Angius v Salier

Issues for determination

1. The operative order for present purposes is order 4 in which Kunc J reserved the questions of the seventh defendant's costs of the notice of motion and how the Administrator's costs referred to in order 3 and the Receiver's costs are to be borne.
2. Kunc J granted liberty to the parties to approach my Associate to obtain a date for directions in relation to the finalisation of the administration and all relevant issues including costs. That order was made because I had volunteered the task of case managing these proceedings in order to shepherd them towards a conclusion. Kunc J did not deal with the costs issue himself because, although he was asked to make the substantive orders, the large measure of consent or lack of opposition to the orders sought by the Receiver had the effect that it was not necessary for Kunc J to become deeply engaged in the evidence before he was able to make the orders that he made.
3. As appears from the transcript of the hearing on 12 February 2021, the parties were proceeding upon the giddily optimistic expectation that the Receiver's administration would be completed soon, and that I would be able to make the orders necessary to bring the proceedings to a conclusion at an early time in circumstances that would make it convenient for me to deal with the outstanding costs issues.

Material aspects of the history of the proceedings

1. It will be necessary to explain aspects of the history of the proceedings that are required for an understanding of the meaning of order 4 made by Kunc J, and to respond to the parties' submissions concerning the orders for costs that should now be made.

Appointment of the Receiver

1. On 14 September 2017, the Administrator filed a notice of motion in these proceedings in which he sought the appointment of a receiver and manager of the companies that were then the second to fourth defendants and the two companies who have since been joined as the fifth and sixth defendants. The Administrator's application came before the Court on 15 and 16 November 2017 and 12 December 2017. The plaintiff was represented by junior counsel on the first two days and senior and junior counsel on the third. The Administrator was represented by his senior and junior counsel on each hearing. Although the seventh defendant was not then a party to the proceedings, he was represented by senior and junior counsel on each hearing and was permitted to make submissions.
2. Speaking broadly, the Administrator was moved to apply for the appointment of a receiver and manager of the company defendants for two reasons. First, the second to fourth defendants were defendants to the plaintiff's claims in the proceedings. The plaintiff and his daughter were the companies' directors. They therefore had a conflict of interest. Furthermore, the Administrator was registered as the holder of the wife's estate's 50% shareholding in the company defendants so he had an interest in ensuring that their defences were conducted effectively. Secondly, the accounts of all five companies were in a complete mess. The companies each held substantial income earning real properties. In outline, the directors of the company defendants had caused the managing agent of their properties to pay all rents into a single account. Those monies had been disbursed in a manner that often did not ensure that each company's funds were applied for its own proper purposes. The value of the wife's estate's shareholding in the company defendants depended upon what their true financial positions were. That value could not accurately be determined given the state of the companies' accounts.
3. The accounting problem was exacerbated because, on 30 November 2016, Kunc J had appointed an expert accountant, Mr Trevor Vella, to prepare a report that determined the proper accounting position of the company defendants. The expert reported that the results of his efforts were inadequate for many reasons, largely because of a lack of cooperation on the part of the plaintiff. The difficulty with the company defendants' accounts had therefore become exceptional, and some means was required to be found whereby the true financial position of the company defendants could be reliably determined.
4. The Court was informed that the Administrator had claims against the company defendants on behalf of the wife's estate. I took the view that the existence of those claims disqualified the Administrator as a person appropriate to be appointed to conduct the defence of the plaintiff's claims against the company defendants. That had the practical effect of necessitating the appointment of a receiver and manager of the company defendants notwithstanding that the appointment would impose upon the companies additional costs.
5. The plaintiff opposed the appointment of the Receiver to take responsibility for the preparation of accurate accounts for the company defendants on a limited basis. That was that the Court should delay the appointment of a receiver and give the plaintiff a relatively short time to prepare proper and accurate vouched accounts himself. The plaintiff's position was that only if that course failed should the Receiver be appointed.
6. The seventh defendant also initially resisted the appointment of a receiver and manager of the companies because of the costs that that course would incur.
7. It is not feasible to try to summarise accurately the proceedings on the three hearings. After discussion at the first hearing, the Administrator was given leave to file an amended notice of motion in court on 15 November 2017. The amended notice of motion sought an order appointing the Receiver as the receiver and manager of each of the company defendants with wide powers, including to conduct the defence of the current proceedings being prosecuted by the plaintiff and to bring such cross claims as he thought fit. In the alternative, orders were sought authorising the Administrator to conduct the same proceedings.
8. At the last of the three hearings, senior counsel for the plaintiff maintained the plaintiff's position, at least in relation to the accounting issue, that any appointment of a receiver and manager of the company defendants should be delayed to provide time for the parties to attempt to agree accurate accounts for the companies as between themselves. As senior counsel said at T 4.6: "… So the point of difference between those short minutes and what I am proposing is exactly when Mr Silvia is appointed." In relation to the representation of the company defendants in defence of the plaintiff's claims, the plaintiff said that he would not object to the Administrator being appointed to represent the companies on an interim basis.
9. Senior counsel for the seventh defendant informed the Court that he had circulated proposed short minutes of order, but then said, at T 5.36: "I have to say to your Honour that I have instructions not to press any of the matters in those short minutes at all. As a consequence, I am not going to be of much assistance to you." At the end of the hearing, senior counsel informed the Court that his instructions had changed, but only to the extent of proposing that a named person other than Mr Silvia be appointed as receiver and manager of the companies.
10. At the conclusion of proceedings on the third day, the Court invited the parties to confer with a view to agreeing the orders that the Court should make appointing the Receiver, but on terms that constrained his powers so that his involvement in the preparation of true and accurate accounts for the company defendants would be as inexpensive as possible. The Court does not know what occurred in the preparation of the short minutes of order that were finally made by the Court in chambers on 15 December 2017, but it may be inferred that they all at least had the opportunity to cooperate in the process of formulating the orders. The Court was not informed that any party opposed the formulation of the short minutes of order.
11. On 15 December 2017, I made the following orders in respect of the appointment of the Receiver: Short minutes of order 1. Order that Tararba Pty Ltd ACN 062 215 918 be joined to the proceedings as Fifth Defendant. 2. Order that Angius Investments Pty Ltd ACN 001 124 965 be joined to the proceedings as Sixth Defendant. 3. Orders that Brian Raymond Silvia (Receiver) be appointed a receiver without security of each of the Second to Sixth Defendants with powers limited as follows: a. Representing each company for the purpose of carrying out the defence of each company in these proceedings. b. Determining, in consultation with the First Defendant and the directors of each of the Second to Sixth Defendants, the appropriate form of an account required from the directors of each company to account for the rent received in respect of the properties owned by those companies, and the disbursal of those rents since 1 July 2011. d. Directing the directors of the company as to the form of the account required and e. Prescribing the time within which such accounts are to be provided. 4. Note that the Receiver is directed to consult with the First Defendant and the directors of each company as to the appropriate form of an account and as to the time by which such accounts are to be provided to the intent that the powers conferred in order 3 hereof be put into effect most efficiently. 5. Note that the Receiver may approach the Court, to the extent required by the Receiver, for such further directions as he may reasonably require. … 7. Order that the remuneration of the Receiver and his staff be calculated from the date of this order until further order, or until otherwise agreed between the parties and the Receiver, in accordance with the scale contained in the Receiver's consent to appointment, or otherwise as determined by the Court. 8. Order that the proper remuneration and disbursements of the Receiver be paid by the companies to which the remuneration and disbursements relate, or otherwise as to one-fifth each, every month. … 11. Costs reserved. …
12. Relevantly, order 3(a) authorised the Receiver to represent the company defendants for the purpose of conducting their defence of the plaintiff's claims.
13. Orders 1 and 2 made by Kunc J on 12 February 2021 were made in respect of the accounting exercise carried out by the Receiver in accordance with the duties imposed upon him by order 3(b) to (e) and order 4. My understanding at the time I made the orders was that the parties who were interested in doing so, including the seventh defendant, had agreed to the terms of order 3(b) to (e) and order 4, in order to confine the accounting exercise that the Receiver would be required to carry out compared to what may have been required if the Court had made an unqualified order that empowered the Receiver to prepare true and accurate accounts for the companies.

