to an examination summons without reasonable cause – where arrest warrant to issue the next day absent further evidence of a reasonable excuse or attendance– application for indemnity costs fixed on a gross lump sum basis – whether special circumstances justify indemnity costs – whether liquidator engaged in disentitling conduct– whether application for indemnity costs procedurally fair– whether liquidator entitled to costs thrown away Legislation: Corporations Act 2001 (Cth) ss 596A, 1335(2)
Federal Court of Australia Act 1976 (Cth) ss 37AF(1)(b), 37AG(1)(a), 37AJ, 43
Federal Court (Corporations) Rules 2000 (Cth) r 11.10
Cases cited: Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873
AOU21 v Minister for Home Affairs (No 2) [2021] FCAFC 212
Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd (No 3) [2021] NSWSC 1537
Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225
Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2009] FCA 399; (2009) 176 FCR 348
Hamod v New South Wales [2002] FCA 424; (2002) 188 ALR 659
Hughes, in the matter of Firepower Operations Pty Ltd (in liq) (No 3) [2010] FCA 141
Hughes, in the matter of Firepower Operations Pty Ltd (in liq) (No 2) [2009] FCA 1457
Jadwan Pty Ltd v Rae & Partners (A Firm) [2023] FCAFC 182
Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (in liq) [2011] FCAFC 136; (2011) 197 FCR 113
Krejci, in the matter of Sydney Exotic Aquariums Casula Pty Ltd (in liq) [2024] FCA 1409
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
Seafolly Pty Ltd v Madden (No 6) [2015] FCA 1369
Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 61 Date of last submission/s: 19 December 2024 Date of hearing: Determined on the papers Counsel for the Plaintiff: Mr M L Rose Solicitor for the Plaintiff: ERA Legal Counsel for Mr Panella: Mr N Y H Li Solicitor for Mr Panella: McEvoy Legal ORDERS
NSD 1287 of 2024 IN THE MATTER OF SYDNEY EXOTIC AQUARIUMS CASULA PTY LTD (IN LIQUIDATION) (ACN 649 148 014)
BETWEEN: MR PETER KREJCI IN HIS CAPACITY AS LIQUIDATOR OF SYDNEY EXOTIC AQUARIUMS CASULA PTY LTD (IN LIQUIDATION) (ACN 649 148 014), RICHMOND LIFTS PTY LTD (IN LIQUIDATION) (ACN 608 024 719), AND UNITED LIFTS TECHNOLOGIES PTY LTD (IN LIQUIDATION) (ACN 659 501 532)
Plaintiff
AND: SYDNEY EXOTIC AQUARIUMS CASULA PTY LTD (IN LIQUIDATION) (ACN 649 148 014)
First Defendant
RICHMOND LIFTS PTY LTD (IN LIQUIDATION) (ACN 608 024 719)
Second Defendant
UNITED LIFTS TECHNOLOGIES PTY LTD (IN LIQUIDATION) (ACN 659 501 532)
Third Defendant
ORDER MADE BY:
PERRY J
DATE OF ORDER:
18 MARCH 2025
THE COURT ORDERS THAT:
1.Mr Teddy Panella is to pay, on an indemnity basis:
(a)the plaintiff’s costs thrown away by reason of his failure to appear at the examination in this Court on 9 December 2024; and
(b)the plaintiff’s costs of, and incidental to, the plaintiff’s interlocutory application of 9 December 2024.
2.The costs referred to in order 1 are fixed in the sum of $15,000 (including any applicable GST).
3.Mr Teddy Panella is to pay the plaintiff’s party/party costs of this application for costs fixed in the sum of $1,500 (excluding GST).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
PERRY J:
1 INTRODUCTION
[1]
2 BACKGROUND
[6]
3 RELEVANT PRINCIPLES
[22]
4 DISPOSITION
[30]
4.1 The award of indemnity costs
[30]
4.2 The Liquidator’s conduct on 10 December 2024
[40]
4.3 The allegation of procedural unfairness
[48]
4.4 Costs thrown away
[51]
4.5 Lump sum costs order
[53]
5 CONCLUSION
[60]
1. INTRODUCTION
This is an application by the plaintiff, the Liquidator of Sydney Exotic Aquariums Casula Pty Ltd (in liq); Richmond Lifts Pty Ltd (in liq); and United Lifts Technologies Pty Ltd (in liq) (the Companies), against Mr Teddy Panella. Mr Panella is an examinee who was served on 11 November 2024 with an examination summons requiring him to attend a public examination on 9 December 2024 regarding the examinable affairs of the Companies.
