Pandolfo v Finadri (Costs)
[2018] VSC 655
•31 October 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
| AT MELBOURNE COMMON LAW DIVISION TRUSTS, EQUITY & PROBATE LIST |
S CI 2017 01985
| ANNA MARIA PANDOLFO (in her capacity | Plaintiff |
| as Administratrix of the estate of Adrian Paul | |
| Fiore Finadri) | |
| v | |
| WALTER FINADRI AND OTHERS | Defendants |
| (according to the schedule attached) |
---
| JUDGE: | DERHAM AsJ |
| WHERE HELD: | Melbourne |
| DATE OF HEARING: | 23 August 2018 |
| DATE OF RULING: | 31 October 2018 |
| CASE MAY BE CITED AS: | Pandolfo v Finadri & Ors (Costs) |
| MEDIUM NEUTRAL CITATION: | [2018] VSC 655 |
---
PRACTICE AND PROCEDURE – Costs – Successful application for preliminary discovery – Whether costs should be awarded to the plaintiff or the defendants and if so whether on
an indemnity basis – Supreme Court Act 1986 (Vic), s 24(1).
---
| APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Ms R G Morison | R B Legal Pty Ltd |
| For the First to Eighth | Mr C R Northrop | Rigby Cooke |
| Defendants | ||
| HIS HONOUR: |
Introduction
1 On 3 May 2018, I handed down reasons for judgment granting the plaintiff
preliminary discovery from the fourth defendant (Finadri Windows).[1] The orders
[1] The reasons for judgment are Pandolfo v Finadri [2018] VSC 211 (Reasons).
I proposed to make were indicated in those reasons and were subsequently made on
20 June 2018.
2 The reasons for the delay in the making of the orders was that the parties made
written submissions in relation to the costs of the application. I had ordered that
those submissions should be limited to two pages. The defendants complied with
the limit, but also filed an affidavit as to the documents already provided and
relating to other matters. The plaintiff filed a nine page outline of submissions.[2]
[2] Dated 31 May 2018.
The defendants objected to the length of the plaintiff’s submissions and requested an
oral hearing properly to develop the brief submissions made in writing. In the result
I considered it was appropriate to have an oral hearing, which took place on
23 August 2018.
4 The plaintiff sought the costs of the proceeding to date from the defendants on an
indemnity basis, essentially because the defendants’ response to the plaintiff’s
application was very adversarial and unreasonable. The defendants maintained that
the plaintiffs proceeding against the first to third and fifth to eighth defendants were
entirely unsuccessful and they should have their costs of the proceeding on an
indemnity basis. Further, the defendants contended there was no proper basis for
the originating motion as issued, the plaintiff’s demands were excessive, and all the
defendants should have their costs of the proceeding on an indemnity basis.
Background
5 In the reasons for decision I gave a short account of the history of this proceeding.[3] I noted that the proceeding commenced as an application made in reliance upon
[3] I will employ the defined terms used in those Reasons.
ss 13, 14, 37 and 44 of the Administration and Probate Act 1958 (Vic) (A&P Act), o 54 of
the Supreme Court (General Civil Procedure) Rules 2015 (Rules), and s 247A of the
Corporations Act 2001 (Cth) (the Corporations Act). The application sought a wide
variety of documents from nine defendants. By a proposed amended originating
motion first advanced in May 2017, but not formally filed until the last day of the
resumed hearing, 15 March 2018, the basis of the relief was expanded to include
application under r 32.05 of the Rules and the documents sought were limited to
documents from Finadri Windows.
6 The plaintiff contended that the limitation of the scope of the documents sought was
because she had obtained sufficient documents and information as a result of filing
this proceeding to commence proceedings against the seventh defendant, Rhoden
Investments Pty Ltd (pursuant to the Corporations Act) (Rhoden) and the sixth
defendant, Acquaflex Pty Ltd (Acquaflex) (in respect of a loan owed to the
deceased). Proceedings have been commenced against those entities.[4]
[4] Fourth affidavit of Con Kiatos (sworn 31 May 2018), [15] and [19].
7 I noted in the Reasons that the defendants disputed that documents provided by
them were the reason for the plaintiff not pressing various parts of her application
but it was desirable to give some account of the matters not pressed as they, together
with other material to be advanced, would be relevant to the costs of the
application.[5]
[5] Reasons, [13].
8 It was made clear by the plaintiff from the outset that the documents she sought
were to enable her to ascertain the assets in the deceased estate of her husband,
Adrian Finadri (the deceased). It was also made clear that the documents were
sought to ascertain whether the estate had a right to any relief in respect of the
various defendant entities arising out of material contained in an informal will made
by Adrian.[6] That this was evident from the affidavit material filed in support of the application is amply demonstrated by the fact that Counsel for the defendants, at the
[6] First Pandolfo affidavit.
first hearing, characterised the application as one made pursuant to r 32.05 of the
Rules, notwithstanding that at that point there had been no application pursuant to
that rule,[7] and that Counsel for the plaintiff initially eschewed reliance on that rule.
