Re Good Home & Property Pty Ltd
[2023] VSC 57
•16 February 2023 (revised 21 February 2023)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 03366
IN THE MATTER of GOOD HOME & PROPERTY PTY LTD (ACN 604 707 048)
(IN LIQUIDATION)
BETWEEN:
| MIN REN | Plaintiff |
| v | |
| GOOD HOME & PROPERTY PTY LTD (ACN 604 707 048) (IN LIQUIDATION & ANOR (according to the attached Schedule) | Defendants |
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JUDGE: | Gardiner AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF JUDGMENT: | 16 February 2023 (revised 21 February 2023) |
CASE MAY BE CITED AS: | Re Good Home & Property Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2023] VSC 57 |
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CORPORATIONS — Application pursuant to s 90-15 of the Insolvency Practice Schedule (Corporations) (Schedule 2 to the Corporations Act 2001 (Cth)) that a liquidator cease to be the external administrator of a company — Liquidator resigns and new liquidators appointed shortly after commencement of the proceeding and principal relief rendered nugatory — Application by plaintiff against former liquidator for costs of the application on an indemnity basis despite no hearing on the merits — Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 — Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 applied — Finding that plaintiff was justified in bringing the application and that liquidator’s conduct warranted an order for indemnity costs in favour of the plaintiff.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr T M Dowling | Robinson Gill |
| For the Defendant | Mr P Wu, solicitor | Hiways Lawyers |
HIS HONOUR:
The plaintiff, Ms Min Ren, makes an application pursuant to s 90-20 of the Insolvency Practice Schedule (Corporations)[1] (‘IPS’) for an order that the second defendant, Mr Peter Goodin, cease to be liquidator of the first defendant, Good Home & Property Pty Ltd (‘Company’) and that Mr Ned Talic be appointed as liquidator in his stead. The plaintiff also seeks orders that Mr Goodin pay, and be personally liable for, her costs associated with this application on an indemnity basis and that he not be entitled to reimbursement in relation to those costs by the Company or its creditors. Finally, an order was sought that Mr Goodin not be entitled to remuneration as liquidator of the Company.
[1]Corporations Act 2001 (Cth) sch 2.
The plaintiff filed several affidavits in support of her application. These are the affidavits of her solicitor, Chenzi Dong, affirmed on 14 September 2021, 13 October 2021, 14 October 2021, and 12 November 2021, together with an affidavit of service of Stephen Freer affirmed on 30 September 2021.
Mr Goodin filed two affidavits, respectively affirmed on 15 November 2021 and 25 November 2021.
The need to consider the principal relief sought in the application, namely the replacement of Mr Goodin as liquidator, became nugatory shortly after the commencement of the proceeding by reason of Mr Goodin’s resignation from the position. There remains for determination the question of costs and so orders were made for the filing of further evidence and submissions by the parties confined to that question. In the ‘Other Matters’ segment of the order the Court invited the parties to make submissions on the question as to whether costs against the second defendant should be made on an indemnity basis. I ordered that the matter be determined on the papers.
The plaintiff seeks an order for her costs on an indemnity basis, while Mr Goodin contends there should be no order as to costs. Despite the balance of the proceeding being confined to the issue of costs, it is necessary, in my view, to nonetheless survey the evidence filed by the parties for the purpose of determining that question.
The Plaintiff’s Evidence
In her affidavit of 14 September 2021, Ms Dong, the plaintiff’s solicitor, states that on 22 February 2021, her client obtained a judgment for $98,566 against the Company in the Magistrates’ Court of Victoria. On 9 April 2021, her former solicitors served a statutory demand on the Company demanding payment of the judgment debt. There was no compliance with the demand.
On 11 June 2021, the plaintiff obtained a garnishee order in respect of the judgment debt for the sum of $102,285 together with the interest, which had subsequently accrued. The garnishee was Hiways Australia Pty Ltd trading as Hiways Lawyers, the Company’s (as well as Mr Goodin’s) solicitors. Hiways Lawyers held $159,024.12 on trust for the Company in a proceeding in this Court. The trust funds were the subject of a freezing order made by Delany J on 15 April 2021, save that the freezing order did not prohibit the Company from paying the judgment debt.
On 16 June 2021, another firm of solicitors acting on behalf of the plaintiff, AJH Lawyers, served the garnishee order on Hiways Australia Pty Ltd. The garnishee order had not been satisfied as at the date this application was made.
Ms Dong states that on 24 August 2021, she conducted an Australian Securities & Investments Commission (‘ASIC’) search of the Company which recorded that:
(a) on 10 June 2021, Mr Goodin was appointed as the sole director of the Company and remained in that position as at the date of the search;
(b) on 29 June 2021, Mr Goodin signed a declaration of solvency which acknowledged that the company owed a total $102,285.17 to unsecured creditors, an amount equal to the judgment debt plus interest and costs under the garnishee order; and
(c) on 30 June 2021, it was resolved at a meeting of members of the Company with Mr Goodin voting as proxy of the deceased estate of the 100% shareholder of the Company, Mr Jun Chen (‘Estate’) that the Company be wound up voluntarily and Mr Goodin be appointed as liquidator. Documents noting the appointment of Mr Goodin were lodged with ASIC that day.
Ms Dong states that as a creditor of the Company, the plaintiff did not receive any notice of meeting or correspondence from Mr Goodin following the winding up resolution of 30 June 2021. No notice was published on the ASIC website.
On 24 August 2021, Ms Dong wrote to Mr Goodin on behalf of the plaintiff, requesting information from him. Mr Goodin did not respond.
On 31 August 2021, Ms Dong again wrote to Mr Goodin on behalf of the plaintiff, requesting that a meeting of creditors be held to consider a resolution for his removal as liquidator and the appointment of Mr Talic in his place. A proof of debt from the plaintiff and a consent to act as liquidator signed by Mr Talic were enclosed in that correspondence.
Ms Dong states that on 1 September 2021, she telephoned Magnetic Insolvency, an insolvency practitioners firm with which Mr Goodin is associated, asking to speak with him. A person identifying himself as Mr Goodin answered the telephone and after introducing herself, Ms Dong enquired whether Mr Goodin had received letters from Robinson Gill (the plaintiff’s solicitors) on the plaintiff’s behalf, dated 24 and 31 August 2021. Mr Goodin responded he had and told her she should not be contacting him. He then said words to the effect that he had been replaced by Mr Matthew Sweeny of Lowe Lippmann ‘a while ago’ and ended the conversation. Ms Dong then telephoned Mr Sweeny’s accounting firm, Lowe Lippmann, and left a message for Mr Sweeny to return her call.
On 2 September 2021, Mr Sweeny returned Ms Dong’s telephone call. He stated he had been approached by Mr Goodin in early July 2021 and that he indicated to him he would consent to act as liquidator of the Company but had not heard from Mr Goodin since that time. Mr Sweeny confirmed his understanding that the replacement of a liquidator requires the passing a resolution, but that this had not occurred.
