Project Construction and Dev v Ellison
[2002] NSWSC 372
•8 May 2002
CITATION: Project Construction & Dev v Ellison [2002] NSWSC 372 CURRENT JURISDICTION: Equity FILE NUMBER(S): SC 1033/00; 1666/01 HEARING DATE(S): 29 April 2002 JUDGMENT DATE: 8 May 2002 PARTIES :
1033/00
Project Construction & Development Pty Ltd (P1)
Stephen James Clayton (P2)
Geoffrey McNeil Ellison (D1)
Collins Thomson Pty Ltd (in liq) (D2)1666/01
Collins Thomson Pty Ltd (in liq)
Stephen James Clayton (D)JUDGMENT OF: Austin J
COUNSEL : Mr W Muddle (Ps in 1033/00; D in 1666/01)
Mr P O'Loughlin (Ds in 1033/00; P in 1666/01)SOLICITORS: Colin Biggers & Paisley (Ps in 1033/00; D in 1666/01)
Potts Latimer (Ds in 1033/00; P in 1666/01)CATCHWORDS: CORPORATIONS - winding up - liquidator resists proceedings to admit proof of debt and brings proceedings for breach of duty - after commencement of hearing, liquidator does not tender evidence - whether liquidator should be ordered to pay other party's costs without resort to the company's assets LEGISLATION CITED: Corporations Act 2001 (Cth), ss 496, 532 CASES CITED: Adsett v Berlouis (1992) 37 FCR 201
Bibra Lake Holdings Pty Ltd v Firmadoor Australia Pty Ltd (1992) 7 ACSR 380
Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 622
Dey v E H Dey Pty Ltd [1966] VR 464
Fugen Industrial Co Ltd v Melsom (1994) 12 ACSR 749
Kinsella v Russell Kinsella Pty Ltd (1986) 4 NSWLR 722
Re Beddoe; Downes v Cottam [1892] 1 Ch 547
Re Biposa Pty Ltd; Condon v Rogers (No 3) (1995) 17 ACSR 703
Re Wilson Lovatt & Sons Ltd [1977] 1 All ER 274
Re Express Engineering Works [1920] 1 Ch 466
Taylor v Carroll (1991) 6 ACSR 255DECISION: Costs of defendant in 1066/01 to be paid by company in liquidation; costs of plaintiffs in 1033/00 to be paid by defendants; liquidator's liability on costs order to be limited to company's assets; liquidator's expenses to be costs of liquidation
IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
AUSTIN J
WEDNESDAY 8 MAY 2002
1033/00 PROJECT CONSTRUCTION & DEVELOPMENT PTY LTD & ANOR V GEOFFREY McNEIL ELLISON & ANOR
1666/01 COLLINS THOMSON PTY LTD V STEPHEN JAMES CLAYTON
JUDGMENT
1 HIS HONOUR: This judgment relates to the costs of two proceedings that have been settled, and in particular, whether the liquidator of a company should be held personally liable for costs of either or both proceedings, with no right of recoupment from the company in liquidation.
2 In proceeding No 1666 of 2001 the plaintiff, Collins Thomson Pty Ltd (in liquidation), sued Mr Stephen Clayton for the sum of $139,288 plus interest. The cause of action, which arose out of a transaction reflected in a deed dated 30 November 1994, was for breach of the fiduciary duty of a director, and failure to discharge the statutory duties of an officer under the Corporations legislation to act honestly and with due care and diligence, and not to improperly use his position.
3 In proceeding No 1033 of 2000 Mr Clayton and his company, Project Construction & Development Pty Ltd, sued Collins Thomson (in liquidation) and its liquidator, Mr Ellison, to establish that Mr Ellison was in error in rejecting Mr Clayton's proof of debt for $13,729.02 (being the amount owing under orders of the Consumer Claims Tribunal against the company, plus interest) and Project Construction's proof of debt for $42,877 plus interest (for the balance claimed to be outstanding to Project Construction under the deed of 30 November 1994). In effect, the only defence by Mr Ellison and Collins Thomson to the proofs of debt was their assertion in proceeding No 1666 of 2001 that Mr Clayton was accountable to the company for breach of fiduciary and statutory duties. The cases have proceeded before me on the basis that the defendants in proceeding No 1033 of 2000 would have no ground for resisting the plaintiffs' claims unless they were successful as plaintiff in proceeding No 1666 of 2001.
