Trinick as Liquidator of Forgione Family Group Pty Ltd (in liq), in the matter of Forgione Family Group Pty Ltd (in liq) v Forgione (No 2)
[2015] FCA 1525
•16 December 2015
FEDERAL COURT OF AUSTRALIA
Trinick as Liquidator of Forgione Family Group Pty Ltd (in liq), in the matter of Forgione Family Group Pty Ltd (in liq) v Forgione (No 2) [2015] FCA 1525
Citation: Trinick as Liquidator of Forgione Family Group Pty Ltd (in liq), in the matter of Forgione Family Group Pty Ltd (in liq) v Forgione (No 2) [2015] FCA 1525 Parties: GLEN DOUGLAS TRINICK AS LIQUIDATOR OF FORGIONE FAMILY GROUP PTY LTD (ACN 009 363 464) (IN LIQUIDATION) v PASQUALE FORGIONE and FRANCESCO FORGIONE File number(s): WAD 86 of 2009 Judge(s): SIOPIS J Date of judgment: 16 December 2015 Catchwords: COSTS – application for indemnity costs – Calderbank offer – whether the offer was unreasonably refused – whether belief that defences would succeed at trial reasonable. Legislation: Corporations Act 2001 (Cth) s 588M(2) Cases cited: Powell v Fryer (2001) 37 ACSR 589 Date of hearing: 16 December 2015 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 34 Counsel for the Applicant: Mr R Harrison Solicitor for the Applicant: Tottle Partners Counsel for the First and Second Respondents: Mr D Thompson Solicitor for the First and Second Respondents: Thompson Downey Cooper
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 86 of 2009
IN THE MATTER OF FORGIONE FAMILY GROUP PTY LTD (ACN 009 363 464) (IN LIQUIDATION)
BETWEEN: GLEN DOUGLAS TRINICK AS LIQUIDATOR OF FORGIONE FAMILY GROUP PTY LTD (ACN 009 363 464) (IN LIQUIDATION)
ApplicantAND: PASQUALE FORGIONE
First RespondentFRANCESCO FORGIONE
Second Respondent
JUDGE:
SIOPIS J
DATE OF ORDER:
16 DECEMBER 2015
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.Judgment be entered in favour of the applicant against the respondents jointly and severally in the sum of $90,279.75 together with interest from 20 December 2004 to 10 July 2015 $57,165.62 as set out in the schedule to this minute.
2.Judgment be entered in favour of the applicant against the first respondent in the sum $160,964.31 plus interest from 20 December 2004 to 10 July 2015 $102,186.01 as set out in the schedule to this minute.
SCHEDULE OF INTEREST CALCULATIONS
Year First and Second Respondents Total 20 December 2004 to
31 December 200411 days x 6% pa x $90,279.75 $163.24 2005 to 2014 inclusive 10 years x 6% pa x $90,279.75 $54,167.85 1 January 2015 to
10 July 2015191 days x 6% pa x $90,279.75 $2,834.53 TOTAL INTEREST $57,165.62
Year First Respondent Total 20 December 2004 to
31 December 200411 days x 6% pa x $160,964.31 $553.60 2005 to 2014 inclusive 10 years x 6% pa x $160,964.31 $96,578.58 1 January 2015 to
10 July 2015191 days x 6% pa x $160,964.31 $5,053.83 TOTAL INTEREST $102,186.01 3.Each of the parties is to have liberty to apply by no later than noon on 23 December 2015 to vary orders 1 and 2 only insofar as they refer to the amount of interest payable.
4.The applicant’s costs of the proceedings up to and including 20 July 2009 be paid by the respondents jointly and severally to the applicant and if not agreed, then to be taxed on a party party basis.
5.The applicant’s costs of the proceedings from 21 July 2009 be paid by the respondents jointly and severally on an indemnity basis that the respondents pay the applicant’s necessary or proper costs of the proceedings as between the applicant and its solicitors, including counsel’s fees and disbursements.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
WAD 86 of 2009
IN THE MATTER OF FORGIONE FAMILY GROUP PTY LTD (ACN 009 363 464) (IN LIQUIDATION)
BETWEEN: GLEN DOUGLAS TRINICK AS LIQUIDATOR OF FORGIONE FAMILY GROUP PTY LTD (ACN 009 363 464) (IN LIQUIDATION)
ApplicantAND: PASQUALE FORGIONE
First RespondentFRANCESCO FORGIONE
Second Respondent
JUDGE:
SIOPIS J
DATE:
16 DECEMBER 2015
PLACE:
PERTH
REASONS FOR JUDGMENT
On 26 June 2015, I delivered reasons for judgment in this matter. One of the orders I made on that day was that within 14 days the parties were to file a minute of orders which reflected the findings in the reasons for judgment together with the amount of interest payable.
