Megalos and Katsaros and Ors
[2017] FamCA 734
•21 September 2017
FAMILY COURT OF AUSTRALIA
| MEGALOS & KATSAROS AND ORS | [2017] FamCA 734 |
| FAMILY LAW – COSTS – pursuant to judgment 9 December 2015 |
Family Law Act 1975 (Cth) ss 117, (2A)
Corporations Act 2001 (Cth)
Megalos & Katsarosand Ors [2015] FamCA 1094
Bent v Gough & Anor [1992] FCA 267 (1992) 36 FCR 204
Cachia v Hanes (1994) 179 CLR 403
Prantage v Prantage (2013) FLC 93-544
D Pty Ltd (in liq) v Calas (Trustee), in the matter of D Pty Ltd (in liq) [2016] FCA 1409
| APPLICANT: | Ms Megalos |
| 1st RESPONDENT: | Mr Katsaros |
| 2nd RESPONDENT: | Mr B Katsaros |
| 3rd RESPONDENT: | C Pty Ltd (ACN …) |
| 4th RESPONDENT: | D Pty Ltd (ACN …) |
| 5th RESPONDENT: | E Pty Ltd (ACN …) |
| 6th RESPONDENT: | F Pty Ltd (ACN …) |
| 7th RESPONDENT: | Mr Calas as Trustee of the Bankrupt Estate of Ms Megalos |
| FILE NUMBER: | MLC | 6793 | of | 2012 |
| DATE DELIVERED: | 21 September 2017 |
| PLACE DELIVERED: | Sydney |
| PLACE HEARD: | Chambers - Hobart |
| JUDGMENT OF: | Benjamin J |
| HEARING DATE: | In Chambers by written submission to be made 25 August 2017 |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Hall |
| SOLICITOR FOR THE APPLICANT: | Mr T & Associates |
| COUNSEL FOR THE 1ST RESPONDENT: | In person and excused |
| SOLICITOR FOR THE 1ST RESPONDENT: | Mr M J Galvin QC & Ms Janine Wald |
| COUNSEL FOR THE 2ND RESPONDENT: | In person and excused |
| SOLICITOR FOR THE 2ND RESPONDENT: |
| COUNSEL FOR THE 3RD RESPONDENT: |
| SOLICITOR FOR THE 3RD RESPONDENT: | Mr J |
| COUNSEL FOR THE 4TH RESPONDENT: |
| SOLICITOR FOR THE 4TH RESPONDENT: | Mr J |
| COUNSEL FOR THE 5TH RESPONDENT: | Excused |
| SOLICITOR FOR THE 5TH RESPONDENT: |
| COUNSEL FOR THE 6TH RESPONDENT: | Excused |
| SOLICITOR FOR THE 6TH RESPONDENT: | |
COUNSEL FOR THE 7TH RESPONDENT: | Peter Fary |
| SOLICITOR FOR THE 7TH RESPONDENT: | Damian Ballan |
Orders
Mr J and Mr K (‘the liquidators’) of C Pty Ltd (in Liquidation) and D Pty Limited (in Liquidation) pay Mr Calas (as the trustee of the Bankrupt Estate of the Applicant (‘the seventh respondent’)) the costs and disbursements of and incidental to:-_
(a)the proceedings regarding the trustee’s application for release of funds filed 16 October 2015, the third and fourth respondent’s defence filed 25 June 2015 and the applicant’s defence of the application, including the hearing on 20 October 2015, in which reasons were delivered and orders made on 9 December 2015 (‘the proceeding’);
(b)this costs application;
(c)such costs and disbursements of the trustee to be determined on a party-party basis; and
(d)such costs and disbursements to be as agreed between the relevant parties or in the absence of agreement to be assessed in accordance with the Family Law Rules 2004 (Cth).
The liquidators of C Pty Ltd (in Liquidation) and D Pty Ltd (in Liquidation) pay the applicant the costs and disbursements:-
(a)of and incidental to the proceeding;
(b)of and incidental to this costs application;
(c)such costs and disbursements to be determined on a party/party basis; and
(d)such costs and disbursements to be as agreed between the relevant parties or in the absence of agreement to be assessed in accordance with the Family Law Rules 2004 (Cth).
The application by the liquidators for costs orders against the applicant and the trustee in respect of the proceeding is dismissed.
The application by the liquidators for a stay of these costs orders, pending the final orders is dismissed.
IT IS CERTIFIED
Pursuant to Rule 19.50 of the Family Law Rules 2004 (Cth) it was reasonable to engage counsel to attend on and in the proceeding and the costs applications.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Megalos & Katsaros and Ors (costs) has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| FAMILY COURT OF AUSTRALIA AT HOBART |
FILE NUMBER: MLC 6793 of 2012
| Ms Megalos |
Applicant
And
| Mr Katsaros And Mr B Katsaros And C Pty Ltd (ACN …)(In Liquidation) And D Pty Ltd (ACN …) (In Liquidation) And E Pty Ltd (ACN …) And F Pty Ltd (ACN …) And Mr Calas as Trustee of the Bankrupt Estate of Ms Megalos |
Seventh Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This is a dispute between Ms Megalos (‘the applicant’), Mr Calas, who is trustee in the bankrupt estate of the applicant (‘the trustee’) and Mr J and Mr K (collectively ‘the liquidators’) who are the liquidators of the companies C Pty Ltd (in liquidation) (‘CPL) and D Pty Ltd (in liquidation) (‘DPL’) (collectively ‘the companies’).
There was a dispute in the Family Court as to whether a consent property order or the agreement upon which it was based created an equitable lien or charge over properties owned by one or other of the companies which are now in liquidation. The companies are parties to the property proceedings and the 2012 property agreement. The trustee sought leave, pursuant to s 471B of the Corporations Act 2001 (Cth) (‘the Corporations Act’) to enforce, the agreement or property orders against the liquidators.
There was raised a question as to the original jurisdiction of the Family Court under the Corporations Act. The trustee sought payment of monies held by the liquidators and further discovery by them in respect of the companies. For the sake of simplicity I will refer to this as ‘the proceeding’ in these reasons.
That proceeding was heard on 20 October 2015. Reasons were reserved and subsequently delivered on 9 December 2015 (‘the December 2015 Reasons’) and Orders were made on that day (‘the December 2015 Orders’). Those orders provided:-
1.Pursuant to s 471B of the Corporations Act 2001 (Cth) the seventh respondent is granted leave to pursue and continue proceedings in this Court against the liquidators for the D Pty Ltd and C Pty Ltd (the third and fourth respondents).