On 2 September 2021, Ms Dong wrote to Mr Goodin by email to advise him of the conversation she had with Mr Sweeny. She confirmed her understanding that Mr Goodin was still the Company’s liquidator and that she required him to respond to her client’s requests set out in her letters of 24 and 31 August 2021. The email read as follows:
Dear Mr Goodin,
We refer to our phone conversation yesterday during which you advised that Mr Matthew Sweeney [sic] from Lowe Lippmann has been appointed as liquidator of the Company and that you have retired.
This apparently is not true.
We spoke to Mr Sweeney [sic] today and understand that whilst he provided a consent to act at your request on 5 July 2021, he has heard nothing further from you and accordingly has not been appointed as the liquidator of the company.
In light of the above circumstances and the current ASIC records, you are still the liquidator of the Company and must respond to the creditor’s request. Given that our client has proposed an alternative liquidator and you have confirmed that you will retire, we suggest that you call the creditors’ meeting as soon as practicable in order to pass the proposed resolution as set out in our letter of 31 August 2021.
Please provide us with your response by close of business on 8 September 2021, failing which we will be obliged to commence the foreshadowed proceedings as well as reporting the matter to ASIC.
We await your urgent response.
There was no response to that email by Mr Goodin.
Ms Dong concludes her first affidavit by stating that the plaintiff has incurred costs as a result of Mr Goodin’s failure to conduct the liquidation of the Company, to pay the plaintiff’s judgment debt, and to respond to the creditor’s request for a meeting of creditors to appoint a new liquidator. She states that had Mr Goodin engaged with the plaintiff the need to bring this proceeding and the costs associated with it could have been avoided.
In her affidavit of 13 October 2021, Ms Dong states that on 15 September 2021, she emailed a sealed copy of the originating process and her supporting affidavit (‘Application Documents’) to Mr Goodin and requested his confirmation that he would accept service by email. There was an automatic read receipt generated by Microsoft Outlook, indicating that the email was read by Mr Goodin on the same day, but he did not respond to it.
On 16 September 2021, Ms Dong instructed a process server to effect personal service of the Application Documents on Mr Goodin. In his affidavit affirmed on 30 September 2021, Mr Stephen Freer deposes the Application Documents were served on Mr Goodin on 28 September 2021.
On 18 September 2021, Ms Dong received an email from Mr Goodin in response to her email of 15 September 2021 which attached the Application Documents. In that email, Mr Goodin advised he was no longer the liquidator of the Company and that he had forwarded the Application Documents to the newly appointed liquidators, Mr Sweeny and Mr Gideon Rathner of the firm of Lowe Lippmann.
Ms Dong conducted another ASIC search of the Company on 20 September 2021, which recorded that:
(a) on 15 September 2021, Mr Goodin ceased to be the liquidator of the Company. The relevant notice was filed with ASIC on 18 September 2021; and
(b) on the same date, Messrs Sweeny and Rathner were appointed liquidators, jointly and severally. The notice to ASIC of that appointment was filed on 17 September 2021.
Ms Dong states the performance of the steps required to replace Mr Goodin as liquidator were therefore only taken after the proceeding was issued by the plaintiff.
Instructions were sought from the plaintiff to make an offer to Mr Goodin to dismiss the proceeding on the basis that he pay the plaintiff’s costs associated with the originating process on a standard basis.
On 20 September 2021, Ms Dong wrote an open letter to Mr Goodin, in which the plaintiff offered to resolve the proceeding on the basis that he pay a fixed sum of $9,700 within 30 days and the parties file consent orders to dismiss the proceeding with no order as to costs. In that letter, Ms Dong elaborated that the fixed sum was comprised of:
(a) Professional fees calculated on the standard basis, in the sum of $4,000;
(b) Counsel’s fees of $3,500; and
(c) Filing fee of $2,200.
The offer was expressed as being made in accordance with the principles in Calderbank v Calderbank (‘Calderbank offer’)[2] and remained open for acceptance until 27 September 2021.
[2](1975) 3 All ER 333.
On the same day, on 20 September 2021, Ms Dong wrote to the newly appointed liquidators, seeking their consent to the proposed orders on the terms set out in the Calderbank offer to Mr Goodin. Mr Sweeny replied via email confirming that the liquidators consented to the proposed orders.
The Calderbank offer contained within the letter to Mr Goodin of 20 September 2021 lapsed on 27 September 2021 without being accepted by Mr Goodin.
On 29 September 2021, Ms Dong received confirmation from the process server, Mr Freer, that the Application Documents were served on Mr Goodin personally on 28 September 2021.
On 8 October 2021, Ms Dong forwarded the hearing notice from the Commercial Court Registry to Mr Goodin, advising that the directions hearing for the matter was listed on Friday 15 October 2021 and that the plaintiff’s solicitors would proceed with the foreshadowed application for costs as outlined in the Calderbank offer.
On the same day, Mr Goodin replied by email, emphasising he was not the liquidator of the Company and referred Ms Dong to the newly appointed liquidators, Mr Sweeny and Mr Rathner.
Ms Dong states the plaintiff commenced the proceeding as a result of Mr Goodin’s failure to respond to requests to take necessary steps in the Company’s liquidation since his appointment on 30 June 2021. She states the plaintiff has incurred legal costs of $14,955.25 up to the Calderbank offer of 20 September 2021 and is estimated to incur a total of $21,555.25 in legal fees up to the hearing on 15 October 2021, including counsel’s fees and disbursements.
In her third affidavit of 14 October 2021, Ms Dong deposes that, in applying the scale of costs set out in Appendix A of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’), the plaintiff’s costs of and incidental to the proceeding up until the date of the hearing listed on 15 October 2021 were $20,598.89. Those costs included professional fees and disbursements that had been, or would be, incurred by 15 October 2021.
In her fourth affidavit of 12 November 2021, Ms Dong states that at the hearing on 15 October 2021, Mr Goodin was ordered to file and serve submissions and affidavit materials by 4:00pm on 5 November 2021, and her client was ordered to file and serve any material in reply by 4:00pm on 12 November 2021. She states that Mr Goodin breached the orders by failing to file and serve any material by the date stipulated.
Ms Dong states that on 9 November 2021, she received an email from Mr Payne Wu of Hiways Lawyers, solicitors for Mr Goodin, seeking the plaintiff’s consent to extend the date by which Mr Goodin was to file and serve materials from 5 November 2021 to 19 November 2021. The reasons for the request for the extension were described in the email as being ‘due to the continuance of lockdown and the dealing with related matters (Shan v Chen and Ors), we have not finalised the required documents’.
Ms Dong obtained instructions from the plaintiff that day to oppose the extension request sought by Mr Goodin and replied to Mr Wu via email, relaying her instructions in that regard. She stated the reasons for that refusal were because Mr Goodin had already been given a lengthy period to file supporting materials, as requested by his solicitors at the hearing of 15 October 2021, and he had a history of failing to engage with his obligations in this proceeding. Ms Dong deposes that as of 12 November 2021, her office was yet to be served with any submissions or affidavit material from Mr Goodin.
Mr Goodin’s Evidence
As noted, Mr Goodin did not adhere to the timetable stipulated for the provision of his evidence and submissions, although such materials were ultimately filed. I determined it was appropriate to allow the reception of such further materials in order that the matter could be progressed.