The Liquidator seeks their costs thrown away by reason of Mr Panella’s failure to appear in compliance with the examination summons, as well as the costs of and associated with the Liquidator’s urgent interlocutory application dated 9 December 2024 which sought orders, including an arrest warrant. The Liquidator contends that these costs should be awarded on an indemnity basis and fixed in a lump sum of $15,000 (including any applicable GST).
Mr Panella accepts that he should pay the costs of the interlocutory application but contends that those costs should be awarded on an ordinary party/party basis. As such, he opposes the application for indemnity costs. Mr Panella also opposes the making of any costs order in respect of costs thrown away, and contends that, if a gross sum costs order is to be made, that amount should be in the sum of $8,300 (excluding GST) only.
Orders were made by Registrar O’Connor on 10 December 2024 for the parties to file and serve evidence and submissions on the application for costs, and for the matter to be determined on the papers.
For the reasons set out below, I agree that the Liquidator should be awarded its costs thrown away and in respect of the urgent interlocutory application. I am also satisfied that costs should be taxed on an indemnity basis and fixed in sum of $15,000 (including any applicable GST).
2. BACKGROUND
The Liquidator was appointed by creditors of each of the Companies on 11 April 2024, replacing the liquidator appointed by the Companies who had been appointed to that role on 28 November 2023.
On 26 September 2024, Jackman J made orders pursuant to s 596A of the Corporations Act 2001 (Cth) for the issue of a summons for examination regarding the examinable affairs of the Companies and addressed to Mr Panella. Mr Panella was served with this summons on 11 November 2024.
On 4 December 2024, Shariff J, as duty judge, heard an urgent application by a number of individuals and entities, including Mr Panella, for an adjournment of the hearing of the examinations which were scheduled to commence the next day before a registrar of this Court: Krejci, in the matter of Sydney Exotic Aquariums Casula Pty Ltd (in liq) [2024] FCA 1409. The purpose of the adjournment was to enable the applicants to be heard on their application for an extension of time to bring an application to discharge summonses that had been served on each of them on the ground that the summonses had been sought for an improper purpose and were therefore an abuse or process. In rejecting the adjournment application, Shariff J held, among other things, that no arguable case had been established by the applicants: Krejci at [31].
On 5 December 2024, Mr Panella’s solicitor, Ms Quyen Thuy Tuong Nguyen, telephoned and texted Mr Panella to confirm that he was required to attend Court on 9 December 2024 and requested that he be available for a conference with his barrister on 6 December at 7:00am.
Mr Panella did not attend the conference on 6 December 2024. Mr Panella informed his solicitor that he was feeling unwell and may not be well enough to attend his examination. However, no application in respect of his examination was then made.
On the morning of 9 December 2024, Mr Panella attended hospital, complaining of chest pains. Between around 6.38am and 7.27am, Ms Nguyen attempted to call Mr Panella on six occasions but the calls could not be connected and Ms Nguyen saw the message “server error” on her phone. At about 7.53am, Ms Nguyen received a call from Mr Panella in which he said that that he had been in hospital earlier that day and was discharged, but the hospital had recommended that he follow up with his GP which he was “going to do … straightaway”.
The “ED Discharge Referral - eMEDs” (discharge referral) from the hospital issued on 9 December 2024 at 7.43am records that Mr Panella self-reported chest pain, occurring from 3.10am, with a self-reported “7/10 intensity”. It also records that:
(1)Mr Panella had a “low to moderate risk” heart score;
(2)his “vitals are stable, normal systemic examinations” and “bloods are unremarkable”;
(3)the result of an electrocardiogram was “sinus rhythm, no acute changers” – a result repeated on a second electrocardiogram;
(4)following a chest x-ray, there was “no evident [sic] of consolidations or pneumothorax”;
(5)Mr Panella “appears well in the ED, no chest pain”; and
(6)provides a discharge plan of “GP follow up and GP to arrange cardiology review” and “Red flags advised, if any concerns please come to ED”.
Mr Panella returned to the hospital around late morning and was again discharged.
Mr Panella subsequently attended his GP, who provided him a medical certificate in the following terms:
Dear Sir/Madam, … Teddy J Panella, age 51yrs, 9mths, has chest pains and has been admitted twice within a period of 3 days. He is also depressed and anxious. He needs to see a cardiologist as soon as possible and referral has been made. Teddy is not fit to attend court and cannot be cross-examined because of his medical condition. He is given a medical leave from 09/12/2024 to 16/12/2024.
Mr Panella failed to attend his examination at Court on 9 December 2024. Yet nothing in the discharge referral or medical certificate explained why Mr Panella would be unable to attend his examination. When the matter was called on 9 December 2024, counsel appearing for Mr Panella said only that Mr Panella would “like to prioritise seeing his GP”, and did not convey any offer from Mr Panella to attend later that day, or the following day.
