ACN 627 087 030 Pty Limited As Trustee For The Ybl Trust v Elisabeth Theodore; ACN 627 087 030 Pty Limited v Andrew John Price

Catchwords: CORPORATIONS — Voluntary administration – Stay of proceedings – Does s 440D operate as a stay of an application by a defendant to a claim for a gross sum costs order against the company?

Legislation Cited: Corporations Act 2001 (Cth) s 9, s 440D

Cases Cited: A.C.N. 627 087 030 Pty Ltd atf The YBL Trust v Elisabeth Theodore; A.C.N. 627 087 030 Pty Ltd atf The YBL Trust v Andrew John Price [2024] NSWDC 592
Lottah Mining Pty Ltd (CAN 168 344 581) (in liq) v Geoffrey Doulgas Summers [2024] VSC 47
Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446
Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 18 ACSR 415
Turner v Universal Home Loans Pty Ltd [2005] 54 ACSR 683

Category: Procedural rulings

Parties: Costs Assessment Dispute Pty Ltd ACN 627 087 030 (Applicant)
Elisabeth Theodore (Respondent 1)
Andrew John Price (Respondent 2)

Representation: Counsel:
F Amirbeaggi (Solicitor on instruction of the Company’s directors) (Applicant)
J Rogers (Respondents)
Solicitors:
Yates Beaggi Lawyers (Applicant)
ICL Lawyers (Respondents)

File Number(s): 2022/374361; 2022/371853

Publication restriction: Nil

JUDGMENT; Ex tempore (revised)

Application for Stay of Proceedings by Costs Assessment Dispute Pty Ltd (in Voluntary Administration)

1. The background of this matter is as follows. On 13 December 2024 after hearing a contested appeal in relation to some costs assessments I delivered reasons for judgment: A.C.N. 627 087 030 Pty Ltd atf The YBL Trust v Elisabeth Theodore; A.C.N. 627 087 030 Pty Ltd atf The YBL Trust v Andrew John Price [2024] NSWDC 592. I made orders indicating that I would deal with any questions of costs at a later date, which later date became 20 February 2025 where I made limited costs orders in favour of the Respondent, and gave the Respondent leave to apply within a period of time to have those costs assessed as a gross sum costs order.

2. The Respondent made such an application on or about 5 March 2025. On 16 March 2025 the parties agreed to a timetable to bring the gross sum application on for a hearing. On 29 April 2025, when that timetable had run its course and the matter was ready to be determined, Mr Amirbeaggi, on behalf of A.C.N 627 087 030 Pty Ltd, now known as Costs Assessment Dispute Pty Ltd (“the Company”), which was the Appellant in the proceedings and, by that stage, had changed its name, I infer this happened some time very shortly before the appointment of Voluntary Administrators, emailed my chambers informing me that Voluntary Administrators (“the Voluntary Administrators”) had been appointed to the Company on 30 April and sought an order that no further steps be taken on the gross sum costs application, to which I responded by email sent by my associate where I prima facie accepted his contention that s 440D of the Corporations Act 2001 (Cth) (“Corporations Act”) applied to the application for a gross sum costs order component of the proceedings, and I adjourned the matter. Because the Respondent had not been heard on that application, I reserved liberty to apply.

3. Thereafter, the Respondent applied to relist the matter. Mr Rogers, of counsel, has appeared before me today on behalf of the Respondents and has made submissions to the effect that s 440D does not apply and that, in all the circumstances, the assessment of the costs ought proceed notwithstanding the appointment of the Voluntary Administrators to the Company.

4. I should record that it is, as I understand it, common ground that Voluntary Administrators were appointed to the Company on 28 April 2025 and that the Administration remains on foot and that what is usually referred to as the second meeting of creditors is scheduled for 1 June 2025. There is not as yet a Deed of Company Arrangement drafted to be put to creditors at that meeting.

5. Mr Amirbeaggi, solicitor, appeared today purportedly on behalf of the Company, but on the instructions of the directors and not the Voluntary Administrators. I very much doubt that gives him a proper retainer. The Voluntary Administrators separately emailed my chambers yesterday advising that their position is that the effect of s 440D is that there is a stay on the proceedings and that no-one has asked the Administrators to consent to the continuation of the hearings. They also said:

"We understand that the company may intend to continue these proceedings subject to creditors' agreeing to a deed of company arrangement proposal which will be put to creditors in the coming weeks."