In his affidavit of 15 November 2021, Mr Goodin states the shareholding in the Company was owned solely by Jun Chen. Mr Chen died on 24 January 2018 and the Company was subsequently controlled by the administrator of his Estate (‘Estate’s Administrator’).
Although the Company’s ASIC extract makes no reference to it,[3] Mr Goodin states that on 28 July 2019, the Company was deregistered by reason of a failure to pay ASIC annual review fees. Mr Goodin states that on 10 June 2020, after the reinstatement of its registration, he was appointed as a ‘caretaker director’ of the Company. Mr Goodin states that after the Company’s reinstatement, he was instructed by the Estate’s Administrator to remain as the director of the Company because the Company was involved in litigation in a number of Australian jurisdictions. These proceedings were as follows:
[3]The ASIC extract records that ‘[s]trike off action was in progress’ from 21 May 2020 to 9 June 2020, but there is no entry recording any period when the Company was deregistered. However, the Document List segment in the extract records that a Court order to restore the Company to the register was processed on 4 May 2020.
(i) Magistrates’ Court proceedings in Victoria — L11202059 (‘Magistrates’ Court proceedings’);
(ii) County Court proceedings in Victoria — CI-20-02201 (‘County Court proceedings’);
(iii) Supreme Court proceedings in Victoria — S ECI 2020 01612 (‘Victorian Supreme Court proceedings’); and
(iv) Supreme Court proceedings in New South Wales — 2020/259250 (‘New South Wales Supreme Court proceedings’).
(collectively, ‘Proceedings’)
Mr Goodin states that as the caretaker director of the Company, he received instructions from the Estate’s Administrator on all matters relating to the Company, including the Proceedings to which reference has been made and where applicable the finances of the Company.
Mr Goodin confirms that on 18 February 2021, the plaintiff in this application obtained an order in the Magistrates’ Court proceedings against the Company for $98,566. Mr Goodin describes this as ‘the February order’. He states the amount owed under the February order has not been paid because all the Company’s funds are held in the trust account of the Company’s solicitors, Hiways Lawyers, and are subject to an undertaking given in the New South Wales Supreme Court proceedings on 15 June 2019 (‘Undertaking’). Pursuant to that Undertaking, Hiways Lawyers is prevented from transferring any of those funds out of its trust account without the written consent of the Company and the plaintiff in the New South Wales Supreme Court proceedings, Shabo Zhang, or by order of that Court.
Mr Goodin states he believes that the plaintiff is aware of the Undertaking because it has been discussed in open court in the Victorian Supreme Court proceedings, to which the plaintiff is a party, and she was represented in Court when it was discussed. In those proceedings, the deceased estate of Jun Chen was the first defendant and was sued by an individual. The plaintiff in this proceeding was joined to the Victorian Supreme Court proceedings by way of a third party notice issued by the Estate. Mr Goodin states that in the course of submissions to the Court on 21 June 2021 before Delany J, his Honour referred to the Undertaking. The Estate’s counsel, Mr Rubenstein, responded to his Honour’s enquiries regarding it, stating that the $159,000.00 held in the trust account of Hiways Lawyers on behalf of the Company was frozen pursuant to the arrangement with the New South Wales purchaser or as a result of that litigation and so, the funds were not potentially available to creditors.
Mr Goodin states that on or about 29 June 2021, he was instructed by the Estate’s Administrator to wind up the Company as it was anticipated that the Company would no longer be able to sustain itself in the light of the order in the Magistrates’ Court proceedings in favour of the plaintiff in this proceeding, the New South Wales Supreme Court proceedings and the legal costs that were anticipated to escalate if those proceedings continued. Mr Goodin states it was his understanding that, during what he describes as his tenure as caretaker director of the Company, the Company had always been solvent.
Mr Goodin states he was appointed as liquidator of the Company on 30 June 2021, but that on or about 1 July 2021, he was instructed by the Estate’s Administrator to resign by reason of issues that had arisen in the Victorian Supreme Court proceedings. The plaintiff had complained to the Court in the Victorian Supreme Court proceedings that the Company was put into voluntary liquidation and that the Company had not paid the judgment debt in her favour under the February order. Mr Goodin was instructed the Estate’s Administrator wanted to avoid any unnecessary issues that may be raised by the plaintiff, Ms Ren, in the Victorian Supreme Court proceedings and so, the Estate’s Administrator instructed him to resign as liquidator. Mr Goodin states he is informed by Mr Wu of Hiways Lawyers, who are also the Estate’s legal representatives, and believes that the Magistrates’ Court order made in favour of the plaintiff was not related to the Victorian Supreme Court proceedings.
On 2 July 2021, in an email that was copied to the plaintiff’s solicitors, Mr Chong of Hiways Lawyers, the solicitors for the Estate and Mr Goodin, advised that an alternative liquidator was to be appointed for the Company. Mr Chong also noted Hiways Lawyers were not presently receiving instructions from the Company.
Mr Goodin states that between 2 and 4 July 2021, he was in contact with Lowe Lippmann for the purpose of handing over conduct of the voluntary winding up of the Company.
On 5 July 2021, he received a letter from Lowe Lippmann in relation to his replacement as liquidator which enclosed for signature several documents, including a consent to act as voluntary liquidators in respect of the appointment of Mr Rathner and Mr Sweeny as joint and several liquidators, a consent to the convening of a members’ meeting on short notice, a form of members’ resolution to replace the liquidator, and a Remuneration Approval Report. He describes these documents as the ‘Appointment Documents’ and I will adopt that description in these reasons.
Mr Goodin states that on 5 July 2021, he wrote to Mr Wu of Hiways Lawyers, his solicitors in this proceeding and for the Estate, noting that Mr Sweeny of Lowe Lippmann was to assume conduct of the liquidation and that he, Mr Goodin, would resign as liquidator. He enclosed a copy of the Appointment Documents for execution by Mr Wu’s Estate’s Administrator client.
On 7 July 2021, Mr Goodin was provided with signed copies of the Appointment Documents by email from Mr Wu. Some of the details, such as the date of resignation, had been left blank and it was Mr Goodin’s understanding from the instructions that he had been given by the Estate’s Administrator that these details would be filled in once the new liquidators had confirmed what date they would assume control of the administration.
Mr Goodin states that on 12 July 2021, he left Victoria and went on five weeks’ leave in the Northern Territory. He returned on 14 August 2021. He says that before going on leave, he sent an email to Mr Sweeny, which (he thought) attached the Application Documents.
Mr Goodin states that in the course of preparing his affidavit of 15 November 2021, he realised there were in fact no attachments in that email to Mr Sweeny. He says that until 12 November 2021, he believed the signed Appointment Documents were attached to his email to Mr Sweeny of 12 July 2021.
Mr Goodin states he also arranged for all correspondence directed to the Company to be delivered to the new liquidators by adopting a practice of forwarding all emails and hard copy correspondence to Lowe Lippmann. He states he attended to this himself when he was in Melbourne and whilst he was absent in the Northern Territory, he had limited reception in the areas that he travelled and he attended to matters when he was able to. Mr Goodin believes that any correspondence or documents received electronically or in hard copy in respect of the Company were forwarded or directed to Lowe Lippmann.