4 Collins Thomson was incorporated as BCHL Projects Pty Ltd in 1993, for the purpose of acquiring and developing a former private hotel in Mona Road Darling Point. The development was financed through a company called D T Ritchard Nominees Pty Ltd. The development took place successfully between late 1993 and 1994, and most of the residential units in the development were sold. To assist in marketing, the company offered many proposed purchasers money by way of second mortgage advances.
5 Up to 30 November 1994 the directors of the company were Mr Clayton and Mr Collins. D T Ritchard Nominees owned about half of the shares in the company during the course of the development, but ceased to be a shareholder in October 1994. The other shareholders were Mr Clayton and his company Project Construction & Development Pty Ltd, and Mr Brett Collins and his company Brett Collins Investments Pty Ltd.
6 Prior to 30 November 1994 Mr Clayton and his company decided to transfer their interests to Mr Collins and his company for $153,225. The amount was made up of an agreed share of profits of $30,000 and half the then value of the second mortgages, $123,225. The agreement between the parties was put into effect in the form of the deed dated 30 November 1994. Between 20 December 1994 and 30 August 1995 Mr Clayton received payments totalling $119,973.
7 The contention of Collins Thomson, by its liquidator Mr Ellison, was that under the transaction of 30 November 1994, the company did not receive any consideration for its mortgages, and that Mr Clayton and Mr Collins had acted to benefit themselves in breach of their fiduciary and statutory duties. There was an obvious answer to this contention. The parties to the deed were the only members of the plaintiff at the time, and consequently the deed represented their unanimous consent to the transaction set out in the deed, which was therefore a valid act of the company upon the principle of Re Express Engineering Works [1920] 1 Ch 466 and Dey v E H Dey Pty Ltd [1966] VR 464. Mr Clayton raised this matter in his defence.
8 In its Further Amended Statement of Claim, Collins Thomson pleaded that at the time of entry into the deed, it was insolvent. If it were established that the company was, or was near to, insolvency at the relevant time, it would be open to Collins Thomson to argue that the unanimous consent of the shareholders of the company would not exonerate the directors from liability for what would otherwise be a breach of their fiduciary duties: Kinsella v Russell Kinsella Pty Ltd (1986) 4 NSWLR 722.
9 Consequently, a critical issue for determination at the hearing was whether Collins Thomson was insolvent as at 30 November 1994. The resolution of this issue involved evidence of the company's financial statements. Unfortunately, there were competing versions of the financial statements for the relevant time.
10 Both cases were set down for hearing before me on 9 April 2002, and I directed that the evidence in one be evidence in the other. The hearing was not concluded on that day, and was adjourned to 29 April 2002. On that day I was informed that Collins Thomson and Mr Ellison did not propose to lead any evidence in proceeding No 1666 of 2001, and would consent to orders in proceeding 1033 of 2000. All that remained was a contest with respect to costs.
11 In proceeding No 1666 of 2001 Mr Ellison was not personally a party, the plaintiff being Collins Thomson in liquidation, while in proceeding No 1033 of 2000 the defendants were Mr Ellison as liquidator and the company in liquidation. In each proceeding, the orders sought against Mr Ellison are that
- (1) he personally pay the costs of the other party on an indemnity basis,
(2) he be not entitled to an indemnity from the funds of the company for his remuneration, costs and disbursements, and
(3) to the extent that any such remuneration, costs and disbursements have been allowed or paid, he be ordered to pay the same to the company.
12 There is no contest between the parties as to the applicable law. Where a liquidator causes proceedings to be brought in the name of the company in liquidation, and is not personally a party to the action, the Court will not ordinarily order the liquidator to pay the costs of the other party in the event that the company in liquidation is unsuccessful: Fugen Industrial Co Ltd v Melsom (1994) 12 ACSR 749, 754; Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) (2001) 39 ACSR 622, 629. It is open to the other party to protect itself by an application for the company to provide security for costs. However, subject to the relevant rules of court, courts have from time to time awarded costs against a court-appointed liquidator whose conduct has provided good reason to do so.
13 Counsel for Mr Clayton provided me with several authorities to the effect that where a liquidator brings proceedings in his or her own name and fails, the usual order is that the liquidator pay the costs of the successful party, and this order makes the liquidator personally liable for the costs: Re Wilson Lovatt & Sons Ltd [1977] 1 All ER 274; Taylor v Carroll (1991) 6 ACSR 255; Bibra Lake Holdings Pty Ltd v Firmadoor Australia Pty Ltd (1992) 7 ACSR 380, 384; Fugen Industrial Co at 754-5. Of course, that is not the present case. As I endeavoured to explain in Cresvale (No 2) there is a difference between cases where the liquidator sues, and cases where the liquidator is sued. Where proceedings are successfully brought against a liquidator personally, whether or not the company in liquidation is also a defendant, the normal practice is for the Court to order the defendants, including the liquidator, to pay the plaintiff's costs, but on occasions the Court has limited the liquidator's liability to the assets of the company.
