Re Richflow Pty Ltd (in liq) (Costs)
[2025] VSC 375
•26 June 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 01796
IN THE MATTER of RICHFLOW PTY LTD (IN LIQUIDATION) (ACN 007 094 886)
BETWEEN:
| JONATHON COLBRAN in his capacity as liquidator of RICHFLOW PTY LTD (IN LIQUIDATION) (ACN 007 094 886) & ANOR (according to the attached Schedule) | Plaintiffs |
| v | |
| NAZIF DARDOVSKI & ORS (according to the attached Schedule) | Defendants |
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JUDGE: | Hetyey AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 3 April 2025 and 9 May 2025 |
DATE OF JUDGMENT: | 26 June 2025 |
CASE MAY BE CITED AS: | Re Richflow Pty Ltd (in liq) (Costs) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 375 |
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CORPORATIONS – Corporations Act 2001 (Cth) – Section 90-15 (Sch 2, Insolvency Practice Schedule (Corporations)) — Application by liquidator for directions from Court as to beneficial ownership of large semi-rural property — Where Court made various declarations, including that company holds property on trust for third defendant.
PRACTICE AND PROCEDURE — Costs — Trust dispute — Competing costs applications by defendants against each other —Whether sixth defendant acted as contradictor in proceeding for judicial advice about existence of trust and beneficial ownership of property — Whether adversarial inter partes proceeding — Whether ordinary rule that costs follow the event applies — Where third and fifth defendant did not succeed on all claims and third defendant abandoned adverse possession claim during trial — Whether rr 25.03, 25.05 and 63.15 of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) apply to withdrawal of adverse possession claim — Apportionment of costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Kohn | Dimos Lawyers |
| For the Third and Fifth Defendants | Mr N Paterson | Jem Lawyers Pty Ltd |
| For the Sixth Defendant | Mr N Jones (only for hearing on 3 April 2025) | DSA Lawyers (only for hearing on 3 April 2025) |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 1
Procedural history.............................................................................................................................. 2
Costs issues......................................................................................................................................... 5
Legal principles and provisions...................................................................................................... 6
Costs in judicial advice proceedings.......................................................................................... 6
Costs discretion generally and in adversarial proceedings.................................................... 8
Costs rules relating to discontinuance and withdrawal of claims....................................... 11
Submissions and analysis.............................................................................................................. 12
Proper characterisation of proceeding and role of each party............................................. 12
Application of rr 25.05 and 63.15.............................................................................................. 15
Relevant event or ultimate outcome of proceeding............................................................... 16
Extent of Feim and Julie’s success in the proceeding............................................................ 16
Whether to differentiate between Feim and Julie in relation to costs................................. 19
Extent of Jelena’s success in the proceeding........................................................................... 20
Disentitling conduct................................................................................................................... 21
Conclusion......................................................................................................................................... 23
HIS HONOUR:
Introduction
On 10 October 2024, the Court delivered its substantive judgment[1] in this proceeding. The proceeding was brought by the first plaintiff (‘liquidator’) for directions as to the beneficial ownership of the property located at 1665 Mount Cottrell Road, Mount Cottrell, Victoria (‘property’). The background and procedural history of the matter are set out in the substantive judgment and need not be repeated. For convenience, I adopt the definitions used in the substantive judgment.
[1]Re Richflow Pty Ltd (in liq) [2024] VSC 618 (‘substantive judgment’).
In the substantive judgment, I determined the property was previously held by Richflow Pty Ltd (in liq) (‘Richflow’ or ‘company’) on resulting trust as to 27.5% on behalf of the fifth defendant (Julie Dardovski) who, in 1987, contributed $40,000 towards the total purchase price of the property of $145,224 (including stamp duty and registration costs).[2] However, I ultimately determined that the entirety of the property is now held by Richflow on trust for the third defendant (Feim Dardovski) in accordance with a declaration of trust executed by the company on 31 January 1995 and pursuant to later declarations of confirmation made by the trust beneficiaries (including Julie)[3] in July 2010 gifting their beneficial interests in the property to Feim.[4]
[2]Ibid [150].
[3]For ease of reference, and without any intended disrespect, I will refer to the members of the Dardovski family by their first names.
[4]Substantive judgment [336]-[338], [341].
The parties do not agree on the appropriate orders as to costs. In summary, the sixth defendant (Jelena Dardovski) makes an application for costs against Feim and Julie on the basis that Feim’s claim for adverse possession was abandoned during the trial, and substantial parts of the other claims advanced by Feim and Julie were unsuccessful. Conversely, Feim and Julie contend that Jelena ought not be paid any costs and, instead, ought to pay their costs of the proceeding. They maintain that Jelena was not a mere disinterested contradictor which might otherwise have warranted her costs being paid from the relevant trust.
Procedural history
The extensive background and procedural history of the proceeding are set out in the substantive judgment. However, the following matters are relevant to the question of costs.
The proceeding was commenced on 28 May 2021. By way of originating process, the liquidator of Richflow sought directions and consequential relief including, among other things, directions from the Court under ss 90-15 and 90-20 of the Insolvency Practice Schedule (Corporations) (which is Sch 2 to the Corporations Act 2001 (Cth) (‘Act’)) and the inherent jurisdiction of the Court concerning the ownership of the property.