Mr Goodin states he received the letter of 24 August 2021 from the plaintiff’s solicitors, Robinson Gill and forwarded it without considering its contents to Lowe Lippmann. He adopted the same course in respect of their subsequent letter to him of 31 August 2021.
Mr Goodin states that on 1 September 2021, he received a telephone call from the plaintiff’s solicitor, Ms Dong. He states he explained to Ms Dong that he was no longer the liquidator of the Company as Mr Sweeny of Lowe Lippmann had been appointed. Mr Goodin states he said to Ms Dong words to the effect that she should contact Mr Sweeny as he would be the appropriate person to deal with matters that related to the Company.
Mr Goodin states because he had informed Ms Dong during the telephone conversation of 1 September 2021 that Lowe Lippmann had been appointed as the new liquidators of the Company, he considered her queries relating to the creditor’s request for a meeting to appoint a new liquidator had been answered by him.
On the same day, on 1 September 2021, Mr Goodin states he emailed Mr Sweeny with queries relating to the transfer of conduct of the liquidation. In response, Mr Sweeny informed Mr Goodin that he had never received the Appointment Documents. Mr Goodin states he believed, at the time, that his email to Mr Sweeny on 12 July 2021 with the Appointment Documents had either gone into Mr Sweeny’s junk mail or there were unexplained technical difficulties with the email network. Mr Goodin states that in an email dated 3 September 2021 he asked Mr Sweeny to check his junk mail. Mr Sweeny responded on 4 September 2021, indicating he would have Lowe Lippmann’s IT section investigate it.
On or about 4 September 2021, Mr Goodin states he arranged with the Estate’s Administrator, via Mr Wu of Hiways Lawyers, to obtain a fresh set of documents appointing the new liquidators signed because the Appointment Documents of 7 July 2021 had expired. The Estate’s Administrator signed a fresh set of Appointment Documents on 15 September 2021. Mr Goodin states that once he received those documents, he lodged them immediately.
Mr Goodin states that an ASIC extract for the Company obtained on 18 September 2021 records that he had ceased to be the liquidator of the Company. The extract notes the actual cease date as being 15 September 2021.
Mr Goodin states he forwarded all correspondence about the Company to Lowe Lippmann and did so without considering their contents, including the Robinson Gill emails of 15 September 2021 and the documents served upon him on 28 September 2021. Mr Goodin understands Ms Dong received an automatic notification that her email of 15 September 2021 had been ‘read’, but Mr Goodin states he only opened the email to forward it to Lowe Lippmann. He stated to Ms Dong by email on 18 September 2021 that he had forwarded the email to Mr Sweeny and his co-appointee, Mr Rathner.
Mr Goodin deposes that his resignation as liquidator was not in response to the plaintiff commencing these proceedings, but rather, arose by reason of the instructions of the Estate on 1 July 2021. He informed Ms Dong by an email of 20 September 2021, in reply to her letter of the same date, that ‘[he] had gone on leave in early July and all the necessary documents for the change of liquidator had been prepared before [he] left and had recently been corrected’.[4] He made no further response to the letter of 20 September 2021 and forwarded it to Lowe Lippmann.
[4]Affidavit of Peter Goodin affirmed on 15 November 2021, [28].
Mr Goodin states despite his telephone call with Ms Dong on 1 September 2021 advising her that Mr Sweeny was appointed as liquidator of the Company, the plaintiff has nonetheless chosen to commence and continue with this proceeding. He states that while it has emerged his resignation in July 2021 was not effected (as he had thought) and not formalised until September 2021, he contends these are matters that ‘could have been sorted out without commencing proceedings’. He concludes his affidavit by stating that on 22 October 2021, the plaintiff in the New South Wales Supreme Court proceedings obtained judgment against the Company for $156,000.
Mr Goodin’s Further Affidavit of 25 November 2021
In this affidavit, Mr Goodin refers to his earlier affidavit, in which he had stated his belief that he had sent the signed Appointment Documents replacing him as liquidator of the Company on 12 July 2021 to Mr Sweeny and thereafter, had adopted the practice of forwarding all communications in respect of the Company to the new liquidator. Mr Goodin takes issue with the suggestion that his evidence in these matters should be given ‘little weight’ and that his evidence has been ‘selective’.
In reference to the redactions of emails in the earlier affidavit, Mr Goodin states the redactions were for the reasons of relevance or to remove privileged communications with his lawyers. He exhibits these emails in unredacted form to his second affidavit. It is appropriate to outline the communications uninterrupted by the redactions.
On 5 July 2021, Mr Goodin emailed Payne Wu, his solicitor, stating that after discussions with a barrister, Abraham Chong, he had arranged for Mr Sweeny to take over the Company’s liquidation and he would resign when that was done. Mr Goodin asked Mr Chong for these documents to be signed.
On 7 July 2021, Mr Wu wrote back to Mr Goodin, attaching the documents signed by the necessary party.
On 12 July 2021, Mr Wu wrote to Mr Goodin noting the plaintiff in the New South Wales proceedings was seeking to contact Mr Goodin in relation to their matter and Mr Goodin was asked about the progress of changing the liquidator.
On 12 July 2021, Mr Goodin wrote to Mr Sweeny stating the documents had been signed and asked what date he should resign. In response, Mr Sweeny stated all documents could be dated that day. Once all the documents were signed, he asked Mr Goodin to send them to Lowe Lippmann and they would attend to the requisite notifications.
On 24 August 2021, Ms Dong emailed Mr Goodin attaching a letter in which Ms Dong, after making observations in respect of the plaintiff’s judgment and Mr Goodin’s subsequent appointment as liquidator of the Company, complained that the plaintiff had received no correspondence or report from Mr Goodin. Ms Dong also enquired as to the sum of $159,024 held in trust on behalf of the Company and whether there was an intention to pay the plaintiff’s judgment debt out of those funds. The letter asked for a response by close of business on 27 August 2021.
The next email exhibited is from Ms Dong to Mr Goodin of 31 August 2021. That letter states the plaintiff proposes to remove and replace Mr Goodin by a resolution of creditors and requests that a creditor’s meeting be convened by Mr Goodin as soon as practicable. The letter encloses a proof of debt by the plaintiff, a copy of a Magistrates’ Court order and a consent to act as liquidator signed by Mr Talic.
On 1 September 2021, Mr Goodin wrote to Mr Sweeny, enquiring as to what had happened with the dates for the changeover to which Mr Sweeny responded he had never received the documents or a response to the attached email. Shortly afterwards, on the same evening, Mr Goodin responded to Mr Sweeny, stating ‘I’ll have to see what documents were done as I saw something before I headed off on leave 7 weeks ago’.[5]
[5]Exhibit ‘PAG-3’ to the Affidavit of Peter Goodin affirmed on 25 November 2021.
On 4 September 2021, Mr Sweeny wrote to Mr Goodin, stating:
I’ll have IT look into the emails of the 12th but not in my spam/junk folder. Is there any benefit appointing us if the only creditor has their nominated liquidator?’[6]
[6]Exhibit ‘PAG-2’ to the Affidavit of Peter Goodin affirmed on 25 November 2021.
In response, Mr Goodin stated:
I think a change in appointee will make the creditor happy. Perception because I was the director. Given there’s still 159K in the bank, it should be worth your while & you should be able to retain it.[7]
[7]Ibid.