14 In Cresvale (No 2) at 631-634 I attempted an analysis of the cases and concluded that, both in the case a court-ordered winding up and in the case of a voluntary winding up, it may be appropriate for the Court in the normal case to protect the defendant liquidator from personal liability when making an order for costs. Such an order recognises the liquidator's right of indemnity against the company for costs and expenses properly incurred. However, the right to an indemnity is a qualified one. The costs must have been properly incurred, so that if litigation was obviously misconceived and extravagant in the resources applied to it, the expense would not be regarded as proper, notwithstanding that the liquidator acted honestly: see, with respect to trustees and trustees in bankruptcy respectively, Re Beddoe; Downes v Cottam [1892] 1 Ch 547, especially at 562; and Adsett v Berlouis (1992) 37 FCR 201 at 212-13.
15 It follows that the questions to be addressed are
· in proceeding No 1666 of 2001, whether there is some good reason for ordering Mr Ellison to pay the defendant's costs personally, rather than merely ordering the company in liquidation to do so; and
· in both proceedings, whether Mr Ellison's conduct has destroyed his right of indemnity out of the assets of the company, so that I should make orders preventing him from recovering his own costs and disbursements from the assets of the company; and
· in proceeding No 1033 of 2000, whether (if the right of indemnity has not been destroyed) I should limit Mr Ellison's liability to pay costs, as an unsuccessful defendant, to the assets of the company.
16 In support of his contention that Mr Ellison should be ordered to pay costs personally in both proceedings, without recourse to the assets of the company for any costs and expenses, Mr Muddle (appearing for Mr Clayton and Project Construction & Development) referred to several matters.
17 Counsel drew attention to the fact that at the time when Mr Ellison was appointed liquidator of the company, by resolution of the members of the company on 21 September 1999, he was in partnership with Mr Moyes, who had been the accountant of Collins Thomson from 1996 until Mr Ellison's appointment as liquidator. Section 532 (2) (b) of the Corporations Act states that a person must not, except with the leave of the Court (not sought or granted here), seek to be appointed or act as liquidator of a company, if the person is a creditor of the company in amount exceeding $5000. The evidence indicates that two substantial distributions were made to the accounting partnership, for a total amount in excess of $5000.
18 The Court takes any breach by a liquidator of the statutory and general law duties concerning conflicts of interest very seriously, when those matters are properly raised and determined. However, it is not appropriate for the Court to make a determination as to whether Mr Ellison has breached a statutory duty or otherwise put himself in a position of conflict between interest and duty, when the matter has been raised only on an application for costs upon which the evidence has been limited and selective. Moreover, in my view the fact that a liquidator has accepted office in breach of duty does not entail that he or she will necessarily be excluded from access to the company's assets to recoup costs properly incurred in legal proceedings in the course of the liquidation. In the present case by far the more important question is whether the costs of these two proceedings were properly or improperly incurred by Mr Ellison.
19 Mr Clayton wrote to Mr Ellison on 8 April 1999, before Mr Ellison became liquidator, to advise him of the debts that he and his company claimed, and they remained in correspondence after the liquidation commenced. Mr Ellison wrote to Mr Clayton in August 1999 asking for information of various kinds, including financial information about the company in 1994. Mr Clayton supplied some information but by 2 September 1999 the tone of Mr Ellison's correspondence had become contentious. He asserted in a letter of that date that he held Mr Clayton responsible for certain funds as a contingent asset of his administration of the affairs of the company. Subsequently Mr Ellison raised questions about the payment of consideration under the deed of 30 November 1994, and on 21 December 1999 he issued a notice of rejection of Project Construction's proof of debt, with respect to the sum of $28,000.
20 Mr Ellison made two distributions to the unsecured creditors of Collins Thomson. There is some correspondence in evidence which indicates that he had prepared post-dated cheques for the first distribution before the expiry of formal notice to creditors. Mr Clayton's solicitor wrote to Mr Ellison's solicitor on 13 March 2000 saying that his client would hold Mr Ellison personally liable if, as a result of the distributions, there were insufficient funds to meet the claims of Mr Clayton and his company. I do not regard this evidence as having any significance on the question of costs. It cannot be contended, on the evidence before me, that Mr Ellison has deliberately stripped the company of assets by making distributions to unsecured creditors, so as to defeat the proofs of debt of Mr Clayton and Project Construction. The preparation of post-dated cheques for the making of distributions seems irregular, but it is not clear from the evidence that the cheques, though "forwarded", were despatched to creditors, and I am unable to make any inferences as to wrongdoing or irregularity.