In particular, the plaintiffs sought directions, including to the effect that the liquidator is justified in treating:
(a) the property as being wholly held on trust by Richflow for the benefit of those persons declared or determined as the persons beneficially entitled to the property; and
(b) the first to fifth defendants as beneficially entitled to the property held on trust by Richflow.
The proceeding was commenced only against the first to fifth defendants, being the children of Jelena’s husband, Naim Dardovski, as named in the declaration of trust and the declarations of confirmation. At that time, those defendants and Richflow itself were the only contenders for the beneficial ownership of the property.
The sixth defendant, Jelena, a shareholder of Richflow, entered an appearance in the proceeding by her solicitors two months later on 24 June 2021. Jelena indicated an intention to oppose the plaintiffs’ application and was joined as a defendant to the proceeding on 25 June 2021 pursuant to r 9.06(b) of the Supreme Court (General Civil Procedure) Rules 2015 (Vic) (‘Rules’).
Feim and Julie filed joint points of claim setting out their contentions and claims which related to, but went beyond, the advisory relief sought by the plaintiffs. In essence, they asserted the property was held for them on resulting trust by reason of their contribution to its purchase price or, alternatively, that the property was held on trust for Feim by reason of the execution of the declaration of trust and declarations of confirmation. Feim also made a claim for adverse possession over the property. Feim and Julie jointly contended that Feim was beneficially entitled to the whole of the property.
In her points of claim and defence filed 15 March 2022, Jelena relevantly asserted that:
(a) she beneficially held half of the shares in Richflow and was the sole director of the company;
(b) Richflow was the legal and beneficial owner of the property and was not the trustee of any trust;
(c) the declaration of trust was not signed or, alternatively, was a sham; and
(d) she and her husband, Naim, had paid for the property.
Jelena also sought declarations that Richflow beneficially owned the property and was entitled to possession of it.
The liquidator adopted a neutral position in terms of the beneficial ownership of the property but sought an indemnity for his costs and expenses from the property.
On 9 March 2023, earlier trial dates for the matter were vacated on the basis that Jelena had retained new lawyers. An order was made reserving the costs of Feim and Julie thrown away as a result of this postponement of the trial.
The trial ran for four days on 22, 23 and 24 May 2023 and 14 August 2023. Following the hearing of the parties’ evidence at trial, Feim abandoned his claim for adverse possession over the property.
On 10 October 2024, the Court delivered its substantive judgment in the proceeding. Given the parties could not agree on the appropriate cost orders, on 11 November 2024, the Court made orders (among others) for Feim, Julie and Jelena to file and serve submissions and for the plaintiffs to file submissions in response on the question of costs. The costs dispute was then set down for hearing on 3 April 2025.
Following the initial exchange of costs submissions between the parties, it became apparent at the hearing on 3 April 2025, that the relevant defendants had not engaged with the real issues concerning the costs of the proceeding. At the request of the parties, orders were made adjourning the hearing on the questions of costs to 9 May 2025 and for the filing of supplementary submissions. The Court subsequently circulated, and the parties endorsed, a list of issues for determination (which are set out below) to provide structure to the submissions and to ensure the real issues were addressed on the question of costs. The following costs submissions are now before the Court:
(a) Jelena’s costs submissions dated 7 March 2025 and costs submissions in reply dated 28 March 2025;
(b) Feim and Julie’s costs submissions dated 25 March 2025 and supplementary costs submissions dated 5 May 2025; and
(c) the plaintiffs’ costs submissions dated 31 March 2025, 2 May 2025 and 8 May 2025.
The plaintiffs’ written costs submissions did not raise any substantive arguments, noting that no costs orders were sought against the plaintiffs. Further, and consistent with his duty of impartiality, the liquidator did not respond to the submissions made by the relevant defendants. Notably, Jelena did not file any supplementary submissions for the reasons explained below.
On 5 May 2025, Jelena’s solicitor filed a notice of ceasing to act. On 8 May 2025, the Court received a copy of an email sent from Mr Stephen Thorp (whose email was included as the last known email address of Jelena in the notice of ceasing to act) to Feim and Julie’s solicitors. The email indicated that Mr Thorp no longer acted ‘as a friend for Ms Dardovski’, that she was ‘not financially or physically well’ and that he did not anticipate she would attend the costs hearing.
As it transpired, Jelena did not appear at the costs hearing on 9 May 2025. Feim and Julie supplemented their written submissions with oral submissions in response to questions from the Court. The plaintiffs also helpfully provided oral submissions on a number of the relevant costs issues.
Costs issues
The following list of issues are relevant to the determination of costs:
(a) What is the proper characterisation of this proceeding? Specifically, should the proceeding properly be regarded as:
(i) an application by the liquidator for directions (akin to a trustee seeking directions) with contradictors appointed who may seek to be reimbursed for their costs out of the trust fund; or
(ii) an inter partes adversarial proceeding (even if it started as the former)?
(b) Depending on the answer to the first question, what role did each of Feim, Julie and Jelena play in the proceeding?
(c) Is there a need to differentiate between Feim and Julie in considering the question of costs given the nature and outcome of their respective claims?