Joinder of the seventh defendant

1. On 31 May 2018, I gave judgment on an application by the seventh defendant to be joined as a party to these proceedings: Angius v Salier [2018] NSWSC 808. I made the following orders, over the opposition of the plaintiff and the Administrator: (1) [The seventh defendant] is joined as the seventh defendant to these proceedings on the following conditions. (2) [The seventh defendant's] participation in these proceedings will be at his own risk as to his costs in that he will pay his own costs of the proceedings, unless the Court otherwise orders; (3) Unless the leave of the Court is granted, cross-examination by [the seventh defendant's] counsel will be limited to areas not otherwise covered by counsel for the first defendant; (4) [The seventh defendant's] evidence will deal with the Togumi Partnership issue only (arising from pars 31 and 32 of the amended statement of claim), unless the leave of the Court is otherwise granted. (5) [The seventh defendant] is joined as a defendant to these proceedings on the condition that he not file any pleading, whether by defence or cross-claim, without first providing a draft of the pleading to all other parties as well as the receiver of the second to sixth defendants, and that he be given leave by the Court to do so on application on 7 days' notice. (6) Without prejudice to the right of the first defendant to claim his costs and expenses of the notice of motion filed by [the seventh defendant] on 15 November 2017 out of the estate of [the plaintiff's late wife], the Court makes no order as to the costs of the notice of motion, with the intent that the parties will bear their own costs.
2. It is to be noted that the effect of order 6 was that the parties to the notice of motion, other than the Administrator, were to bear their own costs of the application.
3. The qualifications that were made by these orders to the joinder of the seventh defendant were made because the seventh defendant's only interest in the proceedings was as a beneficiary of the estate of his late mother, and the Administrator, as administrator of the wife's estate, had the responsibility to defend the proceedings and there was no reason on the evidence for the Court to fear that the Administrator would not perform his duties properly and effectively. Consequently, if the Administrator succeeded in defeating the plaintiff's claim, and became entitled to be paid his costs by the plaintiff, it would in principle be an unfair burden on the plaintiff to be required in addition to pay the costs of the seventh defendant's participation in the proceedings.
4. As I recorded at [41] of my reasons for judgment, the seventh defendant accepted the qualifications in orders 2 to 4 in his written submissions in support of his application.