As a result, the Liquidator applied to the duty judge for an interlocutory process returnable instanter (the interlocutory application). Relevantly, the Liquidator sought a series of orders including for:
(1)the issue of a warrant under r 11.10 of the Federal Court (Corporations) Rules 2000 (Cth) (FCC Rules) addressed to the Sheriff to arrest Mr Panella and to bring him before the Court to be examined under s 596A of the Corporations Act about the examinable affairs of the Companies, detaining Mr Panella in custody in the meantime, together with consequential orders;
(2)an order for costs of the interlocutory application and the hearing before Registrar O’Connor on 9 December 2024 on an indemnity basis; and
(3)non-publication orders pursuant to ss 37AF(1)(b) and 37AJ of the Federal Court of Australia Act 1976 (Cth) (FCA Act) with respect to the affidavit of Mr Blake Joel O’Neill dated 9 December 2024 on the ground that such an order was necessary for the proper administration of justice under s 37AG(1)(a) of the FCA Act.
The application was supported by the confidential affidavit and the non-confidential affidavit of Mr O’Neill, both sworn on 9 December 2024.
I heard the matter as duty judge commencing at 2:15pm on 9 December 2024. Mr Panella, who was represented by counsel at the hearing, opposed the application and relied upon an affidavit of his solicitor, Ms Nguyen, which was then unsworn.
Following the hearing, I ordered that:
Pursuant to rule 11.10 of the Corporations Rules, a warrant be issued and addressed to the Sheriff to arrest Teddy Panella, and to bring him before the Court to be examined under section 596A of the Corporations Act 2001 (Cth) about the examinable affairs of the First, Second and Third Defendants, detaining him in custody in the meantime.
In making the order pursuant to r 11.10 of the FCC Rules, it was necessary for me to be satisfied, and I was in fact satisfied, that Mr Panella had failed to attend “without reasonable cause”. This is despite the fact that, by this time, Mr Panella had twice attended hospital (being discharged each time with, as the Liquidator submitted, “something approaching, if not actually, a clean bill of health”) and had seen his general practitioner. The orders, however, afforded Mr Panella an opportunity to adduce further evidence that he had reasonable cause not to attend by staying the order for the issue of the arrest warrant until 10:15am on 10 December 2024.
On 10 December 2024, Mr Panella attended his public examination and was examined before the Registrar. Following Mr Panella’s attendance, I made orders on 10 December 2024 vacating the order issuing the warrant for Mr Panella’s arrest.
3. RELEVANT PRINCIPLES
Section 43 of the FCA Act confers a wide discretion on the Court with respect to the award of costs: Wills v Chief Executive Officer of the Australian Skills Quality Authority (Costs) [2022] FCAFC 43 at [20] (Logan, Griffiths and Perry JJ). This discretion must be exercised judicially, consistently with the purpose of the power and with regard to all relevant facts and circumstances: e.g. Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (in liq) [2011] FCAFC 136; (2011) 197 FCR 113 at [4] (Greenwood and Rares JJ); AOU21 v Minister for Home Affairs (No 2) [2021] FCAFC 212 at [7] (Griffiths, Mortimer and Perry JJ).
Section 1335(2) of the Corporations Act further provides that “[t]he costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs”. In Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2009] FCA 399; (2009) 176 FCR 348, Lander J held that s 1335(2) “does not limit the operation or reach of s 43(1) of the Federal Court Act” and “does not have the effect of preventing [the Federal Court] from making an order for costs against non-parties in proceedings brought under the Corporations Act” at [312], [314] respectively; see also Hughes, in the matter of Firepower Operations Pty Ltd (in liq) (No 3) [2010] FCA 141 at [16]-[18] (Siopsis J).
Rule 11.10 of the FCC Rules sets out the Court’s powers where a person fails to attend in compliance with an examination summons. That rule reads as follows:
11.10 Default in relation to examination
(1) This rule applies if a person is summoned or ordered by the Court to attend for examination, and:
(a) without reasonable cause, the person:
(i) fails to attend at the time and place appointed; or
…
(2) The Court may:
(a) issue a warrant for the arrest of the person summoned or ordered to attend for examination; and
(b) make any other orders that the Court thinks just or necessary.