21 The proceeding which became No 1666 of 2001 was commenced, by Mr Ellison in the name of the company, by a Statement of Liquidated Claim in the District Court of New South Wales in 2000. Initially there was no allegation that the company was insolvent at the time of the deed dated 30 November 1994. Mr Ellison also caused the company to take proceedings against Mr Clayton and others in the Local Court for recovery of $28,000 plus interest. By the end of the year 2000 there were District Court and Local Court proceedings in which the company in liquidation was plaintiff and Mr Clayton was a defendant, and one proceeding in this Court in which Mr Clayton and Project Construction were the plaintiffs and Collins Thomson and Mr Ellison were the defendants.
22 The Statement of Liquidated Claim in the District Court proceeding was amended on 29 June 2001. On 12 July 2001 Mr Clayton's solicitor wrote to Mr Ellison's solicitor criticising the amended pleading for "fundamental defects". One of the defects was said to be that the members of Collins Thomson unanimously assented to the transaction represented by the deed, which was therefore a valid act of the company. The solicitor invited Mr Ellison to consent to the dismissal of the Amended Statement of Liquidated Claim with costs, and said that if that offer was not accepted, Mr Clayton would rely on the letter to seek an order that Mr Ellison and his firm jointly and severally pay Mr Clayton's costs on an indemnity basis. Referring to the Supreme Court proceedings with respect to the validity of the proofs of debt, the letter asserted that affidavits filed in the Court revealed a number of matters including this:
- "Notwithstanding some assertions in Mr Ellison's affidavit of 1 December 2000, there is no issue as to the solvency of Collins Thomson in 1994. (It being noted that there is no pleading of insolvency in the Amended Statement of Liquidated Claim.)"
23 Mr Ellison's response was to amend the Statement of Claim in proceeding No 1666 of 2001 in 4 September 2001, to allege (inter alia) that Collins Thomson was insolvent at the time of the deed dated 30 November 1994, thus raising the Kinsella issue. In my opinion paragraph 13C of the Further Amended Statement of Claim filed on 4 September 2001 unambiguously pleads that the transaction took place at a time when Collins Thomson was insolvent and unable to pay its debts as and when they fell due. I am puzzled by an affidavit sworn on 16 September 2001 by Mr Ellison's solicitor, in which he said that there was no allegation in the Further Amended Statement of Claim which put into issue the solvency of the plaintiff at the time Mr Clayton allegedly breached his fiduciary duty. That is plainly wrong, and suggests a deep misunderstanding of his client’s pleading and legal position.
24 Mr Muddle criticised Mr Ellison's failure to realise before that time that the proceedings were flawed because of the doctrine of unanimous consent; and he also criticised Mr Ellison for contending that the company was insolvent in November 1994 contrary to the weight of evidence. I agree with Mr Muddle that Mr Ellison, and in particular his legal advisers, should have realised that the pleading prior to September 2001 was defective because all the members of the company consented to the transaction represented by the deed dated 30 November 1994. But in my opinion failure to realise this point should not lead to any adverse costs order. If the company had in fact been insolvent at the relevant time, Collins Thomson would have had a plausible contention that the unanimous assent of the members would not have relieved the directors from their breach of duty. The real question is whether there was any plausible basis for contending that Collins Thomson was insolvent in November 1994. If there was, Mr Ellison was not acting improperly or unreasonably in bringing and persisting in the proceedings, regardless of his solicitor's misunderstanding. If there was not, then Mr Ellison should not have advanced that contention and some consequences in terms of costs should follow.
25 The evidence with respect to the financial position of Collins Thomson in 1994-95 was very confused. The tender bundle contained four sets of financial statements for the year ended 30 June 1994, which were not identical. The financial statements seemed to be drafts and there was no evidence that any of them had been conclusively adopted by the company. Although most versions painted a picture of a solvent company, there is one version that shows a deficiency of shareholders' funds of $13,577 as at 30 June 1994.
