Reozone Pty Ltd v Rene Santoro

[2018] NSWSC 650

Supreme Court

New South Wales

Medium Neutral Citation:

Reozone Pty Ltd v Rene Santoro & Ors [2018] NSWSC 650

Hearing dates:

5, 6 & 7 February & 15 March 2018

Date of orders:

01 May 2018

Decision date:

15 May 2018

Jurisdiction:

Equity

Before:

Slattery J

Decision:

Orders made for payment out of Court. Orders stayed pending the making of final attempts to locate the mortgagor. Funds in Court paid out notably among the applicants.

Catchwords:

FUNDS - IN - COURT - surplus funds paid into Court after sale of real property by mortgagee - Trustee Act, 1925, s 95 - Uniform Civil Procedure Rules 2005, r 55.11 - mortgagor/registered proprietor cannot be found - orders for substituted service upon mortgagor/registered proprietor made - mortgagor/registered proprietor primarily entitled to fund in Court - orders made for additional notice to be given to mortgagor/registered proprietor - three groups of unsecured creditors apply for payment out of the funds in Court - one has a judgment against the mortgagor/proprietor and the others have unresolved claims - whether payment out of Court should be ordered and if so on what basis - what steps should be taken to determine he unresolved claims.

Legislation Cited:

Civil Procedure Act 2005, ss 98(4)(c), 106(1)(c)
Conveyancing Act 1919, ss 23C and 54A
Federal Court of Australia Act 1976, s 52
Home Building Act 1989
Uniform Civil Procedure Rules 2005, rr 39.34, 39.41, 43, 55.11

Cases Cited:

Australian Customer Target Information Code
Pty Limited v Cabool Holdings Pty
Limited [2003] NSWSC 753
Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119
Commonwealth Bank of Australia v The Estate of the
Late Mahmoud Slieman [2010] NSWSC 661
De La Rue v Hernu Peron & Stockwell Ltd (1936) 2
KB 164
Edgar & Walker v Mead (1916) 23 CLR 29
Harmer v Federal Commissioner of Taxation (1991)
173 CLR 264
Hadid v Lenfest Communications Inc [2000] FCA 628
Hamod v State of New South Wales & Anor [2011] NSWCA 375
Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213
Hixon v Wytham (1675) 1 Cas in Ch 248
IMB Limited v Nallathambi [2009] NSWSC1387
MG Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22
Patterson v Cohen [2006] NSWSC 424
Humphris, in the matter of Hazelton Air Charter Pty Limited v Mentha [2002] FCA 529
Reozone Pty Ltd v Rene Santoro [2016] NSWSC
1383
Silva v Czarnikow Limited [1960] 1 Lloyd’s Rep 319
Simone Starr-Diamond v Talus Diamond (No. 4) [2013] NSWSC 811
Tudor Furnishers Limited v Montague and Finer
Production Co Ltd [1950] Ch 113
Wentworth v Rogers [2003] NSWSC 472
Westpac Banking Corporation v Morris [1998] NSWSC 66
Willmott v Barber (1881) 17 Ch D 772
Wolestoncroft v Long (1663) 1 Cas in Ch 32; 22 ER 679
Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99

Texts Cited:

JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths) at [3-130]

Category:

Principal judgment

Parties:

Plaintiff: Reozone Pty Ltd
First Defendant: Rene Santoro
Second Defendant: Elite Civil Group Pty Ltd (in liquidation)
Eighth Defendant: Sydney Trucks and Machinery Centre Pty Ltd
Ninth Defendant: TCT Management Pty Ltd
Tenth Defendant: DuffyKennedy Pty Ltd
Eleventh Defendant: Dominic Calbretta, Liquidator of Bono Group Pty Ltd
Twelfth Defendant: Carrington Electrical Pty Ltd

Representation:

Counsel:
P: n/a
D2: P. Newton
D8-9:   P. Barham
D10: G. D. McDonald
D11-12: M Klooster; E. Tringali

 

Solicitor:

  P: n/a
D1: n/a
D2: Daren J. Anderson, ERA Legal
D8-9: Vincent Macri, V. L Macri Lawyers
D10: Gavin Parsons, Gavin Parsons & Associates
D11-12: Michael Ghobrial, Ghobrial Legal – Convenient Conveyancing

File Number(s):

(2014/281917)

Publication restriction:

No

Judgment

1. The parties to these proceedings contest their respective entitlements to the surplus funds paid into Court. The funds represent the net proceeds after the judicial sale of certain real property, and the payment out of the registered first mortgagee and another party with an equitable charge over the property. The surplus was paid into Court under Trustee Act1925, s 95 and and Uniform Civil Procedure Rules 2005 (“UCPR”), r 55.

2. The plaintiff, Reozone Proprietary Limited (“Reozone”), commenced these proceedings in September 2014. By June 2015, it had successfully obtained declarations that the first defendant, Mrs Rene Santoro, was indebted to it in the sum of $242,204.27, which debt was secured by way of a charge over two properties at Barden Ridge and Horningsea Park in New South Wales (“the properties”). Mrs Santoro was the registered proprietor of the properties. Rein J appointed the trustees for the judicial sale of the properties.

3. The properties were sold by 3 May 2016. The first mortgagee, the NAB, the third defendant, and the plaintiff, Reozone, were paid out of the sale proceeds. The trustees were ordered to pay the remaining net proceeds into Court, which they did.

4. As at 28 April 2017 the funds in Court were substantial. They comprised a capital fund of $1,126,049.15 together with accumulated interest of $16,438.93. The funds in Court have continued to accumulate interest since then.

5. It is not disputed that Mrs Rene Santoro has an equitable interest in the funds in Court, as the mortgagor and former registered proprietor of the properties. But there are a number of other claimants to the funds. These other parties presently advance claims to the funds in Court as unsecured creditors of Mrs Santoro. When this matter came on for hearing in February 2018, their claims were at various stages of procedural finality against her: one, Elite Civil Group Pty Limited, in liquidation (the second defendant), already had judgment against her, one, DuffyKennedy Pty Limited (the tenth defendant) had commenced proceedings but had not obtained judgment, and yet two others, Bono Group Pty Limited and Carrington Electrical Services Pty Limited (the eleventh and twelfth defendants), had only made demands and filed a motion in these proceedings but had not commenced separate proceedings. The issue now for determination is what should be done with the funds in Court in the face of these various claims, action and judgment. These reasons consider the current status of the various claims against the funds in Court and then make orders and directions for their disposition.

6. Mr P Newton and Mr J Foley of counsel appeared for the applicant/second defendant, instructed by ERA Legal.  Mr G D Macdonald of counsel appeared for the cross claimant/tenth defendant, instructed by Gavin Parsons and Associates.  And Mr J Klooster appeared for the cross claimants/eleventh and twelfth defendants, instructed by Nelson McKinnon Lawyers.

Service Upon Mrs Santoro and the Course of the Proceedings

7. Attempts to contact Mrs Santoro to notify her about these proceedings were complicated. She and her husband had entered into a police protection program and were not readily able to be served. But Elite’s solicitors, ERA Legal (“ERA”), had undertaken considerable preliminary work to contact Mrs Santoro and had tracked her down through the police to a confidential email address with which they had been corresponding with her during the progress of the Federal Court proceedings leading to Elite’s judgment against her.

8. Before the proceedings were set down for hearing before me in February this year, orders for substituted service had been made on 28 April 2017 by Lindsay J for the second defendant to bring the existence of these proceedings to Mrs Santoro’s attention. The Court is satisfied that those substituted service orders were complied with prior to the first date for hearing, 5 February 2018.