Rule 11.10 “deals specifically with the Court’s powers in circumstances where a person is summoned under s 596A of the Corporations Act to attend for an examination, and does not do so without reasonable excuse”: Firepower at [19] (Siopsis J). By providing that the Court may “make any other orders that the Court thinks just or necessary”, r 11.10(2)(b) also provides a basis for the Court to order that an examinee who fails to attend an examination without reasonable excuse must pay the liquidator’s wasted costs of their failure to attend, as well as the liquidator’s costs in respect of the compulsion of the person’s attendance: Firepower at [19]-[20] (Siopsis J).
The ordinary rule is that a party is entitled to costs on a party/party basis only. However, costs may be awarded on an indemnity basis if there is some “special or unusual feature in the case” to justify departure from the ordinary practice of costs being paid on a party/party basis: Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 801; (1993) 46 FCR 225 at 233 (Sheppard J). The question “must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis”: Colgate Palmolive at 234 (Sheppard J).
In Firepower, for example, Siopsis J ordered costs on an indemnity basis in circumstances where an examinee failed to answer an examination summons (at [23]-[24]):
In light of my findings in Firepower Operations (No 2) that Mr Johnston's failure to answer the examination summons occurred in circumstances where he deliberately set out to obtain a medical certificate for the purposes of avoiding his attendance at the examination, whether warranted by the state of his health or not, Mr Johnston had acted in deliberate disregard of the Court summons. Further, in contending that the medical certificate obtained in those circumstances constituted a reasonable excuse, Mr Johnston put forward a case which was, once the true facts were revealed, bound to fail.
In my view, those circumstances constitute special circumstances of the kind referred to by Sheppard J in Colgate-Palmolive, which warrant an order that costs be payable on an indemnity basis.
The order awarding indemnity costs in Firepower followed the issue of an arrest warrant in Hughes, in the matter of Firepower Operations Pty Ltd (in liq) (No 2) [2009] FCA 1457.
Finally, it is well-established that “[c]osts are awarded to indemnify a successful party in litigation, not by way of punishment”: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [1] (Brennan CJ). Thus in Hamod v New South Wales [2002] FCA 424; (2002) 188 ALR 659 at [20], Gray J helpfully explained (Carr J agreeing at [26] and Goldberg J agreeing at [27]):
Indemnity costs are not designed to punish a party for persisting with a case that turns out to fail. They are not awarded as a means of deterring litigants from putting forward arguments that might be attended by uncertainty. Rather, they serve the purpose of compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs.
4. DISPOSITION
4.1 The award of indemnity costs
The Liquidator submits that Mr Panella should pay costs on an indemnity basis. In support of this submission, the Liquidator contends that the whole sitting day of 9 December 2024 was “subsumed with the consequences of Mr Panella’s failure to attend” and that his non-attendance also meant that other examinees could not be examined either on 9 or 10 December 2024. The Liquidator further submits that Mr Panella, despite having a number of opportunities to do so, “was unable to muster any proper reason for his non-attendance, and a warrant was issued”. In the Liquidator’s submission, the present case is analogous with the decision in Firepower.
Mr Panella opposes the application for indemnity costs. In his submission, there is no presumption that an absence of “reasonable cause” in a failure to attend an examination necessarily means that there are special circumstances entitling the Liquidator to indemnity costs. Further, Mr Panella seeks to distinguish Firepower, on the basis that Siopsis J found the medical evidence in that case “to be the product of, at least suspicious, if not collusive, circumstances”. In contrast, Mr Panella suggests that there is no basis on which collusion between Mr Panella and a medical professional to produce bogus medical documentation could be inferred. To the contrary, in his submission the Court should not infer, in the absence of an opportunity for Mr Panella to answer any implied allegation on the costs application, that he did not genuinely experience his self-reported symptoms or that his reports of his symptoms were untrue.
I agree that no inference can fairly be drawn that Mr Panella colluded with the hospital or his general practitioner to produce bogus medical documentation. Nor do I understand the Liquidator to make any such submission. Further and in any event, Mr Panella was not cross-examined on the issue and I have no reason to doubt the genuineness of the medical documentation. Mr Panella was also not cross-examined on whether he genuinely experienced the reported symptoms. While the timing of Mr Panella’s symptoms and presentations at the hospital might reasonably raise a suspicion about the genuineness of his reported symptoms, I do not consider that mere suspicion can be a basis for an award of indemnity costs. Nonetheless, in my view there are special circumstances warranting an order for indemnity costs against Mr Panella.