26 Fortunately, much of the confusion was cleared up by Mr Ritchard, who gave oral evidence on that subject on 9 April 2002. He explained that there were two principal differences between the various sets of accounts. The set of accounts showing a deficiency of shareholders’ funds had included a management fee of $61,500, which Mr Ritchard said was not ever payable. Additionally, one set of accounts showed revenue on sales of units together with unsecured loans to Mr Clayton and Mr Collins, while the accounts prepared by Mr Ritchard reversed those sales out and reduce the revenue accordingly. Mr Ritchard's oral evidence was persuasive, and pointed to the conclusion that the company was not insolvent in November 1994.
27 Unfortunately, however, that degree of clarity was reached only on 9 April 2002. Mr Ritchard's accounts were made available to Mr Ellison only in November 2001, and in my opinion his oral information was necessary before the significance of his accounts would be appreciated. Given the uncertain state of the evidence before November 2001, which probably extended until April 2002, I am not able to say that it was unreasonable for Mr Ellison to make an assertion of insolvency in September 2001. In my view Mr Clayton has not shown that Mr Ellison's conduct of the District Court proceeding before and after its transfer to this Court was improper or unreasonable, or anything other than the attempt of a liquidator in good faith to obtain recovery for unsecured creditors.
28 Mr Muddle pointed out that under s 496 of the Corporations Act, a liquidator has an obligation to take steps which may include convening a meeting of the company's creditors if he or she is at any time of the opinion that the company will not be able to pay its debts in full. There is no evidence that any such meeting was convened in the present case. That is said to imply that there was no proper basis for Mr Ellison to contend that the company was insolvent in November 1994. It seems to me that this submission confuses two matters. The liquidator in a members' voluntary winding up is obliged to convene a meeting of creditors if he reaches the conclusion that the company will be unable to pay its creditors in full. It appears that Mr Ellison was of the opinion that the outcome of the liquidation would depend on his success in the proceedings against Mr Clayton and his company (see his solicitor's letter dated 22 March 2002, referred to below). On the limited evidence before me I am not able to make a determination that Mr Ellison has at any stage had a duty to convene a meeting of creditors under s 496, as there seems at least a plausible basis for him to contend that such a duty had not arisen because of the uncertainty of the outcome of the litigation against Mr Clayton. These issues are not to be confused with the question whether Collins Thomson was insolvent some five years before the winding up commenced, at the time of the transaction in which, according to Mr Ellison, Mr Clayton breached his duties. In contending that the company was insolvent at that time, Mr Ellison did not commit himself to convening a meeting under s 496.
29 Prior to 22 March 2002 there were some without prejudice negotiations for settlement of all three proceedings. On that day Mr Ellison's solicitor wrote to Mr Clayton's solicitor, setting out his "analysis" of all three proceedings. The letter was headed "without prejudice", but on 9 April 2002 I held that it was admissible in evidence.
30 As to the Supreme Court proceedings regarding the proofs of debt, the solicitor said that Mr Ellison acknowledged that it was likely that he would be ordered to admit the proofs of debt lodged by Mr Clayton and Project Construction for a total amount of $55,490.02. As to the Local Court proceedings, he expressed the view that the Court would "certainly" enter judgment against Mr Clayton and another defendant. He asserted that Mr Ellison was entitled to set off his obligation to pay Mr Clayton with respect to the proof of debt against the judgment (together with interest and costs) that he would obtain against Mr Clayton in the Local Court.
31 As to the District Court proceedings, which had by then been transferred to the Supreme Court to become proceeding No 1666 of 2001, the solicitor asserted that there was "considerable debate" concerning the application of the doctrine of unanimous consent, and that it was far from certain that the doctrine would be applied to the facts of the case, in view of the "countervailing" views of Mr Ellison and another accountant, Mr Lord, who had each produced experts’ reports as to the solvency of Collins Thomson in 1994-95.
32 The letter concluded with some assertions that appear to be attempts to intimidate Mr Clayton. It said that if Mr Ellison were successful in proceeding No 1666 of 2001 and the judgment and costs were not paid, he would pursue Mr Clayton into bankruptcy. Since any further dividends for the unsecured creditors of Collins Thomson would depend on the liquidator’s success against Mr Clayton, the letter claimed that any lesser level of recovery action against Mr Clayton would be the subject of warranted criticism by the creditors. Moreover, the winning of the Local Court proceedings would mean that the liquidator would have adequate funds to pursue the matter into the Court of Appeal, if he were to lose at first instance. The solicitor said that if the liquidator did not win proceeding No 1666 of 2001 there would be no money left to pay any further dividends to creditors, and therefore no money to pay Project Construction on its proof of debt.