[7] Defendant’s Outline of Submissions, 13 September 2017, [3].
9 One of the points that arises out of the history of the proceeding and the steps taken
in the lead up to it, is that the plaintiff and her lawyer had been attempting to
determine the full extent of the assets and liabilities of the deceased estate and to that
end had made requests of the defendants for documents and information from
9 November 2016 through to 18 May 2017, before the commencement of the
proceeding on 25 May 2017.[8] Another point is that the defendants, with the
[8] Exhibit AMP-2 to the First Pandolfo affidavit; Reasons, [6]-[8].
exception of the ninth defendant, were either members of the deceased’s family or
companies controlled by them. They were all represented by the same solicitors and
Counsel throughout the proceeding. The deceased was the plaintiff’s husband. He
was a member of the Finadri family, an employee in the family business conducted
by Finadri Windows, a shareholder in Rhoden, a beneficiary of some of the trusts
and apparently a lender to Aquaflex. The response of the defendants to requests for
information was to give only very limited information. The failure or refusal to
provide more of the information and documents that the plaintiff requested lead to
the plaintiff bringing this proceeding.
Costs principles
10 Unless otherwise expressly provided by any Act or by the Rules, the costs of and
incidental to all matters in the Supreme Court are 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: Supreme Court Act 1986 (Vic), s 24(1). The discretion regarding costs has
been described as absolute, unconfined or unfettered, although that discretion must
be exercised judicially, that is, not by reference to irrelevant or extraneous considerations, but upon facts connected with or leading up to the litigation.[9] In the
[9] Latoudis v Casey (1990) 170 CLR 534, 537 (Latoudis); cited with approval in Oshlack v Richmond River Council (1998) 193 CLR 72, 86 (Oshlack).
exercise of the discretion, practices or guidelines have been developed.[10] These
[10] Oshlack (1998) 193 CLR 72, 86.
practices or guidelines are not legal rules that confine the exercise of the discretion.[11]
[11] Norbis v Norbis (1986) 161 CLR 513, 537; Oshlack (1998) 193 CLR 72, 86.
11 Although costs are in the discretion of the Court, there is a settled practice
(sometimes called a general rule) that in the absence of good reason to the contrary a
successful litigant should receive his or her costs.[12] It is not, however, a legal rule
[12] Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell and Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General for the State of Tasmania (1956) 95 CLR 460, 477.
devised to control the exercise of the discretion.[13] The purpose of a costs order is to
[13] Oshlack (1998) 193 CLR 72, 86 [35].
compensate the successful party for the costs incurred, and not to punish the
unsuccessful party. That purpose is a guide to the exercise of the discretion.[14] That
[14] Latoudis (1990) 170 CLR 534, 563 (Toohey J, Mason CJ agreeing), 567 (McHugh J); Ohn v Walton (1995) 36 NSWLR 77, 79.
proposition now needs to be read subject to the Civil Procedure Act 2010 (Vic) (CPA),
particularly s 29.[15]
[15] Actrol Parts Pty Ltd v Coppi (No 3) [2015] VSC 758, [105], [110]-[112] (Actrol).
Notwithstanding the width of the Court’s discretion as to costs, there is a specific
rule of Court dealing with costs in preliminary discovery applications: r 32.11(1). It
permits the Court to make an order for the costs and expenses of the applicant, of the
person against who an order is made and of any party to the proceeding, including
the costs of making and serving any affidavit of documents. For present purposes, it
is sufficient to note that there are two elements to the question of costs in an
application like this one, first the costs of the application and, second the costs of
complying with the discovery order.
13 In relation to the first matter, the costs of the application, the usual rule that costs
follow the event does not always follow. Whether it should apply is highly
dependent on the facts and circumstances of the particular case, the relationship between the parties (whether the respondents are strangers or related to the
applicant) and the conduct of the applicant and respondents. Due regard must be
given to the nature of the application, sometimes described as ‘extraordinary’.[16] It is
[16] Procter v Kalivis (No 3) [2010] FCA 1194, [17] (Besanko J) (Procter).
invasive, requiring the respondent to give up its private documents to assist a
prospective plaintiff to decide whether or not to launch proceedings against the
respondent. There may be, depending on the circumstances, a sense in which a
respondent is entitled to remain passive until the applicant makes out a case for
preliminary discovery.[17] If the respondent does not take an adversarial approach to
the application for preliminary discovery and in fact provides discovery then it may
be appropriate to order the plaintiff to pay the costs of the application. If the
respondent does take an adversarial approach then it may be appropriate to order
that it pay the costs caused by that adversarial approach. Everything turns on the
facts of each case.
