Lindholm v Elliott
[2023] VSC 442
•31 July 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
GROUP PROCEEDINGS LIST
S CI 2012 7185
| JOHN ROSS LINDHOLM in his capacity as Special Purpose Receiver of Banksia Securities Limited (ACN 004 736 458) (Receivers and Managers Appointed) (in liquidation) | Plaintiff |
| v | |
| MAXIMILLIAN ELLIOTT as personal representative of the estate of Mark Edward Elliott and others (as per the attached schedule) | Non-Parties |
AND
IN THE SUPREME COURT OF VICTORIA
AT MELBOURNE
COMMON LAW DIVISION
GENERAL LIST
S ECI 2023 01922
In the matter of
ALEXANDER CHRISTOPHER ELLIOTT (A SOLICITOR)
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JUDGE: | John Dixon J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 15 November 2022; 16 June 2023 |
DATE OF JUDGMENT: | 31 July 2023 |
CASE MAY BE CITED AS: | Lindholm v Elliott & Ors |
MEDIUM NEUTRAL CITATION: | [2023] VSC 442 |
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CORPORATIONS - Special purpose receivers appointed to corporation – Compromise of non-party claim for costs brought in group proceeding– Whether special purpose receivers are justified in compromising claim – Corporations Act 2001 (Cth) s 283HB.
GROUP PROCEEDINGS – Settlement – Approval - Supreme Court Act 1986 (Vic) Part 4A.
LEGAL PRACTITIONERS – Roll of practitioners – Consequence of breach of the overarching obligations to the administration of justice – Whether practitioner a fit and proper person – Whether removal of name required.
PRACTICE AND PROCEDURE – Costs – Costs sought from non-parties – Principles – Supreme Court Act 1986 (Vic) ss 24, 33ZF.
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| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J Redwood SC with Mr M Grady | Maddocks |
| For the Non-Parties Maximillian Elliott, Decoland Holdings Pty Ltd, Elliott Legal Pty Ltd and MCM (Mt Buller) Developments Pty Ltd | Garland Hawthorn Brahe | |
| For the Non-Parties Noysue Pty Ltd and Noysy Pty Ltd | Ms W Harris KC with Mr J Rudd | Hope & Co |
| APPEARANCES: IN S ECI 2023 01922 | Counsel | Solicitors |
| For the Solicitor | Mr A Strahan KC with Mr A Christophersen | Garland Hawthorn Brahe |
| For the Contradictor | Mr T Scotter | Victorian Legal Services Commissioner |
HIS HONOUR:
Introduction
John Ross Lindholm in his capacity as Special Purpose Receiver of Banksia Securities Limited (ACN 004 736 458) (Receivers and Managers Appointed) (in liquidation) (SPR) by summons sought costs orders against the following entities that were not parties to the proceeding (the non-parties) -
(a) Maximillian Elliott as personal representative of the Estate of Mark Edward Elliott (Estate of Mark Elliott);
(b) Decoland Holdings Pty Ltd;
(c) Elliott Legal Pty Ltd;
(d) Noysue Pty Ltd;
(e) Noysy Pty Ltd; and
(f) MCM (Mt Buller) Developments Pty Ltd.
The application was heard in two parts, as the application was contested by Noysue and Noysy (the O’Bryan entities) and not contested by the remaining respondents (the Elliott entities).
The SPR sought orders against each of the non-parties that it pay the SPR’s costs of and incidental to the appeal and the Remitter and the Contradictor’s costs of and incidental to the Remitter, to be assessed on an indemnity basis. The appeal is the proceeding reported as Botsman v Bolitho,[1] in which the Court of Appeal remitted to the Trial Division for determination the issue of the approval of the distribution from the Settlement Sum of the claim for legal costs and disbursements and the funder’s commission. The Remitter is reported as Bolitho v Banksia Securities Ltd (No 18) (remitter).[2]
[1](2018) 57 VR 68.
[2][2021] VSC 666 and referred to in these reasons as J:[#].
The summons was first issued and served on 18 August 2020, prior to the completion of the hearing of the Remitter, and has since been amended. It was supported by affidavits of David Charles Newman sworn 17 August 2020, and Samuel Roadley Kingston sworn 5 November 2021, 3 February 2022 and 15 June 2022. The SPR also filed a Notice of Contentions and Written Submissions.
Position of the Elliott entities
The Elliott entities did not file any response to the SPR’s Notice of Contentions and have not filed any affidavits in response to those filed by the SPR. Further, none of the Elliott entities complied with directions given by the court in respect of the summons. On 8 November, 2021, they were directed to file and serve a response to the SPR’s outline of contentions. On 4 February 2022, orders were again made that the Elliott entities file and serve any response to the SPR’s outline of contentions. On 21 March 2022, the time for compliance with this order was extended. Time was again extended on 26 April 2022 and Decoland, Elliott Legal and MCM consented to orders that they each discover documents, identified by category, by 1 June 2022. On 16 June 2022, time was again extended for a response to the Notice of Contention and for discovery. I further ordered that if the Elliott entities did not comply with the order to file a response they could not file such notice other than by leave of the court and, on the hearing of the summons, could not rely on any factual contention that ought to have been set out in such notice except by leave.
On 13 September, 2022, there being continuing non-compliance with prior orders by the Elliott entities, the non-party costs summons, insofar as it sought relief against those entities, was set down for hearing on 15 November 2022. Insofar as relief was sought against the O’Bryan entities, the summons was adjourned to 28 November 2022 for further directions.
When each of these orders were made and directions given, the Elliott entities were legally represented as they were when the summons came on for hearing on 15 November 2022. Having failed to comply with any direction from or order of the court leading up to the hearing, the SPR enquired whether the Elliott entities were consenting to the relief sought. The following exchange then occurred.
HIS HONOUR: So perhaps before we ask him if he consents to something, what are you asking that he consents to?
MR REDWOOD: Whether he consents to the orders in the form of the summons.
HIS HONOUR: In the form of the summons?
MR REDWOOD: Yes.
MR SUSIC:Yes, Your Honour. I'm not in a position to resist any order sought by the SPR today, due to my client's inaction throughout this application.
HIS HONOUR: So you're not in a position to resist?
MR SUSIC: No, and my client will consent to - - -
HIS HONOUR: You're not consenting?
MR SUSIC: No, they would. I do.
HIS HONOUR: They do consent?
MR SUSIC: Yes. Yes, Your Honour.
Notwithstanding this consent, counsel for the SPR proposed, and the court agreed, to take the court through the substance of the application.
The SPR’s case against the Elliott entities.
Principles
The court’s power to award costs is found in s 24(1) of the Supreme Court Act1986 (Vic) which provides that:
Unless otherwise expressly provided by this or any other Act or by the [Supreme Court Rules], the costs of and incidental to all matters in the Court … is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
This power includes the power to make a costs order against a person who is not a party to the litigation.[3]
[3]Knight v FP Special Assets Ltd (1992) 174 CLR 178.