(d) Do rr 25.05 and 63.15 of the Rules apply? Relatedly:
(i) is this a ‘proceeding’ for the purpose of those rules?;
(ii) to whom does ‘the discontinuance or withdrawal relate’ for the purpose of r 63.15?; and
(iii) even if the rules do not strictly apply, do their underlying principles apply by analogy consistent with the Court’s broad costs discretion under s 24 of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’) and s 65C of the Civil Procedure Act 2010 (Vic) (‘CPA’)?
(e) If the proceeding is properly regarded as an adversarial inter partes proceeding, with the result that costs will ordinarily follow the event, what was the relevant ‘event’ or ultimate outcome?
(f) To what extent was:
(i) Feim successful having regard to the claims advanced by him?;
(ii) Julie successful having regard to the claims advanced by her?; and
(iii) Jelena successful in opposing the claims made by Feim and Julie and in obtaining her own declaratory relief?
(g) Is there any disentitling conduct by any party prior to, or following the commencement of the proceeding, that is relevant to the assessment of costs?
Legal principles and provisions
Costs in judicial advice proceedings
Questions about the proper approach to costs may arise in cases where judicial advice is sought by a trustee, liquidator or receiver, including in relation to a trust or fund or the propriety of any action taken or proposed to be taken. Ordinarily, a contradictor in an application by a trustee for judicial advice concerning the administration of a trust, would be entitled to have their costs paid out of the trust fund on an indemnity basis.[5] But that is not a fixed rule and other considerations may arise.
[5]Stojic v Stojic [2018] 98 NSWLR 512, 521-522 (Ward CJ in Eq); Australian Securities and Investment Commission v GDK Financial Solutions Pty Ltd (in liq) (No 4) (2008) 169 FCR 497, 500 (Finkelstein J) and the authorities referred to there.
Justice Colvin provided a helpful overview of the relevant principles in Preston, in the matter of Sandalwood Properties Ltd (No 2) (‘Sandalwood Properties’).[6] His Honour relevantly stated:[7]
Where the application for directions concerns a subject matter that must be resolved as part of the administration of a receivership such that the costs may be viewed as costs of the receivership, then that is a matter that may warrant the costs of a party being fully indemnified out of the assets in the hands of the receivers. This is especially so where a party’s participation has been, in effect, as a proper contradictor and the proceedings do not have the character of true adversarial litigation: as to these matters see [Gothard and Another (as recs and magrs each of AFG Pty Ltd (ACN 051 982 560) (in liq) v Davey and Others (No 2) [2011] 277 ALR 172, 186-187] at [55]-[57]. Also relevant may be the approach taken by receivers on the application and the extent to which they took a considered approach to the issues raised on the application for directions: Bredenkamp v Gas Sensing Technology Corporation, in the matter of Welldog Pty Ltd (In Liq) (Receivers and Managers Appointed) (No 2) [2017] FCA 1125.
Therefore, if a party’s participation is adversarial in the sense that it goes beyond that which is necessary in order to present the facts and address the issues so as to enable the court to provide advice for the purposes of the administration being conducted (in this case the receivership) then the approach to costs that applies to adversarial litigation should be applied. This is all the more so where the intervener participates to agitate a claim or position that has arisen from steps taken by the intervener.
On the other hand, if a party participates as a proper contradictor solely for the purpose of assisting the court in addressing the issues necessary to provide proper and appropriate judicial advice to the party seeking directions, then the approach to costs on applications concerning the administration of a trust, estate or fund should be applied. In such cases it is usual for all parties properly participating to be entitled to their costs on an indemnity basis paid out of the trust, estate or fund on the basis that they are costs of due administration.
Further, having regard to the views expressed by the Court of Appeal in BE Australia WD Pty Ltd v Sutton [[2011] NSWCA 414], the proper approach does not depend upon whether the issue raised is a complex one. Costs on an application for directions that raise complex matters that are dealt with in an adversarial way should be dealt with according to the principle that generally the discretion as to costs is to be exercised in favour of the successful party.
[6]Preston, in the matter of Sandalwood Properties Ltd (No 2) [2018] FCA 816.
[7]Ibid [19]-[22].
In that case, Colvin J ultimately found the proceeding was adversarial in nature, involving a contest between competing positions[8] and ordered costs be paid by the intervenor (on a discounted basis).
[8]Ibid [37]-[38].
In Bianco (Trustee), in the matter of the bankrupt estate of Jones (Deceased) (No 2),[9] the Court granted relief to trustees in the nature of judicial advice, following which a number of interested parties sought that their costs be paid from the bankrupt estate. Justice McElwaine adopted Colvin J’s summary of the relevant principles in Sandalwood Properties.[10] His Honour declined to make an order for payment of the interested parties’ costs out of the estate, finding that they had not confined their participation to that of mere contradictors, but had engaged with the proceeding as substantive active parties whose participation was driven by self-interest.[11]
[9][2023] FCA 271 (McElwaine J).
[10]Ibid [8].
[11]Ibid [19]-[21].
Costs discretion generally and in adversarial proceedings
Section 24 of the Supreme Court Act relevantly provides:
…the costs of and incidental to all matters in the Court … 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.
Section 65C of the CPA allows the Court to make any order as to costs it considers appropriate to further the overarching purpose, namely the just, efficient, timely and cost‑effective resolution of the real issues in dispute.[12]
[12]Section 7 of the Civil Procedure Act 2010 (Vic) (‘CPA’).