[17] Glencore International AG v Selwyn Mines Ltd (2005) 223 ALR 238, [15]; Procter [2010] FCA 1194 [17]; Equiti Capital Ltd v Hewson [2015] NSWSC 1388, [14] (Equiti).
14 Mukhtar AsJ noted in Guest v Guest (No 2):[18]
[18] [2016] VSC 76, [16] (Guest).
(a) there are cases where judges have viewed an application for pre-action discovery as enlivening the general rule that costs follow the event.[19] This has
[19] Procter [2010] FCA 1194, [17]; Equiti [2015] NSWSC 1388, [14].
led to considerations whether or not in these applications the respondent has
taken an ‘adversarial approach’ to the application. It is accepted in the
authorities that a potential defendant in such an application should not be
required to produce documents simply because an applicant asks for them. It
is thought not to be adversarial for a respondent to wait for an application to
be made, to see the supporting evidence and then decide to produce the
documents;
(b) there are cases where a respondent, under the burden of some duty to a third party, regards itself as being unable to hand over documents but takes a passive role in the application, being ready to hand over the documents if and
when ordered to do so; and
(c) then there are cases where the respondent takes the adversarial approach of resisting the application and fails or partially succeeds in its resistance. There
are authorities that say where the application is fought and granted then costs
follow the event unless the Court in its discretion thinks otherwise.[20]
[20] See Equiti [2015] NSWSC 1388, [14].
15 In relation to the second matter, the usual or customary order for costs of making the
discovery is that the applicant pays the costs and expenses of the respondent in
making discovery, which includes the production of documents for the inspection of
the applicant.[21] The logic of that order is that the respondent is put to the expense of
[21] Schmidt v Won [1998] 3 VR 435, 459; Kallitsas v Emerson Finance Pty Ltd [2008] VSC 180, [23]; Guest
making discovery and giving inspection in order to assist the applicant to decide
whether or not to sue the respondent. If in a subsequent proceeding brought by the
applicant against the respondent the applicant succeeds, the costs previously
awarded against the applicant can be made part of the costs of the proceeding which
the applicant will recover from the respondent. A contingent costs order, where the
respondent’s costs of the pre-trial discovery are made costs in any substantive
proceeding brought within a certain time subsequently, is not preferred. It is
desirable that the disposition of costs not be dependent on some uncertain future
event or to await completion of the substantive trial:[22]
That is because the jurisdiction to order preliminary discovery is an extraordinary one; the application is discrete and on principle ought be dealt with discretely; and it is unfair for the respondent to be out of pocket. I prefer
the thinking, in the Victorian cases …, that it is a matter for the applicant to
attempt to claim compensation for such predetermined costs in any trial commenced depending on the outcome of that case and the utility of the documents previously obtained.[23]
[22] J & A Vaughan Super Pty Ltd v Becton Property Group Ltd [2013] FCA 340; Guest [2016] VSC 76, [15].
[23] Guest [2016] VSC 76, [15].
Indemnity costs
16 The exercise of the discretion to award costs over and above the standard basis is
exceptional, and should not be made unless there is ‘some special or unusual feature
in the case to justify the Court in departing from the ordinary practice’.[24] It is
generally reserved for cases where the losing party has engaged in unmeritorious, or
deliberate or high-minded or other improper conduct such as to warrant the Court
showing its disapproval and at the same time preventing the successful party being
left out-of-pocket.[25] It may include ‘particular misconduct that causes loss of time to
the Court’, or continuing proceedings ‘in wilful disregard of known facts or clearly
established law’.[26] It may be appropriate to depart from the general rule and order
indemnity costs where the conduct of the party against whom the order is sought is
‘plainly unreasonable’.[27]
Plaintiff’s submissions
[24] Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225, 232-4 (Colgate-Palmolive); Actrol [2015] VSC 758, [108].
[25] Australian Guarantee Corp Ltd v De Jager [1984] VR 483, 502; PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397, 401.
[26] Colgate-Palmolive (1993) 46 FCR 225, 232; Actrol [2015] VSC 758, [108]. Similar principles were
[27] Liu v Age Co Ltd (2016) 92 NSWLR 679, [278] (Liu); Sydney City Council v Geftlick [2006] NSWCA 280, [90].
17 The plaintiff submits that as a result of issuing the proceeding she has been
successful in obtaining a majority of the documents that she sought, or information
relating to the documents sought.[28] It was also only after the commencement of the
proceeding that the Finadri defendants revealed that there were no documents in
existence in particular categories.
[28] Reasons, [11]–[13].
18 The following documents or information were claimed by the plaintiff to have been
provided after the proceeding was commenced:
(a)
Acorn Consulting Group report detailing the supposed employment entitlements of the deceased;[29]
(b) trust deeds for the Finadri Family Trust, the Finadri Property Unit Trust and [29] Exhibit CK-4 to the Second Kiatos affidavit.
the Finadri investment trust;[30]
[30] Exhibits CK-5, CK-6, CK-7 to the Second Kiatos affidavit.