The discretion conferred is a ‘wide untrammelled discretion’. In Bischof v Adams,[4] Gobbo J declined to constrain to limited and specified types of cases the Court’s discretion as to the circumstances in which costs orders against non-parties could be made. His Honour said that this contention―
… is a misleading one to the extent that it is founded on the proposition that a discretion that it is not confined by the terms of the statute must be exercised within the confines of past decisions. … It is implicit there is a wide untrammelled discretion.[5]
[4]Bischof v Adams (1992) 2 VR 198, 203.
[5]See also Norbis v Norbis (1986) 161 CLR 513, 519.
That said, it is accepted that the discretion is exercised against non-parties with caution. In the first place, a non-party costs order requires justification for departing from the general rule that only parties to proceedings are exposed to costs orders. Ordinarily it would not be just to award costs against a non-party. Secondly, as it is not a question of power, confining the circumstances in which an order is made is a question of discretion and the discretion has been described in the cases as exercised ‘with considerable caution’, granted only ‘sparingly’, or when exceptional circumstances (those falling outside the ordinary run of cases) make such an order ‘reasonable and just’. However, the discretion is to be exercised ‘judicially’ and in accordance with general legal principles pertaining to the law of costs.[6]
[6]The many authorities for these propositions are collected and reviewed by Professor Dal Pont in Law of Costs, 4th ed, LexisNexis, [22.17].
The SPR submitted that the authorities demonstrate that the essential consideration is whether, in the particular circumstances of the case,[7] it is just and equitable that the non-party pay the costs of a party to the litigation.[8]
[7]Carter v Caason [2916] VSCA 236, [13]; Yu v Cao (2016) 91 NSWLR 190, 219.
[8]Vestris v Cashman (1998) 72 SASR 449, 468.
Being a fact-intensive exercise, previous cases should be approached cautiously. That said, the SPR submitted that the following observations from prior cases, if seen as illustrative rather than controlling, identify considerations that may be relevant to the exercise of the discretion.
In FPM Constructions v Council of the City of Blue Mountains,[9] the New South Wales Court of Appeal noted that the following were common or recurring features of the exercise of the discretion:
[9][2005] NSWCA 340, [210].
(a) the unsuccessful party to the proceedings was the moving party, not the defendant;
(b) the source of funds for the litigation was the non-party or its principal;
(c) the conduct of the litigation was unreasonable or improper;
(d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest; and
(e) the unsuccessful party was insolvent or could otherwise be described as a person of straw.
In Slea Pty Ltd v Connective Services,[10] Robson J added to or reframed the range of considerations:
[10][2022] VSC 136, [1645]. See also 1165 Stud Road Pty Ltd v Power (No 2) [2015] VSC 735, [80].
(a) the non-party has engaged in an abuse of process in the broad sense;
(b) the conduct of the litigation was unreasonable, improper, or not bona fide;
(c) the non-party is a (not the) real party to the litigation in critical and important respects (which does not require that the non-party have control over the litigation); and
(d) the non-party, with knowledge of impropriety, permitted a case to proceed.
The SPR drew particular attention to the proposition that the inquiry is less about the status of the non-party. Rather, the emphasis should be on conduct: is the non-party the real litigant in the sense that the court can be satisfied that without their initiative and finance the litigation would not have been pursued by the party, and who stood to benefit materially from its success. Put another way, is the non-party really ‘gaining access to justice for his own purposes’.[11] While this approach does not require actual misconduct, as is suggested in some other cases, the SPR submitted that it was not the fact of funding but the purpose for which the proceeding was funded that is relevant in this case. As Phillips MR stated in Gulf Azoz Shipping v Idisi:[12]
If the intervention is in bad faith, or for some ulterior motive, then the intervener will be at risk in relation to costs occasioned as a consequence of his intervention
Misconduct, fraud and abuse of process as a basis for making a non-party liable for costs are well established.
[11]Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No. 2) (New Zealand) [2004] 1 WLR 2807, 2815.
[12][2004] EWCA Civ 292, [54].
This court in Burns Philp & Co Ltd v Bhagat approved of dicta from a Canadian case:[13]
In my opinion, where [the non-party], is the sole owner of all the shares of Oasis Hotel Ltd; and … conceives a scheme to defraud the insurers of Oasis Hotel Ltd; and where he puts that scheme into effect; and where he uses proceedings in the Supreme Court of British Columbia as the instrument of his fraud; and where he attempts to deceive the Court; then the Supreme Court of British Columbia has power to order that [the non-party] pay to the insurers their party and party costs of those proceedings, notwithstanding that he is not a party to the record in those proceedings.
[13](1993) 1 VR 203, 217-8.
Although the SPR contended that notions of exceptionality should not be pressed too far, that issue was moot given the findings expressed about the conduct of Mark Elliott and his entities. The corrosion of the proper administration of justice engaged the public interest and limited the weight to be afforded to consideration that might be thought to limit the exercise of the discretion in this case.
The focus on whether it would be just and equitable to require a non-party to pay costs incorporates considerations of whether their conduct was a cause of costs being incurred. Causation is a discretionary consideration.[14] It is sufficient if the non-party is an actor in important and critical respects. Exclusive control of the litigation sets the bar too high.[15]
[14]Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406, 414 [37].
[15]Kebaro Pty Ltd v Saunders [2003] FCAFC 5, [111]-[113].
The SPR further submitted that s 33ZF of the Supreme Court Act is an additional source of power to order that the Elliott entities pay the costs (or an amount equivalent to the costs) of the Remitter. Section 33ZF confers a wide power on the court to fashion such orders ‘as are necessary to do justice in the proceeding’.
By this submission, the orders sought by the SPR are indubitably sought ‘in the proceeding’ as the appeal and the Remitter follow on and from, an application under s 33V for approval of a settlement in a group proceeding. Importantly, the distinction between this application and other occasions when s 33ZF has been judicially considered is that what is sought on this application is not payments from group members to a third-party but payments to group members from non-parties closely linked with parties joined to the proceeding. The wide power and discretion to fashion appropriate orders to do justice in the proceeding is to be viewed from this perspective. The SPR posed the question as:
… how could justice be done in this proceeding if group members were left to pay for the enormous costs associated in uncovering a scandalous fraud perpetrated upon them and the Court if those standing behind the parties to that fraud were not held liable for those costs?
The question to be answered under s 33ZF is in substance the same as that to be addressed when considering whether to make a non-party costs order, save that the context of the exercise of power under s 33ZF is that the proceeding is a group proceeding in which the court has a protective jurisdiction in respect of the interests of group members in a settlement.
The SPR submitted that an application for non-party costs is a summary procedure.[16] As such, costs ought to be kept within proper bounds and full blown satellite litigation is to be avoided.[17] The rationale that identifies why a summary procedure is appropriate and fair is the central issue. If the non-party’s connection with the underlying proceeding is sufficient in degree, it would be perverse and inconsistent with principles of finality in litigation for the non-party to be permitted to turn the costs application into a fresh piece of substantive litigation going over and challenging the facts and evidence in the underlying proceeding. Put another way, a summary procedure is logical and appropriate where the non-party was a ‘real party’ to the underlying proceeding.