Mr Goodin refers to the email from Mr Sweeny of 1 September 2021, which was previously exhibited, and which refers to ‘the attached email’. He exhibits a copy of the email from Mr Sweeny of 1 September 2021 and its attachment. Mr Goodin describes the attachment as an email of 12 July 2021 from Mr Sweeny stating that Mr Sweeny did not receive the signed Appointment Documents. Mr Goodin states he saw the email from Mr Sweeny of 12 July 2021 for the first time in preparing his second affidavit and believes he did not see the email until then because at the time this email was sent, he had shut his computer down and subsequently travelled to the Northern Territory, to an area with poor reception.
Mr Goodin concludes by stating he receives a great number of emails.
The Parties’ Submissions
Each party filed submissions. The plaintiff filed submissions in reply, to which Mr Goodin delivered further submissions in response.
The Plaintiff’s Submissions
In the plaintiff’s initial submissions, she identified what were considered to be the salient features of the chronology. The prominent matters appear to be as follows:
(a) the plaintiff is a majority, and likely the sole, creditor of the company by reason of the judgment debt obtained in her favour in the Magistrates’ Court in February 2021;
(b) on 30 June 2021, Mr Goodin resolved, by exercising a proxy in his favour given by the 100% shareholder, to wind up the Company voluntarily and consented to his own appointment as liquidator;
(c) in the months of August and September 2021, the plaintiff, as a creditor of the Company, sought from Mr Goodin through her solicitors information about the voluntary winding up and, after no response was forthcoming, called for a meeting to replace Mr Goodin as the liquidator of the Company. Despite such proceedings being foreshadowed, Mr Goodin did not engage with the plaintiff;
(d) on 14 September 2021, the plaintiff issued these proceedings seeking to remove Mr Goodin as liquidator of the company pursuant to s 90-15 of the IPS. The Court documents were sent to Mr Goodin via email on the morning on 15 September 2021 and subsequently served on him personally via a process server on 28 September 2021; and
(e) on 18 September 2021, the plaintiff’s solicitor received notice from Mr Goodin that he was no longer the Company’s liquidator. The ASIC extracts reveal that this occurred on 15 September 2021, that is the day the Court documents were sent to Mr Goodin. The relevant notice was filed with ASIC on 18 September 2021. Notice of the appointment of the new liquidators was filed by them with ASIC on 17 September 2021.
As new liquidators were appointed to the Company, the substantive relief sought from the Court in this proceeding, namely removing Mr Goodin as liquidator, was no longer necessary. On 20 September 2021, the plaintiff’s solicitor wrote to Mr Goodin, seeking agreement that the proceeding be dismissed on the basis that Mr Goodin agree to pay the plaintiff’s costs and an offer was made in that regard in the correspondence. There was no response from Mr Goodin.
The submissions seek orders that Mr Goodin pay the plaintiff’s costs on an indemnity basis and that the proceeding be otherwise dismissed. As has been mentioned, the new liquidators of the Company consent to the making of orders in that form.
The plaintiff submitted that the Court has a wide and unfettered discretion to make orders in respect of costs. In addition, in corporations matters of this nature, in addition to the general discretion to make any order the Court thinks fit under s 90-15 of the IPS, the making of an order in relation to costs is specifically provided for in s 90-15(3), including that an external administrator be personally liable for those costs.
It is submitted that relevant to the making of an order under s 90-15, as provided in s 90-15(4), is Mr Goodin’s failure to perform his duties as liquidator of the Company, which are specified by the plaintiff as follows:
(a) failing to provide relevant information to the plaintiff in response to her request as a creditor (s 70-45 of the IPS);
(b) failing to call a meeting of creditors at the creditor’s direction/request (s 75-15(1) of the IPS); and
(c) failing generally to respond to communications from the plaintiff in the course of his position as liquidator of the Company and thereby causing the plaintiff to incur the cost of issuing the proceeding.
The submissions conclude with the observation that Mr Goodin was the Company’s sole director and knowingly involved in his own appointment as liquidator. It is contended he was given repeated opportunities to engage with the plaintiff, the Company’s only creditor, concerning the winding up and ultimately the plaintiff’s wish to remove him. It is said that his failure to cooperate or provide any meaningful information or to respond at all left the plaintiff with no option but to bring this proceeding. It is said that the new liquidators, having now been appointed, apparently as a direct result of the court documents having been served, Mr Goodin ought to be liable for the plaintiff’s costs.
Mr Goodin’s Submissions
In Mr Goodin’s written submissions of 15 November 2021, reference is made to various matters identified in s 90-15(4) of the IPS as being relevant to an order under s 90-15(1). It is said that in an application for the removal of a liquidator as relevant matters include ‘the need for confidence in the integrity, objectivity and impartiality in the winding up’.[8] The observation is made that when a proceeding is brought to an end without a determination on the merits, as is sought to be done here, it is ordinarily appropriate there be no order as to costs unless there are special circumstances. Relevant factors were said to include ‘the extent to which the plaintiff acted reasonably in commencing proceedings and whether the defendant acted reasonably defending them’.[9]
[8]Second Defendant’s Submissions on Costs dated 15 November 2021, [4].
[9]Ibid [5].
In late June 2021, by exercise of the proxy provided to Mr Goodin, the sole shareholder resolved that the Company be wound up and Mr Goodin be appointed as liquidator. The submissions observe that almost immediately after Mr Goodin’s appointment, it was determined that he be replaced as liquidator by reason of the issues raised by the plaintiff in the Victorian Supreme Court proceedings. The documents were executed, it is said, in due course, including a resolution signed on 7 July 2021, recording Mr Goodin’s resignation and the appointment of the new liquidators. Mr Goodin thought he had sent an email enclosing the signed Appointment Documents to the new liquidators on 12 July 2021, shortly before he left the State on leave for a five-week trip. He believed, at that time, he was no longer the appointed liquidator and adopted a practice of forwarding all communications to the new liquidators. The submissions observe that Mr Goodin was told by Mr Sweeny on 1 September 2021 that the email enclosing the signed documents effecting the resignation and appointment had not been received. Mr Goodin made arrangements for a fresh set of Appointment Documents, which were signed on 15 September 2021 and lodged immediately.
The submissions contend that the Court’s discretion on costs includes consideration of whether these proceedings should have ever been brought. It is submitted that in light of the plaintiff apparently accepting the new liquidators, that is rather than her own choice of liquidator, Mr Talic, the sole basis for her bringing the application was Mr Goodin’s asserted failure to ‘engage’ with the plaintiff and the presumed lack of independence arising from his directorship of the Company. It is said that the application for costs is further premised on the assertion that Mr Goodin resigned and was replaced as direct result of the proceeding.
Mr Goodin contends these proceedings are, and always have been, unnecessary. The plaintiff, through her lawyers, has been aware of the intention to change liquidators since 2 July 2021 and Mr Goodin advised the plaintiff’s lawyers he was no longer the liquidator on 1 September 2021. It is said that while it then emerged Mr Goodin was mistaken, it remains the case that it was the intention since July 2021 that Mr Goodin be replaced, and the situation was soon regularised. Mr Goodin submits that if the plaintiff had given ‘a little more time to allow Mr Goodin and the new liquidators to sort out the replacement’, she would not have incurred the expense of commencing these proceedings.[10] It is said there was ‘no cause to seek to replace a person who it was intended would be replaced and believed he had been replaced’.[11]
[10]Ibid [17].