(c) authorisation of payments of proceeds of sale of Rye property to go to deceased’s parents;[31]
[31] Exhibit CK-8 to the Second Kiatos affidavit.
(d) acknowledgement that the material held by the plaintiff was sufficient for the plaintiff to consider the estate’s position in respect of the $300,000 loan;[32]
[32] Second Kiatos affidavit, [26].
(e) acknowledgement that the plaintiff has rights pursuant to the Corporations Act in respect of the interests in Rhoden;[33]
[33] Second Kiatos affidavit, [27]–[28].
(f) records pertaining to Rhoden;[34] and (g) information that there were no documents relating to the trust that was alleged to have existed in respect of the Rye property and the conveyancing
file in respect of the sale of the Rye property.[35]
[34] Third Kiatos affidavit, [4].
[35] Finadri affidavit, [5]–[7].
19 The result was that by the time the matter came on for final hearing on 15 March
2018, the plaintiff had eliminated a range of documents that she had sought
originally and was able to confine the application to one made solely pursuant to
r 32.05 of the Rules and solely in relation to claims against Finadri Windows (as
trustee for the Finadri Family Trust).[36]
[36] Reasons, [14].
20 The plaintiff therefore submitted that the defendants should pay the plaintiff’s costs
of and incidental to the proceeding on an indemnity basis. She submitted that she
had an objective basis to bring the claim seeking the categories of documents that she originally sought. The plaintiff was trying to ascertain the assets and liabilities of the
estate, as she is required to do in her position as Administrator. The plaintiff has
duties to the Court to file a true and perfect account of the assets and liabilities of the
deceased.[37] As an administrator she has a right to the documents that the deceased
was entitled to, and those categories of documents are not limited. They include
bank records, legal files, documents that relate to any entitlements that that person
may have had from their employer, superannuation entitlements and the documents
that would illustrate exactly what entitlements the deceased may have under trusts
of which he was a beneficiary in respect of loans in family entities.
[37] A&P Act s 28.
21 The deceased had told her, and set out in the informal will, what he understood to
be his assets and rights as against the various Finadri family entities. She had a firm
basis to believe that she had or may have had a right to obtain relief in the Court
against several of the defendants. In addition to the informal will and what Adrian
had told her, she had correspondence with an employee of Finadri Windows, Marie
Mosca,[38] the deceased’s tax returns, a settlement document concerning the sale of the
Rye property, and documents relating to the loan of $300,000.[39]
[38] Reasons, [42](b).
[39] Exhibits AMP-7, AMP-11, AMP-12, AMP-17, AMP-18, AMP-19 to the First Pandolfo affidavit.
22 The defendants objected to the production of documents sought and there is a basis
to think that the objection was based on personal malice towards the plaintiff, who
was Adrian’s second wife, rather than a firmly based legal objection. In
correspondence between the parties prior to the commencement of the proceeding,
the plaintiff foreshadowed that she would seek indemnity costs against the
defendants if she was forced to issue proceedings to obtain the documents that she
sought and to which she was clearly entitled as Administrator of the deceased’s
estate.[40]
[40] Exhibit AMP-2 to the First Pandolfo affidavit, letter dated 9 March 2017.
23 Despite extensive correspondence between solicitors, with several changes to solicitors acting on behalf of the defendants, the defendants persistently refused to
cooperate and produce the documents sought, necessitating the commencement of
this proceeding.
24 The defendants should have provided the documents that are now the subject of the
orders in accordance with their overarching obligations pursuant to the CPA.[41] From
[41] Liu [2016] 92 NSWLR 679, [190]-[199].
the outset of the proceeding, it was apparent that the claim was pursued on the basis
of the statements that had been made by Adrian in the informal will and that the
plaintiff sought documents to vindicate the deceased’s rights that survived his death
pursuant to s 29 of the A&P Act. As a result of the defendants’ conduct the
application became very adversarial and unreasonable on the part of the defendants.
This unreasonableness is illustrated by the defendants embarking upon an
investigation into the merits of each of the plaintiff’s claims and testing every
conceivable aspect of the plaintiff’s claims. There was no real cooperation as
required by s 20 of the CPA.
Defendants’ submissions
25 The defendants submit that the plaintiff has been entirely unsuccessful as against the
first to third and fifth to eighth defendants (Claimants) who now seek their costs of
the proceeding. They seek those costs on an indemnity basis due to the way in
which the proceeding was conducted by or on behalf of the plaintiff. The originating
motion was patently misconceived. It claimed relief under provisions of the A&P
Act, which had no relevance.[42] The first affidavit of the plaintiff did not state
documents were required pursuant to r 32.05 of the Rules. It advanced the
proposition that the plaintiff needed the information to conduct her role as
Administrator of the deceased’s estate. During the first day’s hearing, the plaintiff
expressly disclaimed reliance on r 32.05.