[16]Flinn v Flinn [1999] 3 VR 712, 755.
[17]Centrehigh Ltd v Amen [2013] EWHC 625 (Ch), [42]; Total Spares & Supplies Ltd v Antares SRL [2006] EWHC 1537 (Ch), [48]; Grecoair Inc v Tilling [2009] EWHC 115, [42].
The SPR further submitted that by reference to the same principle, the general rule that findings made in a proceeding are not admissible against a third party may not apply and that the court’s findings in the Remitter are admissible against the non-parties.
After stating the general rule in Flynn v Flynn,[18] the Court of Appeal observed:
… there are exceptions which enable findings made in litigation to be used against someone who was not a party to that litigation for the purposes of a summary procedure. Specifically, it has been laid down in England by the Court of Appeal that on an application against a non-party seeking an order for the costs of the litigation the applicant may in an appropriate case be permitted to rely on evidence given and facts found in the litigation.
[18][1999] 3 VR 712, 755.
Those English cases may be noted. In Symphony Group Plc v Hodgson,[19] Balcombe LJ held that the departure from the usual rule that judicial findings are not admissible against a third party can be justified ‘if the connection of the non-party with the original proceedings was so close that he will not suffer any injustice by allowing this exception to the general rule’. Straughton LJ expressed the test as ‘it must be just and fair that the stranger should be bound by that evidence and those findings.’
[19][1994] QB 179.
In Deutsche Bank AG v Sebastian Holdings Inc,[20] the non-party costs procedure was described as ‘summary in nature, in the sense that the judge would make an order based on the evidence given and the facts found at trial, together with his assessment of the behaviour of those involved in the proceedings’. Following Symphony, the court stated that in any given case the nature and degree of the non-party’s connection to the proceeding will govern whether it is just and fair that the non-party be bound by the evidence given at trial and the trial judge’s findings. A close connection of some kind is necessary. The court identified the need for a fact sensitive analysis to determine whether there would be injustice or prejudice if the non-party was bound by the trial findings.
[20][2016] EWCA Civ 23, [17].
The following analysis demonstrates that these principles have been appropriately engaged.
Circumstances of the Elliott parties generally
The SPR submitted that the relationship of each of the non-parties to the proceedings, and the misconduct at the heart of the Remitter, is so close that there is no rational basis upon which it could be contended that it is neither just nor fair to determine this application by reference to the facts found in the Remitter.
A number of general considerations of relevance may be noted.
First, none of the Elliott entities has contended that it is not in the interests of justice that they be ordered to pay the costs sought by the SPR.
Second, none of the Elliott entities filed any evidence that establishes the existence of any prejudice said to be suffered by them as a result of the adoption of a summary procedure and made no submission to that effect.
Third, Mark Elliott was the ‘central player’ in the litigation and the mastermind of the misconduct examined in the Remitter.[21]
[21]J:[90].
Fourth, Mark Elliott was at all times the ‘real solicitor’ for Bolitho and Elliott Legal was his law firm and his alter ego.[22]
[22]J:[88]-[89].
Fifth, Decoland and MCM were both entities associated with and controlled by Mark Elliott. His knowledge is to be attributed to those entities under the primary rules of attribution.
Sixth, the non-parties received ample warning that the SPR intended to seek a non-party costs order. Mr Elliott was put on notice of a possible personal liability for costs on 10 February 2020. As already noted, the summons was first issued and served during the trial (on 17 August 2020) well in advance of closing submissions and the summons was supported by the detail of the allegations against the non-parties found in Mr Newman’s affidavit. The Elliott entities could have, but did not, seek leave to intervene in the Remitter. When closing submissions commenced, I remarked that the issues in relation to non-party costs summons, when they ultimately come on, do inevitably turn on the evidentiary base that was established at the trial. The SPR submitted that I could infer that the Elliott entities must be taken to have made a deliberate forensic and strategic decision to sit back and let the trial take its course in the knowledge that the court’s findings would form the basis for this application.
Seventh, there was a pattern of persistent and unexplained breaches of the court’s orders noted earlier. In particular, the Elliott entities have not filed any outline of contentions in opposition to those filed by the SPR, despite being directed by the court to do so. Secondly, the Elliott entities are in default in respect of their discovery obligations and in breach of s 26 of the Civil Procedure Act 2010 (Vic), in circumstances where the SPR is a stranger to the affairs of the non-parties and their relations with the defendants. Adverse findings were made in the Remitter against Mark Elliott and AFP about compliance with discovery obligations. Were it not for the attitude taken by the Elliott entities at the hearing, the court could have considered whether an inference was open that any documents in the possession of the Elliott entities would not have assisted their defence of this application and the inferences that the SPR contended are reasonably open on the evidence might more comfortably be drawn.[23]
[23]Li v The Herald & Weekly Times Pty Ltd [2007] VSC 109, [305].
Eighth, the Bolitho Proceeding was a representative action, a group proceeding under Part 4A of the Supreme Court Act, in which the group consisted of more than 16,000 debenture holders. In that context, duties of undivided loyalty to group members require that it is only the interests of the litigants that are advanced when there is the prospect of any conflict. As the Remitter judgment explained, the defendants engaged in egregious breaches of their fiduciary duties to group members, as well as repeated breaches of their obligations under the Civil Procedure Act.
Ninth, the Remitter uncovered a scheme to fraudulently enrich AFP, Elliott, and the lawyer parties as more particularly described in the Remitter judgment. In a nutshell, at the expense of debenture holders, the defendants sought to achieve and then divide up ill-gotten spoils from the Bolitho litigation and then to thwart the proper administration of justice and retain their illegitimate financial gains. Once they achieved court approval of their settlement scheme through breach of their duties to the proper administration of justice, there was a concerted campaign, over the course of two years and three months, to conceal their misconduct.[24] Their method was the manner of management of the funder, AFP, and each of the defendants to the Remitter had an integral role in that fraudulent scheme,[25] which in substance required abuse of the processes of the court and desecration of the proper administration of justice. In this context, the current application requires assessment of the extent and participation in this scheme of each entity both individually and collectively as there were different roles – enabler, potential beneficiary, material assister etc.
[24]J:[816].
[25]J:[2097].