Further, r 63.04 of the Rules allows the Court to make an order for costs in relation to a particular question or a particular part of the proceeding. Accordingly, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.[13]
[13]Chen v Chan [2009] VSCA 233 [10] (Maxwell P, Redlich JA and Forrest AJA) (‘Chen v Chan’), citing Spotless Group Ltd v Premier Building and Consulting Pty Ltd & Anor [2008] VSCA 115 [14] (Redlich JA).
It is therefore clear that the Court has a wide discretion in relation to costs. It is also clear that the discretion is unconfined and unfettered but must still be exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[14] While not designed to control the exercise of the Court’s discretion, in adversarial proceedings there is a general rule that in the absence of good reason to the contrary, a successful litigant should recover their costs (i.e. costs follow the event).[15]
[14]See Innes-Irons & Anor v Forrest (Costs) [2017] VSC 10 [5] (Derham AsJ); Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585 [6] (Derham AsJ) (‘Towercom’); Latoudis v Casey (1990) 170 CLR 534, 537; Oshlack v Richmond River Council (1998) 193 CLR 72, 86 (Gaudron and Gummow JJ) (‘Oshlack’).
[15]Towercom [7]; Ritter v Godfrey [1920] 2 KB 47, 52; Donald Campbell & Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General (Tas) (1956) 95 CLR 460, 477; Oshlack 86.
Where there are a multiplicity of issues in a case and the parties achieve mixed success on those issues, the Court is entitled to adopt a pragmatic approach, having regard to the success (or lack of success) of the parties on an issue-by-issue basis and awarding the successful party a proportion of their costs.[16] Such an apportionment is done by way of impression and evaluation rather than arithmetical precision.[17]
[16]Chen v Chan [10]. This approach was followed in Lendlease Engineering Pty Ltd v Owners Corporation No 1 & Ors (Costs) [2021] VSC 471 [21] (Forbes J).
[17]Chen v Chan [10], citing Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114 [5] (Chernov and Ashley JJA and Mandie AJA).
In GT Corporation v Amare Safety Pty Ltd (No 3),[18] Robson J explained that where a successful litigant has been unsuccessful in raising particular issues, the Court may, in its discretion, order costs on an issue-by-issue basis.[19] His Honour also identified general principles which inform the exercise of the Court’s discretion to apportion costs as follows:[20]
…
5. As a general rule, costs should follow the event, and a successful party should obtain all of the costs of the action even though it failed to establish some of the alternative heads of its claim: Ritter v Godfrey [(1920) 2 KB 47]; McFadzean v CFMBEU [[2007] VSCA 289].
6.Rule 63.04(1) permits the court, in its discretion, to make an order not only as to a distinct question or issue in the pleading sense, but also to any part of the proceeding: Woolf v Burmon [(1939) 13 ALJR 431 (HC)]; Cretazzo v Lombardi [(1975) 13 SASR 4, 12].
7.The court may, in its discretion, decline to order costs in favour of a successful party, or may order the successful party to pay the costs of the unsuccessful party, where the plaintiff failed to establish discrete heads of claim or failed to establish issues which it pursued in its claim, although ultimately succeeding on the basis of another discrete head of claim: McFadzean v CFMBEU.
8.It is not necessary that the issue concerned was raised unreasonably by the party: Rosniak v GIO [(1997) 41 NSWLR 608]. Although, a relevant consideration may include whether the issue was raised unreasonably: Mickelberg v Western Australia [[2007] WASC 140, [43]-[46]].
9.The court may, in its discretion, make an order that is a single order, fixing what proportion of a party’s costs should be paid by another party, thus obviating cross-orders or particular orders as to particular costs: Byrns v Davie [(1991) 2 VR 568, 571 (Gobbo J)]; McFadzean v CFMBEU ; Nolan v Nolan [[2004] VSCA 134 [6]].
[18][2008] VSC 296.
[19]Ibid [31].
[20]Ibid [59].
Some caution about the apportionment of costs was expressed by the High Court in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (‘Firebird’),[21] where the Court stated:
… the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like. [22]
[21](2015) 327 ALR 192 (French CJ, Kiefel, Nettle and Gordon JJ).
[22]Ibid [6].
However, as O’Meara J observed in Malone v La Playa Nominees Pty Ltd & Anor (No 2),[23] whilst it is unusual to apportion costs, an apportionment may be ordered if it is fair and reasonable to do so and the High Court did not suggest otherwise in Firebird.[24] His Honour further explained that, in Firebird, the ‘event’ sought ‘was relatively defined and so costs might have been thought to have followed on a conventional basis; even when, in that instance, the appellant enjoyed only narrow success in order to obtain it.’[25]
[23][2022] VSC 106.
[24]Ibid [9].
[25]Ibid.
Costs rules relating to discontinuance and withdrawal of claims
Jelena relies upon rr 25.03 and 63.15 of the Rules in support of an argument that costs should be awarded against Feim given his claim for adverse possession was abandoned during the trial.
Rule 25.03 provides that a proceeding not commenced by writ may be discontinued and any part of a proceeding not commenced by writ may be withdrawn at any time by leave of the Court or with the consent of all other parties. Rule 25.05 of the Rules then provides that where part of a proceeding, counterclaim or third party notice is withdrawn, liability for costs shall be determined in accordance with r 63.15. Rule 63.15, in turn, provides that unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice, shall pay the costs of ‘the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal’.