[42] This was identified in argument as the ‘real’ problem. The proceeding commenced on the wrong
26 The defendants submitted that there was no proper basis for the originating motion
as issued. The need to cross-examine Dr Monk in relation to the making of the
informal will was brought about by inconsistent statements in the plaintiff’s affidavit
in support.
27 It is not correct to say that the plaintiff has obtained the majority of the documents
that she sought. The affidavit of Con Kiatos made on 31 May 2018 in support of the
application for costs shows that the plaintiff received:
(a) two trust deeds – not previously requested; (b) financial statements for three years for the seventh defendant, Rhoden; and (c) a summary of loans. 28 Neither of the two proceedings that have been commenced, one against Rhoden and
another against Aquaflex, depend upon documents obtained in the course of this
proceeding. The proceedings against Rhoden rely upon the absence of documents as
grounds for relief. The proceedings against Aquaflex relied upon joint ownership of
property. As a result, the Claimants have been put to a great deal of unnecessary
time and expense dealing with the plaintiff’s excessive demands and they should
have their costs on an indemnity basis.
29 The costs of Finadri Windows of providing discovery should be paid by the plaintiff
in accordance with general principles. Finadri Windows resists any application by
the plaintiff for costs against it. If the application had been confined to a claim in
respect of the deceased’s employment, the proceeding ought to have been
commenced in the County Court or the Magistrates’ Court.
Analysis
30 I have reviewed the affidavits filed on behalf of the plaintiff and the defendants and
the documents produced as exhibits to the affidavits of Mr Kiatos. It is, to my mind,
clear that whatever the basis upon which the plaintiff sought to obtain the material,
11 T0655
the defendants, as a whole, resisted at the provision of any relevant information to
the plaintiff. It was not until after the commencement of the proceeding that, for
example, the solicitors acting on behalf of the defendants as a group provided the
Acorn Consulting Report detailing what Finadri Windows calculated as the
entitlements of the deceased as an employee.[43]
[43] Exhibit CK–4 to the Second Kiatos affidavit.
31 Neither party addressed adequately whether the originating motion as originally
framed had a proper basis. The closest to any proper analysis was made in
submissions by Counsel for the plaintiff.[44] The defendants did no more than assert
that by relying on several provisions of the A&P Act and order 54 of the Rules, there
was no proper basis. It seems to me that to the extent that the plaintiff sought to
obtain property of the deceased, she was entitled to proceed in the way she did. But
as that matter was not properly, argued I do not rest my reasons on that basis. What
is evident is, as I explain below, such documents as the plaintiff did obtain before the
hearing on 15 March 2018 were obtained as a result of the commencement of the
proceeding, or so it seems from the affidavit material filed.
[44] Transcript of 23 August 2018, 51.
32 It is clear that the estate of the deceased, as a beneficiary of several of the trusts, in
particular the Finadri Family Trust, was entitled to copies of the Trust Deeds, and a
variety of other information, as a potential object of that trust. It was not until after
the commencement of the proceeding that the Trust Deeds of the Finadri Family
Trust and the Finadri Property Unit Trust, were given to the plaintiff.[45]
[45] Exhibits CK–6 and CK–7 to the Second Kiatos affidavit.
33 Despite the fact that the deceased had been a part owner of the Rye Property, the
solicitors who acted in the sale of that property (the ninth defendant) declined to
provide any of the information sought notwithstanding that the solicitors for the
plaintiff provided convincing evidence of the position of the plaintiff as
Administrator of the estate of the deceased. It was not until after the commencement
of the proceeding that the ninth defendant provided the information which included signed acknowledgement by the deceased of the entitlement of his parents to the
whole of the proceeds of the sale of that property.[46] The signed acknowledgement
[46] Exhibits CK–8 and CK–9 to the Second Kiatos affidavit, [20].
was not forthcoming earlier notwithstanding:[47]
[47] Exhibit AMP-13 to the First Pandolfo affidavit.
(a) a perfectly reasonable request by the solicitors acting on behalf of the estate of the deceased by letter dated 22 February 2017;
(b) after an initial response from the ninth defendant that no information could be given without proper written authority that can be verified, the provision
of signed written authority from the plaintiff, copies of her marriage
certificate, the deceased’s death certificate and the grant of letters of
administration; and
(c) two follow up letters on 9 and 20 March 2017. 34 When the ninth defendant finally provided the documents requested relating to the
sale of the Rye Property to the plaintiff’s solicitor (in June 2017), it copied the
correspondence to the defendants’ solicitors.[48]
[48] Exhibit CK-8 to the Second Kiatos affidavit.
35 The inference from these facts, is the failure of the ninth defendant to give any
documents relating to the sale of the Rye Property prior to the commencement of the
proceeding, particularly in the context of the very resistant and adversarial conduct
of the proceeding by the defendants as a whole, is that the ninth defendant was
either instructed not to give the acknowledgment by members of the Finadri family
or they gave no instructions at all when asked.