Tenth, Elliott and O’Bryan deliberately chose to use a poorly capitalised funder, AFP, to shield them from exposure to liabilities in the endeavour of prosecuting the class action. AFP was never capable of paying, from its own funds, any adverse costs order in the Banksia Proceeding or meeting any order for compensation. So much was clear from the evidence of Mr Tony Samuel at the trial of the Remitter. In his opinion, as at 30 June 2018, AFP had a current asset deficiency, had generated significant losses, and had significant negative cash flows. AFP’s financial capacity to meet existing liabilities at various other dates between FY14 and FY18 was poor, and it had been required to fund negative cash flows by raising additional equity. Mr Samuel also opined that prior to the commencement of the trial of the Remitter, AFP did not have the capacity to meet an adverse costs order that might be made in the Remitter (then estimated to be in the order of $5 to $7million) and could only do so if it was able to raise more debt or more equity. Mr McGing, an actuary, considered that AFP’s capital at risk was limited to the book value of its net assets from time to time that he notionally assessed as not exceeding $2m.
Although AFP contested these opinions through the evidence of Mr Houston, I was not persuaded to accept his evidence. To the extent that Mr Houston suggested the AFP might be financially supported by its ‘owners and directors’, he begged the question of from whom such financial support might come. One could suspect that the Elliott entities may have been among those on whose door AFP knocked.
As the SPR correctly summarised:
AFP maintained a claim for payment to it of a substantial funding commission and reimbursement of legal costs. This is despite the Court finding that there was never a proper basis for AFP’s claim for funding commission and legal costs of almost $20 million, which was in fact a fraud: J-[70]. Accordingly, AFP, with the material assistance of others, advanced a fraudulent claim for almost three years in circumstances where it did not have the financial capacity to pay any adverse costs order, leaving the debenture-holders to suffer that cost.
Eleventh, the cost of the Remitter has been funded by the debenture holders, out of funds held on their behalf by the SPR that would otherwise have been available for distribution, who have also experienced delay in receipt of their entitlements while the defendants contested the Remitter to avoid disclosure of the fraudulent scheme. Although the Remitter was, in substance, a laborious, costly and delayed[26] examination of the professional conduct of lawyers and a litigation funder, conducted by the court of its own motion, it was not funded by a regulator or by government. It is true that the Remitter resulted in a far greater distribution of the Trust Co settlement sum to debenture-holders than the original proposed settlement, but at a cost to debenture holders funds in excess of $10m.
[26]J:[3].
The SPR submitted, and I agree, this is a weighty consideration as it is plainly contrary to the interests of justice for debenture-holders to be left to bear the substantial costs of the Remitter, whilst the primary contraveners pay nothing, which leads to the next issue.
Twelfthly, by reason of the insolvency or lack of means of the principal contraveners, the SPR has not been able to effect substantial recovery of the judgment from them. As at November 2022, the SPR had recovered $3,012,728.93 from the Legal Practitioners Liability Committee towards the compensation component of the Remitter judgment. The SPR had not recovered any funds in respect of the costs component of the Remitter judgment. No other recoveries had been made by the time of the hearing of the application against the Elliott entities. As at November 2022, it appeared unlikely that there would be any recoveries from the judgment debtors as AFP is in liquidation, O’Bryan and Symons are bankrupts, and Zita and Trimbos do not appear to be of substantial means. A substantial percentage of available professional indemnity insurance cover was spent in defence of the Remitter proceeding.
Circumstances of the specific Elliott entities
Estate of Mark Elliott
Through his various entities (AFP, Decoland and Elliott Legal), Elliott was the real and effective litigant in that the dominant purpose of the fraudulent conduct was to further his personal and commercial interests. His participation in the Remitter proceeding only ended abruptly with his death. He was the central player in the fraudulent scheme. I described O’Bryan and Elliott as the masterminds and summarised his involvement in the fraudulent scheme in the Remitter judgment.
Mark Elliott was the architect of one of the darkest chapters in the legal history of this State. He fraudulently inflated his claim for fees at the time of the Partial Settlement, and encouraged O’Bryan and Symons to do the same in respect of their fees in the Trust Co Settlement. He destroyed relevant documents to avoid disclosure of his conduct. He swore false affidavits. He attempted to intimidate litigants, unrepresented group members and other officers of the court, to pursue his own financial interests and conceal his wrongdoing. He provided false information and instructions to AFP’s solicitors, intending to hamper the Contradictor’s investigations.[27]
[27]J:[90].
The SPR submitted, and I agree, these findings alone justify that his Estate pay the costs incurred in uncovering and redressing his misconduct that lay at the heart of the scheme. However, as the SPR further submitted, a number of specific features of his involvement provide additional, and independent, bases for the imposition of a non-party costs order.
(a) Elliott was the principal person exercising control over, and responsibility for, the conduct of the Bolitho proceeding. I found that Mr Zita was largely a ‘post box’, chosen by Elliott to facilitate his control of the litigation in order to advance his own interests.[28] This was an essential feature of his fraudulent scheme, enabling him to misrepresent to both the court and the other practitioners with whom the plaintiff dealt that Bolitho’s legal representatives were independent from the funder, AFP. Elliott misused his position, being a solicitor and a person otherwise bound to observe the overarching obligations, to conduct the litigation in his own interests in a deception of the court and a repeated abuse of its processes. His misconduct and dereliction of duty was most serious and egregious.
[28]J:[195].
(b) As the managing director and through his corporate entities, the major shareholder in AFP, Elliott exerted complete control over AFP which was his alter ego.[29] The essence of the scheme was that AFP maintain a claim, with no proper basis, to a substantial funding commission and for payment of substantial legal costs. This business model, implemented at Elliott’s direction,[30] was effected through his control of AFP and its claims against a settlement fund and of the proceedings and the benefits to be received by Bolitho that would constitute a settlement fund. Absent these claims, it was the debenture holders who were entitled to the settlement fund.
[29]J:[87],[89].
[30]J:[2097].
(c) The Remitter judgment documents a number of instances of misconduct that comfortably establish an entitlement to non-party costs against his estate. These instances of misconduct were a course of conduct that was a direct attempt to interfere with the proper administration of justice in order to conceal his wrongdoing, to evade proper scrutiny:
(i) Harassing and intimidating correspondence to Mrs Botsman, designed to foreclose any scrutiny of his conduct.[31]
[31]J:[882], [886], [1614].
(ii) Causing AFP to pursue an injunction to restrain Mrs Botsman from prosecuting her appeal.[32]
[32]J:[860].
(iii) Bringing an application for security for costs against Mrs Botsman in an attempt to intimidate her to withdraw her appeal.[33]
[33]J:[1614].
(iv) Developing and implementing a campaign to intimidate counsel for the SPR in the appeal.[34]
[34]J:[944].
(v) Threatening to terminate the settlement, alleging that the conduct of counsel for the SPR amounted to breach of it.[35]
(d) Elliott engaged in deliberate and dishonest destruction of inculpatory documents for the purposes of avoiding discovery in the Remitter.[36]
(e) Elliott was a solicitor and an officer of the court. The Remitter judgment records the myriad ways he was in serious dereliction of his duties to the proper administration of justice and guilty of serious misconduct.
[35]J:[993]-[999].