2.The Court declares that the property at G Street, Suburb H (namely G Street, 1 and 2 I Street, Suburb H) were appropriated in favour of the applicant wife to discharge the first respondent’s obligations pursuant to amounts respectively attributed under order 2 made 7 December 2012 and is thereby charged with the satisfaction of that obligation.
3.Pursuant to the provisions of the Bankruptcy Act 1966, the Court declares that all monies received by the liquidator for the D Pty Ltd and C Pty Ltd (the third and fourth respondents) in relation to the sale of G Street, Suburb H (namely G Street, 1 and 2 I Street, Suburb H) are held in trust for the benefit of the seventh respondent as trustee for the bankrupt estate of the applicant wife.
The remaining proceedings were listed for a further mention date in respect of the identification and recovery of the funds due to the trustee.
The question of costs of that determination were left in abeyance primarily because Mr J, who had at that time become the sole liquidator (and I will address this issue later in these reasons) on 25 January 2016 commenced proceedings in the Federal Court of Australia as liquidator of the companies against the trustee and the applicant.
In those proceedings, the Federal Court determined the issues on the basis that both the company and the liquidator were plaintiffs to the proceedings.[1]
[1] Reasons of Moshinsky J D Pty Ltd (in liq) v Calas (Trustee), in the matter of D Pty Ltd (in liq) [2016] FCA 1409 – paragraph 13.
In those proceedings the liquidator contended that on 4 December 2012 the applicant, her then husband and one of the companies agreed to settle the Family Court proceeding on terms which included the creation of a charge over a property; and that the charging of the property was an “unreasonable director-related transaction” of the company within the meaning of s 588FDA of the Corporations Act. The liquidator sought declarations including that the charge was void and unenforceable.
The trustee and the applicant filed defences. The husband of the applicant and his brother had been joined as parties but did not participate in those proceedings.
The judgment of the Federal Court records that there were two significant shifts in the liquidator’s case at the hearing of the matter. The judgment records:-[2]
15.… In the originating process and points of claim as originally filed, the Liquidator contended that the Consent Orders made by the Family Court, or the charging of the Property by the Consent Orders, constituted a voidable transaction. Further, the Liquidator invoked both the uncommercial transaction provisions and the unreasonable director-related transaction provisions of Pt 5.7B of the Corporations Act.
16.At the outset of the hearing, however, the Liquidator stated that he did not press his case based on the uncommercial transaction provisions. One legal and practical consequence of this was that it ceased to be an issue whether or not [D Pty Ltd] was insolvent at the time of the relevant transaction. The Liquidator also sought leave to amend his case to allege, in summary, that the parties created a charge by agreement on 4 December 2012 (the date when the Minutes of Proposed Consent Orders were signed) and that the charging of the Property pursuant to that agreement was an unreasonable director-related transaction. The Liquidator was granted leave to amend the originating process and points of claim to reflect these changes in his case. The Trustee in Bankruptcy and the Wife subsequently filed amended defences.
17.The amended originating process states that the application is made pursuant to ss 588FE, 588FF and 588FDA of the Corporations Act. The document states that it is an application for an order that the charge (as defined in paragraph 7B(iv) of the amended points of claim – see [19] below) is a voidable transaction pursuant to s 588FDA of the Act, and for orders pursuant to s 588FF(4) to recover the benefit for the creditors of [D Pty Ltd]. The relief sought in the amended originating process (apart from interest and costs and such other orders as the Court considers appropriate) is as follows:
[2] Ibid – paragraphs 15, 16 and 17.
That proceeding was heard on 25, 26 and 27 July 2016 and, as I have already said, reasons of the Federal Court were delivered on 25 November 2016. The liquidator was represented by senior and junior counsel. The liquidator was unsuccessful in that proceeding, the trial judge having concluded in summary:-[3]
11.For the reasons that follow, I have concluded that the Liquidator’s application should be dismissed. My reasons, in summary, are as follows:
(a)First, insofar as the Liquidator relies on the Minutes of Proposed Consent Orders as recording an agreement between the relevant parties creating a charge over the Property, this document was not signed on behalf of [D Pty Ltd] and there is no sufficient basis to infer that [D Pty Ltd] was a party to the agreement. In any event, even if the Minutes of Proposed Consent Orders had been signed on behalf of [D Pty Ltd], I do not think the document evinces an intention to create a charge independently and in advance of the making of consent orders by the Family Court. Rather, I think the document evinces an intention to propose orders to the Court in the terms set out therein.
(b) Secondly, while it may be inferred that, at some point in the period 4 to 7 December 2012, [D Pty Ltd] agreed to orders in substantially the same terms as the Consent Orders actually made by the Family Court on 7 December 2012, it is not established that the parties (including [D Pty Ltd]) reached an agreement which created a charge independently and in advance of the making of any consent orders. I would infer that any agreement between the parties was merely to the Court making consent orders as proposed by the parties. On this analysis, while a charge over the Property was created by the making of the Consent Orders, no charge was created by agreement between the parties in advance of the making of the Consent Orders.
(c)Thirdly, in any event, the Liquidator has not established that it may be expected that a reasonable person in [D Pty Ltd’s] circumstances would not have entered into the alleged transaction. In particular, the evidence does not establish that the alleged transaction was of no benefit to [D Pty Ltd]. Settlement of the Family Court Proceeding may well have been of benefit to [D Pty Ltd]. The Wife had joined [D Pty Ltd] to the proceeding and made claims in relation to property registered in its name. The evidence before me includes a copy of an affidavit filed by the Wife in the Family Court Proceeding which provided at least some basis for her contentions. No contrary evidence has been filed by the Liquidator.
(d)Fourthly, in circumstances where the Consent Orders themselves create a charge over the Property, the declarations sought by the Liquidator would conflict, or appear to conflict, with the Consent Orders, being orders made by another superior court in the Australian legal system. In these circumstances, I do not think it would be appropriate to make the declarations sought.
[3] Ibid – paragraph 11.
In the Federal Court proceedings the liquidator and the company which that Court referred to as D Pty Ltd were ordered to pay the costs of the trustee and of the applicant.[4]
[4] Affidavit of Mr S filed 13 April 2017 – paragraph 7.
There are now before the Court applications by the applicant and the trustee for orders for costs of the proceeding, including indemnity costs, and a response by the liquidators inviting dismissal of these costs application and an order that the trustee and applicant pay the liquidator’s costs of the application for costs.