36 In addition, in his affidavit made shortly before the final hearing,[49] Marco Finadri
gave evidence that, in relation to the sale of the Rye property, there were no
documents relating to any trust; that he did not instruct his solicitors to establish any
trust; and the funds from the sale of the property were distributed as a part of a family arrangement. This evidence put to rest a matter that could have been dealt
with before the proceeding was commenced.[50]
[49] Affidavit of Marco Finadri (made 27 February 2018).
[50] Finadri affidavit, [5]–[7].
37 With respect to Rhoden, the deceased was a shareholder and thus a member of the
company with rights under the Corporations Act. Before commencement of the
proceeding the financial statements and tax return for the 2015 financial year was
provided to the plaintiff’s solicitor under cover of a letter dated 2 December 2016.[51]
[51] Exhibit AMP-2 to the First Pandolfo affidavit.
The response to requests for more information and documents was met with
querulous correspondence.
The affidavit material filed supports the plaintiff’s contention that as a result of a
without prejudice meeting between the accountants for the parties, she obtained
financial reports and trial balances for the 2014, 2015 and 2016 financial years and a
summary of loan accounts for Walter, the deceased and the Finadri Family Trust that
were disclosed in the balance sheet of Rhoden.[52] The plaintiff contends, and the
[52] Third Kiatos affidavit, [4].
defendants dispute, that this has been sufficient to enable her to decide to commence
the proceeding against Rhoden. Without further elucidation of the content of the
documents and how they assisted in the decision to commence the Rhoden
proceeding it is not possible to resolve this dispute. What is clear, however, is that
the documents obtained were not sufficient for the purposes of valuing Rhoden for
the purposes of the oppression proceeding commenced against Rhoden and Walter
Finadri as referred to below.
39 Apart from the materials provided by the defendants’ accountants in relation to
Rhoden, the defendants solicitor simply referred the plaintiff to her rights under the
Corporations Act (saying she can pursue her rights under that Act if she wishes)
rather than cooperating and avoiding the incurring of further costs by all parties in
providing information to the plaintiff as Administrator of the deceased’s estate.[53] In
[53] Second Kiatos affidavit, [27]–[28].
fact, the originating motion did claim to inspect books of the company on the basis of
s 247A of the Corporations Act. The response of the defendants’ solicitor seems to
have been calculated to obstruct rather than to co-operate with the plaintiff.
40 In any event, the application under s 247A of the Corporations Act in this proceeding
was not pursued. It has been pursued in another proceeding against Rhoden and
Walter Finadri, in the Corporations jurisdiction of the Court. That proceeding is an
oppression proceeding in reliance on s 232 of the Corporations Act (the Rhoden
proceeding).[54] In that proceeding it is the evidence of the plaintiff that since the
[54] Pandolfo v Rhoden Investments Pty Ltd (Proceeding No S ECI 2018 00074).
death of the deceased, the relationship between the plaintiff and Walter Finadri has
broken down and they no longer communicate other than via their solicitors.[55] That
[55] Exhibit CK-13 to the Fourth Kiatos affidavit.
evidence is further confirmed by the conduct of the parties in this proceeding. For
the purposes of valuing Rhoden, the application also includes a claim to inspect the
books of the company under s 247A.
41 It is noteworthy that in the Rhoden proceeding, orders were made on 17 May 2018
for Rhoden to make its books available for inspection, including tax returns, financial
statements, general ledger reports, bank statements, and other documents for the
periods from July 2011 to June 2016 or 2017, depending on the nature of the
documents. The orders made were resisted by the defendants. It was submitted by
Counsel appearing for the defendants in the Rhoden proceeding (who was the same
Counsel as in this proceeding) that the plaintiff had not established the right to
inspection of the books of the company under s 247A of the Corporations Act.[56]
[56] Transcript of Proceedings, Pandolfo v Rhoden Investments Pty Ltd (S ECI 2018 00074, Gardiner AsJ, 17 May 2018) 12.
Associate Justice Gardiner found against that submission, whereupon there was an
outburst from a person in the body of the Court directing abusive language at
someone in the Court. The degree of abuse recorded in the transcript was very
strong and shows the degree of hostility between the parties and the real reason why
such an adversarial approach was taken by the defendants to the plaintiff’s
application that was before me.
42 It is true, that the plaintiff did not obtain some of the documents that her Counsel
claimed to have obtained. Moreover, the defendants’ solicitor’s acknowledgement
that the material held by the plaintiff was sufficient for the plaintiff to consider the
estate’s position in respect of the $300,000 loan to Aquaflex was hardly
determinative of the plaintiff’s rights.[57]
[57] Second Kiatos affidavit, [26].