9. But as the subsequent paragraphs of these reasons explain, the Court took a more demanding approach about contacting Mrs Santoro than had been reflected in the previous orders. The Court did this for several reasons. There was a substantial sum of money in Court. Mrs Santoro was prima facie a person most entitled to that sum. All the other claimants to the funds were her unsecured creditors, who had no right prior to Mrs Santoro to the funds. In order to execute against the funds in Court they would need to proceed to judgment upon their claims and then seek to execute that judgment.

10. When these proceedings came before the Court for hearing on 5 February 2018, the Court enquired of the parties as to what efforts had been made to locate Mrs Santoro to notify her of the application. The efforts made to contact her in relation to these proceedings (and to pursue enforcement of the judgment obtained by Elite against her in the Federal Court) had principally been made via email to the confidential email address. It was to that confidential email address that ERA had sent a series of emails relating to this application, which included: sending the Notice of Motion; sending supporting affidavits; and noting developments in the application, including that it had been listed before me for 5 February 2018.

11. But on closer analysis of the historical email traffic. It became clear that there had been no reply from that email address since 9 December 2014. Although no formal reply indication had ever been received that indicated the email address was no longer in use. The Court formed the view that the efforts to contact Mrs Santoro by sending emails to that confidential email address, though compliant with the orders for substituted service made in April 2017, did not satisfactorily exhaust all avenues reasonably open to notify her of the present competing claims upon the funds in Court.

12. After joining the additional claimants as new defendants, the Court directed on 5 February that by the next occasion in Court, the parties should take further steps to contact Mrs Santoro. The Court also directed that the new defendants serve their motions, their cross-claims defining their claims and all affidavits in support of their claims upon Mrs Santoro, through and with the assistance of ERA, by 6 February. Cross claims were ordered so that Mrs Santoro and Elite would have clarity about the nature of the claims the new defendants were making. Notice was given to Mrs Santoro of her opportunity to appear on 7 February 2018. The proceedings were adjourned to 7 February 2018.

13. As earlier indicated, ERA had access to the confidential email address for Mrs Santoro. So ERA offered to assist the other parties to facilitate service on the confidential email address of Mrs Santoro. This was both more secure and a more efficient course than seeking to distribute the confidential email address to the other parties to these proceedings so that they could each seek to serve her with Court documents at that address.

14. The Court directed on 5 February 2018 that the tenth, eleventh and twelfth defendants, respectively referred to in these proceedings as DuffyKennedy, Bono Group and Carrington Electrial, to serve their motions, cross claims, affidavits, outlines of submissions and the Court’s orders of 5 February by email. These were to be sent to ERA, who would then forward them to Mrs Santoro’s confidential email address.

15. ERA then independently took further steps to ascertain the whereabouts of Mrs Santoro. On 6 February, ERA conducted internet searches for Mrs Santoro on Facebook, LinkedIn, Google and the White Pages. No contact details were found for her in any of the Facebook, LinkedIn, or Google search results. Seven results for the name “Santoro” with initial “R” were returned in the online White Pages search for New South Wales, Western Australia and Victoria. ERA made phone calls to each of the seven numbers listed, but could not locate Mrs Santoro at any of them.

16. On 7 February 2018, ERA attended the offices of the Australian Electoral Commission (“AEC”) to conduct a search of the electoral roll in each Australian state and territory under the name “Rene Santoro”. Only one result was returned for all those searches for an individual, Rene Santoro, who was recorded at the address 3 Seamans Place, Horningsea Park, NSW. ERA made another visit to the AEC offices the following day, 8 February, on which occasion a further search of the New South Wales electoral roll for the name “Santoro” was made. That search delivered an additional result for “Vince Santoro” being recorded at the same address, 3 Seamans Place, Horningsea Park, NSW. The Horningsea Park address is the address of one of the two properties sold pursuant to the orders for the appointment of trustees for sale.

17. ERA conducted a further online search for Rene Santoro. That involved a search of the “Trove” website operated by the National Library of Australia at for the names “Santoro”, “Rene Santoro”, “Vincenzo Santoro”, “Vincent Santoro”, and “Vince Santoro” in search option “Digitised newspapers and more”. But the search results did not contain any results dated later than 1 March 2001 and did not reveal evidence of any current contact details for Mrs Santoro.

18. ERA also made further email and telephone enquiries of Detective Senior Constable Arun Chopra of the Robbery and Serious Crime Squad of the NSW police force on 5 February and 12 February respectively seeking any other available contact details for Mrs Santoro. Detective Senior Constable Chopra had previously been responsible for forwarding communications to Mrs Rene Santoro and her husband Mr Vince Santoro in relation to Court proceedings. But, when ERA communicated with him in February of this year, he explained that he did not have any remaining contact with either Mr or Mrs Santoro and that he was unable to forward correspondence onto them.

19. The proceedings resumed on 7 February 2018. The Court then made orders as to the quantum of Elite’s lump claim (including interest) and a lump sum costs order in relation to that claim. The reasons for those orders are set out later in this judgment. The Court then received evidence on the additional defendant’s claims but did not conclude the evidence. The Court then adjourned the proceedings to 15 March to see if Mrs Santoro would appear.

20. The Court made additional orders on 7 February 2018 for notice of these proceedings to be published in newspapers primarily circulating in New South Wales but also more widely throughout Australia. The publication was in the following terms:

“RENE SANTORO

SUPREME COURT OF NSW PROCEEDINGS 2014/281917

Elite Civil Group Pty Ltd (in liquidation) and its liquidator Mitchell Warren Ball, DuffyKennedy Pty Ltd, Bono Group Pty Ltd (in liquidation) and its liquidator Domenic Calabretta and Carrington Electrical Services Pty Ltd have made applications to the Supreme Court of NSW, in proceedings number 2014/281917, for the payment out to them of funds held by the court on behalf of Rene Santoro.

On 6 and 8 February 2018 the Supreme Court of NSW received evidence from each of the above applicants in support of their applications. The applications were adjourned to 9.30 am on 15 March 2018 for the purpose of giving Rene Santoro the opportunity to be heard in relation to the applications.

If Rene Santoro wishes to be heard in relation to the applications, she should file a Notice of Appearance in the Registry of the Supreme Court of NSW and serve a copy of that Notice of Appearance on the legal representative whose details appear below and appear herself or by her legal representative in the Supreme Court of NSW at 9.30 am on 15 March 2018, failing which the Supreme Court of NSW may determine the applications without further notice to her.

Legal representative: Daren Anderson, ERA Legal, Level 15, 45 Clarence Street, Sydney NSW 2000; email: [email protected].

Supreme Court of NSW Law Courts Building, Queens Square, Sydney NSW 2000; tel: [phone].”

ERA placed a notice to that effect in the Daily Telegraph published on 12 February, in the Sydney Morning Herald published on 12 February, and in the Australian published on 13 February. That same notice and a copy of the Court’s orders were also published on the ERA Legal Facebook page.

21. Despite Elite’s extensive additional efforts to notify Mrs Santoro of the present applications, she did not appear, or seek to make contact after 7 February 2018.

22. The Court is fully satisfied as a result of compliance with the Court’s further orders that the parties have now taken all reasonable steps to notify her of these proceedings.

23. But as an additional precaution the Court has decided that upon the making of orders in these proceedings, which involve the payment of the funds out of Court to the various claimants, the Court will stay those orders for a short period of time sufficient to allow service of these reasons and the orders upon Mrs Santoro. This should give her one last opportunity to intervene to advance any argument that she may have against the payment of the funds out of Court. Those orders are provided for later in these reasons.