This costs dispute was to be determined in chambers on the written submissions of the relevant parties. I have adopted that course.
BACKGROUND
By way of explanation as to the nature of these proceedings it is worthwhile setting out the introduction in the December 2015 Reasons where this Court said:-
1. This is a dispute between the Mr Calas (‘the Trustee in Bankruptcy’) who is the trustee of the Bankrupt estate of Ms Megalos, and Mr J and Mr K (‘the Liquidators’) who are liquidators of the companies C Pty Ltd (in Liquidation)(‘C), and D Pty Ltd (in Liquidation)(‘D’).
2. Some real property owned by C and D has been sold by the liquidators; the Trustee claims that the net proceeds of sale of such properties are secured in favour of the Ms Megalos (‘the wife’) and as such are secured and payable him as Trustee of her bankrupt estate.
3. The underlying questions are:-
(a)how did this commercial dispute find its way to the Family Court;
(b)what is the dispute, and what are the sources of this Court’s jurisdiction and power;
(c)should it remain in this Court;
(d)if not, to which court may or should it be sent and pursuant to exercise of which power; and
(e)if it is to remain in this Court, what are the issues and how are they determined.
The reason this commercial dispute found its way to the Family Court
4. In July 2012 the wife commenced proceedings for property adjustment under the Family Law Act 1975 (‘the Act’) seeking orders against Mr B Katsaros (‘the husband’).
5. In those proceedings Mr Katsaros (her ‘brother-in-law’) was later joined as a party and he is the second respondent.
6. In addition, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd (collectively called ‘the four companies’) were also joined as parties and are the third, fourth, fifth and sixth respondents, respectively. The wife asserted that the four companies were either the alter egos of the husband or at least part property of the husband.
7. During November 2012 the parties negotiated a property settlement and on 7 December 2012 consent orders were made in these proceedings (‘the consent orders’). The consent orders were drafted by Ms L, who was solicitor representing the husband, brother-in-law and the four companies. On application the wife and of Ms L (as solicitor appearing for the husband, the brother-in-law and the four companies) those consent orders were made and provided for adjustment of property.
At the time of the consent orders, D owned property G Street, Suburb H.
9. On 22 August 2014 D and C went into liquidation and the Liquidators were jointly and severable appointed.
10. The Liquidators asserted that D owned a two thirds share of a property at G Street, Suburb H and that the other one third was owned by M Pty Ltd. That Suburb H property as sold for $350,000 and D share of the sale of that property was said to be $233,333.33. One of the Liquidators, Mr J, deposed that the Suburb H property was subject to liabilities to N Pty Ltd of $93,333.33 and to Mr O of $133,270 which would extinguish any claim the Trustee had to those monies.
11. The Trustee in Bankruptcy[5] asserted that the effect of the consent orders made on 7 December 2012 or, in the alternative, the agreement upon which that order was based, created an equitable charge or an equitable lien in favour of the wife over the proceeds of sale of the property at G Street, Suburb H pursuant to order 2 made on 7 December 2012. That order provided:-
[5] The Seventh Respondent.
2.The husband will pay into a trust account in the name of the wife the sum of $500,000, the initial sum being the sum of $300,000 to be paid from the proceeds of the sale of [C Pty Ltd] of [P Street, Suburb Q] (and any shortfall on or about the proceeds of sale) by [D] in respect of property [G Street, Suburb H]. This money will be used to purchase a town house to be developed by or on behalf of the husband to the value of $500,000. It will be no smaller than a two bedroom home unit with an area or suburb to be reasonably selected by the wife. The property will be registered in the name of the wife but shall be accommodation for her and [the child] until such time as [the child] has attained the age of thirty years, his birthday being [November 2002], after which the home will rest absolutely in the wife. I note the agreement between the wife and the husband that the wife will execute an irrevocable will providing that she leaves the whole of her estate to the son and will re-execute the will if she enters into a de facto relationship or remarries.
12. In July 2014 the wife commenced spousal maintenance proceedings and enforcement of the property orders in this court. This was quickly followed by her bankruptcy and the liquidation of the subject companies.
What is the dispute, and what are the sources of this Court’s jurisdiction and power?
13. The Trustee in Bankruptcy seeks:-
(a)Leave to commence the proceeding pursuant to s 471B of the Corporations Act 2001 (Cth) (‘the Corporations Act’);
(b)A declaration pursuant to the Corporations Act that the order or the agreement create an equitable charge or equitable lien over either the net proceeds of sale of the property or the sum of up to (presumably $300,000) within the net proceeds of sale of the property. This is given that the property P Street, Suburb Q was sold and there were no funds available for distribution from that property; and
(c)Discovery as to the payment of the proceeds of sale of the Suburb H property.
14. The Liquidators opposed these orders and sought:-
(a)The transfer of these proceedings to the Federal Court or to the Supreme Court of Victoria; and
(b)That if the proceedings remained in this court, that no leave be granted to enable the Trustee to continue these proceedings.
15. Pursuant to s 79(12) of the Family Law Act 1975 (Cth) (‘the Family Law Act’) leave had been earlier granted to the wife to participate in these proceedings and appear by solicitor. This was because it was asserted by her that, despite the fact that she was bankrupt, if these funds were recovered it would be likely that there would be a significant distribution to her from the Trustee in Bankruptcy and as such she had an interest in the outcome of the proceedings.
16. Given that the current issues only relate to a dispute between the Trustee of the wife’s bankrupt estate and the Liquidators for C and D, the husband and the brother-in-law were excused from participating in this aspect of the continuing dispute.
17. As to the fifth and sixth respondents, no orders were being sought against them. They did not appear.
THE EVIDENCE
18. Each of the parties provided written submissions in relation to the question of costs namely:-
·The wife’s submissions prepared by Mr John Hall of counsel dated 13 July 2015
·The Trustee in Bankruptcy’s submissions prepared by Peter Fary of Counsel dated 19 October 2015 (in that submission he excluded the reference to the property P Street, Suburb Q);
·The Liquidators’ submissions prepared by Andrea Mapp of Counsel dated 19 October 2015; and
19. The parties relied upon the consent order made 7 December 2012 together with the consent document signed by the parties and dated 4 December 2012 consisting of 4 pages which was part of the court record.
20. The parties also referred to the affidavit of the liquidator, Mr J, sworn and filed 1 December 2014 and in particular paragraphs 9 to 14. It is not in issue that the Liquidators have been appointed to liquidate C and D.