[36]J:[66], [93(b)], [1138]-[1161]
The SPR submitted in concluding its submissions in respect of Mark Elliott’s estate that his close and intimate connection with every aspect of the proceedings permits an inference I ought to draw that:
Mr Elliott commenced the Bolitho Proceeding for the dominant purpose of furthering his commercial interests through the implementation of the fraudulent scheme, with the goal of unjustly enriching himself. In doing so, he abused the processes of the Court and used the Court itself as the instrument of that fraud. He went to extraordinarily lengths, and engaged in egregious misconduct, in order to keep that fraud hidden.
It is clear from the Remitter judgment that I am satisfied that I ought to do so, and have done so.
I would add, in case it is thought to have been overlooked, that Elliott’s death does not preclude the court from making a costs order against his estate. Although the Elliott entities did not suggest otherwise, I have so concluded for the like reasons as were set out in the Remitter judgment in relation to the estate of Peter Trimbos.[37] The right to a costs order is not a cause of action as that term is properly understood. Section 29 of the Administration and Probate Act 1958 (Vic) has no application. The question to be asked when exercising the broad and untrammelled discretion granted by s 24 of the Supreme Court Act is whether in all the circumstances the interests of justice require that a costs order be made against that person’s estate.
[37]J:[2071]-[2081].
The SPR pointed to four matters on this question.
(a) The close and intimate connection that Elliott had with every aspect of the proceeding as the person who stood to benefit most from it. His conduct contributed greatly to the costs incurred by the SPR in the remitter as he attempted to conceal his wrongdoing.
(b) Elliott died shortly before the trial, and the facts, matters and circumstances making it just for a non-party costs order to be made against him all occurred prior to his death.
(c) Before he died, Elliott swore false affidavits in the Remitter.[38]
(d) The Contradictor put Elliott squarely on notice of a costs order prior to his death.
[38]J:[92].
I am satisfied that the interests of justice require an order that Maximillian Edward Elliott, as the representative of the Estate of Mark Edward Elliott, deceased, pay the costs of and incidental to this proceeding including, for the avoidance of doubt, the Contradictor’s costs, to be assessed on an indemnity basis.
However, the Estate of Mark Elliott has net liabilities of $494,136.
Decoland
I am satisfied as to the following matters, which were not contested.
Elliott was a director of Decoland between 28 March 2000 and February 2020. The other director was his wife, Pina Elliott, who has been a director since 26 June 1990. Elliott and Pina Elliott each held 50% of the issued share capital in Decoland. From at least the date of the commencement of the Bolitho Proceeding until his death, Elliott was the directing mind and will of Decoland such that it was his alter ego.[39] I found in the Remitter judgment that Elliott’s practice was to exercise complete control over his corporate vehicles, including AFP and Elliott Legal,[40] and I am satisfied that he did so in respect of Decoland, as the SPR contended. There was no evidence of Pina Elliott, or any other person, exercising any control over the affairs of Decoland, nor did the Elliott entities put contentions in support of an alternative interpretation of events. The Elliott entities refused to comply with court orders for discovery that might have shed light on such matters. The documents tendered in the Remitter revealed an example of Elliott, of his own accord, instructing the Westpac Bank to transfer $300,000 from Decoland to Sue Noy on 8 February 2016.
[39]In the sense described in Tesco Supermarkets Ltd v Nattrass [1972] AC 153, 170-1. See further Brambles Holdings v Carey (1976) 15 SASR 270, 279; Krakowski v Eurolynx Properties Ltd (1995) 183 CLR 563, 582-3; ACCC v Prysmian Cavi E Sistemi SRL (No 12) [2016] ATPR 42-525 [224]; Commonwealth Bank of Australia v Kojic (2016) 249 FCR 421, 452-3 [127]-[128].
[40]J:[89].
Decoland was the trustee of the Elliott Equities Investment Trust and the MEE Superannuation Fund, which I am informed by the SPR have very considerable assets. It is unclear whether the transactions and holdings I am about to describe represent business of one or other of these trusts.
Decoland owns 450,000 fully paid shares in AFP, representing approximately 34% of AFP’s issued share capital. Decoland owns 50% of the issued shares in AMEO Investments Pty Ltd ACN 167 221 507 that owns 50,000 fully paid shares in AFP representing approximately 4% of AFP’s issued share capital. Plainly, Decoland holds a substantial interest in AFP.
I have earlier noted the evidence in the Remitter established that AFP was thinly capitalised with limited ability to meet its liabilities and that it served a purpose of protecting the interests of those who stood behind it, including Decoland. Decoland was the real funder of the Bolitho proceeding and of AFP’s claim and defence in the Remitter. It provided the initial capital together with the O’Brian entities (considered later in these reasons). Two further matters that support this finding can be noted. First, AFP entered into contingent fee arrangements with its legal services providers so that it did not have to meet those legal costs as and when they were incurred. Secondly, Decoland provided funds to AFP on an ‘ad-hoc’ basis, via a loan account, when required to meet expenses. Decoland paid at least $2,130,000 to AFP to enable it to maintain the Bolitho proceeding by 24 payments in sums varying between $5,000 and $990,000 between 3 February 2016 and 23 August 2019 that the SPR could identify from the documents discovered in the Remitter.
My finding that Elliott was the alter ego of both AFP and Decoland satisfied me that Decoland knew that until 13 August 2020, AFP maintained a claim for payment of a substantial funding commission and ‘reimbursement’ of substantial legal fees in the Bolitho Proceeding, which claims lacked a proper basis. It was with that knowledge that Decoland funded AFP’s claims in the Remitter as its payments to AFP enabled it to pay the substantial fees of AFP’s solicitors in the Remitter, Arnold Block Leibler. There is an evident trail of funds from Decoland to APF to Arnold Block Leibler. This had the direct consequence of enabling AFP to delay the exposure of its fraudulent activities, increasing the costs burden of the Remitter for the SPR and delaying group members’ receipt of entitlements. Decoland was a real funder of AFP in the Bolitho proceeding.
As Elliott intended, Decoland benefited from, and stood to benefit further from, the Bolitho Proceeding, which was demonstrated by documents discovered in the Remitter. It was the entity that was to principally receive the fruits of Elliott’s fraudulent scheme. It was the single largest shareholder in AFP, while Elliott was not himself a shareholder. It seems probable that Decoland received funds as trustee for the trusts earlier mentioned although I cannot make any positive finding in that respect as Decoland did not comply with orders that it make discovery.
Discovery in the Remitter enabled an analysis of how Decoland benefited from the partial settlement. On 12 December 2016, AFP received $5,240,000, being the settlement sum approved in the partial settlement. It transferred $400,000 to Elliott Legal, who transferred that sum to Decoland. On 13 December 2016, AFP transferred $397,500 to Elliott Legal with the description ‘ELP/L-Banksia fees’ and Elliott Legal then transferred $400,000 to Decoland. Almost the entire funding commission claimed by AFP and approved was received by Decoland.