Earlier judgments and orders in these proceedings

1. A number of judges of this Court have delivered judgments on various issues following my order for the joinder of the seventh defendant as a party to the proceedings. It appears that the seventh defendant was represented by counsel and solicitor on all of the applications.
2. On 1 March 2019, Henry J published her reasons for judgment on separate questions arising out of particular paragraphs of the plaintiff's amended statement of claim and the Administrator's cross claim, as well as an application by the plaintiff to file a further amended statement of claim: Angius v Salier [2019] NSWSC 184. Her Honour made the following costs orders: (2) The plaintiff/cross-defendant, the first defendant/cross-claimant and the seventh defendant pay their own costs in relation to the hearing of the separate questions. … (4) Order the plaintiff to pay the costs of the first defendant in relation to the plaintiff's application made at the hearing of the separate questions seeking leave to file the further amended statement of claim.
3. Henry J explained her decision that the seventh defendant should bear his own costs in relation to the hearing of the separate questions as follows: [125] As he was joined as a party at risk of his own costs, I will also order that [the seventh defendant] pay his own costs in relation to the separate questions.
4. Henry J published a further judgment on 7 June 2019, in which she refused an application made by the plaintiff for leave to file another further amended statement of claim: Angius v Salier (No 2) [2019] NSWSC 682. Her Honour's reasons included: [64] The seventh defendant's appearance and submissions were made on a limited basis. I have, therefore, made no order as to his costs.
5. Judges of the Court published a number of short judgments in 2019 and 2020 in response to applications for the appointment by the Court of a tutor for the plaintiff. Such an order was made. It appears that, save for the costs of one directions hearing that were ordered to be paid by the plaintiff, the costs of parties not directly involved in the application, such as the seventh defendant, were reserved. It does not appear to me that the seventh defendant had a proper, separate interest in the application for the appointment of a tutor for the plaintiff, even though he is recorded in the reasons for judgment as being represented on the applications.
6. On 20 May 2020, Ward CJ in Eq (as her Honour then was) made the following orders by way of an agreed settlement of aspects of the parties' claims in the then current pleadings, which were the plaintiff's amended statement of claim and the amended second cross claim: Short Minutes of Order: 1. The Amended Statement of Claim be dismissed. 2. The claims in paragraph 37 to 46 of the Amended Second Cross-Claim be deferred to the taking of accounts required to be undertaken pursuant to Order 3(b) of the Orders made on 15 December 2017. 3. The Amended Second Cross-Claim otherwise be dismissed. 4. Each party pay its own costs of the proceedings including the Amended Second Cross-Claim.
7. These orders disposed of all of the claims made by the parties in the proceedings by dismissing them, save that order 2 preserved the claims in pars 37 to 46 of the amended second cross claim, the determination of which required the completion of the taking of accounts by the Receiver required by order 3(b) made by the Court on 15 December 2017.
8. As will be seen, order 4 has some relevance to the issues in these proceedings as it had the effect that the company defendants were required to bear their own costs of the proceedings as part of the compromise. Those costs would include the costs incurred by the Receiver in conducting the litigation on their behalf. The seventh defendant is the principal beneficiary of the estate of the wife, and became entitled under her will to her shareholding in the company defendants. For most of the time when these proceedings have been on foot, the wife's shares were held in the name of the Administrator, as her estate had not been administered to the point where the shares had been transferred into the name of the seventh defendant. Relevantly to a submission made on behalf of the seventh defendant, the effect of order 4 was that the seventh defendant's interests in the company defendants would bear half of their costs of the proceedings.
9. Relevantly to the determination of the issue now before the Court, the orders made by Ward CJ in Eq were made by consent and without the Court being required to determine the merits of the various claims made by the parties.
10. It will now be appropriate to consider in more detail the claims that were made by the company defendants as cross claimants in pars 37 to 46 of the amended second cross claim, as these were the only claims that remained alive as between the plaintiff and the company defendants after the orders had been made by the Court on 20 May 2020. In essence, the amended second cross claim alleged that the plaintiff was at all material times a director of and a 50% shareholder in each of the company defendants. Consequently, he owed statutory and fiduciary duties to the companies. The pleading alleged that the plaintiff caused the companies' funds to be paid into accounts controlled by him and not the companies' accounts. It is not necessary to analyse the claims made in the amended second cross claim that were dismissed by consent as a result of order 3 made by Ward CJ in Eq. The amounts involved in relation to the claims that were dismissed were substantial: for example, $1,810,700.64, $894,607.13, $334,504, $895,385.33 and so on. These amounts are only significant insofar as they and the other amounts pleaded in the part of the amended second cross claim that was dismissed were very substantially greater than the claims made in pars 37 to 46 that were preserved by the orders made by her Honour. Those claims were in amounts of $30,000, $15,000 and $45,000. Therefore, the part of the amended second cross claim that was deferred until after the taking of the accounts by the Receiver was relatively inconsequential.
11. Ward CJ in Eq delivered a further judgment in these proceedings on 18 June 2020: Angius v Salier (No 3) [2020] NSWSC 764. As her Honour said at [1]: "… The present dispute is as to the costs orders to be made following the dismissal by consent of what by then was the only remaining claim for relief against the first defendant." Her Honour made the following orders in relation to costs: 2. Order that the Plaintiff pay on the ordinary basis the costs of the First Defendant (other than any costs the subject of extant costs orders) and the costs of the Seventh Defendant of the proceedings from 20 November 2019 to date, including any costs thrown away by the vacation of the November 2019 hearing dates and including the costs of these applications. 2. Order that otherwise the First Defendant's costs of the proceedings be paid from the estate of the late Laura Angius on the indemnity basis.
12. Her Honour gave the following reasons for making these orders (which I have, with respect, abbreviated for the purpose of the brevity of these reasons): [103] The present applications illustrate the force of the admonition expressed in authorities such as Lai Qin and Nichols as to conducting an hypothetical trial (in effect, satellite litigation) in relation to costs in proceedings that have been resolved prior to a hearing on the merits, at least insofar as the submissions made by [the seventh defendant] (and by the plaintiff in response to those submissions) invite the Court to embark upon an exercise of assessing the adequacy of the evidence that had been filed or served in the proceedings prior to their dismissal by consent (and without a hearing on the merits beyond that conducted by Henry J on the separate questions for determination). [104] The general proposition is that, where there has been no hearing on the merits, it is not appropriate for the Court to conduct what would amount in effect to an hypothetical trial in order to determine an application for costs (see, for example, Lai Qin at 624 per McHugh J). More recently, in Nichols (to which [the seventh defendant] has referred), Payne JA said (at [30]): 30. If both parties to a proceeding which has been settled without a hearing on the merits have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. … [106] As was made clear in Nichols (and as [the seventh defendant] appears to accept in his submissions), if the question of unreasonableness cannot be answered without reviewing (in that case, a large corpus of) evidence and resolving, on a tentative basis, disputed questions of fact then the Court should not embark upon that exercise. [107] Here, it must be remembered that to date the matter has been before me solely on interlocutory stoushes between the parties and at directions hearings. For me now to form a view, as [the seventh defendant] here seemingly wishes me to do, in relation to the unreasonableness (or otherwise) of the plaintiff's conduct in pursuit of these proceedings by reference to "admissions" said to have been made in affidavit evidence of the plaintiff (or on his behalf) or by reference to the perceived deficiencies in the affidavit evidence of the plaintiff, would be to embark upon the very kind of exercise disavowed by the Court of Appeal. Indeed, to my mind, such a course is not appropriate. [108] As to whether other aspects of the conduct of the proceedings are so unreasonable as to warrant an adverse costs order in circumstances where the balance of the claims in the amended statement of claim have now been dismissed by consent without a hearing on the merits, I make the following observations. [109] First, it is relevant that the settlement of the proceedings was reached following agreement between the plaintiff and the second to sixth defendants without consultation or involvement in the settlement negotiations of either the administrator or [the seventh defendant]. Therefore, neither the administrator nor [the seventh defendant] can be criticised for now cavilling with the proposition that they should bear the costs of the proceedings. [110] Second, there is no doubt that the plaintiff has, by his conduct, been responsible for increased cost and delay in the proceedings… … [113] To my mind, that conduct is so unreasonable, applying the test in Lai Qin, as to warrant the making of costs orders against the plaintiff in favour of the administrator (and equally in favour of [the seventh defendant]) in respect of the vacation of the November 2019 hearing and the interlocutory applications since then, none of which would have been necessary had the plaintiff conducted his litigation appropriately by providing his solicitor(s) with proper instructions. [114] With that said, I do not consider that this warrants a costs order in relation to the earlier applications to appoint a receiver, since those were based not on the failure of the plaintiff to provide proper instructions but on the basis of deficiencies identified in the expert report prepared for the substantive dispute and the extant evidence. As such, to assess this would require me to delve into the underlying factual dispute between the parties which, for the reasons I have just explained, is not an appropriate course. … [124] For completeness, I note that the costs orders will relate only to costs in respect of which no order has already been made (i.e., the reserved costs). I am not here varying (nor do I understand that I am here being asked to vary) any extant costs orders. [125] As to [the seventh defendant's] costs, as already indicated above, I am not persuaded that I should embark upon an exercise of determining where the merits lay as between [the seventh defendant] and his father (the plaintiff) in this dispute. Moreover, I place weight on the fact that [the seventh defendant] was permitted to be joined as a party to the proceedings for a limited purpose and on the basis that he accepted that it was at the risk that he would bear his own costs. While I accept that this condition did not (and, indeed, does not) mean that [the seventh defendant] was to bear his costs under any circumstance (it being only a "risk" and not an inevitability), I see no reason to depart from that basis. [126] The fact that [the seventh defendant] (as the beneficiary of half the shareholding in the second to sixth defendants) might in a practical sense be said by the consent orders effectively to bear 50% of the costs of the second to sixth defendants (on which [the seventh defendant] places weight in relation to the present costs application) seems to me (apart from the apparent piercing of the corporate veil) not sufficiently to take into account that the dismissal of the claim against the second to sixth defendants was without a hearing on the merits (and, again, hence the principles articulated in Lai Qin are applicable). [127] Accordingly, I do not accept that there should be an order that the plaintiff pay [the seventh defendant's] costs on the ordinary basis from the time of his joinder as a party to the proceedings. That said, and as already adverted to, the unreasonableness of the plaintiff's conduct of the proceedings from 20 November 2019 will equally have had an effect on the costs incurred by [the seventh defendant] in these proceedings and I see no reason why the same conclusion should not follow in relation to his costs for that part of the proceedings.
13. I respectfully agree with her Honour's reasoning, and will apply it below when I consider the submissions made on behalf of the seventh defendant.
14. On 30 July 2020, the Receiver filed a notice of motion for a declaration as to the true construction of the accounts of one of the company defendants. Ward CJ in Eq dealt with that application in a judgment published on 28 August 2020: Angius v Salier (No 4) [2020] NSWSC 1171. Save for the Administrator, whose costs were ordered to be paid out of the estate of the plaintiff's late wife, Ward CJ in Eq by order 3 ordered "that each party bear its own costs of the notice of motion filed on 30 July 2020".
15. Although these proceedings are so diffuse that it is difficult to form a reliable view concerning all of the issues and how they have been dealt with by the Court, and how and in what circumstances the parties have been required to incur costs, it seems that the various costs orders that I have related above, particularly the orders made by the then Chief Judge, have dealt with all of the costs incurred by the parties up to 28 August 2020.