21. The parties relied upon an affidavit of Mr R[6] sworn and filed 12 December 2014, in particular Exhibits AO3, AO4 and AO5 to confirm that the property at G Street, Suburb H Victoria was sub-divided by plan of sub-division … on 10 May 2014 into three lots namely, G Street Suburb H, 1 I Street, Suburb H and 2 I Street, Suburb H.
[6] Solicitor for the Trustee in Bankruptcy
22. The Trustee in Bankruptcy relied upon a part of the affidavit of the wife sworn 9 July 2014 and filed 10 July 2014, in particular paragraphs 23 to 33. This was to provide the context of the orders made on 7 December 2012.
23. The Trustee tendered[7] in evidence letters by Ms L, the first being a fax and the second being the original of that fax sent 5 November 2012, but amended in terms of the address of the Court whereby Ms L asserted:-
[7] Exhibit 1.
We now act for [the husband] and the other parties named as respondent’s thereto namely [the brother-in-law], C Pty Ltd, E Pty Ltd, D and F Pty Ltd.
24. In that letter Ms L reported that the parties had reached an agreement and it has been requested that the matter be listed on 7 December 2015, presumably so that the agreement could be considered in the context of the consent order.
25. On 5 December 2012 a copy of the minute of consent orders completed by the husband and wife were forwarded to the Court.
26. The court order reveals that on 7 December 2012, before me, an application was made to the Court and upon hearing the wife in person and Ms L for the respondents (emphasis added) that the orders ought to be made.
27. I am satisfied, on that evidence, that Ms L acted for the husband, the brother-in-law and expressly on behalf of the companies when the orders were made.
HISTORY OF THESE PROCEEDINGS
28. After the orders were made in December 2012 it is clear that the wife had hoped that this would be the end of the proceedings.
29. However, an initiating application was filed on behalf of the wife on 10 July 2014 naming the husband, the brother-in-law, and the four companies, C Pty Ltd, D Pty Ltd, E Pty Ltd and F Pty Ltd, as respondents. In that application the wife sought enforcement of the property order and also the enforcement of a spouse maintenance order. The wife relied upon an affidavit filed by her sworn 9 July 2014 and filed 10 July 2014.
30. On 9 August 2014 a Sequestration Order was made against the wife and Mr Calas was appointed as her Trustee in Bankruptcy of her property.
31. As indicated earlier, on 22 August 2014 D Pty Ltd and C Pty Ltd were placed into liquidation.
32. On 1 December 2014, Mr J, one of the Liquidators of C and D filed an affidavit providing information to the Court.
33. On 3 December 2014 the husband filed a response to the application initiating proceedings together with an affidavit.
34. On 12 December 2014 the Trustee in Bankruptcy filed an application in a case seeking orders in relation to the sale of property, including the proceeds of sale of G Street Suburb H and other proceeds of sale. The Trustee sought an injunction restraining the respondents (including the Liquidators) from dealing with the property. That application was supported by an affidavit of the Trustee’s solicitor Mr R.[8]
35. The proceedings came before Bennett J on 16 December 2014 and were adjourned for interim hearing before me on 15 January 2015. Consent orders were made in relation to the holding of monies from the sale of properties in a trust account of Ascot Solicitors (the solicitors for the Liquidators) and a direction was made to file material.
36. On 15 January 2015 the Trustee in Bankruptcy was joined as a party to these proceedings. At the same time orders were made appointing the Liquidators as parties to the proceedings. Consent orders were made in relation for the retention of proceeds of sale of the property.
37. On 27 February 2015 the wife was granted leave pursuant to s 79(12) of the Family Law Act to make submissions and appear in these proceedings.
38. On 28 April 2015 the Trustee in Bankruptcy filed a response to an application in a case seeking a transfer of the funds in relation to the sale of properties by the Liquidators.
39. The matter came before the Court on 4 May 2015 and at that time the Trustee in Bankruptcy set out a statement of its claim (court document 54). In that statement of claim the Trustee asserted, amongst other things, that the proceeds of sale of a number of properties, including G Street, Suburb H, were in fact property of the secured property (in some undefined form) of the wife and therefore vested in the Trustee in Bankruptcy by reason of the Sequestration Order.
40. In his response to initiating application, filed 6 May 2015, the Trustee in Bankruptcy, sought the release of the funds in respect of the sale of the property (or parts of the property) at G Street, Suburb H be paid to them.[9]
41. On 25 June 2015 the Liquidators filed a Defence in which they asserted that no such security was created by the consent orders.[10]
42. On 16 October 2015 the Liquidators filed an application seeking stay of the proceedings pursuant to s 500(2) of the Corporations Act until leave was granted for the commencement of proceedings pursuant to s 491(B) of the Corporations Act. Further, the Liquidators sought the transfer of the proceedings as between the Trustee in Bankruptcy and the Liquidators to a court pursuant to s 9 and s 58AA of the Corporations Act. This was to be either to the Federal Court or to a State Supreme Court.
[8] Filed the 16 October 2015.
[9] Response to Initiating Application filed 11 August 2015 – document 60.
[10] Defence filed 25 June 2015 document 62.
The applications and evidence and submissions
The applicant sought an order for the costs of the proceeding and relied upon a series of documents. In addition she sought by way of enforcement of the original orders a declaration of trust as to the money held by the liquidator, and payment of money held by the liquidator to the trustee. This determination relates only to the question of costs, and it is the submissions of the parties in that respect which I am to determine.
The applicant sought costs on an indemnity basis, or in the alternative on a solicitor/client basis or party/party basis. She and relied upon:-
(a) her application in a case filed 11 April 2017;
(b) her affidavit filed 5 April 2017;
(c) her financial statement filed 10 July 2014;[11]
(d) an affidavit by her solicitor, Mr T, filed 5 April 2017;
(e) an outline of her submissions filed 6 April 2017 made by John Hall of counsel; and
(f) her reply to the submissions of the liquidator filed 15 June 2017, also made by John Hall of counsel.
[11] Affidavit of the applicant – paragraph 1.
The trustee filed a response to an application in a case seeking costs orders against the liquidators on an indemnity basis or alternatively on a standard basis. In addition he sought orders for the liquidator to pay to him the money presently held by them, and an accounting and payment of money used or disbursed by the liquidators in respect of the companies in liquidation. In support of the costs application he relied upon:-
(a) his response to an application in a case filed 13 April 2017;
(b) an affidavit of his solicitor, Mr S, filed 13 April 2017;
(c) an affidavit of his solicitor, Mr U, filed 21 July 2017; and
(d) submissions prepared by Peter Fary of counsel filed 16 June 2017.