6. That statement seems to indicate a lack of understanding by the Voluntary Administrators in relation to the current state of the proceedings, being the appeal by the Company from the Costs Assessment Review Panel in this Court. That case is finished, other than the Respondent’s outstanding application for a gross sum costs order. Perhaps the Voluntary Administrators mean that they intend to continue to oppose the gross sum costs order - that is the only component of the case which has any life left in it - or perhaps they mean that they might wish to appeal my decision. I do not know.

7. Turning to the substance of Mr Roger’s submissions, the terms of s 440D are well known and do not need repeating. The section applies to "a proceeding in a court against a company or in relation to any of its property."

8. It provides that such proceedings cannot be begun or proceeded with except with the consent of the administrator or leave of a Court, being a Supreme Court of one of the States or Territories of the Federal Court of Australia. The definition of “Court” in s 9 of the Corporations Act does not include the District Court of New South Wales.

9. Mr Rogers has taken me to a number of authorities, the first being a decision of Campbell J in Supreme Court of New South Wales in Turner v Universal Home Loans Pty Ltd [2005] 54 ACSR 683, and in particular what his Honour said at paras [3]-[5].

10. In that case, his Honour quoted with approval and applied what Finn J had said in Pasdale Pty Ltd v Concrete Constructions (1995) 59 FCR 446, to the effect that, in the circumstances of a respondent to litigation that had been commenced by a company in Voluntary Administration, which respondent had on foot an application for security for costs against the company, that s 440D(1) did not apply to the application for security for costs against a company in Administration in proceedings commenced by that company because the phrase “proceeding in a court against a company” only captured a case that had been commenced against the company, and notwithstanding the potential breadth of that phrase, it does not capture an application within proceedings commenced by a company by a Respondent back against the company for security for costs.

11. Campbell J noted that Santow J in Simoon Pty Ltd v Renbay Systems Pty Ltd (1995) 18 ACSR 415 had expressly doubted Finn J's construction but did not need to decide the matter because he granted leave to proceed on the assumption that leave was necessary.

12. Goulden AJ in the Supreme Court of Victoria in Lottah Mining Pty Ltd (CAN 168 344 581) (in liq) v Geoffrey Doulgas Summers [2024] VSC 47 at [89] followed the approach that commended itself to Campbell J.

13. For my own part, uninstructed by authority, I would take the view that the phrase a “proceeding in a court against a company” in s 440D, properly constructed, encompasses any positive claim, whether it be procedural or substantive, being made by any party in a court case against a company in Voluntary Administration, regardless of whether that claim was commenced by the company or against it. This is because, whilst an application for something like a security for costs or a costs order - or the position in this case, a gross sum costs order - would not fall within the ordinary meaning of a “proceeding in a court against a company”, if one approaches the construction question through the prism of the purpose and context of the section, I think the clear purpose, the context, is the short moratorium period provided for by pt 5.3A of the Corporations Act, which is designed to allow, effectively, for all activities of a company to be frozen so as to allow an administrator to try to come to a view and make a recommendation as to whether it is in the best interests of the company to continue under the control of the directors, enter into a Deed of Company Arrangement or go into liquidation. Anything that distracts an Administrator from that task would seem to me to be contrary to the overall purpose and intent of the part of the Corporations Act.

14. Obviously, an Administrator's attention ought be directed to what is in the best interests of the body of creditors generally, and the well-known ability of litigation to cost money, it seems to me, would not just be a distraction to an Administrator, but also an expense which would be detrimental to the interests of the body of creditors generally.

15. I think there may well be an important distinguishing feature between the circumstances before me and the circumstances under consideration in the various cases to which I have referred. In each of those cases, as I read them, there was a claim being propounded by the company in Voluntary Administration which remained on foot. The application being made by the respondent/defendant to that claim was of an interlocutory nature being an application for security for costs. In those circumstances, it does seem tolerably clear that it would not have been Parliament's intention to, on the one hand, allow a company in Voluntary Administration, on the instructions of the Voluntary Administrator, to continue with a claim against a defendant, whilst at the same time removing, by route of s 440D, the ability of that same defendant to seek any positive orders of an interlocutory nature back against the company. Looked at in that way, the conclusions of Campbell J and Finn J are not unsurprising and accords with a practical, common sense, purposive approach to the construction of s 440D.