The Claims Now Brought Upon the Funds in Court

24. Only a few of an originally larger number of claims against the funds in Court are now pressed. As earlier indicated, the NAB, the third defendant and the first mortgagee, and Reozone, the plantiff, were reimbursed out of the sale proceeds before the funds were paid into Court.

25. Of the remaining defendants, the position of the second defendant, the liquidator of Elite Civil Group Pty Ltd (“Elite”), Mr Mitchell Ball of BPS Recovery, is the most advanced. The liquidator was appointed to Elite on 11 March 2014. Mrs Santoro had been a director of Elite before its liquidation. In Federal Court proceedings (NSD0948/214) the liquidator and Elite sought to set aside certain allegedly voidable transactions into which Mrs Santoro had entered with Elite. On 26 April 2017, Jagot J of the Federal Court set aside the transactions and entered judgment for Elite against Mrs Santoro in the sum of $1,049,670. Her Honour also awarded interest up to judgment of $202,230.44. Elite’s judgment in this sum was greater than the funds in Court as at 28 April 2017 by a margin of approximately $100,000.

26. The position of the remaining applicants may be shortly summarised. The fourth to ninth defendants were all caveators over the properties. After Rein J made interlocutory directions in June 2016 for the management of the claims of those caveators. The claims of those various caveators were listed for hearing before White J on 1 and 2 September 2016. As a result of their being brought on for hearing, the claims of the first, fifth and seventh defendants were no longer pressed.

27. On 30 September 2016, White J ordered the payment out of some monies to the sixth defendant and dismissed the claims of the eighth and ninth defendants: Reozone Pty Ltd v Rene Santoro [2016] NSWSC 1383. Shortly afterwards, orders were made that the balance of the funds in Court not be paid out to the first defendant, Mrs Santoro, pending finalisation of Elite’s claim. Jagot J gave judgment on this claim on 13 April 2017.

28. By its motion dated 26 April 2017, Elite seeks the release of the balance of the funds in Court. In the alternative, it seeks a garnishee order against the funds on the basis of its 13 April 2017 Federal Court judgment.

29. On 28 April 2017, as earlier indicated, the Court (Lindsay J) ordered Elite: to publicise its intention to make this application; to serve it on Mrs Santoro; and to bring it to the attention of any other potential claimant on the funds.

30. The Court is satisfied that Elite complied with the April 2017 orders. But the publication of the application brought out a number of competing claimants to the funds. These claimants have already been identified. By the time the hearing commenced the following claims were being pressed:

1. DuffyKennedy Pty Ltd (“DuffyKennedy”) was seeking an order by motion dated 13 January 2017 to be joined as a party to the proceedings. It claimed a declaration that Mrs Santoro is indebted to it in a sum of $78,460.03. The Court ordered that DuffyKennedy be joined as the tenth defendant.

1. Carrington Electrical Pty Ltd (“Carrington Electrical”), was seeking by motion filed on 17 May 2017 an order that it be joined as a party to the proceedings, claimed an unsecured debt owed by Mrs Santoro to it. The Court ordered that Carrington Electrical be joined as the eleventh defendant.

2. Dominic Calbretta, as Liquidator of Bono Group Pty Ltd (“Bono Group”) was seeking by motion filed on 17 May 2017 to be joined as a party to the proceedings. Bono Group also claims to be owed monies by Mrs Santoro. The Court ordered that Dominic Calbretta be joined as the twelfth defendant.

31. Neither Elite nor any of the other applicants claimed to have a written instrument creating an equitable interest in the properties (as would satisfy the requirements of Conveyancing Act1919, ss 23C and 54A), in turn leading to an interest in the funds in Court, realised from the sale of the properties.

32. Where equitable claimants compete for funds in Court, the procedure is clear that the Court should identify the person or persons prima facie entitled to the funds (in this case Mrs Santoro); then the claimant should seek to establish the claimant’s beneficial interest and to identify other potential claimants to the funds: IMB Ltd v Nallathambi [2009] NSWSC 1387 at [8] and Commonwealth Bank of Australia v The Estate of the Late Mahmoud Slieman [2010] NSWSC 661 at [8]. Once this is done, the Court will be put in a position to determine priorities between claimants and then authorise payment out under UCPR, Part 55.

33. The identification of these other potential claimants has occurred here through the advertising of Elite’s application in April 2017 and through the further advertising directed in February this year.

34. But no claimant now presses a beneficial entitlement to the funds in Court. All these claimants are now only pressing claims as unsecured creditors. The parties advanced competing evidence and submissions to establish they are unsecured creditors of Mrs Santoro. All their submissions sought payment out of Court.

35. Elite already has a judgment. It does not have to prove its claim any further. But there seems to be no good reason why the other unsecured claimants should not also be allowed to proceed to judgment as well before the Court considers the issue of payment out of Court. As earlier indicated the Court allowed each of the claimants other than Elite to read the evidence in support of their respective claims.

36. The principal findings supporting the conclusion that the claimants are creditors of Mrs Santoro in the amounts claimed are set out in the next section, followed by the Court’s analysis of the claims.

DuffyKennedy’s Claim

37. The tenth defendant, DuffyKennedy, conducts a construction business. It seeks the entry of judgment for and the recovery of $78,460.03 from Mrs Santoro.

38. In 2012, DuffyKennedy entered into an agreement with Ms Santoro to supply to her, via third party suppliers, concrete and timber flooring for the Barden Ridge property. DuffyKennedy alleges this agreement was formed during conversations in January 2012 between Mrs Santoro’s husband, Mr Vince Santoro, acting as her agent, and the sole director of DuffyKennedy, Mr Gavin Duffy, as its agent.

39. The evidence establishes to the Court’s satisfaction that DuffyKennedy agreed to arrange for the supply of concrete and timber flooring to Mrs Santoro in return for the payment an amount calculated on the basis of the usual margin charged by DuffyKennedy for its supply (which was a mark-up of 20%). The evidence also appears to offer support for the making of an agreement for the grant of a security interest by Mrs Santoro to DuffyKennedy in the Barden Ridge property to secure the payment of the monies owed, although in the end DuffyKennedy only pressed an unsecured claim for money. To the extent that Mr Santoro is also liable on this agreement he is jointly and severally liable with Mrs Santoro.

40. DuffyKennedy issued an invoice for the sum of $206,400.00 to Mr and Mrs Santoro on 24 August 2012. DuffyKennedy calculated that amount by estimating the materials supplied, plus a 20% margin, plus 10% GST (“the invoiced amount”). But it turned out there had been an under supply of materials, compared with the estimate in the invoice. The actual supply of materials (including the 20% margin and GST) only amounted to $78,460.03 (“the actual amount”). The actual amount owing was reconciled by reference to the supplier’s invoices to DuffyKennedy, for the material that was supplied to Mrs Santoro. DuffyKennedy issued a credit note to Mr and Mrs Santoro (called in the evidence an “Adjustment Note”) on 13 June 2012 for the amount of $127,939.97. This was the difference between the invoiced amount and the actual invoiced value of the materials supplied. The breakdown of the amount owing is as follows.

41. I am satisfied that the evidence establishes that DuffyKennedy arranged for the supply of concrete and timber flooring to Mrs Santoro on three occasions between February and July 2012.

1. On or about 1 February 2012, DuffyKennedy agreed to supply and then supplied concrete to Mrs Santoro through a third party supplier, Boral Construction Materials Group Limited (“Boral”). In respect of those supplies between 15 February and 24 August 2012, Boral issued to DuffyKennedy invoices amounting to $25,383.36.

2. On or about 11 July 2012, DuffyKennedy arranged to have timber flooring supplied to Mrs Santoro through a third party supplier, E & D Danias Pty Ltd trading as Danias Timber (“E&D Danias”). The timber flooring was supplied and on 11 July 2012, E&D Danias issued to DuffyKennedy an invoice in the sum of $20,000 in respect of that supply.