The liquidator opposed the costs applications and sought an order for costs against the trustee and the applicant in respect of the costs applications. In that response he also sought the dismissal of the application in the case of the applicant and the application for orders by the trustee’s response. He sought declarations that the proceeds of sale of a property be charged in favour of the costs and expenses of the liquidator, and also sought various other orders enabling payment of his fees and then payment to the creditors of the relevant companies. He sought a declaration that any charge or interest of the trustee be subject to the charges in favour of the liquidator and the creditors of one or other of the companies. He sought a specific order for release of $76,762 held by him to pay his costs and expenses. Finally, he sought an order removing him as a party to the proceedings.
In his amended response the trustee sought, inter alia, that the consent orders made 7 December 2012 be set aside and consequently, that the question of costs be stood over pending the determination of the overall proceedings and if not that any award of costs be stayed. The liquidator relied upon:-
(a) his response filed 26 May 2017;
(b) his amended response filed 15 August 2017;
(c) the two affidavits of Mr J filed 26 May 2017 and 16 August 2017;
(d) the liquidator’s outline submissions filed 26 May 2017 prepared by Mr MJ Galvin QC and Ms J Wald; and
(e) the liquidator’s supplementary outline of submissions filed 15 August 2017 prepared by Mr MJ Galvin QC.
Given that the question of costs arises out of the December 2015 Orders and the December 2015 Reasons, I have had regard to both. In addition, as the parties have referred to the proceedings in the Federal Court before Moshinsky J I have had regard to his published reasons of 25 November 2017.
The Issues
The issues are:-
(a) Whether there should be a determination of the question of costs at this time or should it await the final hearing. If this issue is determined in the way sought by the liquidator, then the remaining issues would need to be deferred for some time;
(b) If the Court determines that the costs applications should proceed at this time, then what is the situation as to the liability of the liquidator or liquidators, there being a sub-issue in regard to the change in the constitution of the liquidators;
(c) If the application is not premature, whether the costs be considered under the provisions of s 117 of the Family Law Act 1975 (Cth) or under the general law.
(d) If the application is not premature, whether there ought to be a costs order against the liquidator/s in favour of the trustee, and if so:-
(i)whether those costs ought to be on an indemnity basis or practitioner-client basis or party/party basis; and
(ii)whether those costs should include the costs of the costs application.
(e) If the application is not premature, whether there ought to be a costs order in favour of the applicant, who is bankrupt, and if so:-
(i)whether those costs ought to be on an indemnity basis, or practitioner/client basis or party/party basis; and
(ii)whether those costs should include the costs of the costs application.
(f) Whether there ought to be a costs order in favour of the liquidators and if so on what basis; and
(g) If costs are ordered, should payment of the costs be stayed pending a final determination of the various applications.
Whether there should be a determination of this question of costs of the proceeding at this time or should it await the final hearing
The delay on the question of costs arises in the amended application of the liquidator filed in August 2017. In that amended application the liquidator seeks orders pursuant to ss 79A(1)(a) and (b) setting aside the consent orders made 7 December 2012, claiming a miscarriage of justice by reason of fraud, duress, suppression of evidence, the giving of false evidence or any other circumstance (the later part was emphasised). In addition it was submitted that circumstances have arisen since the order was made making it impracticable for the order or part of the order to be carried out.
The effect of this application, if successful, would or could have a profound impact on the husband and his brother, who have been excused from appearing in this Court in regard to the conflict between the trustee, applicant and the liquidator. The whole question of property as between the parties to the marriage may be opened up and the present circumstances of the husband could become relevant. Both he and his brother would need to be heard.
The submissions of the liquidator to this end address a number of areas.
The remaining issues, which I alluded to earlier, have not been determined. The question of priorities has not been addressed nor have the interests of the applicant’s son been considered. There is also the very significant issue of the s 79A application.
The questions before me in October 2015 were wholly contained, and if the then liquidators were to bring an application to set the substantive consent orders aside, the question must arise as to why they did not raise that issue in the context of that hearing. If the contentions of the liquidator that the substantive consent orders ought to be set aside are correct then the whole of the determination of 9 December 2015 becomes moot.
According to the liquidator the basis of the application to set aside the substantive consent orders is that the applicant has become a bankrupt and the companies have been wound up under creditors’ voluntary liquidations, on the basis of their insolvency. Further, the orders of 7 December 2012 were for the accommodation for the applicant and her son, which would also be impacted by the bankruptcy and the liquidations.
Whether these submissions subsequently lead to the setting aside of the substantive consent orders, I make no comment. What is clear however, is that all of those factors were in place when the substantive proceedings which are now the subject of the costs applications were made, heard and determined. They were clearly in the knowledge of the parties and those who were advising and representing them
Given those circumstances and the possibility of more parties joining or re-joining the proceedings, as perhaps may be the case for the applicant’s son, I determined that the costs applications should not be postponed.
If the Court determines that the costs applications should proceed at this time, then what is the situation as to the liability of the liquidator or liquidators? There being a sub-issue in regard to the change in the constitution of the liquidators
When the proceeding was heard Mr J and Mr K were the liquidators of the companies. The evidence in the proceedings was that both Mr J and Mr K were appointed liquidators on 22 August 2014.[12]
[12] December 2015 Reasons – paragraph 9.
No notice was provided to the Court, prior to the delivery of the December 2015 Reasons and the making of the December 2015 Orders, that Mr K was no longer a liquidator with Mr J.
The evidence that Mr K was no longer a liquidator was contained in the affidavit evidence of Mr J, where he said that Mr K ceased as a liquidator in the companies on 11 November 2015 and that Mr J remains as the sole liquidator of the companies. [13]
[13] Affidavit of Mr J filed 26 May 2017 – paragraphs 36 and 41.
The fact that the Court was not informed of that change in circumstance prior to the making the December 2015 orders and that Mr K did not seek to be excused from the proceedings means that any costs orders which flow from this application will apply to both liquidators.
The liquidator set out his liability to pay costs in the submissions to which I earlier referred. The thrust of the argument is that no costs order ought to be made against the liquidators and that any costs order against the companies would be futile.