Decoland also received eight payments from AFP between 4 May 2016 and 18 October 2019 totalling $2,040,000. However, the SPR could not identify the purpose of these payments only having access to the bank statements of AFP. Decoland provided no explanation, despite the payments being particularised in the SPR’s contentions. In conjunction with Decoland’s refusal to comply with discovery orders, I can more comfortably infer that these substantial payments were to benefit Decoland, or to return capital to it, or to repay loans made by Decoland to continue to support AFP and its activities.
In the Remitter, I concluded that the payments made by Decoland to Noysy were more likely to be payments relating to the settlement of another class action funded by AFP, Camping Warehouse v Downer EDI. I concluded that it had not been established that neither Noysue nor Noysy was paid any sum for the transfer of Noysue’s shares in AFP in pretended compliance with Bolitho No. 4 as O’Bryan contended. In the Remitter, O’Bryan pointed to payments of sums on dates and in amounts that did not correlate with the purported share transfer but appeared to correlate with the receipt of funds from the settlement of that class action.
I am satisfied that Decoland was knowingly involved in, and assisted, the conduct of AFP and Elliott in abusing the processes of the court and using these processes as an instrument of the fraud that they attempted.
I am satisfied that the interests of justice require an order that Decoland pay the costs of and incidental to this proceeding including, for the avoidance of doubt, the Contradictor’s costs, to be assessed on an indemnity basis.
Elliott Legal
Elliott was a director and company secretary of Elliott Legal, an incorporated legal practice that is wholly owned by Decoland. Alex Elliott was also a director in 2016-2017 and since February 2020.
My findings in the Remitter establish the following matters.
(a) Elliott as the managing director of Elliott Legal was in practice as a solicitor in his role with that firm. Alex Elliott also practised as a solicitor in his role with that firm as both an employee and a director.
(b) Zita, the solicitor on the record for Mr Bolitho, acted as directed by Elliott such that Elliott, including when acting as the principal of Elliott Legal, exercised actual control of the conduct of the proceeding on matters of substance to Zita’s exclusion.
(c) Elliott’s knowledge and state of mind, as discussed above, is attributable to Elliott Legal such that Elliott Legal is complicit in the acts, omissions, and misconduct of Elliott and Alex Elliott (who also acted as directed by Elliott).
Elliot Legal charged fees of $797,500 in the Bolitho proceeding and benefitted from the maintenance of that proceeding. It is a reasonable inference from what occurred with the partial settlement that it stood to benefit from the payments of approximately $20 million sought by AFP from the Trust Co settlement. That is so for at least the reason that the payment from the proceeds of the partial settlement was less than what it claimed to be owed on account of its fees. Further, my findings in relation to Elliott’s conduct in compiling the fee claims of O’Bryan, Symons and Zita also permit that inference to be drawn.
For the reasons already explained in respect of Decoland, Elliott Legal knew that Elliott caused the Bolitho proceeding to be instituted and maintained and that Elliott engaged in conduct that abused the processes of the court to prosecute a fraudulent scheme. Elliott legal was complicit in this conduct and assisted in its execution. For example, Elliott Legal permitted Elliott (and Alex Elliott) to use its office, computers, and email address to conduct the Bolitho Proceeding. Elliott Legal rather than Portfolio Law responded to telephone queries from debenture-holders. Elliott was across the passwords to all computers and programs at Elliott Legal. I am satisfied that I can readily infer that but for the Bolitho No.4 decision, Elliott Legal would have remained the firm on the record and continued to directly, rather than indirectly, conduct the litigation and perpetrate the Elliotts’ fraud. The fact that it did so covertly and in contravention of Bolitho No. 4 is further basis for the imposition of non-party costs.
While so conducting the proceeding through Portfolio Law, Elliott Legal was also AFP’s personal solicitor too, even when other solicitors, such as ABL were retained. I can readily infer that in this capacity, Elliott Legal enabled and assisted in the fraudulent scheme. The SPR gave the following example drawn from the findings in the Remitter. In the circumstances of the partial settlement, I found that Elliott Legal fraudulently inflated its fees claim to be paid from the partial settlement. It then acted as solicitor for AFP when it sought a funding commission that was based, in part, on those inflated fees.
In the remitter, I made findings about document destruction by Elliott. This conduct involved Elliott Legal property (its computers, phones and accounts) and took place at its offices.
I am satisfied that in the circumstances of Elliott Legal’s conduct in, and in relation to, the proceeding, as I have described it in the Remitter, it is just and equitable in all the circumstances that Elliott Legal pay the costs sought by the SPR. Further, as an incorporated legal practice, Elliott Legal engaged in conduct that was in serious dereliction of its duties to the court, and constituted serious misconduct, such that a costs order ought to be made against it. It would constitute a grave injustice to debenture holders to conclude otherwise.
MCM (Mt Buller) Developments Pty Ltd (MCM)
MCM was formerly named Regent Support Pty Ltd.
Although its involvement in the proceeding was not direct, like the other Elliott entities already discussed, it was no less significant. On 14 December 2014, Pina Elliott was the sole director and shareholder of MCM when it became the legal owner of 500,000 shares in AFP following a transfer from the O’Bryan entity, Noysue, on whose behalf Noysy had initially subscribed $500,000 for those shares. O’Bryan and Susan Noy were at all relevant times the directors and shareholders (in equal shares) of Noysy and it was the trustee of two trusts until in or around March 2021, Susanorman Family Trust and the Norman O’Bryan Superannuation Fund. Susan Noy was the sole director and shareholder of Noysue, which held 500,000 shares in AFP from 20 January 2014 to 14 December 2014.
I am satisfied that Elliott directed the affairs of MCM. Importantly, he signed the share transfer form produced in evidence at the Remitter in support of the contention that Noysue had disposed of its interest in AFP consequent on the Bolitho No. 4 ruling. I am also satisfied that Elliott did not cause MCM (or any other Elliott entity on its behalf) to pay Noysue the consideration noted on the transfer form. In substance, MCM remained a bare trustee of the shares.[41]
[41]J:[127].
This transaction was a sham that was part of Elliott’s fraudulent scheme.[42] While MCM was not directly involved in the sense that Elliot and Decoland, for example, were involved, the share transfer transaction was critical.
[42]J:[130].
The misleading share transfer form enabled Elliott and O’Bryan to represent to the legal representatives of other parties that Noysue no longer had any financial interest in AFP such that formal court orders implementing the Bolitho No. 4 ruling were not necessary and none were made. How Elliott, O’Bryan, Symons and AFP deceived the court, and officers of the court, into thinking that O’Bryan and Noysue had disposed of their financial interest in AFP, is described at length in the Remitter Judgment. The crux of this conduct was that it permitted O’Bryan to remain as senior counsel for Mr Bolitho while avoiding the clear directive of the court. MCM assisted both O’Bryan and Elliott to remain conflicted and in control of the proceeding in a position to ensure they (or their entities) benefitted from the proceeding at the expense of the debenture holders. Had the other parties not been persuaded not to press the court for injunctive relief, the opportunity for the Elliott and O’Bryan entities to improperly profit would have been severely constrained.