On that day, I also made directions for the filing of affidavits and submissions by all parties to facilitate the determination of the question of costs after senior counsel for the applicant had foreshadowed, when the judgment was delivered, that there might be an application for indemnity costs.
On 21 July 2015, the applicant filed an affidavit by Mr Harrison in support of the applicant’s claim for indemnity costs. However, the respondents have not filed any affidavits or submissions in opposition to the applicant’s claim for indemnity costs.
The applicant, I might say, has not been pressing to have the matter relisted and for costs determined and the parties have cooperated in this respect. In October 2015, a consent order was made deferring the date of the costs hearing. On 7 December 2015, the parties filed another minute of consent order seeking to extend further the date of the costs hearing. In light of the length of time that had elapsed since the handing down of the reasons for judgment, I refused to make the consent order and advised the parties that the matter would be listed for a hearing today.
During the trial the law firm, Ashurst Australia (Ashurst), acted as solicitors for the respondents. However, it is Mr Thompson’s firm, Thompson Downey Cooper, which now acts as solicitor for the respondents and Mr Thompson appears on their behalf today. The respondents are now in dispute with Ashurst.
The respondents have changed solicitors a number of times during the course of this proceeding. The respondents were initially represented by Metaxas & Hager. Then they were represented by the Melbourne firm, Maddocks Lawyers. Thereafter, they were separately represented for a while - Mr Meredith acted for the second respondent and Mr Thompson acted for the first respondent. Thereafter, both respondents were represented by Ashurst up to and at the trial. Now the respondents are represented by Mr Thompson’s firm.
The applicant’s application for indemnity costs is founded on a claim that the respondents unreasonably refused a Calderbank offer made by his solicitor, Tottle Partners, to the respondents by letter dated 20 July 2009; alternatively, an offer made by a letter dated 27 August 2010. Those letters as well as other correspondence relating to attempts to settle the proceedings are annexed to Mr Harrison’s affidavit of 21 July 2015.
The respondents sought an adjournment of the hearing today. Each respondent has filed an affidavit in support of his application for an adjournment. In short, the respondents say that they did not take steps to respond to Mr Harrison’s affidavit of 21 July 2015, and otherwise, to comply with the directions made on 26 June 2015, because the applicant made a without prejudice approach to agree the question of costs and that they had been waiting for a proposal from the applicant. The respondents also said that they were not in a position to deal with the question of indemnity costs because Ashurst has refused to release their files. The respondents said that they wanted an adjournment of the hearing today in order to make an application to the Court for the release of the files by Ashurst so that they can be in a position to make submissions in relation to the claim for indemnity costs made against them.
I refused the application for the adjournment for the following reasons.
In my view, it was open to the respondents to have given evidence as to why they had refused the 20 July 2009 offer and the 27 August 2010 offer without them first having obtained possession of the files being held by Ashurst. This is because the events surrounding the making and refusing of the applicant’s offers of 20 July 2009 and 27 August 2010 predate the engagement by the respondents of Ashurst as their solicitors. In fact, the 27 August 2010 offer was made and declined at a time when Mr Thompson himself was acting for one of the respondents. No adequate explanation was given as to why the respondents were unable to depose as to why they refused the offer of 20 July 2009 or the offer of 27 August 2010, when those offers were made and refused during a period which predated the involvement of Ashurst.
There was, accordingly, in my view, no justification for an adjournment of this hearing.
I now turn to the question of whether indemnity costs should be awarded against the respondents.
As mentioned, the applicant’s primary claim is for an order that the costs of the proceeding up to and including 20 July 2009 be paid by the respondents jointly and severally to the applicant on a party and party basis; and that the applicant’s costs of the proceeding from 21 July 2009 be paid by the respondents jointly and severally on an indemnity basis.
In his submissions, Mr Harrison referred to aspects of the correspondence annexed to his affidavit.
Mr Harrison’s affidavit discloses that, prior to the commencement of the application against the respondents, Tottle Partners wrote a letter dated 23 October 2008 to Metaxas & Hager, the solicitors then representing the second respondent, alleging that the respondents were liable under s 588M(2) of the Corporations Act 2001 (Cth), and advising that the applicant intended to commence proceedings, unless the matter could be settled.
