Melhelm Pty Ltd, in the matter of Boka Beverages Pty Ltd (in liquidation) v Boka Beverages Pty Ltd (in liquidation) (No 2)

The case involved Boka Beverages Pty Ltd, which was in liquidation, and Melhelm Pty Ltd, a creditor of the company. The dispute centred around costs associated with the litigation, specifically whether liquidators of the company should be barred from relying on the right of indemnity from the company's assets or recoveries to cover the costs incurred. Melhelm sought orders preventing the liquidators from accessing these funds to pay the costs, arguing that the liquidators had acted unreasonably in defending the litigation. The case was heard by the Federal Court of Australia.

The primary legal issue before the court was whether the liquidators had acted unreasonably in defending the litigation, which would then permit Melhelm to seek personal liability from the liquidators for the costs. The court considered the principle that liquidators should not incur personal liability for costs incurred in their role, unless they acted unreasonably. The court also had to determine the appropriate allocation of costs between the parties involved in the litigation, particularly focusing on the costs associated with the appointment of special purpose liquidators.

In its decision, the court found that the liquidators had not acted unreasonably in defending the litigation. The court noted that while it was true that creditors would find it more difficult to achieve recovery if the costs were paid out of the company’s assets, this alone did not justify depriving the liquidators of the usual rule protecting them from personal liability for costs. The court ordered that the company bear Melhelm’s costs for the application to appoint the special purpose liquidators. It also ruled that the liquidators' costs from the application for the appointment of special purpose liquidators should be treated as costs in the liquidation. Melhelm, having failed in its application for orders against the liquidators personally, was ordered to pay the liquidators' costs of that application.

The court's final orders were that the first defendant, Boka Beverages Pty Ltd, should pay Melhelm Pty Ltd's costs of the application for the appointment of special purpose liquidators. The second plaintiff's application for costs was dismissed. The second and third defendants' costs of the application for the appointment of special purpose liquidators were to be costs in the liquidation of the first defendant. Lastly, Melhelm Pty Ltd was ordered to pay the second and third defendants' costs of its application for costs orders against the second and third defendants.