MCM was knowingly involved in, and assisted, this conduct. I am satisfied that Elliott’s knowledge and intentions are to be imputed to MCM for the same reasons as are discussed above in respect of Decoland. There was evidence in the remitter that supported the inference that Elliott’s practice or habit was to control family companies. Although not a director of MCM, he executed the transfer form. That conduct was inconsistent with a proper discharge of fiduciary obligations by MCM’s director.
I can more comfortably draw these inferences against MGM for three reasons. It consented to the orders made, offering nothing in opposition to the SPR’s contentions or the relief being sought before it did so. It wilfully failed to observe court orders to make discovery, and led no evidence that Pina Elliott had anything to do with these transactions. Had the director of MCM required it to transact legitimately and the continued involvement of O’Bryan as senior counsel been terminated – there being not a shred of evidence that MCM could pay the consideration due to Noysue, while the director’s fiduciary obligations hardly permitted MCM to transfer shares of at least that value in the absence of binding consideration – the foundational premise of personal control of the proceeding by its funders would have been thwarted.[43]
[43]Compare Hardsted Pty Ltd v Tomanek (2018) 55 VR 158, 186-7 [116]-[118].
Quantum of the judgment being entered
No submission was made that the court ought to apportion the total legal costs of the Remitter between the Elliott entities. Given that fraud is involved, it will not be in the interests of justice to do so. In this case each of Decoland, Elliott Legal and MCM were used by Elliott and AFP as instruments to perpetrate their fraud on the court and debenture holders while attempting to shield each of the primary wrongdoers from any substantial liability in connection with their maintenance of the Bolitho Proceeding. For the same reasons that I gave when dismissing the attempts by the parties to seek proportionate judgments against them,[44] it is not in the interests of justice that the risks that any non-party held liable for the costs may be insolvent or otherwise able to frustrate execution of a judgment be borne by the debenture holders.
[44]J:[2120]-[2115].
Further, as alter egos of Elliott, it is appropriate to order that costs be assessed on an indemnity basis where the non-party to pay such costs has engaged in unmeritorious or deliberately improper conduct that would warrant the court both showing its disapproval and, at the same time, preventing the winning party from being left out of pocket. Such conduct, both in the course of the proceeding and in the course of this non-party costs application, has been documented above.
For these reasons on 1 March 2023, I ordered that each of:
(a) Maximillian Elliott as personal representative of the Estate of Mark Edward Elliott (Estate of Mark Elliott);
(b) Decoland Holdings Pty Ltd;
(c) Elliott Legal Pty Ltd; and
(d) MCM (Mt Buller) Developments Pty Ltd,
pay the costs of and incidental to the proceeding, including the Contradictor’s costs, on an indemnity basis.
Noysue & Noysy
Before the application in respect of the O’Bryan entities for non-party costs orders came on for hearing the claim was compromised.
On 2 June 2023, after the SPR reached that settlement with the O’Bryan entities, and O’Bryan himself, he amended the non-party costs summons to instead seek the court’s approval of this settlement, pursuant to ss 283HB of the Corporations Act 2001 (Cth) and ss 33V(1), (2) and 33ZF of the Supreme Court Act. The SPR sought a declaration that it has the power to settle the claims against O’Bryan, Noysue and Noysy, and is justified in doing so on the agreed terms. For the following reasons, I will make that declaration and the appropriate supporting orders.
For this purpose, I note that the compensation component of the Remitter Judgment is approximately $11.7M and the costs component is approximately $10.6M, although those costs have not been assessed. Mr Lindholm has opined that on an assessment he is likely to be entitled to more than $9.5M. The costs have not been assessed pending negotiations for resolution of the execution of the Remitter Judgment, given the additional costs likely to be involved in a costs assessment. Further costs in respect of non-party recoveries are estimated at approximately $600,000.
After allowing for recoveries from the Legal Practitioners Liability Committee of the balance remaining in the policies in respect of O’Bryan and Symons and the return of fees of $375,683 by Zita and adding interest, the current outstanding balance of the compensation component of the judgment exceeds $9.7M. Accepting Mr Lindholm’s estimate of the likely outcome of a costs assessment, the liability of the contraveners exceeds $19.7M and the exposure of the non-parties in respect of costs likely exceeds $9.5M. Although Mr Lindholm has described in detail the course of settlement negotiations with all contraveners and non-parties in a confidential affidavit, which I have noted, those negotiations remain ongoing and there is no benefit to be achieved by disclosing that information in these reasons.
The parties concluded the settlement deed on 27 March 2023. The salient terms are:
(a) The claims against the O’Bryan entities are dismissed;
(b) The entities will pay a settlement sum of $1.25m to the SPR, to be distributed to all debenture-holders of Banksia pari passu in accordance with the settlement distribution scheme approved by me on 22 May 2019;
(c) This settlement sum is in full and final satisfaction of O’Bryan’s liability under the Remitter Judgment, and to compromise the SPR’s claims for non-party costs order against Noysue and Noysy.
The SPR submitted that the proposed settlement is fair and reasonable and in the interests of debenture-holders because:
(a) There is little to no likelihood of substantial financial recovery from O’Bryan using any enforcement steps available to the SPR and no realistic possibility of substantial financial recovery against Noysue and Noysy within the foreseeable future;
(b) Settlement will prevent material risks and delays in recovery, including potential appeals, associated with continuing to pursue the non-party costs summons; and
(c) Settlement allows the SPR to focus his efforts and finite resources on more productive avenues for substantial financial recovery.
I accept, as the SPR submitted, that I have the power to make these orders under the court’s broad remedial and protective jurisdiction conferred by s 283HB of the Corporations Act, to make any order the court considers appropriate to protect the interests of debenture holders,[45] as well as s 33V(1) of the Supreme Court Act, given that this involves approval of a settlement of claims arising from a class action, for the ultimate benefit of group members.
[45]Re Banksia Securities (in liquidation) (rec & mgr apptd) [2018] NSWSC 629, [17]-[32]; Banksia Securities Ltd v Insurance House Pty Ltd (Settlement Approval) [2020] VSC 123, [12]-[17].
The ultimate question is whether the decision to enter into the settlement was fair and reasonable and in the interests of debenture holders. In order to answer this question, I do not have to reconsider all the factors the SPR has considered, but rather to be satisfied that the decision is proper and reasonable, which usually requires assessment of the SPR’s reasons for the settlement, and the process by which the decision was reached.[46]
[46]Re One.Tel Networks Ltd (2014) 99 ACSR 247, 256 [36].
The wishes of the debenture holders and their reactions are an important consideration;[47] the court should be satisfied there is no error of law or bad faith or impropriety; and should pay due regard to the commercial judgment of the SPR, and the legal advice he has received.[48] Other relevant factors include the history, complexity and stage of proceeding and the risk of continuing to litigate the claim, the risk of recovery, and the prospect of obtaining a greater sum, to ascertain whether the decision is within the reasonable range of potential outcomes, having regard to the circumstances known or reasonably foreseeable to the SPR and his advisors.[49]
[47]Banksia Settlement Approval, [20], [25(g)] (n 45).