In response to that letter, Mr Grubb of Metaxas & Hager wrote a letter dated 4 November 2008 denying liability on behalf of their client, and expressing reasons why the second respondent was not liable. One of the defences advanced in that letter was that the second respondent was, at all relevant times, a person who was ready, willing and able to meet all of the debts of the company as and when they fell due, and, therefore, the company was not insolvent; and, in those circumstances, there was no insolvent trading as alleged by the applicant.
Another defence referred to in the letter was that the second respondent had relied upon Lincolns, the company’s accountants, to provide him with information and that Lincolns were responsible for preparing all the financial records of the company. Mr Grubb went on to say that Lincolns had not informed the second respondent that there were outstanding tax liabilities. The letter also stated that although Metaxas & Hager were not instructed by the first respondent, that the first respondent would be able to rely upon the same defences.
I interpose to say that, as is apparent from the reasons for judgment that I delivered in June 2015, that at trial, the defences as foreshadowed in Metaxas & Hager’s letter were at the forefront of the defences relied on by the respondents at trial. At trial, the applicant relied on both deemed insolvency and actual insolvency to prove that the company was insolvent when the impugned debts were incurred. In response, the respondents contended that the company was not insolvent because the second respondent was at all material times ready, willing and able to discharge the debts of the company. That same allegation permeated most of the other defences raised by the respondents. As is also apparent from the reasons for judgment, I found that the second respondent had a number of opportunities to give effect to his asserted willingness to pay the company’s debts as and when they fell due, but he failed to do so.
On 20 July 2009, Mr Harrison of Tottle Partners, sent the following letter to Ms Hibberd of Maddocks Lawyers, the solicitors then representing the respondents:
We refer to your letter of 17 July 2009.
…
You stated that you had some difficulty as to whether the amount claimed in the statement of claim for unpaid tax was a “debt” in terms of the Act and whether the company could in various circumstances “incur” such a debt.
You asked us to cite in support of our client’s case some precedent in which there was a finding that the incurring of a tax could be a debt for the purposes of the Act.
Our authorities are:
ŸSands & MacDougall Wholesale Pty Ltd (in liquidation) & Anor v Commissioner of Taxation (1999) 1 VR 489 @ 504;
ŸStandard Charter Bank of Australia v Antico (Nos 1 & 2) (1995) 38 NSWLR 290 @ 314;
ŸShepherd & Anor v ANZ Banking Group Ltd (1996) 20 ACSR 81 @ 89;
ŸHawkins v Bank of China (1992) 26 NSWLR 562 @ 572
ŸPowell v Friar (2001) 37 ACSR 589
There is a slim line of contrary authority being:
ŸCastrisios v McManus (1990) 4 ACSR 1
ŸCommissioner of State Taxation (WA) v Pollock (1992) 9 ACSR 295
That line of reasoning in those two cases has not been followed elsewhere and the usual authority applies that courts should not depart from interpretation already placed on a provision of the Act by another Full Court unless it was convinced that it was plainly wrong.
We now turn to the amount claimed being:
(a)$100,279.25 DCT debt
(b)$17,993.30 being superannuation contributions.
For your clients to propose that an offer of $10,000.00 be accepted in settlement of a claim of $118,272.55 plus interests [sic] and costs does not convey to our client that your clients have seriously considered the amounts claimed and strength of the case against them.
It must also be stressed that the amount offered of $10,000.00 is one twelfth of the principal amount that is sought by way of relief without considering costs and interest. This is not truly a commercial proposal.
Our client does make the following without prejudice offer of settlement:
1.Our client to accept the sum of $60,000.00 (“Settlement Sum”) payable in full in 30 days from the date of this offer.
2.The Settlement Sum to be received in full satisfaction of all claim, interest and cost as set out in proceedings WAD 86 of 2009.
3.This offer to remain open until 5 pm WST 25 July 2009.
4.Upon settlement being reached a brief deed of settlement to be entered into between the parties.
5.Upon payment of the Settlement Sum proceedings WAD 86 of 2009 is to be dismissed with no order being made for costs.
We await your response.
(Original emphasis.)
It is apparent from that letter that there had previously been correspondence between Mr Harrison and Maddocks Lawyers as to whether a tax debt is a debt which could comprise a debt for which the respondents may be liable under s 588M of the Corporations Act. In his letter, Mr Harrison has gone to some length in dealing with that issue and has referred to authorities which support the proposition that a tax debt is “incurred” and can form a basis of a claim in respect of insolvent trading. In fact, one of the cases to which he refers is Powell v Fryer (2001) 37 ACSR 589, to which I referred in the reasons for judgment.
The applicant offered to accept the sum of $60,000 payable within 30 days in full satisfaction of all claims, interests and costs against both respondents. The offer was to remain open until 5:00 pm on 25 July 2009. The respondents did not accept the offer.