First, as the Liquidator submits, Mr Panella was unable to provide any “reasonable cause” for his failure to attend his examination. That was the basis upon which the arrest warrant was issued, pursuant to r 11.10(1)(a) of the FCC Rules. On the morning of 9 December 2024, Mr Panella twice attended hospital. He was discharged after both visits. This indicates that the hospital, in both cases, was satisfied that Mr Panella was sufficiently healthy and could be released, with the discharge referral indicating that the hospital had no serious health concerns. It stated that Mr Panella’ vitals were “stable”, his bloods “unremarkable”, and he “appear[ed] well”. It recommended only a follow-up with his GP and review by a cardiologist. The discharge referral did not indicate that Mr Panella was in need of an urgent follow-up with his GP or a cardiologist.
Further, “in contending that the medical certificate … constituted a reasonable excuse”, Mr Panella “put forward a case which was, once the true facts were revealed, bound to fail”: Firepower at [23] (Siopsis J). The medical certificate provided by Mr Panella’s GP relevantly does not stipulate the basis for the medical opinion or indicate any level of clinical analysis beyond a summary of Mr Panella’s self-reported symptoms. The medical certificate also does not give any reason as to why it was not possible for Mr Panella to attend in person or remotely via audio-visual link. I therefore agree with the Liquidator’s submissions that the medical certificate does not disclose why any self-reported medical conditions (being chest pains, depression and anxiety) were an impediment to Mr Panella’s attendance at his examination, or why the period between 9 December 2024 to 16 December 2024 was an appropriate or necessary period for medical leave.
Secondly, despite being aware of the scheduled examination on 9 December 2024, Mr Panella disregarded the Court summons on the morning of 9 December 2024. Mr Panella’s solicitor, Ms Nguyen, contacted Mr Panella seven times between 8:21am and 10:37am on 9 December 2024. In the course of those conversations, Ms Nguyen informed Mr Panella that the Liquidator had indicated that he may seek an arrest warrant. Ms Nguyen also repeatedly asked Mr Panella to confirm whether he could physically attend court, and presented a remote video link as an alternative option for the examination. In response, Mr Panella stated that he was unwell and was not prepared to agree to any commitment to attend court either physically or remotely.
Thirdly, despite being warned again of the potential for an arrest warrant during the hearing for the interlocutory application, Mr Panella failed to give any undertaking to attend. Ms Nguyen made a phone call to Mr Panella during an adjournment in the hearing. In that conversation, Ms Nguyen asked Mr Panella if he would be fit enough to attend court by video link, and that his instructions were urgently required as the Court may be minded to issue a warrant for his arrest. At the end of the conversation, Mr Panella instructed Ms Nguyen that he would not be able to give an undertaking to the Court about his fitness to attend court on 10 December 2024.
Fourthly, following the stay of the arrest warrant until 10:15am on 10 December 2024, Mr Panella did ultimately attend such that the order for the arrest warrant was vacated. Although the stay was ordered in part to allow Mr Panella an opportunity to adduce better evidence in support of his medical condition. Mr Panella did not present any further evidence on 10 December 2024.
With respect to this last point, Mr Panella submits that he “had a reasonable expectation that his attendance on 10 December 2024 would result in the vacation of the orders” and as such that it was unnecessary to reopen the interlocutory application and reagitate the correctness of the Court’s orders. However, that does not explain why, even in the context of the application for indemnity costs, he did not seek to put on any further evidence as to his medical condition. In my view, the inference to be drawn from his failure to do so is that there was no such evidence and that there was therefore no medical reason as to why he could not have attended Court on 9 December 2024 or given an undertaking on 9 December 2024 to the Court to attend on 10 December 2024.
In all of the circumstances, therefore, in my view not only has Mr Panella failed to establish a reasonable cause for not attending, but his behaviour constituted a “deliberate disregard of the Court summons” to attend on 9 December 2024: Firepower at [23] (Siopsis J) by analogy. In my view, therefore, “special circumstances” have been established which justify an order for costs on an indemnity basis in this case, subject to considering Mr Panella’s contentions that the Liquidator’s conduct should disentitle him to indemnity costs and Mr Panella’s allegation that he was not afforded procedural fairness with respect to the claim for indemnity costs.
4.2 The Liquidator’s conduct on 10 December 2024
Mr Panella submits that, in light of the Liquidator’s conduct on 10 December 2024, the Liquidator should be entitled only to an award of costs on a party/party basis. This is because, in Mr Panella’s submission, on the morning of 10 December 2024, his solicitors proposed that the arrest warrant be vacated upon Mr Panella being sighted in the Court premises. However, Mr Panella claims that the Liquidator then refused to consent to the arrest warrant being vacated unless Mr Panella agreed to pay the Liquidator’s costs on an indemnity basis. Mr Panella contends that “to insist on the execution of an arrest warrant where the examinee has voluntarily attended court as bargaining leverage for a special costs order” offends the purpose of r 11.10 and constitutes “relevant disentitling conduct to the award of costs on an indemnity basis”.