43 There is, however, a basis to think that the defendants’ whole approach to the
provision of documents and information to the plaintiff was based on personal
malice towards her. This emerges from the correspondence between solicitors
before the proceeding was launched.[58] That correspondence began with requests for
[58] Exhibit AMP-2 to the First Pandolfo affidavit.
the recovery of property of the deceased, something that was also claimed in the
proceeding. It was met with obstruction and countervailing claims. The
correspondence descends to pettiness and produces little of value to enable the
plaintiff to identify the assets of the deceased’s estate, including the deceased’s
entitlements as an employee of Finadri Windows and as a member of the Finadri
family, whose affairs were conducted through trusts and companies. This was the
plaintiff’s avowed intent from the beginning.
The defendants’ submission in relation to costs seeks to distinguish between the
costs incurred by all the defendants other than Finadri Windows. Counsel for the
defendants contended that no documents where obtained from the first defendant
(the deceased’s brother Walter Finadri), the second and third defendants (the
deceased’s parents) when all the defendants were represented by the one solicitor
and the one Counsel. That there may have been some costs incurred by the
defendants as a group in responding to requests for information and documents that
in the end have either not been pursued by the plaintiff or were documents to which
she was not entitled, does not mean that there should be orders for costs in favour of those defendants. There is no factual basis advanced for the separation of the costs
of individual defendants from the costs of the solicitors and Counsel acting on behalf
of all the defendants. Their representation was as a group and in the context of this
case the costs of the defendants should be dealt with together.
45 One particular reason for this is that there were months of correspondence before the
commencement of the proceeding where the various individuals and the entities that
were ultimately named as defendants in the proceeding changed their solicitors
three times and put the plaintiff to significant cost in repeating requests and further
explanations for the requests for information and documents. The only information
given before the commencement of the proceeding was the 2015 tax return and
financial accounts of Rhoden.[59]
[59] First Pandolfo affidavit, [67].
46 In the ultimate analysis, in my view the plaintiff has been substantially successful in
her application considered as a whole. The categories of documents sought in
originating motion were:
(a) from the second and third defendants, documents relating to any trust of the Rye property, any documents executed by the deceased in relation to it, and
any assignment or authority executed by the deceased in relation to its sale or
the proceeds of the sale. This was satisfied by the Finadri affidavit and the
provision of the conveyancing file pertaining to the sale of the Rye property
(para [2] of the originating motion);
(b) from Finadri Windows, documents relating to the deceased’s employment by that company and superannuation entitlements arising from that employment
(and related matters), which was substantially the matter dealt with and
satisfied by the earlier Reasons (para [3] of the originating motion);
(c) from the fifth defendant as trustee of the Finadri Properties Unit Trust, documents relating to the Finadri Properties Unit Trust, which was substantially satisfied by the Second Kiatos affidavit (para [4] of the
originating motion);
(d) from the sixth defendant (Aquaflex) as trustee of the Finadri Investment Trust, documents relating to that trust, which was not pressed at the hearing
and the plaintiff indicated it would commence proceedings in relation to it.
The Fourth Kiatos affidavit reveals that a proceeding has been commenced
under pt IV of the Property Law Act 1958 (Vic) and consent orders were made
for the sale of the property part owned by Aquaflex (para [5] of the
originating motion);
(e) from Rhoden, financial documents concerning its activities, which was partly satisfied by the provision by Rhoden’s accountants of the documents referred
to in para [4] of the Third Kiatos affidavit (para [6] of the originating motion);
(f) from the eighth defendant, documents relating to the transactional basis and quantum of monies owed by that company to the deceased. This was not
pressed at the hearing (para [7] of the originating motion); and
(g) from the ninth defendant, the lawyers acting in the sale of the Rye property, the documents referred to in para (a) above.
47 In my view, the plaintiff has been substantially successful in the proceeding. There
was greater cooperation from the defendants after the proceeding commenced,
which itself demonstrates the necessity for the plaintiff to launch the proceeding.
Despite some co-operation after the proceeding commenced, significantly by the
provision of material identified in affidavits filed by or on behalf of the defendants,
the plaintiff faced determined opposition.
48 The parties are not strangers. It is a part of the role of the plaintiff, as Administrator
of the estate of the deceased, to identify and collect the assets of the deceased’s
estate. In this case those assets are significantly wrapped up with or owned by
entities controlled by members of the deceased’s family. In these circumstances the
18 T0655
present case is to be distinguished from the situation facing respondents who are not
related. The family members should have cooperated with the plaintiff in her
endeavour to identify the assets of the estate, but did not. In my opinion, those
controlling the several defendants did not act reasonably in defending the claims
made by the plaintiff. The defendants have taken an adversarial approach and
should pay the consequences. There is no proper basis for the costs orders that the
defendants have sought. There was a proper basis for the relief initially claimed in
the originating motion, and by bringing the claim the plaintiff did obtain some
documents and information relevant to the performance of her duties as
Administrator.