3. On around 11 July 2012, DuffyKennedy arranged to have additional timber flooring supplied to Mrs Santoro through a third party supplier, Hardwood Floors Pty Ltd (“Hardwood”). The timber flooring was supplied and on 16 July 2012, Hardwood issued DuffyKennedy an invoice in the sum of $20,000 for that supply.

42. These three amounts add to $65,383.36. DuffyKennedy forwarded these invoices to the Santoros. DuffyKennedy’s 20% mark-up brings its total claim to $78,459.60. The claim made varies insignificantly by a few cents.

43. Mr and Mrs Santoro did not pay these invoices. On or about 9 April 2013, Mr Duffy met with Mr and Mrs Santoro to follow up payment of the invoices. The Santoros made admissions on this occasion that the monies claimed on the invoices was due from them. The evidence establishes that Mr Santoro told Mr Duffy, apparently in Mrs Santoro’s presence, that the invoice would be paid as soon as the Barden Ridge property was sold, using “the proceeds from the sale of the Barden Ridge property”. This was a concession that the amount claimed was not disputed and would therefore be paid in due course.

44. Mr Duffy had another conversation with Mr and Mrs Santoro at a mutual friend’s wedding on 3 August 2013. At this meeting, making another admission Mr Santoro assured Mr Duffy, “we will pay you soon”. But DuffyKennedy still was not paid. On 29 January 2014, Mr Duffy tried conducting Mr Santoro by telephone. But there was no answer.

45. Shortly after that attempted telephone contact to follow up payment, Mr Duffy went out to the Barden Ridge property to try and meet the Santoros. But by then neither Mr nor Mrs Santoro was at the property. Mr Duffy was met by a tenant, who said he was renting the property.

46. On the basis of these findings I conclude that the amount $78,460.03 remains owing by Mrs Santoro to DuffyKennedy.

Bono Group’s Claim

47. Bono Group operates a concreting works business. Mr Theodore Bonatakis is Bono Group’s sole director. From 2011, Mr Bonatakis carried out concreting works through Bono Group for Mr and Mrs Santoro’s company, Elite, at various constructions sites around Sydney.

48. In late 2011, Mr Bonatakis had conversations with Mr Santoro about undertaking concreting works at the Barden Ridge property. Shortly after those conversations, Mr Bonatakis went out to the Barden Ridge property. There he met Mr and Mrs Santoro, and Mr Perry Condoleon, a licensed builder, who had been engaged to superintend the construction of a substantial residence on the site.

49. The evidence establishes to the Court’s satisfaction that at that meeting, Mr Bonatakis agreed to carry out concreting works on the Barden Ridge property on a “do and charge basis” at the rate of $60.00 plus GST per hour. After receiving architectural and structural drawings from Mr Condoleon, Mr Bonatakis commenced carrying out the requested concrete works at the Barden Ridge property, through Bono Group. These works included: forming and reinforcing strip footings; completing formwork; laying out steel reinforcement, pouring and finishing the ground floor slab and first floor slab; concreting outside footpaths; concreting the driveway; and finishing polished concrete for the garage. Mr Bonatakis sub-contracted up to ten different concreters to do all this work.

50. Mr Bonatakis was not paid for the work. After he had finished the ground floor slab, I accept that he had a conversation with Mrs Santoro in the presence of Mr Condoleon, and Mr Bonatakis’ site-supervisor, Mr Celso Canovo, in which he asked to be paid. Mrs Santoro in substance admitted the amount due at that point, when she responded to him, “We are a bit strapped for cash. Bear with me and I will pay you soon”, and “Give me to next week and I will give you some money”.

51. Mr Bonatakis was not paid the following week. Mr Bonatakis had another meeting at the property with Mr and Mrs Santoro and Mr Condoleon. In this meeting Mr Bonatakis again asked to be paid. Mrs Santoro replied, “Please, I need you to finish so I can pay you”, and “I can pay you as soon as I’ve sold the house”. I accept that as a result of this statement Mr Bonatakis decided to finish the remaining works, believing that he would be paid in the end. When the works were finished he gave Mrs Santoro a tax invoice for $139,733 (including GST).

52. Shortly after issuing the invoice, Mr Bonatakis received a phone call from Mr Santoro, demanding that he not contact Mrs Santoro again. Mr Santoro is alleged to have said to Mr Bonatakis, “Don’t let me catch you around. If I was you I would wipe the debt. My wife’s giving you nothing”. I accept that Mr Bonatakis replied to this, “I’m not wiping the debt”. I also accept that Mr Santoro then responded menacingly, “Watch your back, there will be people coming for you”.

53. Mr Bonatakis was undertaking other work for Elite, apart from the concreting at the Barden Ridge property. He recalls that one of these was a job site in Potts Point. About the time of these conversations with Mr Santoro, Mr Bonatakis recalls a number of male persons walking onto the Potts Point site looking for Mr Santoro saying that he owed them money. He also recalls that members of bikie gangs were attending construction sites in which Mr Santoro was involved and attempting to take machinery for debts that he allegedly owed. Fearing for his safety, Mr Bonatakis made no further attempts to claim the money Mrs Santoro owed to him. Mr Bonatakis has still not been paid.

54. But for legal issues arising under the Home Building Act 1989 (“HBA”), the Court is satisfied that Mrs Santoro owes Bono Group $139,733, including GST in respect of Bono Group’s supply of concrete to the Barden Ridge site. But as will be seen there is a supervening issue about the enforceability of Bono Group’s contract which is discussed below.

Carrington Electrical’s Claim

55. Carrington Electrical operates an electrical works business. It is a licensed builder under the HBA.

56. Mr George Giannaros is a director of Carrington Electrical. In February 2012, Mr Giannaros had several conversations at his office in Belmore with Mr and Mrs Santoro, Mr Condoleon, and Mr Condoleon’s foreman, Mr Ray Hanna. During the meeting, Mrs Santoro asked Mr Giannaros whether he would be interested in carrying out electrical works on the Barden Ridge property. In April-May 2012, Mr Giannaros met with Mr and Mrs Santoro again and I accept they agreed to carry out the electrical works on the Barden Ridge property at an hourly rate of $85, with a 20% mark-up on materials supplied in the course of the works.

57. Carrington Electrical commenced the installation of a complex range of electrical works to the property on 11 May 2012. Those works included the supply, wiring, commissioning and installation of the following: light fittings; power points; audio, surround sound and television systems; a CCTV surveillance system; an intercom system; and an alarm system. The evidence established all these electrical systems and components were installed.

58. By October 2012, Carrington Electrical employees informed Mr Giannaros that other contractors on site were not being paid for the work they had done at the property. So in late October - early November 2012, Mr Giannaros attended the Barden Ridge property to meet Mrs Santoro to discuss payment for the work. These discussions with Mrs Santoro all assumed that the electrical work had been done and that money was due to Carrington Electrical for that work. Mr Giannaros asked her, “Who do I invoice to get some money in?”. He deposes that Mrs Santoro replied, “We have no money. We need to finish the house to sell it so that we can pay you”. Mr Giannaros said, “If you give me your word that when you sell the house you will pay me, I’ve got no issue”. Rene Santoro replied, “You have my word”.

59. On 6 November, about a week after his conversation with Mrs Santoro, Mr Giannaros issued a tax invoice for the electrical works Carrington Electrical had completed at the Barden Ridge property, in the amount $50,919 (including GST).

60. On the basis of Mrs Santoro’s assurances of payment, between 7 November 2012 and 16 January 2013, Carrington continued to carry out electrical works on the property. It supplied these works on three further occasions.