The principles concerning r 25.05 were summarised by Derham AsJ in Soteriadis v Nillumbik Shire Council[26] as follows:
[26][2015] VSC 363 [12].
By these rules the wide discretion of the Court as to costs is modified. The modification is that the onus is on the party seeking to discontinue the proceeding (in this case the applicant) to satisfy the Court that the costs should not be paid by her. The principles and factors that the authorities outline on these, and other similar rules in other jurisdictions, have been collected and summarised by Hallen AsJ (as he then was) in Johnson & Anor v Clancy & Anor [[2010] NSWSC 1301, [21]]. My summary of them is as follows:
(a)The rule does not give rise to a presumption that costs will be ordered against the discontinuing party;
(b)However, the rule does create a starting position for the plaintiff or discontinuing party to pay the defendant’s costs, subject to a contrary order;
(c)The contrary order itself involves a discretionary decision to be exercised judicially. If there is to be a departure from the starting position, it should be done in a particularised, and principled way. The Court is required to make such order as it thinks just in the particular circumstances of the case;
(d)The burden is on the party who seeks to persuade the Court that a contrary order should be made. If facts are to be relied upon to found the Court making a different order, the plaintiff will bear the onus of proving the relevant facts;
(e)All the relevant circumstances, not just the fact of discontinuance, should be considered. This may include a consideration of the whole of the proceedings. Generally the discretion will be exercised on the basis of the objective circumstances established on the evidence and not involve the subjective considerations of one party;
(f)A relevant consideration is whether the plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them. It might also be appropriate for the Court to consider the conduct of the defendant prior to the commencement of the proceedings where such conduct may have precipitated the litigation;
…
Submissions and analysis
Although Jelena did not appear at the hearing nor file supplementary submissions, I have taken into consideration her earlier written submissions in my determination of the cost issues to which I now turn.
Proper characterisation of proceeding and role of each party
In response to questions from the Court concerning the characterisation of the proceeding, whether it changed over time and the role of the various defendants, the plaintiffs’ counsel made oral submissions that:
(a) the proceeding commenced as an application by the liquidator for directions as to the beneficial ownership of the property;
(b) the proceeding was necessary due to the contradictory and inconsistent evidence that emerged from the prior Federal Court public examinations in relation to the declaration of trust and other documents;
(c) although the position may have been arguable, no defendant sought to characterise themselves as contradictor or to be indemnified from the trust assets (being the property) in respect of their costs;
(d) even if Jelena’s role in the proceeding started as that of contradictor, she went beyond simply presenting facts, testing evidence and addressing the relevant issues. Her role shifted to that of a litigant by agitating her personal interests and seeking declaratory relief that Richflow was the beneficial owner of the property (to secure her entitlement to it as one of the company’s shareholders); and
(e) having regard to the evidence and arguments advanced by each of Julie, Feim and Jelena, the proceeding became an adversarial proceeding where the defendants were advocating for their own position.
Feim and Julie identify that the originating process sought a direction that the liquidator was justified in treating the property as beneficially held by the first to fifth defendants, consequential directions regarding the property and indemnities for the plaintiffs. No substantive relief was sought in favour of Richflow but there was an overlap in the relief sought by Feim and Julie in their points of claim and the application brought by the plaintiffs. Following the commencement of the proceeding, Jelena, as a shareholder the company, then entered an appearance to oppose the application and seek her own declaratory relief. However, Feim and Julie submit that, in doing so, Jelena was not acting as a contradictor. She was not a beneficiary of a trust who had a direct interest in the obtaining of judicial advice for the benefit of the trust, nor was she offering submissions as to the proper construction or administration of the trust. She was in fact contesting the very existence of the trust ultimately found by the Court to subsist. She went well beyond testing the evidence of Feim and Julie to actively agitating her own positive case and seeking substantive relief from which she would benefit. Feim and Julie say the proceeding involved competing claims to the beneficial ownership of the property and was clearly adversarial in nature. Accordingly, the usual costs rules should apply.
For her part, Jelena made few submissions about her role in the proceeding and the characterisation of the proceeding generally. In fact, her written submissions are premised on the notion that the proceeding was adversarial as between herself and Feim and Julie and that the ordinary costs rules apply. While she suggested the liquidator regarded her as having an important role in the proceeding as contradictor,[27] the point was not further developed. She did not address the question of whether her role as apparent contradictor changed throughout the proceeding. Nor did she seek to be indemnified from the assets of the trust (the property) in respect of her costs.
[27]Noting an exchange at a mention on 31 August 2022, as referred to in the substantive judgment [34].
Having regard to the above background facts and the submissions of the parties, I am of the view that whilst the proceeding commenced as an application by the liquidator for directions (akin to a trustee seeking judicial advice), following the filing of points of claim by Feim, Julie and Jelena, the matter took the distinct character of an inter partes adversarial proceeding. Each of Feim and Julie, on the one hand, and Jelena, on the other, advanced competing claims in respect of the beneficial ownership of the property. Prior to the commencement of the trial, each of those defendants objected to the evidence of the other. In the case of Jelena, she objected to the admissibility of critical documents in the proceeding, including the declaration of trust, and contested the very existence of a trust. Through their counsel, each side undertook robust cross-examination of relevant witnesses, while the plaintiffs sought to maintain a neutral position.