[11]Ibid.
The submissions conclude with a contention that the Application Documents were served on Mr Goodin after the proceedings were rendered nugatory. In this regard, it is said that a ‘read’ receipt is not evidence of service and Mr Goodin deposes he forwarded all communications concerning the Company to the new liquidator. Mr Goodin communicated with the plaintiff only to state he was no longer the liquidator, a statement that was based on his reasonable belief. It is said that in these circumstances, there should be no order as to costs.
The Plaintiff’s Submissions in Reply
The plaintiff’s submissions in reply begin with a complaint of non-compliance by Mr Goodin with the orders made regarding filing and service of evidence and submissions that were made in respect of the issue as to costs. It was submitted that this failure on Mr Goodin’s part is a continuation of his dilatory conduct with respect to this matter.
The submissions then moved to a response to Mr Goodin’s submissions. It is submitted that Mr Goodin’s evidence exposes his own error in failing to provide the necessary Appointment Documents to the new liquidator, Mr Sweeny, in his 12 July 2021 email, before apparently going on leave. The redaction of Mr Sweeny’s response to that email, it is said, leads to the inference that those surrounding communications do not assist Mr Goodin’s submission and that ‘[l]ittle weight can be afforded to Mr Goodin’s evidence about these matters’.[12] The plaintiff observes that Mr Goodin returned from leave on 14 August 2021. However, it was only on 24 August 2021, following contact by the plaintiff’s solicitors enquiring about the liquidation of the Company that he was then notified by the plaintiff’s solicitor of Mr Sweeny’s view that Mr Goodin had not provided the Appointment Documents. The criticism is made that Mr Goodin’s evidence is silent as to why he did not act in response to Ms Dong’s email on 2 September 2021 referred to in paragraph 15 of these reasons. It is said that that omission is significant because it was at this critical point that the plaintiff considered she was left with no other option but to issue the previously foreshadowed proceeding.
[12]Plaintiff’s Reply Submissions on Costs dated 22 November 2021, [4].
It is submitted that Mr Goodin had been put on notice of the issue concerning his resignation, but he did not engage with the plaintiff, or at the time with Mr Sweeny, until he received this application on 15 September 2021. Mr Goodin does not dispute receiving the Application Documents by email at that time, despite his submission about formal service having been effected later.
The submissions direct attention to the series of emails that began with an enquiry by Mr Goodin as to what had happened with the transfer of the conduct of the liquidation. In response, Mr Sweeny stated he had never received the documents ‘or a response to the attached email’. The ‘attached email’, which preceded Mr Goodin’s enquiry of 1 September 2021, has been redacted in the exhibit. He is criticised for electing not to include the email in evidence and it is said that Mr Goodin’s evidence is selective and ought to be approached with caution.[13]
[13]In response to that criticism, after the delivery of the plaintiff’s submissions in reply, that email was later exhibited to Mr Goodin’s second affidavit in unredacted form.
The submissions then observe that despite Mr Goodin realising his error and the need to arrange Appointment Documents, and in the face of the unanswered email from Ms Dong of 2 September 2021, there was no communication with the plaintiff’s solicitor to correct the record or to provide any of the details that now appear in his affidavit. It is said that Mr Goodin’s submission that the proceedings were unnecessary because it was apparent to the plaintiff there was ‘an intention’ to replace the liquidator is speculative and should be rejected.
The plaintiff contends the substantive issue in the proceeding of Mr Goodin’s removal was not determined on the merits because Mr Goodin, after the proceeding was issued, did what he had failed to do previously by lodging the necessary documents, thereby removing himself as liquidator. It is said that a vastly different proposition to that was dealt with in the cases relied upon by Mr Goodin in support of his submissions for there to be no order as to costs.
In this case, the plaintiff brings this proceeding seeking specific orders for Mr Goodin to pay her costs and be liable for them personally under the jurisdiction of the IPS. It is submitted that this an order that may be justified per se and arises from the discretion prescribed in ss 90-15(1), 90-15(3)(d), and 90-15(5) of the IPS. It is said that two additional matters identified by Mr Goodin in his submissions are relevant to the making of an order under s 90-15(1), both of which are mentioned in s 90-15(4):
(a) whether an action or failure to act by the liquidator is in compliance with an order of the Court (s90-15(4)(c)); and
(b) whether the Company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator (s 90-15(4)(d)).
It is said that both matters come to bear on this application. The submissions conclude with a contention that costs should be ordered on an indemnity basis.
Mr Goodin’s Further Submissions on Costs
Mr Goodin sought leave to rely on further submissions (together with the further affidavit of Mr Goodin in reply affirmed on 25 November 2021), in response to certain parts of the submissions made on behalf of the plaintiff in reply on 22 November 2021. It is said that such leave should be granted because parts of the plaintiff’s submissions make serious suggestions about Mr Goodin’s credit and ought not to be received by the Court without a response. I determined that I should have regard to those submissions as the plaintiff’s application for indemnity costs involves the exercise of a discretion regarded as being exceptional.
The first matter that is sought to be addressed is the contention by the plaintiff that ‘little weight’ can be afforded to Mr Goodin’s evidence about his assumption that he had sent the signed Appointment Documents before he went on leave. It is said that it is unclear what is being suggested, but there is no reason not to accept Mr Goodin’s evidence. It is contended that Mr Goodin has been candid in stating he believed he had sent the Appointment Documents, but that unfortunately, there was no attachment to his email. The plaintiff’s reference to the redaction of the exhibit, to which reference has been made, provides no basis for the assertion that ‘little weight’ should be afforded to Mr Goodin’s evidence. It is said the redactions were for reasons of relevance and privilege, but in the interest of transparency, unredacted versions of the complete email chains were now provided in a further affidavit of Mr Goodin.
As to the plaintiff’s submission stating that it was plain Mr Goodin’s evidence is selective and ought to be approached with caution, Mr Goodin submits that this broad statement, seemingly directed at the entirety of Mr Goodin’s evidence, is supported solely by a statement from Mr Sweeny about having not received ‘a response to the attached email’. No requests had been made for that email to be located and it has now been exhibited to Mr Goodin’s second affidavit.
Legal Principles
Section 90–15 of the IPS provides:
(1)The Court may make such orders as it thinks fit in relation to the external administration of a company.
Orders on own initiative or an application
(2) The Court may exercise the power under subsection (1):
(a)on its own initiative, during proceedings before the Court; or
(b)on application under section 90-20.
Examples of orders that may be made
(3)Without limiting subsection (1), those orders may include any one or more of the following:
(a)an order determining any question arising in the external administration of the company;
(b)an order that a person cease to be the external administrator of the company;
(c)an order that another registered liquidator be appointed as the external administrator of the company;
(d) an order in relation to the costs of an action (including court action) taken by the external administrator of the company or another person in relation to the external administration of the company;
(e)an order in relation to any loss that the company has sustained because of a breach of duty by the external administrator;
(f)an order in relation to remuneration, including an order requiring a person to repay to a company, or the creditors of a company, remuneration paid to the person as external administrator of the company.