The liquidators submitted that the trustee and the applicant seem to be confused in terms of the applications. It is clear that the trustee and the applicant sought orders to clarify the status of the funds from the sale of property as being unavailable to the liquidators given the lien.[14] The trustee and the applicant are seeking orders against the liquidators, which is made clear in the applicant’s submissions in reply.[15]
[14] Applicant’s submission in reply – paragraphs 16 to 24.
[15]Ibid – paragraph 24(f).
I accept that the liquidator does not stand in the shoes of the company, as distinct from the position of a trustee in bankruptcy, so in essence the trustee is seeking orders against non-parties, viz the liquidators. However, the only way the lien could be recognised was in litigation with the companies through the liquidators.
I generally accept the analysis of the law in that respect as was set out by counsel for the liquidators.
I also note the comments made by Moshinsky J in the Federal Court reasons, where he said:-
67. Paragraphs (h)-(j) of s 588FF(1) each provide for orders to be made in relation to an agreement constituting, forming part of, or relating to, the voidable transaction. In such cases, the court’s order will alter a legal relationship between the company and another person, to the benefit of the company and to the detriment of the other person; for this reason it will be appropriate for the company to be a party to the proceedings initiated by the liquidator: New Cap Reinsurance Corp Ltd v AE Grant (2009) 257 ALR 740 at [17] per Barrett J; see also Assaf et al, Voidable Transactions in Company Insolvency (LexisNexis Butterworths, 2015), at [8.39].
In Bent v Gough & Anor [1992] FCA 267; (1992) 108 ALR 131 (1992) 36 FCR 204 (5 June 1992) the Full Court of the Federal Court, comprised of Black CJ, Northrop and Ryan JJ, considered an order made in the Family Court. At first instance, Fogarty J made a costs order against a liquidator, who was a non-party. There was a question of the jurisdiction on which to base such an order and if there was jurisdiction whether the order ought to have been made.
The Full Court held that the Family Court had jurisdiction to make such an order. That issue was not argued before me. Further, the Full Court held that there was power to make such an order, with Chief Justice Black saying:-[16]
I consider, therefore, that the learned primary judge was correct in concluding that he had power to order that the liquidator pay the costs personally although not a party to the proceeding. I turn then to the exercise of his Honour's discretion
[16] Ibid – page 137, line 39.
The question before me is whether in this matter the discretion to make such an order ought to have been exercised.
Obviously, each determination must swing of its particular facts.
In discussing the exercise of discretion Northrop and Ryan JJ observed:-[17]
It was also conceded on behalf of the appellant that Fogarty J correctly took into account the need not to discourage liquidators from performing their public duty in pursuing litigation by an undue readiness to impose on them personal liability for the costs of successful parties. However, it was then said that the reference to Latoudis v Casey [1990] HCA 59; (1990) 65 ALJR 151 distracted attention from "the real issue". We do not understand his Honour to have given himself any direction other than that the discretion should be exercised sparingly [emphasis added], not by way of punishing an imprudent liquidator, but only where the circumstances make it just or appropriate for the successful party to be indemnified against his or her costs. We regard that approach as unexceptionable
[17] Ibid – page 146, line 43.
Northrop and Ryan JJ went on to say:-[18]
… A perception that a prima facie case exists depends on facts known to the liquidator at a given time. Accordingly, the discretion should be exercised having regard to the liquidator's conduct and actual or constructive knowledge over the whole period from institution of the proceedings until judgment.
… that a liquidator should not be deterred by an opponent's long purse and refusal to compromise from pursuing an action properly seen to be in the interests of the company's creditors or shareholders. However, we understand Fogarty J in this part of his judgment to have done no more than assess whether the institution or maintenance of the proceedings was hazardously speculative.
[18] Ibid – page 145, commencing line 43 and late 146 at line 9.
I have considered the principles set out by Campbell J in Hypec Electronics Pty Ltd (2004) 61 NSWLR 169, in particular the situation where the liquidator is opposing litigation and protecting the fund.
I have also had regard to the comments of Bell J in JGM Nominees Pty Ltd v Australvic (in liq) (No. 3), [2010] VSC 623. His Honour too went to the reasons in Bent v Gough & Anor (supra) saying that the exercise of this discretion should be used sparingly.[19]
[19] Paragraph 103.
I will have regard to these principles when exercising the broad discretion that I have in terms of costs.
This includes:-
(a) that the liquidators were respondents to the proceeding;
(b) at the time the proceeding commenced, the liquidators were aware of the claims by the trustee at the commencement of the proceeding, and the substantive consent orders were available to them. As parties to the proceeding they had access to the Court file; and
(c) The property subject to the lien and consequently the proceeds of sale of that property was not available to the liquidators for payment of their fees or distribution to any creditors.
The question of the exercise of my discretion will be considered in the scope of each of the applications and in the light of the relevant law.
Whether the costs ought to be considered under the provisions of s 117 of the Family Law Act 1975 (Cth) or under the general law?
The proceeding related to the exercise of jurisdiction and power under the Act and under the Corporations Act.
The position of each of the parties is that the costs applications ought to be considered under the provisions of s 117 of the Act,[20] and I will adopt that course.
[20] Applicant’s submissions - page 3, paragraph 16. Trustee’s submissions page 8, paragraph 19. Liquidator’s supplementary submissions – page 3, paragraphs 7 to 9.
There are two areas to which I need to address the law. The first is in relation to whether a costs order ought to be made at all, and the second is in relation to whether it ought to be an indemnity costs order.
The power to make costs orders are set out in s 117 of the Act, which provides:-
(1)Subject to subsection (2), subsection 70NFB(1) and sections 117AA, 117AC and 118, each party to proceedings under this Act shall bear his or her own costs.
(2)If, in proceedings under this Act, the court is of opinion that there are circumstances that justify it in doing so, the court may, subject to subsections (2A), (4), (4A) and (5) and the applicable Rules of Court, make such order as to costs and security for costs, whether by way of interlocutory order or otherwise, as the court considers just.
(2A)In considering what order (if any) should be made under subsection (2), the court shall have regard to:
(a)the financial circumstances of each of the parties to the proceedings;
(b)whether any party to the proceedings is in receipt of assistance by way of legal aid and, if so, the terms of the grant of that assistance to that party;
(c)the conduct of the parties to the proceedings in relation to the proceedings including, without limiting the generality of the foregoing, the conduct of the parties in relation to pleadings, particulars, discovery, inspection, directions to answer questions, admissions of facts, production of documents and similar matters;
(d)whether the proceedings were necessitated by the failure of a party to the proceedings to comply with previous orders of the court;
(e)whether any party to the proceedings has been wholly unsuccessful in the proceedings;
(f)whether either party to the proceedings has made an offer in writing to the other party to the proceedings to settle the proceedings and the terms of any such offer; and
(g)such other matters as the court considers relevant.