49 Despite this conclusion, the width of the claims for documents in the originating
motion and as referred to in the affidavits in support may have seemed alarming to
the defendants. Although in my view the plaintiff has been substantially successful,
there are aspects of the plaintiff’s claims that have not been successful or were not
pursued. This is particularly the case in relation to the first, sixth and eighth
defendants, from whom no documents were apparently obtained. This is a case
where there should be some adjustment to the costs payable by the defendants. In
my view a reduction overall of 20% of the plaintiff’s costs for pursuing documents or
information not persisted with and for failing to obtain documents is warranted.
In relation to the plaintiff’s claim for her costs on an indemnity basis, the exercise of
the discretion to award costs over and above the standard basis is exceptional. The
relevant question in this case is whether there is ‘some special or unusual feature in
the case to justify the Court in departing from the ordinary practice’.[60]
[60] Colgate-Palmolive (1993) 46 FCR 225, 232-4; Actrol [2015] VSC 758, [108].
51 In my view the defendants have engaged in unmeritorious and deliberate conduct
with the intention of thwarting the plaintiff from identifying the assets of the
deceased’s estate and enabling her to decide whether or not to commence a
proceeding in the Court to obtain the identified relief for unpaid employment entitlements and superannuation. The ultimate narrowing of the claims to an
application for preliminary discovery under r 32.05 of the Rules, and my finding that
the plaintiff is entitled to the discovery she claimed under that Rule, and the reason I
gave for that conclusion, show that although the defendants had arguments against
the grant of the discovery sought, the arguments lacked substance and the
defendants should have known that to be the case. I refer particularly to paragraphs
[40]-[69] in relation to the employment benefits and [70]-[83] in relation to the
superannuation.
52 These matters warrant the Court showing its disapproval and at the same time
preventing the successful party being left out-of-pocket. I will, accordingly, order
the payment by the defendants of 80% of the plaintiffs costs of the proceeding on an
indemnity basis.
53 A final matter should be mentioned. At the outset of the hearing on 23 August 2018,
the plaintiff complained that there had been non-compliance with the orders for
discovery made on 20 June 2018. The defendants did not have proper notice of the
complaint so the matter could not be dealt with. I reserved liberty to apply in
relation to those orders. I will repeat that liberty in relation to whether or not there
has been compliance with the Court’s orders. There is some doubt at present as to
whether the usual order, that the plaintiff pay the costs and expenses of Finadri
Windows in making discovery, should be made. I will therefore reserve that
question for the time being.
Conclusion
54 For the foregoing reasons, the appropriate order of the Court is that the defendants
should pay 80% of the plaintiff’s costs of the proceeding up to an including the
hearing on 23 August 2018 on an indemnity basis. I will reserve the costs of Finadri
Windows in making discovery. Liberty to apply will be reserved to the plaintiff in
relation to compliance with the Court’s order made on 20 June 2018.
20 T0655
21 T0655
SCHEDULE OF PARTIES
| ANNA MARIA PANDOLFO (in her capacity as | Plaintiff |
| Administratix of the Estate of Adrian Paul Fiore Finadri) | |
| - and - | |
| WALTER FINADRI | First Defendant |
| MARCO FINADRI (in his capacity as trustees of the Finadri | Second Defendant |
| Superannuation Fund) | |
| MARIA FINADRI (in her capacity as trustees of the Finadri | Third Defendant |
| Superannuation Fund) | |
| FINADRI WINDOWS PTY LTD (ACN 005 544 249) (in its | Fourth Defendant |
| own capacity and in its capacity as trustee for the Finadri Family Trust) | |
| FINADRI PROPERTIES PTY LTD (ACN 073 141 090) (in its | Fifth Defendant |
| capacity as trustee for the Finadri Properties Unit Trust) | |
| AQUAFLEX PTY LTD (ACN 006 888 400) (in its capacity as | Sixth Defendant |
| trustee for the Finadri Investment Trust) | |
| RHODEN INVESTMENTS PTY LTD (ACN 103 132 789) | Seventh Defendant |
| FWICO PTY LTD (ACN 069 984 256) | Eighth Defendant |
| TARTAGLIA LAWYERS PTY LTD (ACN 167 518 729) | Ninth Defendant |
22 T0655
1 T0655
2 T0655
3 T0655
4 T0655
5 T0655
[2016] VSC 76, [12]; David L Bailey and John K Arthur, Williams’ Civil Procedure Victoria (LexisNexis
Butterworths, Service 310, August 2018) [I 32.11.0].
6 T0655
discussed by Harper J in Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189, [7]–[8].
7 T0655
8 T0655
9 T0655
footing: Transcript of Proceedings, Pandolfo v Finadri (S CI 2017 01985, Derham AsJ, 23 August 2018)
36 (‘Transcript of 23 August 2018’).
10 T0655
12 T0655
13 T0655
14 T0655
15 T0655
16 T0655
17 T0655
19 T0655
3
2
0