The parties' submissions

1. The parties have delivered the following submissions on the costs issues the subject of these reasons (the delay in giving these reasons being partly attributable to the time taken for the Court to make, in a serial fashion, the orders necessary to give effect to the work undertaken by the Receiver): 1. Administrator's submissions dated 7 July 2021; 2. Seventh defendant's submissions dated 8 July 2021; 3. Plaintiff's submissions dated 15 July 2021; 4. Joint further submissions of the Administrator and the seventh defendant dated 15 July 2021; 5. Further submissions of the plaintiff dated 27 July 2021; 6. Further submissions of the seventh defendant dated 2 March 2023; 7. Further submissions of the Executor dated 14 March 2023; and 8. Further submissions of the Administrator dated 16 March 2023.
2. I will deal with the submissions made by the other parties before I consider the submissions made by the plaintiff or on behalf of his estate, as the general thrust of the other parties' submissions was that what is now the plaintiff's estate should bear the burden of the costs, and the submissions made on behalf of the plaintiff or his estate generally answer that claim.
3. I should record first that the Receiver's amended report dated 22 September 2020 of the results of the accounting exercise that he had carried out expressed the following conclusions: 1. A total amount of $1,407,065.26 of rent due to the company defendants had been paid to the plaintiff; 2. A total of $1,485,498.71 had been paid from the bank accounts of the company defendants to the plaintiff or the plaintiff's accountant; 3. The sum of $16,942 had been paid from the bank accounts of the company defendants to the Deputy Commissioner of Taxation for the benefit of the plaintiff; and 4. A total amount of $220,000 of rent due to the company defendants had been paid to the wife in the 2012 financial year.

The Administrator's position

1. The Administrator initially submitted that the plaintiff's estate should be ordered to pay the costs of the Administrator and the Receiver that were reserved by order 4 made on 12 February 2021, as the overwhelming majority of the adjustments by value made pursuant to the orders made by the Court on that date were debits to the plaintiff's loan account, and the plaintiff was the only effective director of the second to sixth defendants following the death of the wife on 3 or 4 January 2012. The only adjustments made to the accounts of the wife were in the total sum of $220,000.