In Oshlack at [69], McHugh J, citing the principle set out by Devlin J in Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874, explained that a successful party may be deprived of a beneficial exercise of a costs discretion where the party:
by its lax conduct effectively invites the litigation; unnecessarily protracts the proceedings; succeeds on a point not argued before a lower court; prosecutes the matter solely for the purpose of increasing the costs recoverable; or obtains relief which the unsuccessful party had already offered in settlement of the dispute.
Mr Panella’s submission refers to correspondence between the solicitors for the parties. Mr Panella’s solicitors wrote to the Liquidator’s solicitors at 8:26am after being instructed that Mr Panella would soon be within the court premises. That email relevantly stated:
We note that the arret [sic] warrant is only stayed until 10:15am, and that the examination proceedings do not commence until 10:15am.
In order to vacate the orders before the stay is lapsed, we propose that consent orders be sent to her Honour’s associate around 10:00 am once the liquidator has sighted Mr Panella in or around at Courtroom 18D.
We propose that the form of order is that Order 2 and 3 of the orders made on 9 December 2024 be vacated.
Please confirm if your client consents to the above proposal.
In response, the Liquidator’s solicitors stated at 9:23am:
Our client would require the consent orders to include a costs order on the indemnity basis and forthwith before our client can consider that proposal. You have not provided any reason why the warrant should be discharged. The only reason for the vacation of the order is because Mr Panella has now decided to attend his examination. Our client was put to the costs of the warrant application, and on issue of a warrant, the appropriate order is that costs be paid on the indemnity basis: Hughes, in the matter of Firepower Operations Pty Ltd (in liquidation) (No 3) (2010) 183 FCR 150 at 154, [18]-[24].
These costs should be payable forthwith in the fixed sum of $10,000 for wasted costs and the costs of the application. If that is not agreed, our client will claim further costs incurred in connection with the costs argument.
At 9:42am, Mr Panella’s solicitors sent an email to the Court copied to the Liquidator’s solicitors applying to have the matter relisted at 10:00am before me as duty judge to vacate orders 2 and 3. That email noted that the Liquidator sought to be heard on costs. In response, at 9:47am, the solicitors for the Liquidator replied, copied to my Chambers, advising that the Liquidator would not consent to any vacation of the orders until Mr Panella’s attendance could be verified. At 10:17am, the Liquidator’s solicitors sent an email to my Chambers, copied to Mr Panella’s solicitors, advising that:
We understand that Mr Panella is in court for his examination. On that basis, it therefore seems appropriate that orders 2 and 3 made by the court on 9 December 2024 be vacated.
Further, and as foreshadowed in our client’s interlocutory process and at the hearing yesterday, our client seeks that his costs thrown away by reason of the non-attendance by Mr Panella on 9 December 2024 and in connection with the warrant, be paid, on the indemnity basis, forthwith. It therefore seems appropriate, subject to what those who act for Mr Panella say, that the parties exchange submissions by no later than 4pm on 11 December 2024 in respect of the question of costs.
While it may have been preferable for the parties’ solicitors to have dealt with the question of costs separately from the immediate issue of vacating the order, I do not consider that the Liquidator’s solicitors’ conduct is such as to disentitle the Liquidator from an order for indemnity costs where the circumstances otherwise establish that such an order is appropriate.
First, the Liquidator’s initial correspondence conveying that he did not to consent to a vacation of the orders cannot be characterised as solely attributable to the Liquidator’s insistence on indemnity costs. In their email to the Court, the Liquidator’s solicitors noted that the Liquidator “has not been able to verify that Mr Panella is in Court” and that he would communicate his position following verification of Mr Panella’s attendance.
Secondly, shortly thereafter the Liquidator consented to vacation of orders 2 and 3 upon sighting Mr Panella in court notwithstanding that the applicant did not agree to an order for indemnity costs. Thus, even if the email to Mr Panella’s solicitors at 9:23am suggested that the Liquidator would not agree to consent orders without an order for indemnity costs in his favour, the bar to the Liquidator’s consent as at 9:47am was the fact that Mr Panella’s attendance had not been verified. Further, once Mr Panella had been sighted, the Liquidator agreed to vacate the orders at 10:17am, with the issue of indemnity costs to be determined later. As a consequence, the Liquidator’s consent to vacation of the orders for the arrest warrant was not ultimately withheld because Mr Panella had not agreed to an order for indemnity costs, and the Liquidator accepted that the question of indemnity costs would be addressed separately.