Section 90-15(4) and (5) of the IPS further provides:
Matters that may be taken into account
(4)Without limiting the matters which the Court may take into account when making orders, the Court may take into account:
(a)whether the liquidator has faithfully performed, or is faithfully performing, the liquidator's duties; and
(b)whether an action or failure to act by the liquidator is in compliance with this Act and the Insolvency Practice Rules; and
(c)whether an action or failure to act by the liquidator is in compliance with an order of the Court; and
(d)whether the company or any other person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the liquidator; and
(e)the seriousness of the consequences of any action or failure to act by the liquidator, including the effect of that action or failure to act on public confidence in registered liquidators as a group.
Costs orders
(5)Without limiting subsection (1), an order mentioned in paragraph (3)(d) in relation to the costs of an action may include an order that:
(a)the external administrator or another person is personally liable for some or all of those costs; and
(b)the external administrator or another person is not entitled to be reimbursed by the company or its creditors in relation to some or all of those costs.
The principal relief was sought by the plaintiff in her capacity as creditor of the Company and she sought an order of the type described in s 90-15(3)(b) of the IPS. The order that the plaintiff seeks for costs is contemplated by s 90-15(5). The order in respect of entitlement to remuneration is contemplated by s 90-15(3)(f) of the IPS.
In my view, s 90-15 of the IPS contains clear power to deal with the question of costs associated with the application. The plaintiff is ‘another person’ within the meaning of s 90-15(3)(d), who is contemplated to be entitled to an order in relation to the costs of the application. Similarly, the plaintiff is entitled to make application in respect of Mr Goodin’s entitlement to remuneration for acting as liquidator of the Company under s 90-15(3)(f). Section 90-15(5) contemplates an order that Mr Goodin be personally liable for the costs of the application and that he not be entitled to reimbursement by the Company or its creditors in relation to those costs.
In addition, the Court has a wide and unfettered discretion to make orders in respect of costs under s 24(1) of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’), which provides:
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
Of course, the wide general discretion and power given to the Court by Supreme Court Act the must be exercised judicially, taking into account all relevant matters and making a decision that is fair and just to the parties. Courts have laid down certain principles to guide them in the exercise of that discretion in cases such as the present, where there has been no hearing on the merits, where events have occurred after the issue of the originating process and where the parties compromise on the issues but cannot agree on the costs. However, these are merely guidelines and do not fetter the Court’s discretion.[14]
[14]Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214, [42] (‘Champagne View’).
In his submissions, Mr Goodin had contended that because there was no ultimate hearing on the principal relief sought in the proceeding, notably he cease to be liquidator of the Company, the Court is not in any position to properly assess the position as to costs and so, there should be no order as to costs.
In Australian Securities Commission v Aust-Home Investments Ltd (‘Aust-Home’),[15] Hill J set out the following propositions:
(1)Where neither party desires to proceed with litigation the Court should be ready to facilitate the conclusion of the proceedings by making a cost order …
(2)It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a Court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3)In determining the question of costs it would be appropriate, however, for the Court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them …
(4)In a particular case it might be appropriate for the Court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation …[16]
[15](1993) 44 FCR 194, 530.
[16]Ibid (emphases added).
In Gribbles Pathology Pty Ltd v Health Insurance Commission (‘Gribbles’),[17] Finkelstein J, after a discussion concerning Hill J’s propositions in Aust-Home, stated:
For my own part I should wish to emphasise that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in exceptional circumstances. To do otherwise would require some prediction of the outcome of the case. It seems to me that the third proposition stated by Hill J was intended to cover the situation where the court was in fact able to form a clear view about the merits of the case without a trial. So, if a claim is patently hopeless that would be a good reason to make an order for costs against the claimant. Likewise if a defence was bound to fail that would be a good reason for awarding costs in favour of the claimant.[18]
[17](1997) 80 FCR 284, 287.
[18]Ibid.
In Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd,[19] Gillard J observed the following, in relation to the observations of Finkelstein J in Gribbles:
I would not go as far as his Honour has, in stating that any other order other than each party bear its own costs can only be made ‘in special circumstances’. Each case must depend upon its own circumstances. As a general proposition if there is no other material before the court other than the pleadings then it would be extremely difficult to make any order other than each party bear its own costs.
However, there may be circumstances which justify an order being made in favour of a party.
Even where there are only pleadings before the court, evidence may be adduced which establishes with some degree of certainty the likely outcome of the trial. Of course the evidence must be confined and not venture into areas of disputed fact. But the circumstances may be such that in a brief and succinct way a court can draw a conclusion as to the likely outcome.[20]
[19]Champagne View (n 14) [47]–[49].
[20]Ibid.
The seminal decision of the High Court in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin[21] (‘Lai Qin’) has, in my view, particular application to the circumstances here. Lai Quin concerned the costs of an application to appeal a decision of the Minister of Immigration and Ethnic Affairs and Refugee Review Tribunal to refuse the applicant’s protection visa. The Minister was aware of the applicant’s intention to appeal the decision and on 11 January 1996, the Minister received a recommendation to ‘consider whether to grant a protection visa’ by exercising his discretion. On 15 January 1996, the applicants commenced proceedings in the High Court, unaware that the Minister was considering the exercise of his discretion. On 22 January 1996, the Minister exercised his discretion and as a result, the High Court proceeding became unnecessary.
[21](1997) 186 CLR 622 (‘Lai Qin’).
In the course of his Honour’s reasoning in Lai Qin, McHugh J stated:
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties … In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted so unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation.
…
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried … But such cases are likely to be rare.[22]
[22]Ibid 624–5 (emphasis added).
Consideration
I consider that the evidence that is before me enables me to proceed to make a determination in respect of the issue of costs despite the hearing not proceeding to a trial on the merits. The affidavits of Ms Dong comprehensively detail the relevant factual background to enable that task to be performed and Mr Goodin has been given the opportunity to respond to that evidence and make submissions. The chronology leading up to and after the issue of the proceeding is essentially uncontroversial and it is evidenced, for the main part, by email correspondence. In my view, the evidence enables me to determine whether the plaintiff acted reasonably in commencing the proceeding by reason of Mr Goodin’s conduct prior to its commencement.
I observe at the outset that the appointment by Mr Goodin, the sole director of the Company, of himself as liquidator of the Company gives rise to an obvious conflict. This conflict quickly became apparent to the Estate’s Administrator and her solicitor very shortly after Mr Goodin’s appointment. I also note that as director, Mr Goodin signed a declaration of solvency as part of the documentation bringing about the winding up, which noted the creditor’s judgment. There is no evidence as to what resources the Company had to pay that judgment debt, but I note it is said by Mr Goodin that the need to place the Company into liquidation came about because the Company would no longer be able to sustain itself in the light of the judgment in the Magistrates’ Court proceeding in favour of the plaintiff, the New South Wales Supreme Court proceeding, as well as the legal costs that were anticipated to escalate if those proceedings continued.