In the case of Jelena, I am satisfied that she crossed the line from mere contradictor (who was, for convenience, joined as a defendant) to a substantive party agitating her own claim or position, driven by her own self-interest. She went well beyond assisting the Court in considering the evidence and underlying issues necessary to provide appropriate advice to the liquidator.
Given the true inter partes nature of the proceeding and the adversarial roles played by each of Feim, Julie and Jelena, the ordinary rules as to costs must apply. Costs will follow the event.
Application of rr 25.05 and 63.15
As already noted, Jelena relied upon rr 25.03, 25.05 and 63.15 in support of her argument that costs should be awarded against Feim who abandoned his adverse possession claim during the trial. In particular, Jelena submitted the Court should accept these rules are applicable in circumstances where the Court had ordered the parties to make their claims in the proceeding by way of points of claim.
Feim and Julie submit that r 25.05 is not directly applicable because the relevant ‘proceeding’ contemplated by the rule was not commenced by them but the plaintiffs, and their points of claim are not a separate ‘proceeding’, counterclaim or third party notice. In that sense, any discontinuance or withdrawal for the purpose of r 63.15 must be read as one against the plaintiffs rather than Jelena.
In my view, there is some doubt about whether the proceeding, which was commenced by the plaintiffs by way of originating process on 28 May 2021 under the Supreme CourtCorporations Rules 2013 (Vic) (‘Corporations Rules’) (as then in force),[28] is a ‘proceeding’ for the purpose of r 25.05 of the Rules. A ‘proceeding’ is defined in r 1.13 of the Rules to mean ‘any matter in the Court commenced by writ or originating motion or as otherwise provided by or under any Act or these Rules’. That said, r 1.3(3) of the Corporations Rules stated ‘[t]he other Rules of the Court apply, so far as they are relevant and not inconsistent with [the Corporations Rules] … to a proceeding in the Court under the [Act].’ However, there is also force to Feim and Julie’s submission that Feim’s discontinuance of the adverse possession claim was against the plaintiffs rather than Jelena, which is another reason why rr 25.05 and 63.15 may not be engaged.
[28]Replaced by the Supreme Court(Corporations) Rules 2023 (Vic) which came into operation on 15 June 2023.
Regardless of whether rr 25.05 and 63.15 strictly apply to the present circumstances, I will consider the principles pertaining to the operation of those rules by analogy and in the exercise of the Court’s broad discretion as to costs.
Relevant event or ultimate outcome of proceeding
Feim and Julie submit that the ultimate outcome of the proceeding was a declaration that Feim is the sole beneficial owner of the property, an outcome that was sought by each of them. Subsidiary to that outcome were:
(a) the successful claim in respect of the declaration of trust and declarations of confirmation (by which the other children of Naim confirmed their intention to gift their beneficial interests in the property to Feim);
(b) the partially successful claim by Julie for a resulting trust in respect of the purchase of the property (as to 27.5% of the beneficial interest in the property)[29] which was subsumed by her declaration of confirmation[30] and lead to the ultimate finding in favour of Feim;
(c) Feim’s abandoned alternate claim for adverse possession, which was immaterial to the ultimate outcome; and
(d) the failed defence and positive claims of Jelena as to the alleged beneficial interest of Richflow.
[29]Substantive judgment [146]-[150], [170].
[30]Ibid [319], [340].
Jelena did not file any submissions identifying the relevant events for the purposes of determining the question of costs and the plaintiffs did not disagree with Feim and Julie’s summary of the events. I also accept their summary. The ultimate outcome was the Court’s determination that the property is held on trust by Richflow for Feim.
Extent of Feim and Julie’s success in the proceeding
Jelena argued the claim by Feim pursuant to a resulting trust was wholly unsuccessful because, although the Court found Julie had paid the first instalment, the allegations of payment of the deposit and the second and third instalments failed on the basis of contradictory and unsatisfactory evidence.[31] Further, it is said that while Julie succeeded only to a limited extent on the resulting trust claim, she ultimately failed in the proceeding as it was found she had gifted her interest to Feim.
[31]Ibid [140], [151], [156], [170].
Jelena also submits she was put to the cost of opposing Feim’s adverse possession claim, including evidence which was found to be unsatisfactory. Further, she says the adverse possession claim was raised unreasonably in circumstances where Fezije Dardovski, Feim’s litigation guardian and spouse, failed to disclose Feim’s imprisonment during the period of his alleged possession of the property.
By contrast, Feim and Julie submit that Feim’s success, in terms of the relief ordered in his favour, was complete. To the extent the resulting trust claim failed for a lack of corroborative evidence, that is unsurprising given the effluxion of time since the purchase of the property in 1987. Importantly, Julie succeeded in part of her claim that Richflow held the property on resulting trust as to 27.5% on her behalf but failed in respect of her claim that Richflow held a further 27.5% for her.[32] The resulting trust claims and Feim’s abandoned adverse possession claim were ultimately subsumed or obviated by Feim’s successful claim pertaining to the declaration of trust. In any event, matters pertaining to those claims provided relevant context to the successful trust claims in that:
(a) evidence pertaining to Feim and Julie’s contribution to the purchase price of the property, although largely insufficient to establish a resulting trust, was relevant to the legitimacy of the declaration of trust, which referred to payment of the purchase monies and Jelena’s contention that the declaration of trust was not signed or a sham;[33] and
(b) evidence pertaining to Feim’s occupation, use and improvement of the property, advanced in support of the adverse possession claim, was consistent with the treatment of that property as belonging to him pursuant to a trust.[34]
[32]Ibid [151].