16. However, the facts before me are entirely different. There was a claim made by the Company now in Voluntary Administration, which, prior to the appointment of the Voluntary Administrators, had been determined and concluded. All that remains to be dealt with is the Respondent's application, who was successful in obtaining an order for costs against that Company, seeking to obtain an order to quantify those costs. It is in that factual setting that I consider that the phrase “proceedings in a court against the company" falls to be considered.

17. Nonetheless and despite my own doubts, but more importantly, the doubts expressed by Santow J (a most respected and experienced judge in, amongst other areas, corporations law) the decisions of Finn J and Campbell J are clear enough. I feel I am bound to follow Campbell J's decision which is expressed in broad terms and therefore I conclude that s 440D does not apply to the unresolved application by the Respondent in this case for the costs order which is already in place to be assessed by me on a gross sum basis, because such an application is not a “proceeding in a court against a company” for the purpose of s 440D.

18. If I am wrong and s 440D does apply, that if I had jurisdiction to grant leave under s 440D, which I do not, I consider that this is a very clear case for a grant of leave because all of the work necessary for the parties to prepare for the application has already been done and indeed filed. All that is left to happen is for me to receive some short submissions in relation to that material, perhaps some short cross-examination. The point being the matter is very close to finalisation, and it would be to everyone's advantage, including the Voluntary Administrators and the body of creditors, to know sooner rather than later what the actual liability is as between the Applicant and the Respondent.

19. There is a separate reason why I would grant leave if I had the power to do so. That is because Mr Amirbeaggi has apparently given a personal undertaking to the Court to pay any amount of costs that the Company is found liable to pay personally up to a limit of $50,000.

20. It would be unfortunate, to say the least, if there is such an undertaking, if Mr Amirbeaggi could escape liability on that undertaking simply because of the imposition of a stay created by the statute designed to protect the assets of the Company for the benefit of its creditors.

21. Having said all that, in the here and now, I cannot proceed with the application today because the company, through its Administrator or through its Directors, did not have notice that was a possibility today, so that would not be fair.

22. The question becomes what I should do, because I am told the second meeting of creditors is scheduled for 1 June 2025, which is only about two weeks away. If a Deed of Company Arrangement is approved by creditors at that meeting, then it may well affect the Respondent's ability to enforce any claim it has against the Company, although it would not affect the claim it says it has in relation to Mr Amirbeaggi's undertaking. Again, if the Company goes into liquidation at the second meeting of creditors then I think that the claim for a gross sum costs order would be a claim against the Company, which prima facie would be stayed in a liquidation scenario and the Respondent would be required to start the process by seeking to prove for that amount. There are two more possibilities: the Company goes back to the control of the directors, in which case the application can proceed; or there is an adjournment of the second meeting of creditors, in which case the matters will remain unresolved.

23. I think, in all the circumstances, the appropriate thing for me to do to be fair to all parties is firstly to allow the Respondent’s solicitor, Mr Taylor, to file in Court the amended motion he has foreshadowed so as to put on the table the claim against Mr Amirbeaggi personally; secondly, to adjourn that application and the application for the gross sum costs order against the Company for directions to 9.30am on 6 June 2025 - that is a few days after the second meeting of creditors - on which day I will decide what should happen next, but the parties, including the Voluntary Administrators, should all be aware that whatever happens after 6 June will happen very quickly and probably there will be a hearing of whatever is left to be determined sometime later in that week.

24. I am also going to direct Mr Roger’s client to write to the Voluntary Administrators to ensure that they have all the material necessary to properly answer the gross sum costs order part of the application.

25. In conclusion, upon my finding that there is no stay on the Respondent's claim for a gross sum costs order created by s 440D of the Corporations Act (2001) (Cth) or otherwise, my orders are:

26. Grant leave to the Respondent to file in Court an amended Notice of Motion in the form handed up by the Respondent and signed by Newlinds SC DCJ.

27. Dispense with the need for further service of that Notice of Motion.

28. The amended Notice of Motion, together with the outstanding gross sums costs application, is listed for directions before Newlinds SC DCJ at 9:30am 6 June 2025.

29. Direct the Respondent to correspond with the Voluntary Administrators of the Applicant, so as to ensure the Voluntary Administrators have all material that has been filed by either side in relation to the gross sum costs application.

30. Direct the Respondent’s solicitor to notify the Voluntary Administrators of the directions hearing on 6 June 2025, and that the Voluntary Administrators should be in a position on that day to advise the Court as to the then status of the company and make submissions as to an appropriate way forward.

31. The costs of today’s proceedings are reserved.

32. Grant liberty to either party to apply on short notice.

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