In Penfold v Penfold (1980) FLC 90-800 the majority of the High Court expressed the general rule that s 117(1) is not paramount to s 117(2) of the Act. A court must make a finding that there are circumstances justifying the making of a costs order before proceeding to make the orders.
There is no guidance in the legislation between the two sub sections nor any additional special onus on the applicant for an order as to costs. I have had regard to the approaches set out above in relation to a non-party.
The next step is to consider the matters set out in s 117(2A). There is nowhere in s 117(2A) that says any one factor provides a hierarchy in relation to the other factors. One factor may be enough. As such the Court has a wide discretion.
It is of value to repeat what I have said in earlier judgments that the Court needs to consider the difference between the various types of unquantified costs orders available under the Act. There are many variations of types of costs orders, but they generally fall into three types:-
(a) Party and party costs - which are calculated having regard to the schedule of costs under the Family Law Rules 2004 (Cth);
(b) Lawyer and client costs – these are essentially indemnity costs, with the onus upon the costs applicant to satisfy the taxing authority that such costs are on balance fair and reasonable; and
(c) Indemnity costs[21] - these are essentially lawyer and client costs, with the onus upon the costs respondent to satisfy the taxing authority that such costs are on balance not fair and reasonable, that is the reversal of the onus of proof.
[21] See also Rule 19.08(3).
It should be borne in mind that costs orders are restorative and not punitive, and costs cannot exceed the amount actually incurred. They are an indemnity or partial indemnity. In Cachia v Hanes (1994) 179 CLR 403 the plurality of the Court, comprising Mason CJ, Brennan, Deane, Dawson and McHugh JJ observed:-[22]
Whilst the restricted basis upon which party and party costs are awarded may be debated as a matter of policy, it is to be borne in mind that party and party costs have never been regarded as a total indemnity to a successful litigant for costs incurred, let alone total recompense for work done and time lost. Putting to one side the question posed by the relatively rare exception of a solicitor acting in person, there is no inequality involved: all litigants are treated in the same manner. And if only litigants in person were recompensed for lost time and trouble, there would be real inequality between litigants in person and litigants who were represented, many of whom would have suffered considerable loss of time and trouble in addition to incurring professional costs. The partial indemnity which the law allows represents a compromise between the absence of any provision for costs (which prevails as a matter of policy in some jurisdictions) and full recompense. In these days of burgeoning costs, the risk of which is a real disincentive to litigation, the proper compromise is a matter of both difficulty and concern.
Whether there ought to be a costs order against the liquidator/s in favour of the trustee, and if so;
[22] At pages 414 and 415.
(i)whether those costs ought to be on an indemnity basis or practitioner-client basis or party/party basis; and
(ii)whether those costs should include the costs of the costs application.
The liquidators were respondents in the proceedings and have been engaged in the proceedings since at least 15 January 2015, about five months after their appointment as liquidators.
I accept that in the circumstances where these costs orders are sought, the liquidators are non-parties. Both under the Act and in general law the order of costs in that circumstance ought to be exercised sparingly.
At the commencement of the proceeding the liquidators had notice of the substantive consent orders and the lien which was created at or about the time the orders were made in December 2012. In my view the outcome was clear.
I accept that the liquidators are entitled to be paid their remuneration out of the assets of the company. However, the property/ies the subject of the lien and the proceeds of sale of such property do not fall into the category of being assets of the companies to which the liquidator is or was entitled.
It was open for the liquidators to apply to set the December 2012 orders aside, as they have now determined to do, albeit belatedly.
I accept the submission that the liquidators have a responsibility to take control of and manage the company. I am aware and I have had regard to the need not to discourage liquidators from performing their public duty.
In terms of s 117(2A) of the Act and having regard to all of the facts and circumstances in the proceeding and consequent costs application, I am satisfied that there ought to be a departure from s 117(1) that each party should bear their own costs given that the matters to which I have and will allude, including that the liquidators were unsuccessful.
As to section 117(2A)(a), I did not have regard to the financial circumstances of the trustee and the liquidators, at least in their personal capacities, as they were not the subject of evidence. I was made aware of the funds collected, expended and held in the course of the liquidation.
The trustee and the liquidators gave no evidence that they were in receipt of legal aid and as such this is not a relevant consideration.
As to the conduct of the parties to the proceedings, I gave weight to the submission of the applicant and the trustee as to the defence of the proceeding in the absence of an application to set aside the substantive consent orders. In the absence of that application at that time the defence was doomed to fail.
There was no evidence that the proceeding was necessitated by the failure of a party to the proceedings to comply with previous orders of the Court.
As I have said earlier, the liquidator was wholly unsuccessful.
There was no evidence of any offers of settlement.
I have considered the position of the liquidators as non-parties as a very relevant factor, particularly in the light of the principles outlined earlier.
Given all of the facts and circumstances I determine that, on balance, the liquidators should pay the costs of the trustee.
As to the claim for indemnity costs, I have considered the submissions of the trustee and the position of the trustee.
In Prantage v Prantage (2013) FLC 93-544 the Full Court of the Family Court said that there needed be exceptional circumstances to justify an order for indemnity costs.
It is necessary for the Court to have the terms of the costs agreement to assess the difference between party/party and indemnity costs. Rule 19.08 provides:-
19.08(1) A party may apply for an order that another person pay costs.
19.08(2)An application for costs may be made:
(a)at any stage during a case; or
(b)by filing an Application in a Case within 28 days after the final order is made.
19.03(3) A party applying for an order for costs on an indemnity basis must inform the court if the party is bound by a costs agreement in relation to those costs and, if so, the terms of the costs agreement.
Note 1 The Court may make an order for costs on its own initiative (see rule 1.10).
Note 2 A party may apply for an order for costs within 28 days after the filing of a notice of discontinuance by the other party (see subrule 10.11(4)).
Note 3 A party may apply for an extension of time to make an application (see rule 1.14).
Note 4 For costs orders related to appeals, see Part 22.10.
Having regard to the approach adopted by the Full Court in Kohan v Kohan (1993) FLC 92-340 I have compared the costs pursuant to the first and third costs agreements and the scale under the Rules.