The seventh defendant's position

1. The seventh defendant noted in his submissions that he is the son of the plaintiff and the wife and that he is the beneficiary of his mother's 50% shareholdings in the company defendants. The Administrator has not been able to complete the administration of his mother's estate in the time since her death in large part due to various claims raised by the plaintiff, and the need for the accounting process undertaken by the Receiver to be completed before true and accurate accounts of the company defendants could be settled. A further reason for the delay in the completion of the administration was that the Executor in her personal capacity had made a family provision claim against the wife's estate.
2. The seventh defendant acknowledged that, when he was joined as a party to the proceedings on 31 May 2018, that was on the basis that he would be "at his own risk as to his costs in that he will pay his own costs of the proceedings, unless the court otherwise orders".
3. The seventh defendant also noted that, in accordance with the powers vested in him by the Court, the Receiver on behalf of the company defendants settled these proceedings in which the plaintiffs sued those defendants on terms that the proceedings be dismissed and each party bear their own costs. That settlement effectively meant that the seventh defendant would bear 50% of the company defendants' costs of the proceedings generally.
4. As noted above, on 18 June 2020, Ward CJ in Eq ordered the plaintiff to pay, on the ordinary basis, the costs of the Administrator and the seventh defendant of the proceedings from 20 November 2019 to date, including any costs thrown away by the vacation of the November 2019 hearing dates and including the costs of "these applications": Angius v Salier (No 3) [2020] NSWSC 764. Upon the dismissal of the proceedings, following their settlement, the Receiver's remaining role was the taking of accounts that led to the orders made by Kunc J on 21 February 2021.
5. The seventh defendant was in a position to consent to the orders made by Kunc J because, as a party ultimately entitled to 50% of the shareholding in the company defendants, he had been able to confirm the conclusions reached by the Receiver relying upon the advice of an accountant that he had retained.
6. As did the Administrator, the seventh defendant also submitted that the plaintiff's estate should be ordered to pay his costs insofar as those costs were reserved by order 4 made by Kunc J, from the date of the appointment of the Receiver to the conclusion of the determination of the reserved costs. That was on the basis that the plaintiff, as the effective director of the company defendants for most of the relevant period, was responsible for the companies paying in the order of $4,000,000 of their funds for the benefit of the plaintiff. Furthermore, the seventh defendant will have to bear half of the costs incurred by the Receiver on behalf of the company defendants under the terms of the settlement (indirectly by reason of his being entitled to 50% of the shareholding in those companies).
7. Notwithstanding the reservation made by the Court at the time he was joined as a party, the seventh defendant submitted that he had an adequate and proper interest in being involved in the proceedings, and that he had assisted the Court in making the substantive orders made by Kunc J on 21 February 2021, because he had incurred the costs necessary to enable him to give that consent.

Orders jointly proposed by the Administrator and the seventh defendant

1. In the joint submissions made by the Administrator and the seventh defendant on 15 July 2021, they submitted that the Court should make the following orders in relation to the costs reserved by Kunc J: 1. The plaintiff pay the costs of the Receiver of and incidental to the Notice of Motion filed 5 November 2020. 2. The Plaintiff pay the costs of the [Administrator] of and incidental to the Notice of Motion filed 5 November 2020.
2. By those submissions, the seventh defendant sought the following additional orders: 1. The Plaintiff pay the costs of the Seventh Defendant of and incidental to the Notice of Motion filed 5 November 2020. 2. The Plaintiff pay the costs of the Receiver and the Seventh Defendant of and incidental to all work undertaken in order to comply with Order 3(b) made on 15 December 2017. 3. The Plaintiff pay the costs of the Receiver and the Seventh Defendant following necessary liquidation of any and all Companies, being the Second to Sixth Defendants, to enable the discharge of the $4,131,775 debt owing by the Plaintiff to one or more of those Companies, in accordance with the Orders of Kunc J made on 21 February 2021.
3. The effect of proposed orders 1 and 2 sought by both the Administrator and the seventh defendant and (the second) proposed order 1 sought by the seventh defendant would be, if made, that the plaintiff's estate would be ordered to pay the costs of the Receiver, the Administrator and the seventh defendant of dealing with the Receiver's notice of motion that led to Kunc J giving the Receiver the directions that he sought on 21 February 2021. Those costs would be limited to the costs of the notice of motion.
4. Proposed order 2 sought by the seventh defendant would, if made, require the plaintiff's estate to pay all of the costs of the Receiver and the seventh defendant incidental to all of the work carried out by the Receiver in undertaking the accounting process that led to the directions made by Kunc J on 21 February 2021. The costs payable by the plaintiff's estate would not include the Receiver's costs of conducting the proceedings that were the subject of the power given by the Court to the Receiver by order 3(a) made on 15 December 2017.
5. Order 3 proposed by the seventh defendant would, if made, require the plaintiff's estate to pay the costs of the Receiver and the seventh defendant "following" the orders that have been made by the Court for the winding up of four of the five company defendants. It is that process that has taken up most of the time since the hearing before Kunc J. For one reason or another, it was necessary for most of the company defendants to be wound up as part of the process of the realisation of their assets and the making of the payments necessary to ensure that the company defendants' bank accounts ultimately reflected the correct position as determined by the Receiver as a result of the accounting process that he undertook in accordance with the Court's orders.

The plaintiff's position

1. The plaintiff's position was initially stated by his tutor before the Administrator and the seventh defendant delivered their joint submissions. The tutor observed that he only had had a limited role in the proceedings and suggested that an order should be made directing the plaintiff personally to file and serve any submissions he cared to make in relation to the proposed costs orders.
2. Nonetheless, the tutor made a submission in relation to costs as between the plaintiff and the company defendants. In practical terms, I understand that submission to refer to the costs of the Receiver that were reserved by order 4 made by Kunc J on 21 February 2021. That submission was that the costs should be apportioned as between the plaintiff and the Administrator, as the Receiver determined that the amount of $220,000 had been wrongly paid to the wife. The tutor submitted that the apportionment should not be simply a mathematical exercise that focused on the proportions of the funds of the company defendants that had wrongly been paid to the plaintiff and the wife. The tutor submitted that the Administrator should be required to bear a relatively higher proportion of the costs of the Receiver to reflect the substantial general investigations undertaken by the Administrator. The tutor did not suggest what the proportions should be.
3. In relation to the reserved costs as between the plaintiff and the seventh defendant, I understand that the tutor's submission was that the seventh defendant should be required to bear his own costs. That is, the Court should not make a special order that the seventh defendant should be paid his costs by the plaintiff, contrary to the basis upon which he was added as a party. The tutor also noted that in the judgment given by Henry J on 1 March 2019, her Honour ordered the seventh defendant to pay his own costs of the hearing of the separate questions determined by her Honour: Angius v Salier [2019] NSWSC 184 at [166(1)]. That order was partly made on the basis on which I ordered the seventh defendant to be joined as a party to the proceedings.
4. In his subsequent submissions following the service of the joint submissions by the Administrator and the seventh defendant, the tutor relied upon the fact that the effect of the orders made by Kunc J on 12 February 2021 was that, in substance, the plaintiff was required to pay the money back to the company defendants. The orders were not made in favour of the Administrator or the seventh defendant. As I understand the tutor's submissions, they were to the effect that, if the plaintiff is ordered to pay the Receiver's costs of his notice of motion, then the seventh defendant, as the party entitled to a 50% shareholding in the company defendants, will have been fully recompensed. An order against the plaintiff that he pay the seventh defendant's costs as well would be "double dipping".
5. The tutor also made the submission that orders 2 and 3 proposed by the seventh defendant alone claim orders for costs that were not reserved by Kunc J on 12 February 2021, as his Honour only reserved the seventh defendant's costs of the notice of motion. The tutor submitted that the seventh defendant could only seek proposed orders 2 and 3 if he filed a new notice of motion seeking those orders, and that application would need to be dealt with by the Court in the ordinary way.