[48]Ibid [21].
[49]Ibid [25]-[26].
In assessing the relevant factors, I have had regard to:
(a) An affidavit of Samuel Roadley Kingston, with the settlement deed attached; and
(b) Three affidavits deposed to by the SPR, John Ross Lindholm, two of which were confidential.
I have also taken into account –
(a) a joint opinion of counsel prepared for the purposes of this application. Counsel have advised Mr Lindholm that his prospects of success against the O’Bryan Entities in the non-party costs application are better than even but carry material risk, noting that these entities have aggressively contested the application. The prospect of further delay through appeals cannot be discounted and neither can the prospect of protracted litigation to execute any judgment.
(b) a joint opinion of counsel provided to the Supreme Court of New South Wales on the SPR’s application for directions that he was justified in not accepting a global settlement offered by each of the judgment debtors to the Remitter Judgment;
(c) a joint opinion prepared by counsel for the SPR prior to his decision to reject a subsequent global settlement offer made by each of the judgment debtors to the Remitter Judgment; and,
(d) Mr Lindholm’s views about, and reasons for, resolving the claims with O’Bryan and the O’Bryan entities set out in the two confidential affidavits he has sworn.
The SPR has acknowledged that the settlement sum seems low (10.7% of compensation awarded, excluding costs), particularly given O’Bryan’s central role in, and culpability in respect of, the fraud. He accepts that the settlement does not result in a substantial financial return to debenture-holders, who may struggle to accept that it is, in his opinion, a fair and reasonable resolution of the judgment and ongoing dispute with those parties. However, he has been guided by an objective comparison of the benefit in getting in those funds now, against the prospects of further financial recovery and the cost and delay involved in further enforcement steps.
The SPR advanced, as the overwhelming consideration, the poor prospects of substantial financial recovery from the bankrupt O’Bryan and the O’Bryan entities within any reasonable period of time. The SPR has provided evidence of his knowledge of the financial position of O’Bryan, Noysue and Noysy and his analysis of the enforcement and financial recovery prospects and I accept his analysis of those matters. Mr Lindholm has also taken account of the long history of this matter and the demographic profile of debenture-holders, in concluding that it is in the best interests of debenture-holders not to commit their funds to funding further investigations into Mr O’Bryan’s financial affairs.
Noting that the settlement is clearly out of proportion with the gravity and nature of the misconduct O’Bryan has been found to have committed, Mr Lindholm has, as I accept he must, distinguished between the personal position of the bankrupt O’Bryan, who has contributed nothing, and the position of the entities that are to contribute the settlement funds. It is not for Mr Lindholm, in his position as SPR, to ensure that the public interest considerations that emerged in the remitter proceeding,[50] are satisfactorily resolved. The purpose of his appointment was to protect the interests of debenture holders by maximising their recoveries by a considered cost-benefit analysis. Although there has been some distraction generated by some individuals seeking separate compromise of claims that they personally might have against the contraveners, it was not Mr Lindholm’s role to resolve such claims notwithstanding that they have been raised in negotiations. The committee of debenture holders unanimously supported the proposed settlement with O’Bryan and the O’Bryan Entities, but with a reluctance that was solely based on their financial position.
[50]The judgment was referred to the police but, to date, no action is apparent.
From this material, I am satisfied that:
(a) the SPR has followed proper process in negotiating the settlement – there is certainly no question of impropriety or bad faith.
(b) the reasons given for accepting the settlement offer are cogent.
(c) the reasoning is supported by sound advice from counsel.
(d) the debenture holder committee has expressed unanimous support for the settlement and none have objected.
(e) the debenture holders are elderly and payments should be effected as soon as possible.
Further, and importantly, I am satisfied that Mr Lindholm is objectively entitled to conclude the terms of settlement with O’Bryan and the O’Bryan entities, when assessed from both legal and economic viewpoints, the terms being within an acceptable range, although I agree that the settlement must be regarded as being at the low end of that range.
For these reasons, I will make the necessary orders approving the settlement.
Peter Trimbos
The SPR also sought court approval of a settlement with the estate of Peter Trimbos, deceased, in respect of the judgment debt and any other claims against Ms Katerina Peiros as representative of the estate.
The settlement deed in respect of this claim, concluded on 24 May 2023, provided that the Legal Practitioners Liability Committee pay $1,413,197.13 to the SPR, being the balance of the available limit of Mr Trimbos’s policy of insurance. The estate is not otherwise making any financial contribution.
The SPR submitted that the proposal was fair and reasonable and in the interests of debenture holders because:
(a) It allows for swift recovery of Trimbos’s available insurance proceeds, without the cost and delay of having to take legal steps to recover the proceeds; and
(b) There are no other commercially viable sources of recovery from Trimbos’s estate.
This settlement may also be considered low because it is limited to insurance proceeds to which the SPR has a statutory entitlement under s 51 of the Insurance Contracts Act 1984 (Cth), without any additional payment by the estate. However, there was no evidence to suggest that Trimbos was a man of wealth. His only available asset was an investment property in his name with available equity of around $500,000 in respect of which his widow asserts an equitable interest as the beneficiary of a constructive trust. It appears likely any efforts to enforce the judgment against the property would lead to further disputes with the widow and it is open to Mr Lindholm, acting reasonably from both legal and economic perspectives to conclude it is not commercially viable or appropriate to commit debenture holders’ resources to further litigation with a very limited upside when there are other more fruitful avenues to pursue.
Distribution
In an earlier judgment,[51] I considered the proper basis for the distribution of settlement sums received from previous settlements. It is proper and reasonable for any distribution of some or all or the settlement sums hereby approved to occur on a pari passu basis and in accordance with the previously established distribution scheme.
[51]Banksia Settlement Approval, [103]-[108] (n 45).
Alexander Christopher Elliott - S ECI 2023 01922
On 11 October 2021, I ordered that Alex Elliott show cause whether, in the context of the findings published in Bolitho v Banksia Securities Ltd (No 18) (remitter) [2021] VSC 666, he is a fit and proper person to remain on the roll of persons admitted to the legal profession kept by this court.
Mr Elliott appealed against some of those findings and undertook to the court not to seek a practising certificate pending the resolution of his appeal. The appeal was not prosecuted and was deemed to have been abandoned. When the show cause motion was called on, I appointed the Victorian Legal Services Commissioner as a contradictor.
Subsequently, the court was informed that Mr Elliott and the contradictor agreed that the appropriate response to the court’s findings is that Mr Elliott’s name be removed from the roll of practitioners kept by the court and that insofar as it is necessary, Mr Elliott consented to such removal.
I will order that the name and other particulars of Alexander Christopher Elliott be removed from the roll of Australian lawyers kept by the court.
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