61. On about 16 January, Mr Giannaros rang Mr Hanna to enquire whether the house had been sold but Mr Hanna was not able to tell him. Shortly after that phone conversation, Mr Giannaros received a phone call from Mr Santoro in which I accept Mr Santoro threatened him in the following terms, “Do you know who the fuck I am? You’re not going to get anything. I’m going to throw you off the gap. Stay away from my wife”.

62. Carrington Electrical’s invoice dated 6 November 2012 for $50,919.00 was for goods and services of $46,290 plus GST of $4,629. The invoice broke down the electrical systems, components and goods installed in detail.

63. The Court is satisfied that Carrington Electrical has not been paid for these electrical works at the Barden Ridge property. But, as with Bono Group an issue arises as to whether the amount claimed on the invoice is recoverable by reason of the provisions of the HBA.

The Home Building Act and the Quantum Meruit Claim

64. The HBA regulates assurance of quality building work in the residential building industry in New South Wales. The HBA applies to “residential building work” and “specialist work” entered into on or after 1 May 1997. The concreting works carried out by Bono Group are residential building works, and the electrical works carried out by Carrington Electrical are residential building works and also specialist works, within the meaning of the HBA.

65. Under HBA, s 10 a person who contracts to do residential building work or specialist work but who does not meet certain requirements of the HBA is precluded from enforcing the contract and bringing a claim for damages for breach of contract. It is not in contest that both Bono Group and Carrington Electrical are unable to enforce their agreements with Rene Santoro under the HBA. This is for a number of reasons. Neither Bono Group nor Carrington Electrical: (1) entered into a written agreement with Rene Santoro (in breach of HBA, s 7); (2) took out home owners’ warranty insurance (in breach of HBA, s 92); or (3) in Bono Group’s case, held the requisite license to carry out building work under the HBA. Therefore under HBA, s 10 they are unable to recover payment for an action for breach of contract.

66. Although Bono Group and Carrington Electrical cannot enforce each of their agreements with Rene Santoro against her, it is still open to them to pursue a claim against her on a quantum meruit basis. Before a quantum meruit claim can be made out in their favour the Court must determine: (1) the reasonable value of the concreting works and the electrical works provided to, and accepted by Mrs Santoro; and (2) whether it is “just and equitable”, within the meaning of HBA, s 94(1A) for Bono and Carrington to recover on a quantum meruit basis, notwithstanding their non-compliance with the HBA.

67. These reasons now address each of these matters.

68. The Reasonable Value of the Works. In assessing the reasonable value of the work done by each of Bono Group and Carrington Electrical, the Court’s task is to ascertain what would be fair and reasonable compensation to the builder for the goods provided or services performed, and which were accepted, actually or constructively, by the recipient. There is no issue that the works in question were accepted by Mrs Santoro.

69. To establish the reasonable value of the work done, both Bono Group and Carrington Electrical rely on an expert report of Adam Perigo dated 5 February 2018, entitled “Civil and Electrical works performed by Bono Group and Carrington Electrical” (“the Perigo Report”). The Perigo Report confirms that the value of the work provided by Bono Group, as claimed by Bono Group, is in line with industry rates for work of that kind. The Perigo Report also confirms that the labour and materials for the electrical works, as claimed by Carrington Electrical, is in line with industry rates for work of that kind. The Court accepts this evidence. The quantum meruit amounts in this case are equivalent to the invoiced amounts. That will not always be the case but is the outcome that the Court accepts on the basis of the Perigo Report.

70. Having assessed the reasonable value of the concreting works and the electrical works done to the Barden Ridge property as corresponding with the amounts that Bono Group and Carrington Electrical claim respectively in their invoices, the Court must now decide whether it is “just and equitable” for Bono Group and Carrington to recover for the work done on a quantum meruit basis.

71. Is Recovery Just and Equitable? Bono Group and Carrington Electrical contended the Court should be satisfied that it is also just and equitable for them to recover monies from Mrs Santoro on a quantum meruit basis. Their reasons for so submitting are persuasive.

72. First, there is no evidence that Bono and Carrington acted dishonestly in not having secured a contract for insurance under HBA, s 92. Quite the contrary, the evidence establishes that Mrs Santoro and her husband actively persuaded the principals of these companies to become involved in undertaking “residential building work” and “specialist work” at the Barden Ridge property and induced them to continue to complete those works on the basis that they would be paid.

73. Second, there is no evidence that the failure to have a contract of insurance has had a negative effect on the resale value of the Barden Ridge property for the purpose of the matters to which the Court can have regard under HBA, s 94(1C). The failure to have contracts of insurance would only be likely to negatively affect the resale value, if there was unresolved claim for defective building work at the property. There was no such claim.

74. Third, the fact that Mr Perry Condoleon, a licensed builder, was present on site during the commissioning of the electrical and concrete works provides some explanation for why insurance was not obtained. The evidence establishes that from the very first moment that the principals of Bono Group and Carrington Electrical were involved at the site, they were introduced to Mr Condoleon and placed under his direction or that of his foreman, Mr Hanna. Both Bono Group and Carrington Electrical were conscious that Mr Condoleon was a licenced builder and that appeared to make them more comfortable to carry out the works that were requested of them.

64. Fourth, action for any complaint about the quality of the electrical works would now be statue barred. Even if insurance had been taken out, the HBA statutory policy would now not respond to any claim that might arise. This would on its own be a weighty reason to find that recovery on a quantum meruit basis was permissible.

65. Fifth, there is no evidence of any significant defects in the work carried out by Bono Group or Carrington Electrical. Importantly, at no stage did Mrs Santoro complain about defects in the work. But she readily admitted that payment for the work was due and should come out of the proceeds of sale of the property.

66. Sixth, Bono Group and Carrington Electrical carried out the works in good faith, and their conduct viewed in the whole of the surrounding circumstances does not exhibit blameworthiness such as to make it inappropriate for them to receive a reasonable reward for the work that has been done.

67. For these reasons, the Court concludes that it is just and equitable for Bono Group and Carrington Electrical to recover a reasonable reward for the work completed by them for the benefit of Mrs Santoro on a quantum meruit basis. That reasonable reward corresponds in this case to the amount they have invoiced.

Competing Unsecured Claims to an Insufficient Fund

79. Various legal analogies are available to resolve competing unsecured claims to a fund that is insufficient to satisfy them all. Interpleader proceedings are one analogy which are governed by UCPR, r 43. On an interpleader motion, the Court may make such orders “as it thinks fit”: UCPR, r 43.7. The nature of interpleader relief which allows for the competing claims to be determined by the Court has been extensively discussed: De La Rue v Hernu Peron & Stockwell Ltd (1936) 2 KB 164 and Australian Customer Target Information Code Pty Limited v Cabool HoldingsPty Limited [2003] NSWSC 753 at [9] – [10].

80. Principles of garnishment provide another analogy. The applicable rule is UCPR, r 39.3. Where money has been paid into Court, the Court can be placed in the position of a garnishee. But this is not a true garnishment: Westpac Banking Corporation v Morris [1998] NSWSC 66. In the field of garnishment, where a claim by garnishee that someone other than the judgment creditor may be entitled to any money to be paid under a garnishee order or may be entitled to an interest in such money, then UCPR, r 39.41 provides for the Court to “hear and determine the garnishee’s claim and give such judgment or make such order in respect of the claim… as the nature of the case requires”. If a third party has a lien or charge over the attached debt, the Court must take that fact into account: MG Charley Pty Ltd v FH Wells Pty Ltd [1963] NSWR 22; 80 WN (NSW) 754. A third party may be given leave to appear on the motion and assert a claim to the debt: Wentworth v Rogers [2003] NSWSC 472.