[33]Ibid [298], [301].
[34]Ibid [295(c)].
Further, Feim and Julie submit that:
(a) the adverse possession claim was pleaded in the alternative and run in parallel with the trust claims. It was reasonably brought and not logically inconsistent with the trust claims;
(b) the adverse possession claim was partially defensive to Jelena’s assertion that Richflow was entitled to the property;
(c) the adverse possession claim was not ultimately determined against Feim; and
(d) the submission made by Jelena that the period of Feim’s imprisonment was relevant to the assessment of that claim does not mean the claim was improper.
In my opinion, Feim was substantially successful in the proceeding by obtaining a declaration that the entire property was held on trust for him by Richflow pursuant to the declaration of trust and the declarations of confirmation executed by his siblings. However, he did not succeed in relation to his contention that he had paid for the deposit and third instalment on the purchase of the property so as to give rise to a resulting trust, as an alternative or supplementary declaration. There was insufficient credible evidence in support of those matters.
In relation to Feim’s abandoned adverse possession claim, whilst I accept some of the evidence relied upon was also used to advance the trust claims, I do not consider the adverse possession claim was necessarily logically consistent with the trust claims. It seems to me there was an inherent tension in Feim simultaneously contending he was the beneficial owner of the property held on trust by Richflow and maintaining that he had an intention to dispossess the owner with the paper title to the property.[35] Further, the failure by Fezije to disclose Feim’s imprisonment during a portion of the time he was allegedly in possession of the property was a material omission that bears on the overall reasonableness of the claim. It does not matter that no ultimate findings were made in relation to the adverse possession claim. The Court was expressly critical of the evidence given by Fezije on behalf of Feim in this regard.[36] While Feim’s counsel suggested at the 9 May 2025 costs hearing that a forensic decision was made during the course of the trial not to pursue the adverse possession claim any further, that decision was made after unnecessary costs were incurred.
[35]See Whittlesea City Council v Abbatangelo [2009] VSCA 188 (Ashley, Redlich and Kyrou JJA) for a statement of the principles relating to adverse possession.
[36]Substantive judgment [63].
I consider Julie was partly successful in her resulting trust claim. I disagree with Jelena’s contention that Julie ultimately failed in the proceeding because it was found she had gifted her interest to Feim. In fact, it had always been her case that the effect of her declaration of confirmation was to confirm that she intended any interest she had in the property to be gifted to Feim and that she relinquished any such interest in his favour.[37] She had an interest in seeing her gift to Feim perfected. Julie had, together with Feim, sought the vesting of the property in Feim at all times during the course of the proceeding (including in her points of claim and in closing submissions at trial) and they were successful in obtaining a declaration that Feim was the beneficial owner. Moreover, her own resulting trust claim was advanced in tandem with the declaration of trust claim, which claims are not inconsistent.[38]
[37]Ibid [340].
[38]Ibid [317]-[320].
Whether to differentiate between Feim and Julie in relation to costs
Feim and Julie submit there is no need to differentiate between them in considering the question of costs because they were jointly represented throughout the proceeding and ran the various trust claims in parallel. Their counsel elaborated in oral submissions that Feim and Julie jointly approached the proceeding with the same aim and sought the same relief in favour of Feim.
I accept Feim and Julie’s submissions in this regard and do not consider there is any material benefit in distinguishing between them. Each were jointly successful in obtaining a declaration of beneficial ownership in favour of Feim. To the extent Feim and Julie ran claims that proved unsuccessful or were abandoned, those matters will be taken into consideration in the exercise of the Court’s discretion as to costs, including any apportionment.
Extent of Jelena’s success in the proceeding
Feim and Julie submit, and I accept, that Jelena:
(a) contended Richflow was not the trustee of any trust and owned the property beneficially, which contention failed;[39]
[39]Ibid [267]-[270], [274].
(b) was unsuccessful in her arguments that any resulting trust failed because Richflow was not yet in existence,[40] or because Naim’s will suggested a contrary intention of the parties,[41] or by reason of s 53(1)(b) of the Property Law Act 1958 (Vic);[42]
(c) contended certain trust documents were inadmissible, which contention failed;[43] and
(d) contended the declaration of trust was not signed or a sham, which contentions failed.[44]
[40]Ibid [160].
[41]Ibid [161].
[42]Ibid [169].
[43]Ibid [193].
[44]Ibid [297]-[314].
Feim and Julie do concede (appropriately, in my view) that Jelena had some measure of success in aspects of her defence of their claims in that:
(a) Feim abandoned his adverse possession claim at trial and did not prove his resulting trust claim; and
(b) Julie did not prove all aspects of her resulting trust claim.