33 The letter asserted that "the liquidator is fully funded for this litigation and the various security for costs entirely protect him in the case wherever he might be unsuccessful" [sic], and it concluded:
- "Therefore, on our analysis the liquidator runs almost no risk in litigating each of these files to judgment in each matter and the only way that such a course of action will not take place is if Mr Clayton makes a substantial offer of settlement to the liquidator."
34 In my opinion this letter was unwise, oppressive and unfair. It exaggerated Mr Ellison's prospects of success and threatened bankruptcy for Mr Clayton. It did so for the purpose of extracting a substantial offer of settlement from Mr Clayton. Since I can only infer that the letter was written on the instructions of Mr Ellison, Mr Ellison's instructions had those same attributes. However, it is relevant that the letter was written by one solicitor to another in response to attempts to negotiate a settlement. Mr Clayton had access to advice from his solicitor about his real prospects of success, and his real risk of bankruptcy. Mr Ellison’s solicitor made an incorrect assessment of his clients’ prospects in the litigation, and evidently did not properly understand the unanimous consent and Kinsella points, but in my opinion it would still have been on balance plausible for Mr Ellison to persist with the litigation in March 2002. The solicitor's letter, though unfortunate, did not render improper or unreasonable Mr Ellison's conduct of the litigation as a whole. It did not provide good reason for ordering Mr Ellison to pay costs personally or for depriving him of his right of indemnity out of the assets of the company in liquidation.
35 Mr O'Loughlin, appearing for Mr Ellison, submitted that Mr Clayton and his company should receive their costs only from the time when Mr Ritchard’s accounts became available to Mr Ellison. Mr Ritchard’s affidavit of 6 November 2001 did not attach or identify the accounts prepared by him, and those accounts became available to Mr Ellison only when Mr Lord’s affidavit of 9 November 2001, which attached Mr Ritchard’s accounts, was served on him, on about 14 November 2001. Therefore, Mr O'Loughlin submitted, Mr Clayton and his company should have their costs only from 14 November 2001. I disagree with this submission. Collins Thomson and Mr Ellison have been unsuccessful in the two proceedings because they chose not to lead any evidence when the cases resumed on 29 April 2002. It is appropriate to assume that they were advised that they would not succeed in establishing that the company was insolvent in November 1994. Costs should be awarded against the unsuccessful parties. The fact that Mr Ritchard’s accounts emerged only in November 2001 should not be allowed to alter this outcome. Mr Ellison may have been able to discover the true position at an earlier stage, had he pursued and questioned Mr Ritchard.
36 Weighing up the conduct of Mr Ellison as a whole, I do not regard him as having acted improperly or unreasonably. In my view, in proceeding No 1666 of 2001 there is no good reason for making an order that Mr Ellison, not a party to that proceeding, should be liable to pay any costs personally. The correct order in proceeding No 1666 of 2001 is simply an order that the plaintiff pay the defendant's costs.
37 Since I do not regard Mr Ellison as having acted, overall, unreasonably or improperly, it seems to me that his normal right of indemnity as a liquidator against the assets of the company in liquidation remains. Following the lead given by Young J (as the Chief Judge in Equity then was) in Re Biposa Pty Ltd; Condon v Rogers(No 3) (1995) 17 ACSR 703 at 739, my view is that as liquidator, Mr Ellison is entitled to his costs out of the assets of the company, and the opponents’ costs should also come out of the assets: see also Cresvale (No 2) at 631-2. Therefore in proceeding No 1033 of 2000 I shall order the defendants to pay the plaintiffs' costs, limiting Mr Ellison's liability to do so to the assets of the company.
38 I shall also direct that the costs and disbursements incurred by Mr Ellison in both proceedings be costs of the liquidation.
39 Mr Muddle submitted that costs should be awarded in favour of his clients on an indemnity basis. Having regard to my findings as a whole, I do not regard this as an appropriate case for indemnity costs.
40 I direct Mr Ellison by his legal representatives to prepare draft short minutes of orders to reflect these reasons for judgment. The draft is to be submitted to the legal representatives of Mr Clayton and his company by no later than Monday 13 May 2002, and I direct them to respond with comments on or before Wednesday 15 May 2002. I direct Mr Ellison to submit the draft to my Chambers on or before Thursday 16 May 2002, with a covering letter indicating whether there is any disagreement about the terms of the orders. If there is no disagreement as to the text of the draft and it is acceptable to me, I shall make orders in Chambers to avoid the parties incurring further costs. If not, I shall bring the parties back to Court for the purpose of making orders.
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