81. Money paid into Court as security for a judgment may also be the subject of a charging order: Patterson v Cohen [2006] NSWSC 424. Elite’s liquidator, although having the benefit of a judgment, has not yet applied for a charging order. Under Civil Procedure Act2005 (“CPA”), s 106 (1)(c) the Court has a discretion to grant a charging order by which “a judgment debt may be enforced”.

82. The applicants here are all seeking payment out of Court. Funds paid into Court “may only be paid out of court pursuant to the directions of the Supreme Court”: UCPR, r 55.11. That power of directions is unconfined. On its face, this power is broad enough to encompass the giving of directions for the trial of issues still to be contested among competing claimants before the payment out of Court is finally authorised.

83. That implies a broad power to do justice between competing claimants. If one applicant is in a more advanced position to seek an attachment order or to seek payment out from the funds, in fairness that applicant may have to wait so other claims can be resolved. That is the situation here. Disadvantages to competing claimants may be able to be minimised by staying proceedings and ordering the various claimants to provide security for the costs of other claimant parties, by analogy with what can occur in interpleader proceedings, where the ordinary rules as to security for costs may apply: Tudor Furnishers Limited v Montague and Finer Production Co Ltd [1950] Ch 113.

84. Where the monies paid into Court represent the fund of a debtor, for which fund various claimant creditors are competing, before paying funds out of Court the Court’s role is to determine the conflicting claims and counterclaims, so that the funds in Court could satisfy any orders, including any orders for costs, made by the Court consequent upon its determination of those conflicting claims, and the monies are held to be dealt with in accordance with the orders of the Court and not otherwise: Harmer v Federal Commissioner of Taxation (1991) 173 CLR 264; [1991] HCA 51 at CLR 274.

85. Finally, the principle that “equity is equality” will, in my view, apply to the distribution of the funds if multiple claims are established against the funds in Court and the funds are insufficient to meet all claims. The maxim “equity is equality” is the basis of the rule which requires the rateable distribution of equitable assets between specialty and contract debts: Wolestoncroft v Long (1663) 1 Cas in Ch 32; 22 ER 679; and Hixon v Wytham (1675) 1 Cas in Ch 248; 22 ER 784, see also JD Heydon, MJ Leeming and PG Turner, Meagher, Gummow & Lehane’s Equity: Doctrines and Remedies (5th ed, 2014, LexisNexis Butterworths) at [3-130].

86. Here the parties agreed that if Bono Group’s and Carrington Electrical’s claims were established that the funds in Court should be paid out according to this principle. And they have agreed upon orders to reflect this. These orders are made below.

87. The modern analysis of this principle illustrates its utility. Humphris, in the matter of Hazelton Air Charter Pty Limited v Mentha [2002] FCA 529; (2002) 41 ACSR 472 (“Humphris”) was such a case. In Humphris both the Ansett and Hazelton airline groups were in administration and an issue arose as to how a fund of $150 million would be distributed among creditors of the two groups. Goldberg J was considering the distribution of the fund which had been provided by the New Zealand government to release Air New Zealand and its directors from all claims that Ansett or Hazelton may have arising out of a letter of comfort given by Air New Zealand in late August 2001 and from claims arising out of the management and affairs of the two groups.

88. At the time the memorandum of understanding was signed with Air New Zealand all potential claims had not been identified by the administrators. When the memorandum was signed the $150 million was paid to the administrators of Ansett but it was agreed the money was for the benefit of both groups (Ansett and Hazleton). But the administrators could not agree on how the money should be apportioned between the groups and their creditors. To resolve the dispute, administrators sought a declaration from the court as to how the money should be apportioned. They each advanced a proposed apportionment on grounds of fairness and appropriateness. But the Court rejected the proposals of both administrators and applied the principle of equality in distribution of the funds.

89. Before setting out the statements of principle that emerge from Humphris, the background may be shortly summarised. The parties identified a number of possible basis of distribution of the $150 million which his Honour summarised as follows:

“[17]   The parties identified a number of possible bases by reference to which the apportionment of the $150m could be determined:

(a)   a comparison of the total gross liabilities of the Ansett group and the Hazelton group;

(b)   a comparison of the net liabilities of the Ansett group and the Hazelton group;

(c)   a comparison of the employee entitlements of the Ansett group and the Hazelton group which were entitled to priority payment.  This basis was supported by the Australian Council of Trade Unions and twelve unions (“the ACTU”) which represented the interests of employees and former employees of the Ansett group;

(d)   a comparison of the trading losses of the two groups during the period of their respective administrations;

(e)   mathematical equality according to the number of claimants to the fund;

(f)   a comparison of the claims released under the Letter of Comfort.”

90. But Goldberg J indicated that he did not consider that any of the bases for apportionment advanced by the parties was the appropriate method to use or adopt (at [22]). His Honour concluded that he was not guided by any provision in the memorandum of understanding as to the intention of the parties how the fund was to be apportioned between the two groups and whether it would be on the basis of the proportions of employee entitlements, the number of creditors, or the relative proportion of liabilities (at [25]). His Honour acknowledged that the various bases advanced by the Ansett administrators and the Hazelton administrators for apportionment had an element of fairness and appropriateness about them but “they are not predicated upon any legal or equitable principle” (at [30]). His Honour determined that his task was “to determine by reference to appropriate principles of law in equity, what was the extent and measure of the interest in the fund of the two groups at the time which it was agreed to create the fund, namely the time of execution of the memorandum”.

91. Goldberg J determined that the correct approach was as follows, as his Honour explained in [32] and [35]:

“[32]   I consider that the proper principle to be applied to determine the extent of the respective interests of the two groups in the fund and the manner of its apportionment between them is to determine what was bargained away or given up, by each group in exchange for the receipt of the $150m and then to place a value on what each group bargained away or gave up.  In this way it is possible to identify the relative value of what was relinquished in exchange for an interest in the fund of $150m.

…

[35]   In the absence of any agreement as to the apportionment of the $150m between the Ansett group and the Hazelton group, I consider that the measure of their respective proprietary interests in the fund of $150m is to be determined by reference to the relative proportions of the value of the rights or claims which each of them bargained away and gave up in exchange for the receipt of the $150m.  Each of them had a share in the fund of $150m proportionate to the value of what they had bargained away.”

92. Goldberg J considered that he was, in taking this approach, applying what has been called “the principle of proportion”. Goldberg J explained the case law behind this principle in the following way:

“[36]   This approach reflects the application of what has been called the principle of proportion.  An illustration of the principle is found in Spence v Union Marine Insurance Company Limited [1868] LR3CP 427.  The plaintiff shipped on a boat 43 bales of cotton which were insured by the defendant.  In total, 1,876 bales were shipped on the boat.  The boat was wrecked and all the cotton was damaged or lost.  Most of the cotton that was damaged could not be identified by reference to its owner.  Of the 1,876 bales shipped 231 were lost and 1,645 bales arrived without any distinguishing marks on them.  The plaintiff contended that all of its bales (apart from 2 bales) should be considered as included in the lost bales because as a result of the damage to the remaining bales, it was impossible for the plaintiff to retain the identical bales which it had shipped and insured.  The Court rejected the plaintiff’s argument.  The Court said at 437:

“In our own law there are not many authorities to be found upon this subject; but, as far as they go, they are in favour of the view, that, when goods of different owners become by accident so mixed together as to be undistinguishable, the owners of the goods so mixed become tenants in common of the whole, in the proportions which they have severally contributed to it.”