However, Feim and Julie say that neither of these outcomes affected the relief claimed by each of them, namely a declaration that Feim held the whole of the property beneficially, nor was Jelena granted any positive relief. I agree with that analysis. It follows that Jelena’s success in the proceeding was limited and did not affect the ultimate outcome.
Disentitling conduct
Feim and Julie submit the proceeding arose in the following circumstances:
(a) Richflow was reinstated on 28 July 2017 on application by Jelena for the purpose of selling the property;
(b) on 2 August 2017, Jelena was reappointed as a director of Richflow;
(c) Jelena obtained $225,000 on 11 August 2017, being the proceeds of the partial compulsory acquisition (‘compulsory acquisition funds’) of the property by Western Water in June 2016, which proceeds she kept;
(d) Richflow was placed into liquidation on 4 September 2019 for non-compliance with a statutory demand relating to land tax which could have been satisfied from the compulsory acquisition funds;
(e) in Richflow’s Report on Company Activities and Property, Jelena declared that Richflow owned the property but did not hold any property on trust;
(f) Jelena had asserted to the liquidator that Feim and Fezije were in occupation of a dwelling on the property but had no proprietary interest in it;
(g) according to draft documents given to the liquidator by Jelena’s lawyers on 3 October 2019, Jelena had, prior to the winding up of Richflow, been trying to sell the property and continued to do so even after the winding up had commenced; and
(h) in the Federal Court public examinations, Jelena denied the property was held on trust or that she had signed the declaration of trust.
Feim and Julie submit Jelena’s conduct leading up to the commencement of the proceeding was dishonest because she knew Richflow had no entitlement to the property. They say her actions were the primary cause of the proceeding. Further, Jelena has received the compulsory acquisition funds which must, on the basis of the trust found to exist, have been trust property to which she was not entitled. They say a defaulting trustee who has committed a breach of trust is not entitled to have recourse to the trust unless the default has been made good[45] (noting, of course, that Jelena was not a direct trustee of the property).
[45]Citing HBSY Pty Ltd v Lewis (No 2) [2025] FCAFC 44 [18]-[27], referring at [20] to such rule stated by the Full Bench of the Supreme Court of Victoria in Cumming v Austin (1903) 28 VLR 622, 628-629 (Holroyd J, with Williams and Hodges JJ agreeing).
Feim and Julie also make extensive reference to Jelena’s alleged ‘lack of bona fides’ in relation to the proceeding, referring to the Court’s finding that she was an unreliable witness in relation to critical evidence[46] and her historical change in position concerning the ownership of the property whenever it suited her.[47]
[46]Substantive judgment [64].
[47]Ibid [291].
Feim and Julie rely on the above matters as conduct by Jelena that would disentitle her from receiving the benefit of any costs order. In her written submissions, Jelena resists this argument and says the alleged disentitling conduct is outside the scope of the proceeding and irrelevant to the question of costs.
I am unpersuaded there is any relevant disentitling conduct by Jelena that should be taken into account in exercising my discretion as to costs. Much of the identified conduct predates the proceeding by a number of years. It is also a matter of speculation whether the proceeding would have been commenced in the absence of Jelena’s denial of the existence of a trust over the property. The claims made by Feim and Julie may have necessitated the application for directions even without Jelena’s denial of a trust, although the proceeding would have undoubtedly been less costly. Whilst I found Jelena to be a wholly unreliable witness, I did not make a particular finding that she had acted dishonestly or that she lacked bona fides in relation to the proceeding.
Conclusion
It is apparent from the substantive judgment that the Court ultimately found in favour of Feim and Julie, with the result that Feim holds the entire beneficial interest in the property. I therefore consider Feim and Julie have achieved substantial overall success in the proceeding. That said, it is fair and reasonable to apportion costs in light of Feim’s abandoned adverse possession claim and the unsuccessful aspects of Feim and Julie’s resulting trust claims. I consider such an approach to be preferred over making cross-orders as to costs between Feim and Julie, on the one hand, and Jelena on the other.
In the exercise of the Court’s discretion and in balancing all of the considerations referred to above, it is appropriate that Jelena pay 80% of Feim and Julie’s costs of the proceeding on a standard basis, to be taxed in default of agreement. For the avoidance of doubt, such costs should include Feim and Julie’s costs thrown away as a result of the vacating of the earlier trial dates as reserved by order 2 of the order dated 9 March 2023 and the costs of and incidental to the hearings on the question of costs on 3 April 2025 and 9 May 2025.
SCHEDULE OF PARTIES
| S ECI 2021 01796 | |
| BETWEEN: | |
| JONATHON COLBRAN in his capacity as liquidator of RICHFLOW PTY LTD (IN LIQUIDATION) (ACN 007 094 886) | First Plaintiff |
| RICHFLOW PTY LTD (IN LIQUIDATION) (ACN 007 094 886) | Second Plaintiff |
| - v - | |
| NAZIF DARDOVSKI | First Defendant |
| NEVRUS DARDOVSKI | Second Defendant |
| FEIM DARDOVSKI (BY HIS LITIGATION GUARDIAN FEZIJE DARDOVSKI) | Third Defendant |
| SEHIHA SELIEVSKI | Fourth Defendant |
| JULIE DARDOVSKI | Fifth Defendant |
| JELENA DARDOVSKI | Sixth Defendant |
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