Recent submissions by the seventh defendant

1. The seventh defendant referred to submissions made by his counsel to Kunc J on 12 February 2021, that he should not be required to bear any of the costs caused by the plaintiff's use of the funds of the company defendants for his own purposes. Counsel submitted that the plaintiff should be required to pay what I understand to be the Receiver's costs out of his equity in the sixth defendant, Angius Investments Pty Ltd, which is the only company defendant that will not be required to be wound up, and is said to have sufficient funds such that the plaintiff's liability to pay the costs of the Receiver could be met by a dividend in favour of the plaintiff's estate from that company. The seventh defendant's further submissions included the statement that he "no longer presses any costs orders in relation to the four other family companies which have been liquidated," which is a reference to the second to fifth defendants.

Position of the Executor

1. The Executor dealt first with the claim for costs made by the seventh defendant. She adopted the submissions that had earlier been made by the plaintiff's tutor. She submitted that the plaintiff's estate should not be ordered to pay the seventh defendant's costs of the notice of motion because the orders made by Kunc J were not opposed by the plaintiff. His Honour's orders were not made following a contested hearing: see Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6.
2. The Executor also relied upon the fact that in Angius v Salier (No 3) [2020] NSWSC 764, as extracted above, Ward CJ in Eq had made a limited costs order against the plaintiff, because the plaintiff had failed to provide his successive solicitors with proper instructions, leading to the vacation of the hearing date in November 2019 and various interlocutory applications up to the appointment of the plaintiff's tutor in 2020. Her Honour found that this conduct was so unreasonable as to warrant the making of a costs order against the plaintiff in favour of the seventh defendant on the Lai Qin principle. However, her Honour had also declined to make an order that the plaintiff pay the seventh defendant's costs from the time of his joinder as a party to the proceedings, because of the restriction placed by the Court on the seventh defendant's entitlement to costs at the time he was joined as a party to the proceedings. Her Honour also found that the fact that the seventh defendant would indirectly be required to bear half of the Receiver's costs because of his entitlement to a 50% shareholding in the company defendants was not sufficient to justify an order that the plaintiff pay the seventh defendant's costs because, first, that would pierce the corporate veil, and secondly, the settlement of the primary claim in these proceedings as between the plaintiff and the company defendants took place without a hearing on the merits.
3. The Executor submitted that the plaintiff's estate should not be ordered to pay any of the costs of the company defendants, but if such an order is to be made, it should be apportioned as between the plaintiff and the Administrator as originally submitted by the plaintiff's tutor.
4. The executor added the submission that the plaintiff should not be ordered to pay the Receiver's costs of the notice of motion, because the Receiver had not himself made an application for that costs order.

Recent submissions by the Administrator

1. By his final submissions, the Administrator withdrew his application for an order that the plaintiff should pay the costs of the company defendants of the notice of motion filed on 5 November 2020.
2. The only order finally sought by the Administrator is that the plaintiff should be ordered to pay the Administrator's costs of the notice of motion, and that the Administrator's costs of the proceedings otherwise should be paid out of the estate of the wife on the indemnity basis.