4.3 The allegation of procedural unfairness
Mr Panella also submits that it would be procedurally unfair for costs to be assessed on an indemnity basis. Mr Panella submits that the Liquidator did not give him “practical notice” of his intention to seek a special costs order (or costs thrown away) before making the interlocutory application, because the materials were served on 9 December 2024 at about 1.12pm only by email to McEvoy Legal’s generic (administration) email and not to the direct email address for his solicitor, Ms Nguyen. While Mr Panella accepts that both email addresses were included in his filed address for service, in circumstances where the Liquidator intended to make its interlocutory application returnable instanter, Mr Panella submits that the interlocutory application should have been sent to both email addresses. In his affidavit affirmed on 19 December 2024, Mr Kwai Hong Kevin Cheng, a consultant solicitor at McEvoy Legal who was assisting Ms Nguyen who was then on leave, deposed that he had been advised by Ms Nguyen that she did not see any version of an interlocutory application for Mr Panella’s arrest until she was copied into an email on 9 December 2024 at 4.12pm.
However, the materials were served to one of the two addresses given in the filed address for service for Mr Panella. Furthermore, Mr Panella was represented by counsel at the hearing for the arrest warrant on 9 December 2024 commencing at 2.23pm where the applicant’s claim for indemnity costs was expressly raised. Moreover, pursuant to orders made on 10 December 2024, Mr Panella was afforded ample opportunity to respond to the application for costs and has in fact done so by filing evidence and detailed submissions on 17 and 19 December 2024 in opposition to the application. While, therefore, it would have been preferable for the interlocutory application to have been emailed to both email addresses, the failure to do so was not material and has no relevance to the question of whether indemnity costs should be awarded.
Mr Panella also contends that he is not in a position to be able to determine whether the costs claimed are reasonable insofar as the orders made on 9 December 2024 rendered part of the material prepared in connection with the interlocutory application confidential and references are made to draft documents in the Liquidator’s solicitors’ recorded narrations. On this basis, Mr Panella claims that procedural fairness “requires that costs be ordered on the ordinary basis so that plaintiff has the onus of showing the amount of costs fairly and reasonably incurred”. These are not, however, reasons to deprive the Liquidator of an indemnity costs order. Rather, I address them in the context of determining whether, if indemnity costs are awarded, they should be awarded in a lump sum, as contended by the Liquidator, or an order should be made that they be taxed, if not agreed.
4.4 Costs thrown away
Mr Panella opposes the making of any costs order in respect of costs thrown away. Mr Panella contends that it is questionable whether there were any costs thrown away, because the Liquidator could have examined other witnesses and made the interlocutory application returnable another day. Mr Panella submits that solicitors who were no longer required to instruct on the examination of witnesses “ought not be entitled to charge for court time that they did not attend” and other solicitor work on the preparation of documents for examinations would not be thrown away.
Contrary to Mr Panella’s submission, I accept the evidence as set out in the affidavit of Mr O’Neill affirmed on 13 December 2024, which states that the examination of Mr Panella needed to be prioritised above others because, as director of the relevant Companies, Mr Panella was “an important witness in respect of the Companies’ examinable affairs”. This is supported by the confidential affidavit of Mr O’Neill affirmed on 9 December 2024 which explains why there was sufficient urgency in Mr Panella’s examination to justify seeking an arrest warrant. Deferral of other witnesses as a result of this prioritisation relevantly resulted in costs thrown away.
4.5 Lump sum costs order
The principles in relation to fixing costs in a lump sum are set out in Jadwan Pty Ltd v Rae & Partners (A Firm) [2023] FCAFC 182 at [9] (Markovic, Stewart and Anderson JJ):
(1) The purpose of the lump sum costs provisions is the avoidance of the expense, delay and aggravation involved in protracted litigation arising out of taxation (at [11] citing Innes v AAL Aviation Ltd (No 2) [2018] FCAFC 130 at [12]).
(2) The costs fixed should be proportionate to the nature, including the complexity, of the case (at [11] citing Innes at [17]).
(3) In assessing quantum, the court is entitled to take into account the evidence that is before it, its own observations of the proceedings and the judge's own assessment experience (at [11] citing Innes at [18]).
(4) Of its nature, determination of a gross sum is not the result of a process of taxation or assessment of costs (at [12] citing Harrison v Schipp [2002] NSWCA 213; 54 NSWLR 738 at [22]).
(5) The gross sum can only be fixed broadly having regard to the information before the court, which involves applying a much broader brush than would be applied on taxation (at [12] citing Harrison at [22]).
(6) The approach taken to estimate costs must be logical, fair and reasonable (at [12] citing Harrison at [22]).