Very shortly after his appointment as liquidator, Mr Goodin states he ‘was instructed by the [E]state’ to resign as liquidator of the Company on 1 July 2021 by reason of matters arising in respect of the Victorian Supreme Court proceedings. I observe that Mr Goodin was required to act independently in his capacity as liquidator and have regard to the interests of creditors. It was not a matter of him resigning on the instructions of the Estate’s Administrator.
While the Estate and Mr Goodin’s lawyers, Hiways Lawyers, circulated to the plaintiff’s solicitors via email that it was intended an alternative liquidator was to be appointed, it seems this was the last the plaintiff or her representatives heard about the matter until the plaintiff’s solicitor approached Mr Goodin on 1 September 2021 when he had failed to respond to her correspondence of 24 and 31 August 2021. The plaintiff was, at that time at least, the sole creditor of the Company and is entitled to be informed of what was occurring in the liquidation and be responded to.
On 12 July 2021, Mr Goodin, believing that he had sent the necessary documentation to effect the appointment of new liquidators, went on leave for five weeks and travelled to the Northern Territory. He returned to Victoria on 14 August 2021.
On 24 August 2021, the plaintiff’s solicitors wrote to him enquiring about the liquidation of the Company and his position as liquidator, but he did not respond to that correspondence.
On 31 August 2021, the plaintiff’s solicitors again wrote to Mr Goodin, requesting a meeting of creditors to be held to consider a resolution for his removal and for the appointment of another liquidator in his place[23]. There was no response to that letter.
[23]See Corporations Act 2001 (Cth) sch 2 s 75-15 (‘Corporations Act’).
On 1 September 2021, the plaintiff’s solicitor telephoned Mr Goodin, who indicated he had received the letters of 24 August and 31 August 2021, but then rebuffed her, stating she should not be contacting him. He states he did not read that correspondence.
Mr Goodin contacted Mr Sweeny on 1 September 2021, who informed him that he had never received the Appointment Documents.
Thus, Mr Goodin knew as of 1 September 2021 that he was still the appointed liquidator, but he did not inform the plaintiff’s solicitor of what had occurred or what steps were proposed be taken to rectify the situation. If he had, it is more than likely that the plaintiff would have held off bringing her application. Indeed, it seems that if Ms Dong had not raised the matter with him, he would have continued to consider he was no longer the liquidator indefinitely.
On 2 September 2021, Ms Dong was told by Mr Sweeny that whilst he had been approached to act as liquidator by Mr Goodin in early July, he had not heard from Mr Goodin since that time.
The plaintiff’s solicitor then wrote to Mr Goodin again on 2 September 2021, advising him of the conversation that she had with Mr Sweeny, confirming her understanding that Mr Goodin was still the liquidator, and requiring him to respond to her client’s requests set out in her letters of 24 and 31 August 2021. There was no response by Mr Goodin.
This application was filed on 14 September 2021 and a copy emailed to Mr Goodin with the request for him to confirm if he would accept service by email. While Mr Goodin concedes the email was read, there was no response to it. His explanation was that, as with other correspondence dealing with the liquidation, he did not read it, but merely forwarded them on to Mr Sweeny. This is in the context of an originating process seeking his removal from an insolvency administration and the disallowance of his remuneration.
After being satisfied that Mr Goodin was no longer the liquidator of the Company, Ms Dong wrote to Mr Goodin on 20 September 2021, making the offer to resolve the proceeding on the basis that has been described above, but this was not responded to or accepted by Mr Goodin within the time stipulated in the Calderbank offer.
After being formally served with the application by a process server on 28 September 2021, Mr Goodin continued not to deal with the matter. When Ms Dong wrote to him on 8 October 2021 indicating that the matter was listed for hearing in a week’s time, despite the application seeking relief against him personally, he again replied by stating he was not the liquidator and referred Ms Dong to the newly appointed liquidators.
In my view, the commencement of this application by the plaintiff was, having regard to the events leading up to its issue and Mr Goodin’s conduct, entirely justified and reasonable. Mr Goodin’s failure to engage with the plaintiff as a creditor of the Company who had the benefit of a judgment debt was, in my view, a breach of his obligations as the external administrator of the Company.[24] When the current application was foreshadowed, Mr Goodin chose not to engage with the plaintiff or her solicitors and did not read the correspondence sent to him or the originating process and the supporting affidavit.
[24]Corporations Act sch 2 s 70-45.
I consider that the evidence adduced by the plaintiff would have led to the removal of Mr Goodin as liquidator and his replacement by reason of his clear conflict as both director and liquidator of the Company. Moreover, the plaintiff was, at that time at least, the sole creditor of the Company and any court considering her application would clearly have had regard to her application for his removal. As such, I consider that the application for principal relief would have succeeded.
The evidence seems clear that Mr Goodin only became aware that his resignation had not been effected when Mr Sweeny informed him of this on 1 September 2021. He criticises the plaintiff for commencing this proceeding because the matters the subject of the proceeding were matters that ‘could have been sorted out without commencing proceedings’. I do not accept this. The evidence is that throughout the timeline, Mr Goodin was unresponsive to communications from the plaintiff’s solicitor. I regard Mr Goodin’s conduct as not meeting the requisite standard of a registered liquidator.
I consider that Mr Goodin should personally pay the costs of the application on an indemnity basis. The plaintiff was entirely justified in commencing the proceeding and responsibly sought to bring it to a conclusion when the principal relief sought became nugatory.
There was no response by Mr Goodin to an offer by the plaintiff to resolve the proceedings in accordance with the Calderbank offer of 20 September 2021 and Mr Goodin maintained the position that there should be no order as to costs. The offer made by the plaintiff’s solicitors was a most reasonable one in the circumstances and its acceptance would have prevented further costs being incurred by the parties.
On an application of the well-known principles enunciated in Australian Competition and Consumer Commission v Colgate-Palmolive Pty Ltd,[25] I consider that Mr Goodin should pay the costs of the application on indemnity basis, including any reserved costs. Although the order of indemnity costs is exceptional, the plaintiff only brought the proceeding after several attempts to communicate with Mr Goodin, which were not responded to, and I consider that Mr Goodin’s conduct, which is described in detail above, warrants the Court showing its disapproval and preventing the plaintiff being left out of pocket. In Ms Dong’s third affidavit affirmed on 14 October 2021, she itemises costs based on the scale of costs set out in Appendix A of the Rules, that is to say on a party-party basis, as being $20,598.89 incurred until 15 October 2021, but as I have said, I will order costs on an indemnity basis and if they cannot be agreed, they will need to be taxed.
[25][2020] FCA 598, [15]–[20] (Bromwich J).
The balance of the relief claimed in the application, which is described in paragraph 1 of these reasons, was not pressed in written submissions.
I will order that:
(a) The proceeding be dismissed; and
(b) The second defendant is to pay the plaintiff’s cost of the application, including any reserved costs on an indemnity basis.
SCHEDULE OF PARTIES
| S ECI 2021 03366 | |
| BETWEEN: | |
| MIN REN | Plaintiff |
| - v - | |
| GOOD HOME & PROPERTY PTY LTD (ACN 604 707 048) (IN LIQUIDATION) | First Defendant |
| PETER ANDREW GOODIN | Second Defendant |
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