However, on 4 November 2009, Maddocks Lawyers, the solicitors acting for the two respondents made a Calderbank offer to the applicant to settle the proceeding. That letter stated that whilst the respondents remained confident of successfully defending the applicant’s claim, they were willing to settle the proceeding on the basis that the respondents would pay the applicant the amount of $20,000 inclusive of costs and interest by way of an upfront payment of $5,000 within seven days of the applicant’s acceptance of the offer, followed by three instalments of $5,000 payable 30, 60 and 90 days respectively after the acceptance of the respondents’ offer. The offer was to remain open until 5:00 pm on 9 November 2009. The applicant did not accept the offer.
Thereafter, the two respondents became separately represented for a period - Mr Bill Meredith of William Llewellyn Meredith representing the second respondent and Mr David Thompson representing the first respondent.
On 17 November 2009, Mr Meredith wrote to Mr Harrison advising that to the extent that the second respondent “may have been interpreted” as having made an offer to settle the proceeding, “such interpretation would have been mistaken”.
By letter dated 27 August 2010, Tottle Partners made a further offer to settle the proceeding. A letter was address to each of Mr Meredith and Mr Thompson who, as I have said, at that time each represented one of the two respondents. It is this letter which the applicant relies upon for his alternative case for indemnity costs.
The letter referred to the previous offer of 20 July 2009 and said that the applicant was prepared to reduce the offer for settlement, and to settle the existing proceeding upon the receipt of the payment of $35,000 which was payable within 30 days of an agreement being reached. The settlement sum was to be in full satisfaction of all claims, interest and costs against both respondents. The offer remained open until 5:00 pm on 31 August 2010. No reply from the respondents was forthcoming.
The first question is whether the offer of 20 July 2009 was unreasonably refused.
The reasonableness of the respondents’ conduct in refusing the offer is assessed by reference to the time of the refusal. As stated in the letter of 20 July 2009, the sum claimed by the applicant at that time was the tax debt and the superannuation contributions which totalled $118,272.55. The offer which was made was to settle all claims including interest and costs, by the respondents making a payment of $60,000.
As is apparent from the minute of proposed final orders produced by Mr Harrison, which only includes interest up to 10 July 2015, the judgment sum in respect of debt for which the respondents are jointly and severally liable is the sum of $147,445.37. The final sum which would include interest up to today will be even greater. I leave out of account the judgment sum against the first respondent personally, and the very large amount that would have been incurred in costs. Even leaving those sums out of account, the final judgment sum against both respondents substantially exceeds the amount that was offered to the respondents to settle the proceeding. This circumstance weighs substantially in favour of concluding that the offer of 20 July 2009 was unreasonably refused by the respondents. However, it is not determinative and it is necessary to consider the respondents’ explanation for not accepting the offer.
As I have already said, in this case, the respondents chose not to address any evidence to this issue. However, correspondence annexed to Mr Harrison’s affidavit and the manner and nature of the respondents’ defences at trial, provide the basis for drawing an inference as to their reason for not accepting the applicant’s offer of 20 July 2009.
I infer that the reason the respondents refused the offer was that the respondents believed that they had valid defences to the applicant’s claims. This is because, even before the proceeding was commenced, Metaxas & Hager referred in their letter to the defence, based on the second respondent’s claim that he was at all times ready, willing and able to discharge the debts of the company, and the defence based on blaming Lincolns, the accountants, and those defences were at the forefront of the respondents’ case at trial. In the reasons for judgment, I found that both defences were untenable.
I found that the defence that the second respondent was always ready, willing and able to pay the company’s debts was founded on a misguided perception of reality by the second respondent when considered by reference to the objective evidence as to what he knew about the dire financial affairs of the company, and the opportunities he had, but failed to take, to pay the company’s debts. Likewise, the defence in which the respondents sought to blame Lincolns, the company’s accountants, was unattractive and also founded on a misguided perception of reality. The respondents’ belief that either of these defences, or indeed, any of their defences, would be successful at trial was, to put it mildly, unreasonable.
In my view, the obstinacy which was demonstrated by the second respondent in the witness box is reflected in the respondents’ refusal to accept the applicant’s offer made on 20 July 2009. In my view, the conduct of the respondents’ in refusing that offer amounts to an unreasonable refusal of that offer. I will make the order for indemnity costs sought by the applicant.
I, therefore, make orders in terms of para 4 of the minute of proposed orders that has been handed up to the Court.
I certify that the preceding thirty‑four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Siopis. Associate:
Dated: 4 February 2016
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