(7) Although it is the usual practice of the court when making a lump sum costs order to apply a discount to the amount that the party was liable to pay to its lawyers, that does not mean that the court must apply a percentage discount to the sum sought. Rather, the court must be astute not to cause an injustice to the successful party by applying an arbitrary “failsafe” discount on the costs estimate. Thus, if the court can be confident that there is little risk that the sum includes costs that might be disallowed on assessment the case for a discount is seriously undermined (at [13] citing Hancock v Rinehart (Lump sum costs) [2015] NSWSC 1640 at [57]).
The Liquidator seeks for costs to be fixed in a specified lump sum. Accepting that the usual practice (as explained in Jadwan) is that costs claimed on a lump sum application should ordinarily be discounted, the Liquidator submits that costs should be fixed in the gross lump sum of $15,000 (including any applicable GST). This sum factored in a discount, given that Mr O’Neill’s evidence was that the Liquidator would be justified in seeking costs in the total sum of $16,748 (excluding GST). The Liquidator also seeks an order that Mr Panella pay the Liquidator’s costs of the costs application, fixed in the sum of $1,500 (excluding GST).
Evidence as to the work undertaken and thrown away by reason of the interlocutory application is given by Mr O’Neill in his affidavit affirmed on 13 December 2024. That affidavit is based on his extensive experience in running superior court litigation in the Supreme Court of New South Wales and the Federal Court.
It was Mr O’Neill’s evidence that:
10.The plaintiff has incurred legal costs of and incidental to this application, including:
(a)preparing an interlocutory application and supporting affidavits in these proceedings and the filing fee in connection to that application (Application);
(b)preparing for and appearing at the hearing of this Application before Perry J on 9 December 2024, which included cross examination of Ms Nguyen by plaintiff's counsel, Michael Rose.
11.The failure of Mr Panella to attend his examination on 9 December 2024 also resulted in wasted time and disruption to the examination schedule in circumstances where Mr Panella as director of the Companies was an important witness in respect of the Companies' examinable affairs and his examination need to be prioritised above others, resulting in the deferral of at least 6 other examinations to an unassigned date in 2025.
Mr O’Neill also carefully set out the basis on which the proposed lump sum costs had been calculated.
Mr Panella submits that, where a gross sum costs order is made, “it will be appropriate to apply a discount to reflect the contingencies that may otherwise have arisen on a costs assessment”: Seafolly Pty Ltd v Madden (No 6) [2015] FCA 1369 at [38] (Tracey J); Broadway Plaza Investments Pty Ltd v Broadway Plaza Pty Ltd (No 3) [2021] NSWSC 1537 at [157] (Ward CJ in Eq). Mr Panella suggests that a gross sum costs order should be in the amount of $8,300 accounting for the facts that:
(1)attendance of more than one solicitor to instruct on the interlocutory application was “excessive” and it is adequate compensation to allow 2.5 hours for the principal solicitor to instruct without deduction; and
(2)counsel had already prepared submissions and solicitor work in relation to submissions is excessive.
I reject Mr Panella’s argument. The costs claimed are reasonable and proportional to the complexity of the application and the time wasted by reason of Mr Panella’s failure to appear. I do not accept Mr Panella’s contention that the attendance and work of solicitors is “excessive” in the circumstances, particularly given the urgency of the interlocutory application and the importance of prioritising his examination. Nor, given Mr O’Neill’s evidence, do I agree that Mr Panella lacks sufficient information to be able to determine whether the costs claimed by the Liquidator are reasonable even though he does not have access to some material prepared in relation to that application because it is covered by non-publication orders or relates to draft documents. In this regard, it must be borne in mind that lump sum costs orders are assessed in a relatively broad-brush manner, as opposed to a taxation, and that the amount claimed by the Liquidator already factors in a discount. In these circumstances, to make an order for costs to be taxed in the absence of agreement would be productive only of delay and wasted resources, and would be disproportionate to the amount claimed. In accordance with the principles in Jadwan, I therefore accept that the sum proposed by the Liquidator, including the proposed discount, is appropriate in the circumstances.
5. CONCLUSION
It follows for these reasons that the Liquidator’s application for costs against Mr Panella should be granted, and that Mr Panella be ordered to pay the Liquidator’s costs thrown away and in relation to the interlocutory application on an indemnity basis fixed on a gross lump sum basis.
The Liquidator also seeks an order that Mr Panella pay his costs of the costs application, fixed in the sum of $1,500 (excluding GST). Having regard to my above conclusions, I agree that these costs should be awarded on an ordinary party/party basis fixed in the sum of $1,500 (excluding GST).
I certify that the preceding sixty-one (61) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Perry. Associate:
Dated: 18 March 2025
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