In Prantage v Prantage (supra) Thackray and Ryan JJ observed:-
100.His Honour’s statement, at [50], that Sheppard J’s emphasis in Colgate-Palmolive was “on parties who must have or should have known their approach was simply imprudent” does not, in our view, accurately reflect the law as explained in Colgate-Palmolive and other cases dealing with indemnity costs.
101.It is true, as the trial Judge noted, that Sheppard J included in the list of situations that might give rise to an order for indemnity costs “the imprudent refusal of an offer to compromise”. However, in our view, imprudence by a party in “their approach” is not sufficient to enliven the power to award indemnity costs.
102.It is important in this context to recognise, as Lindgren J did in NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77 at [56], that there is no rule that indemnity costs will be ordered “where the losing party was guilty of ethical or moral delinquency in the antecedent facts which have given rise to the litigation”.
103.Lindgren J went on to point out (original emphasis):
Even in a proved case of fraud, for example, in my opinion the presumption is that a costs order against the fraudulent party will be on the party and party basis. The conduct of a party that is relevant to the issue of indemnity costs is the party’s conduct as litigant. But, as noted below, the knowledge that a party has, including knowledge of his or her past conduct, may be relevant to an assessment of his or her conduct as litigant.
I am not satisfied in this case that there should be an order for indemnity costs or in the circumstances for practitioner/client costs in favour of the trustee.
The cost orders should apply to the trustee’s application for costs.
I will so order.
Whether there ought to be a costs order against the liquidator/s in favour of the applicant, and if so;
whether those costs ought to be on an indemnity basis or practitioner-client basis or party/party basis; and
whether those costs should include the costs of the costs application.
I repeat the matters that I said above regarding the liquidators being respondents in the proceeding and having been engaged in the proceedings since at least 15 January 2015.
I accept that in the circumstances where these costs orders are sought, the liquidators are non-parties. Both under the Act and in general law the order of costs in that circumstance ought to be exercised sparingly.
I repeat that at the commencement of the proceeding the liquidators had notice of the substantive consent orders and the lien that was created at or about the time the orders were made in December 2012. In my view the outcome was clear. Further, I accept that the liquidators are entitled to be paid their remuneration out of the assets of the company. However, the property/ies the subject of the lien and the proceeds of sale of such property do not fall into the category of being assets of the companies to which the liquidator is or was entitled. It was open for the liquidators to apply to set the December 2012 orders aside as they have now determined to do, albeit belatedly. I accept the submission of that liquidators have responsibility to take control and manage a company. I have been aware and had regard to the need not to discourage liquidators from performing their public duty.
In terms of s 117(2A) I repeat that which is set out in respect of the trustee’s claim.
Having regard to all of the facts and circumstances in the proceeding and consequent costs application, I am satisfied that there ought to be a departure from s 117(1) that each of the liquidators and the applicant should bear their own costs given that the matters to which I have had regard and will allude to including that the liquidators were unsuccessful.
As to section 117(2A)(a) I had regard to the applicant’s financial circumstances as set out in her material. She is in receipt of Centrelink benefits. Her husband is in arrears of child support. She had been living in a de facto relationship, however, that partner died in March 2013. She lives in his home and does not pay rent. She will receive a modest sum from her late partner’s estate, but it will be wholly subsumed by debt. The applicant has the care of a child of the relationship with her former husband. That child was aged 13 as at May 2017.
The only asset of any significance will be the applicant’s entitlement, if any, arising from the substantive consent orders made in December 2012.
The applicant’s financial circumstances are parlous. The applicant is a bankrupt. She has engaged in these proceedings in the expectation that if the funds due to her are made available it will assist in providing accommodation for her and her son.
There is no evidence that the applicant is in receipt of legal aid.
As to the conduct of the parties to the proceedings, I gave weight to the submission of the applicant and of the trustee that the defence of the proceeding in the absence of an application to set aside the substantive consent orders was doomed to fail.
There was no evidence that the proceeding was necessitated by the failure of a party to the proceedings to comply with previous orders of the Court.
As I have said earlier the liquidator was wholly unsuccessful.
There was no evidence of any offers of settlement.
I have considered the position of the liquidators as non-parties as a very relevant factor, particularly in the light of the principles outline earlier.
Given all of the facts and circumstances I determine that, on balance, the liquidators should pay the costs of the applicant.
As to the claim for indemnity costs I have considered the submissions of the applicant and the position of the trustee.
I repeat the comments I made as to indemnity costs. I am not satisfied in this case that there should be an order for indemnity cost or in the circumstances for practitioner-client costs in favour of the applicant.
The cost orders should apply to the applicant’s application for costs.
I will so order.
Whether there ought to be a costs order in favour of the liquidators and if so on what basis
The next question I need to consider is whether there ought to be a costs order in favour of the liquidators and if so on what basis.
Given the comments made about and the outcome of the costs applications, I have determined that the liquidators’ costs applications in respect of the costs of the proceeding, ought be dismissed, and I will so order.
If costs are ordered, whether payment of the costs ought to be stayed pending final determination of the various applications
In his amended response the remaining liquidator sought that the costs application be stood over to the conclusion of the overall hearing. That application is dismissed given the reasons set out earlier.
As an alternative, he sought an order staying the operation of the costs orders, if made, presumably until the proceedings were finalised.
Given the circumstances of the applicant and the ongoing nature of these proceedings, including the amplification of them with the application to set aside the substantive consent orders of December 2012, I have determined that that such stay ought not to be granted.
The onus of proof to establish a proper basis for the stay is on the applicant for the stay. I accept that it is not necessary for the liquidator to demonstrate “special” or “exceptional” circumstances. The liquidator set out in his supplementary submissions the reason he contended that the costs determination is premature. I addressed that issue earlier in these reasons. Presumably those same submissions apply to the stay application. I reiterate what I have said earlier.
The applicant and the trustee are entitled to the benefit of the costs orders and ought not in the circumstances be required to wait some indeterminate period. A party who has obtained a judgment is entitled to the benefit of that judgment.
I have no concerns about the bona fides of the liquidator in the costs proceeding.
There is no way that a stay can be granted in a way that is fair to both parties. Given the nature of a costs order, and that it is by way of indemnity costs paid or incurred, the alternatives are essentially black and white.
As such the stay application will be dismissed. Nothing in that order precludes the liquidator from seeking a further stay should he decide to appeal. This ought not to be taken as encouragement to appeal or not to appeal.
I certify that the preceding one hundred and eleven (111) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Benjamin delivered on
Associate:
Date: 21 September 2017
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