Consideration

1. In order to deal with the outstanding costs questions, it will be necessary to review in a summary way the material aspects of the conduct of these proceedings that I have considered above.
2. Order 11 made by me on 15 December 2017 reserved the costs of the application for the appointment of the Receiver. Although there was a measure of resistance by the plaintiff to the Receiver being appointed immediately, the plaintiff cooperated in the formulation of the orders for the appointment and did not ultimately resist the orders being made. There is no basis for ordering the plaintiff to pay the costs of the Administrator's notice of motion. The seventh defendant could not be entitled to his costs of the notice of motion because he was not then a party and was heard by the Court as an indulgence.
3. It is material that the Administrator's application was made for two primary purposes. One was the conflict of interest that arose in relation to the defence of the claims against the company defendants and the general stalemate in the conduct of their businesses. The other was the need to conduct an investigation to prepare true and accurate accounts for the company defendants. The first of these purposes could not be attributed to the wrongdoing of the directors and shareholders of the company defendants. In that respect, the Receiver's remuneration and disbursements were simply a consequence of the need for his appointment. At least in theory, the Receiver's remuneration and disbursements for conducting the accounting exercise could be found to be the responsibility of the directors who did not cause the company defendants' funds to be dealt with properly.
4. As I have explained above, judges of the Court delivered various judgments on 31 May 2018, 1 March 2019, 7 June 2019 and various other dates in 2019 and 2020. To the extent that particular costs orders were made, those orders will stand. If costs orders were not made, then the costs will be reserved.
5. As explained, on 20 May 2020, Ward CJ in Eq made orders dismissing the amended statement of claim and the amended second cross claim in accordance with an agreed settlement between the plaintiff and the Receiver on behalf of the company defendants. Each party was ordered to pay its own costs of the proceedings. It follows that the plaintiff's estate cannot now be ordered to pay the company defendants' costs in relation to any of the issues that arose out of the pleadings that were dismissed.
6. The agreed settlement and order 2 made by Ward CJ in Eq set out above left open the process of the Receiver's determination of true and accurate accounts for the company defendants. That is because a small number of minor claims in the amended second cross claim were deferred until after the accounting process was completed. This Court does not know why the determination of some of the issues was deferred.
7. The Receiver did not in the amended second cross claim sue the plaintiff for compensation on the basis that his breaches of duty to the company defendants had caused those companies to suffer the costs of his appointment (at least in relation to the conduct of the accounting exercise). The plaintiff has never been sued for that compensation by the company defendants.
8. The further judgment of Ward CJ in Eq delivered on 18 June 2020 in relation to the residual claim against the Administrator made the limited orders for costs that are set out above.
9. The result of the proceedings as between the plaintiff and the Administrator to 18 June 2020 is that the costs of those proceedings were dealt with by the Court. A limited order for costs was made in favour of the seventh defendant because of delinquent conduct of the proceedings on behalf of the plaintiff. Otherwise, no order was made for the costs of the seventh defendant.
10. As explained above, as part of Ward CJ in Eq's 28 August 2020 judgment, her Honour made an order that the Administrator's costs should be paid out of the estate of the wife but all other parties were to bear their own costs of the application.
11. The position generally in relation to the Administrator's costs that he is entitled to be paid those costs out of the wife's estate on the indemnity basis for the whole of the proceedings. It is a separate matter whether orders should be made against any party to the proceedings that that party pay to the Administrator the part of the Administrator's costs that he has incurred as a party to the proceedings.
12. As to the Receiver's remuneration and costs, he is entitled to be paid those amounts under orders 7 and 8 made by the Court on 15 December 2017. As was the case for the Administrator, it is a separate question whether any other party should be ordered to pay that part of the Receiver's costs that he has incurred as a participant in these proceedings.
13. Since the settlement orders were made by the Court on 20 May 2020, the Receiver's performance of the duties imposed upon him by the orders made by the Court on 15 December 2007 generally relate to the following: 1. The management of the company defendants' businesses; 2. The performance of the tasks that were necessary for the Receiver to undertake in order to prepare true and accurate accounts for the company defendants; and 3. The participation in these proceedings in the name of the company defendants, which was still a necessary task notwithstanding the dismissal of the amended second cross claim.
14. One of the tasks that it was necessary for the Receiver to undertake after he had caused draft true and accurate accounts for the company defendants to be prepared was to obtain the authorisation of the Court to strike those accounts in accordance with the conclusions that the Receiver had reached as a result of the accounting investigation. The Receiver would have given instructions to his solicitors to prepare the necessary notice of motion and evidence in support of his application for the Court's approval. That led to the filing of the notice of motion that was dealt with by Kunc J on 12 February 2021. It must be noted that the Receiver's remuneration and costs of conducting the accounting investigation were a separate matter to his costs of the notice of motion.
15. The costs orders made by Kunc J on 12 February 2021 have been set out above. In order 3, his Honour made the usual order that the Administrator's costs should be paid out of the estate of the wife on the indemnity basis. His Honour was not asked to make any order that any party pay the Receiver's costs of the notice of motion.
16. By order 4, Kunc J reserved the seventh defendant's costs of the notice of motion. His Honour said nothing about the seventh defendant's costs of the proceedings generally. Those costs may have been dealt with specifically by the orders made by judges of this Court from time to time, but it is possible that the seventh defendant has incurred costs that should be regarded as having been reserved because they were not specifically dealt with. The position in this respect is not clear.
17. So far as the costs of the notice of motion determined by Kunc J are concerned, it is relevant to note that the orders made by his Honour were made by consent or without opposition. The plaintiff did not consent to, but did not oppose the making of the orders, because the plaintiff was represented by a tutor who felt constrained as to the response to the notice of motion that he should make on behalf of the plaintiff. Relevantly, his Honour made the orders that he made without any determination on the merits of the accuracy of the draft accounts that had been prepared by the Receiver on behalf of the company defendants. A fortiori, there was no determination of the question whether the work necessary to be undertaken by the Receiver to prepare the draft accounts was caused by the delinquent conduct of the plaintiff or any other party as a director of the company defendants, or otherwise.
18. The meaning and effect of order 4 made by Kunc J may not be entirely clear. His Honour reserved the question of the seventh defendant's costs of the notice of motion. His Honour did not reserve any other aspect of the seventh defendant's costs. Insofar as his Honour reserved the question of how the Administrator's costs of the notice of motion should be dealt with, it appears that his Honour meant that it remained open to the Administrator to claim against other parties to the proceedings that they should pay his legal costs of the notice of motion.
19. As I have explained above, the Administrator has acted upon the reservation of costs by Kunc J to submit that the plaintiff's estate should be ordered to pay his costs of the notice of motion. As I understand it, the Administrator has not made any application for any other portion of his costs of the proceedings that have been reserved, assuming without knowing that there are parts of the Administrator's costs of the proceedings that have not been dealt with and that remain reserved.
20. As for the Receiver's costs, the reference to those costs by Kunc J in order 4 may have been intended to be limited to the Receiver's costs of the notice of motion. Although order 4 is not explicit in that regard, that would be a consistent way to interpret the wording of the order.