The Court continued further at 439:

“We cannot assume that the whole of the plaintiffs’ forty‑one bales were amongst those that were destroyed, any more than we can assume that they all formed part of the 1645 which were brought home; and we see no means of determining the extent of the interest of the several owners, except by adopting a principle of proportion, and which would, we think, be equally applicable in determining the plaintiffs’ portion of the 231 bales that were totally lost as of the 1645 which arrived in this country, though without marks.

The principle of proportion is that which was applied by Lord Ellenbrough, where one gross sum was paid to a broker in respect of two debts due to different principals without distinguishing how much was paid in respect of each:  Flavenc [Favenc] v. Bennett 11 East, at p.41.  It is also the principle adopted in cases of general average, and of jettison, where it is not known whose goods are sacrificed, as stated by Cassaregis and Emerigon in the passages that were quoted in the argument; and we think it is the proper principle to apply to this case.”

Spence v Union Marine Insurance Co (supra) was cited with approval in Indian Oil Corp Ltd v Greenstone Shipping SA [1987] 3 All ER 893 at 903, and in Re Stapylton Fletcher Ltd [1995] 1 All ER 192 at 208‑209.

[37]   In Favenc v Bennett (1809) 11 East 36; 103 ER 917, the defendants had purchased two parcels of coffee from a broker. One parcel cost more than £707 and the other cost more than £272. The defendants accepted a bill for £800 which was more than either of the two amounts alone but less than the total. There was no specific appropriation of the amount to either parcel. Lord Ellenbrough CJ concluded that the amount should be apportioned between the respective owners of the coffee in the proportions which their debt bore to the total of the debts.”

93. His Honour then considered the submissions of the Hazelton administrator as to what would be the fallback position if the court was unable to determine the common intention of the parties. The Hazelton administrators’ submissions are recorded as follows:

“[45]   The Hazelton administrator submitted that if I was unable to determine the common intention of the parties as to the method of apportionment, the equitable maxim “Equity is Equality” was relevant.  The Hazelton administrator relied on the following passage in Halsbury’s Laws of Australia, volume 12 at [185‑115]:

“Generally speaking, equity looks to an equal distribution of profits and losses proportionate to the claims or liabilities in question.”

In In re Steel, decd[1979] Ch 218 (cited as a footnote to that passage), Megarry V-C said at 226:

“When the maxim ‘equality is equity’ comes to be applied, it often, and I think usually, will mean mathematical equality, in that no other basis of equality can be discerned:  but given suitable circumstances a true equality of treatment may require the application of a mathematical inequality, and instead a proportionate equality. …

There seems to me to be a real difference between shares of a fund on the one hand and legacies of fixed amounts on the other hand:  one moves in a world of proportions, and the other in a world of determinate sums.”

(See also Bialkower v ACOHS Pty Ltd (1998) 83 FCR 1 at 13).”

94. His Honour concluded (at [46]) that there was no common intention of the parties and he then applied the principle of equity as equality in the following way:

“[47]   Against this background, the maximum “equity is equality” is to be applied not by reference to the number of companies in each group, three in the case of the Hazelton group and forty‑one in the case of the Ansett group, but rather by reference to the proportionate share of the fund measured by the extent and value of the claims or rights given up in exchange for an interest in the fund.

…

[50]   Nevertheless, if the task at hand is to determine and value the extent of the interests of the Ansett group and the Hazelton group in the fund of $150m, an attempt must be made by the parties to value the claims given up in exchange for those interests.  To adopt an apportionment based on the other alternatives proffered by the parties is to ignore principle and, in effect, conduct a conciliation or an ex aequo bono arbitration which is not the task of the Court.

[51]   A number of the submissions of the parties led in this direction.  For example, the Hazelton administrator said that his proposal to apportion the $150m in proportion to the unsecured liabilities of the Hazelton group and the Ansett group was “commercial, pragmatic, transparent, realistic and fair”.  That may be so, but it is not a basis upon which the Court can resolve the present issue.  The matter must be determined by reference to principles of law and equity, rather than by reference to notions of commerciality and fairness.”

95. Similar principles are applicable in this case. The Court must apply the principle that equity is equality and distribute the present funds in proportion to the value of the claims made upon them and the Court will so order. But giving effect to an element of compromise, including as to costs, the parties have conveniently agreed upon a form of orders to give effect to this principle in this case in any event, were the Court to find the claims of Bono Group and Carrington Electrical established. The Court has found their claims established, so it will make the orders sought.

A Specific Gross Sum Costs Order and Costs Generally

96. On behalf of Elite, ERA sought a specific gross sum costs order under CPA, s 98(4)(c). This order was made on 7 February 2018. These are the reasons for that order.

97. The Court is empowered to make a specific gross sum costs orders in lieu of an assessment of costs in a broad range of circumstances where a full costs assessment would be unnecessarily burdensome to the parties.

98. The applicable law in relation to CPA, s 98(4)(c) may be shortly stated. The Court’s power to make a specified gross sum costs order instead of assessed costs was in the rules of this Court by 1970. These rules were initially enacted as the Fourth Schedule to the Supreme Court Act No. 52, 1970. And Part 52, Rule 6(2)(c) of the Fourth Schedule had in turn been based on a rule to similar effect in the English Rules of the Supreme Court (Revised in 1965) Order 62 Rule 9 (4)(b) entitled “Fractional or gross sum in place of taxed costs”.  One early example of the application of the English predecessor rule is Silva v Czarnikow Limited [1960] 1 Lloyd’s Rep 319 in which, after an action lasting eight days, the managing clerk for the defendant’s solicitor estimated the total legal costs at over GBP 2,000 and based upon that evidence the judge fixed under O 62 r 9(4)(b) a gross sum in lieu of assessed costs at GBP 1,250.

99. Reported Australian case law on the topic of specified gross sum costs orders is scant until the early to mid - 1990s, when in cases such as Beach Petroleum NL v Johnson (No. 2) (1995) 57 FCR 119 (“Beach Petroleum”), judges began to commonly apply analogous provisions. Part 52A (Costs) was inserted into the Supreme Court Rules 1970 in 1994, which provided in rule 6(2) that the Court could make a gross sum costs order. This Part was repealed in 2005, upon the passing of the CPA.

100. But Courts have long exercised the power to fix a specified gross sum instead of assessed costs as part of the Court’s broad costs discretion, without the need for specific authorising rules.  One early example of the High Court exercising such jurisdiction is Edgar & Walker v Mead (1916) 23 CLR 29 in which Isaacs J (at 46) explained his application of the practice adopted and described by Jessel MR in Willmott v Barber (1881) 17 Ch D 772, as follows:

“But taking everything into consideration, including the several findings in favour of the respective parties, and realizing the desirability of putting an end to unnecessary further expense, I act on the principle laid down or recognized by the Court of Appeal in Willmott v. Barber. It was there stated that the discretion of the Judge as to costs is very large and extends even to the course which Jessel M.R. said he sometimes adopted, and generally found the parties were grateful to him for so doing. He thus described the course: “fix a definite sum for one party to pay to the other, so as to avoid the expense of taxation, taking care in doing so to fix a smaller sum than the party would have to pay if the costs were taxed.”

101. In New South Wales this Court’s specified gross sum costs jurisdiction is now embodied in CPA, s 98(4)(c) which relevantly provides as follows:

“(4)   In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to:

(a)   costs up to, or from, a specified stage of the proceedings, or

(b)   a specified proportion of the assessed costs, or

(c)   a specified gross sum instead of assessed costs, or

(d)   such proportion of the assessed costs as does not exceed a specified amount.”

102. It is to be noted that the jurisdiction is only available before a matter is referred for the assessment of costs.  Referral to costs assessment of the costs orders in question has not occurred in this case, so the specified gross sum costs jurisdiction is available.