21. It is possible, however, that order 4 could have been intended to encompass the Receiver's costs of his participation in the proceedings more generally. However, the Receiver is not a party to the proceedings and has generally not participated in a personal capacity. He has participated in his capacity as the manager of the company defendants. The relevant legal costs have been the costs of the company defendants and not of the Receiver. The costs incurred by the Receiver in relation to the notice of motion are in a different category, because the Receiver filed the notice of motion in his personal capacity in order to obtain an order authorising his proposed conduct for the purposes of his own protection.
22. It is not necessary for the Court to be concerned with this distinction and the possible uncertainty because the Receiver has not made any claim against any other party for the payment of his legal costs, whether in his personal capacity as the applicant on the notice of motion or as the manager of the company defendants. That is a position that the Receiver was entitled to take. In relation to the notice of motion, it was open for the Receiver to decide that, as the plaintiff did not oppose the orders made by Kunc J, it was not warranted that the Receiver incur the costs that would have been incurred as a result of a costs argument that the plaintiff should be ordered to pay the Receiver's costs, notwithstanding that he did not oppose the making of the orders sought by the Receiver.
23. As to the Receiver's costs more generally, it must be remembered that no party has commenced proceedings to establish that the plaintiff should be ordered to compensate the company defendants for the costs of the receivership. The plaintiff could not be liable for the component of the Receiver's costs caused by the conflict of interest or the stalemate. The Court could not order the plaintiff to pay the Receiver's remuneration and costs of the accounting investigation under the guise of a costs order in favour of the Receiver for the company defendants' participation in these proceedings, as a side wind to a simple application for an order for costs against the plaintiff. Even if the conduct on the part of the plaintiff as a director of the company defendants was delinquent and a breach of his duty to those companies, and so was the foundation of the need for the company defendants to incur part of the Receiver's remuneration and costs, that conduct on the part of the plaintiff was not delinquent in relation to the prosecution of the proceedings. To the extent that the plaintiff's conduct in the prosecution of the proceedings was delinquent, that conduct has already been dealt with by the costs orders made by Ward CJ in Eq on 18 June 2020. It is not necessary for the Court to consider whether it is still open for the one company defendant that has not been deregistered to commence proceedings against the plaintiff's estate for an order against the plaintiff that he compensate the company for relevant parts of the remuneration and costs incurred by the Receiver. It may be noted, however, that such compensation was not sought against the plaintiff in the amended second cross claim that was filed by the Receiver on behalf of the company defendants.
24. Even though the seventh defendant is now a 50% shareholder in the only company defendant that has not been deregistered, his shareholding does not give him standing to make a claim against the plaintiff's estate in his own right for compensation to be paid to the company, nor does he have standing to submit that the plaintiff's estate should be ordered to pay any part of the remuneration and costs incurred by the Receiver as receiver and manager of any of the company defendants, or even the one company defendant that has not been deregistered. Such a claim for costs can only be made against the plaintiff's estate by the Receiver, or in due course, by the remaining company defendant.
25. In this respect, it is to be noted that the Administrator has properly withdrawn his submission that the plaintiff's estate should be ordered to pay the Receiver's costs, whether of the notice of motion or more generally, in respect of the costs incurred by the Receiver in the name of the company defendants.
26. Consequently, the Court will not make orders 2 and 3 sought by the seventh defendant as part of the orders jointly proposed by the Administrator and the seventh defendant that are set out above at [55]. As the proceedings have been prosecuted, there is no basis for the Court to order the plaintiff's estate to pay the costs of the Receiver and the seventh defendant in relation to the accounting investigation and the preparation of draft true and accurate accounts for the company defendants, or any of the other costs incurred by the Receiver and the seventh defendant in relation to the liquidation of any of the company defendants, as part of the outworking of the striking of the company defendants' accounts in accordance with the orders made by Kunc J.
27. The only remaining question is whether the Court should order the plaintiff's estate to pay the Administrator's costs of the Receiver's notice of motion (order 2 set out above at [54]) and the costs of the seventh defendant of the notice of motion (order 1 set out at [55]).
28. As the plaintiff did not oppose the making of those orders and his conduct was not delinquent in relation to the prosecution of the notice of motion, I will not make an order that the plaintiff's estate pay either the Administrator's or the seventh defendant's costs of the notice of motion. I base that conclusion on the same reasoning as that given by Ward CJ in Eq in the extract from Angius v Salier (No 3) [2020] NSWSC 762 that I have set out above at [39].
29. In any event, had I ordered the plaintiff's estate to pay the Administrator's costs of the notice of motion, I would not have ordered the plaintiff's estate to pay the seventh defendant's costs of the application. The seventh defendant's interest in the company defendants was as the beneficiary of his mother's estate in relation to the wife's 50% shareholding in the companies. That shareholding had been registered in the name of the Administrator, whose duty it was to satisfy himself as to whether he should consent to or oppose the Court giving the Receiver the authorisation that he sought by his notice of motion. The seventh defendant has not tendered any evidence to prove that his interests were not adequately protected by the Administrator's response to the notice of motion, or that the seventh defendant reasonably incurred additional costs for which he ought to be compensated.
30. Before I make final costs orders, I should record that I am well aware that the conduct of the plaintiff as a director of the company defendants was the effective cause of the need for the appointment of the Receiver for the purpose of conducting the investigation necessary to prepare draft true and accurate accounts on behalf of the company defendants. The plaintiff's conduct may have provided a basis for the institution of proceedings against him in the name of the company defendants for compensation for the consequences of his conduct, perhaps even extending to part of the remuneration and costs incurred by the Receiver. As I have already observed, no such proceedings have been instituted. The Court does not expect the Receiver to have commenced proceedings against the plaintiff on behalf of the company defendants to obtain compensation from the plaintiff. The Receiver was not authorised by the Court to commence proceedings with that effect. As a practical matter, it appears the company defendants did not commence such proceedings because of the stalemate whereby half of the shares in the companies were held by the plaintiff himself or his estate, so that neither the Administrator nor the seventh defendant were able to cause the company defendants to institute proceedings against the plaintiff.
31. I am satisfied that it would not be a proper exercise of the Court's costs discretion to make costs orders against the plaintiff's estate on the submission of the seventh defendant that required the plaintiff's estate to compensate the company defendant that has not been deregistered as part of a costs order in respect of the proceedings generally that has not been sought by the Receiver.
32. In order to ensure that the Administrator is properly protected as to his costs, and that there is no unintended gap in the costs orders that have been made in his favour, I will make a further order to ensure that the Administrator will be indemnified for his costs of the whole proceedings out of the estate of the wife.

Orders

1. The orders of the Court are: 1. Order for more abundant precaution that the first defendant is entitled to be paid the whole of his costs of these proceedings out of the Estate of the late Laura Angius on the indemnity basis. 2. Make no order for the costs of the notice of motion filed by the Receiver on 5 November 2020 with the intent that the parties to the notice of motion and these proceedings who responded to the notice of motion shall bear their own costs. 3. Order that all other costs orders made by the Court in these proceedings are affirmed. 4. Otherwise, make no other costs orders in these proceedings. 5. Grant leave for all parties and the Receiver to make any application necessary or desirable in order to conclude the determination of these proceedings.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 22 June 2023