103. The principles for the making of specified gross sum costs orders instead of assessed costs are now well settled. The circumstances in which the Court may make a CPA, s 98(4)(c) gross sum costs order are not confined and the power may be exercised whenever the circumstances warrant its exercise, having regard to the scope and purpose of the provision: Hamod v State of New South Wales & Anor [2011] NSWCA 375 (“Hamod”) at [813] and Zepinic v Chateau Constructions (Aust) Ltd (No. 2) [2014] NSWCA 99 at [28] and [29].

104. The purpose of the rule is to avoid the expense, delay and aggravation arising out of taxation:  Beach Petroleum. Probable inability to pay a costs order will usually provide a proper basis for the making of a s 98(4)(c) order. If the unsuccessful party ordered to pay costs is unlikely to be able to pay the amount of costs ordered, then the successful party is further aggravated by having to fund the additional costs of taxation, those costs also probably being unrecoverable: Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 (“Schipp”) at [21] (Giles JA) and Hadid v Lenfest Communications Inc [2000] FCA 628 (“Hadid”) (Lehane J).

105. How does the lump sum assessment take place? The specified gross sum under s 98(4)(c) can be fixed broadly, having regard to all the information available to the Court: Schipp at [22] and Hadid at [27].  The approach taken to the estimation of costs must be “logical, fair and reasonable” and the powers should only be exercised when the Court considers it can do so “fairly between the parties, and that includes sufficient confidence in arriving at an appropriate sum on the materials available”:  Schipp at [22] per Giles JA.”

106. I further summarised the law regarding the powers available under CPA, s 98(4)(c) in Simone Starr-Diamond v Talus Diamond (No. 4) [2013] NSWSC 811.

107. This is an appropriate case in my view for the making of a specific gross sum costs order. The various claimants on the fund have co-operated sensibly and reasonably to permit ERA to undertake much of the work that is necessary on behalf of all parties to give further notice to Mrs Santoro of the various applications in these proceedings. ERA has undertaken this work. Ms Denise Wright in a series of affidavits has set out the nature of that work and the cost of it. Her affidavit breaks down the charge out rates for the various solicitors involved in the matter working on behalf of ERA, including Mr Daren Anderson, Mr Blake O’Neill, Mr Aaron Kam, and herself Ms Denise Wright.

108. Ms Wright has also deposed what she believes to be a reasonable assessment of fees for various stages of Elite’s application based on her experience. Her cost estimates cover the cost of complying with the orders made by White J made on 7 October 2016, the cost of pursuing Elite’s notice of motion filed on 28 April 2017, and an estimate of the additional costs associated with complying with the Court’s orders made on 5 and 7 February 2018. I am satisfied on the basis of the detailed description of the work provided in her affidavits that the work was done, the disbursements were incurred, the costs incurred should reasonably be assessed in the amount which has been agreed between the parties at $68,000. That amount is comprised of an assessment of $7,404 in respect of the orders made by White J and further $52,235.51 in respect of Elite’s notice of motion of 28 April 2017 up until 7 February 2018. The balance of the $68,000 would have been incurred since 7 February 2018.

109. The other parties do not seek a separate costs order in respect of the agreements that they have made with Elite. But they have agreed for their costs to be included in the figures which were the subject of ultimate compromise between the parties and which are reflected in the orders made below. But the making of those orders is triggered by the fact that the Court has found the claims of DuffyKennedy, Bono Group and Carrington Electrical established in the amounts they have pursued.

Interest on Elite’s Claim

110. In her affidavit of 7 February 2018, Ms Denise Wright calculates the post judgment interest pursuant to Federal Court of Australia Act 1976, s 52 calculated upon the principal amount of the judgment debt of $1,049,670 for the period between 18 April 2017 to 7 February 2018, a period of 296 days at a rate of 7.5%. This is a sum of $63,842.94. When added to the judgment debt the total amount due to Elite as at 7 February 2018 is $1,315,743.38. This figure was included in the orders made for judgment for Elite on 7 February 2018.

Conclusion and Orders

111. Accordingly, the Court makes the following orders and directions:

1. Notes that in substitution for the note in paragraph 1 of the orders made on 7 February 2018 the Court will note the following: The First Defendant (Rene Santoro) is liable to the Second Defendant (Elite Civil Group Pty Ltd (in liquidation)) for $1,315,743.38 comprising the total amount of the judgment for the Second Defendant against the First Defendant given by of Jagot J in the Federal Court of Australia on 13 April 2017 and entered on 18 April 2017 in proceedings number (P)NSD948/2014 and post judgment interest pursuant to section 52 of the Federal Court Act 1976 (Cth) up to 7 February 2018.

2. Orders that pursuant to s 98 (4)(c) of the Civil Procedure Act 2005 (NSW), the Second Defendant be paid the sum of $68,000.00 as a specified gross sum for costs instead of assessed costs.

3. Judgment for the Tenth Defendant (DuffyKennedy Pty Ltd) against the First Defendant in the amount of $78,460.03.

4. Judgment for the Eleventh Defendant (Bono Group Pty Ltd (in liquidation)) against the First Defendant in the amount of $127,030.00.

5. Judgment for the Twelfth Defendant (Carrington Electrical Services Pty Ltd) against the First Defendant in the amount of $46,290.00.

6. By consent of the Second, Tenth, Eleventh and Twelfth Defendants, direct the Registrar to apply all moneys held by the court arising from the moneys paid into court on 14 June 2016 by Mr Woodgate and Mr Rowley as trustees for the sale of the properties at 6 Foster Street, Barden Ridge being the whole of the land contained in folio identifier 29/1061416 and 3 Seamans Place, Horningsea Park being the whole of the land contained in folio identifier 3002/10004750 as follows:

1. first, in payment of the sum of $68,000, being the amount of the gross sum cost order specified in paragraph 2 above, to the Second Defendant’s solicitors or as they may direct, and

2. secondly, according to the principles of proportionate equality, to each of the Second Defendant, Tenth, Eleventh and the Twelfth Defendants in amounts that bear to one another for each defendant the same proportions to one another as the following amounts do for each defendant, namely:

1. as to the Second Defendant the sum of $1,315,743.38;

2. as to the Tenth Defendant the sum of $71,921.70;

3. as to the Eleventh Defendant the sum of $108,000;

4. as to the Twelfth Defendant the sum of $42,000.

7. Upon calculation of the amount to be paid to the Second Defendant from the funds in court, pay such amount to the solicitors for the Second Defendant or as they may direct.

8. Upon calculation of the amount to be paid to the Tenth Defendant from the funds in court, pay such amount to the solicitors for the Tenth Defendant or as they may direct.

9. Upon calculation of the amount to be paid to the Eleventh Defendant from the funds in court, pay such amount to the solicitors for the Eleventh Defendant or as they may direct.

10. Upon calculation of the amount to be paid to the Twelfth Defendant from the funds in court, pay such amount to the solicitors for the Twelfth Defendant or as they may direct.

11. Order that notice of these orders be given to the First Defendant by sending the orders via email to the confidential email addresses identified in paragraph 7 of the “Confidential Affidavit” made 7 February 2017 and marked “MFI-1” by 16 March 2018.

12. The Notice of Motion of the Second Defendant is otherwise dismissed.

13. The Notice of Motion and Cross Claim of the Tenth Defendant is otherwise dismissed.

14. The Notice of Motion and Cross Claim of the Eleventh Defendant is otherwise dismissed.

15. The Notice of Motion and Cross Claim of the Twelfth Defendant is otherwise dismissed.

16. Order that these orders be entered forthwith.

**********

Decision last updated: 15 May 2018