Attorney-General (NSW); Ex rel Corporate Affairs v Australian Softwood Forest Pty Ltd

velopments Pty Ltd (subject to a Deed of Company Arrangement) (Third Defendant) Representation: Counsel: R Marshall/D Moujalli (Plaintiffs) A W Smith (Defendants) Solicitors: Marsdens (Plaintiff) Hicksons Lawyers (Defendant) File Number(s): 2012/322387

Judgment 1On 22 October 2014, I delivered judgment ([2014] NSWSC 1444) determining an application by the Plaintiffs, Mr Tony Elias and others, for orders under s 447E of the Corporations Act 2001 (Cth) in respect of the administration and deed administration of Joe & Joe Developments Pty Ltd (subject to deed of company arrangement) ("Company"). I held that a claim for relief was established in respect of payments made by the Defendants, Messrs Albarran and Pleash, the administrators of the Company and subsequently deed administrators, of invoices rendered by their former solicitors. I observed (at [194]) that the Plaintiffs had established that a failure by Messrs Albarran and Pleash to review the relevant invoices was prejudicial to creditors and (at [195] - [197]) noted that I would adopt an approach which had something in common with an accounting by a trustee, on a wilful default basis, and allow Messrs Albarran and Pleash a further opportunity to lead evidence to justify the legal costs they had paid and, to the extent that such costs were not justified by the evidence, they should be ordered to repay such costs to the Company. I indicated that I would hear the parties as to the orders that needed to be implemented for that process and to whether it should be referred to a referee and directed the parties to bring in short minutes of order to give effect to the judgment. I also noted that I would also hear the parties as to the issue whether Messrs Albarran and Pleash should be entitled to an indemnity for their remuneration from the Company for the work done in defence of the proceedings and for their costs of the proceedings. 2The parties have now submitted their respective draft orders and made written and oral submissions in respect of the relief which they seek. Although there is some common ground in those orders, there are also significant differences between them that will need to be resolved in this judgment. Plaintiffs' proposed order 1 - Whether a declaration should be made 3The Plaintiffs seek a declaration that Messrs Albarran and Pleash have managed, and made omissions in managing, the Company's business and affairs in a way that is prejudicial to the interests of its creditors and members by reason of two specified matters, which broadly reflect findings and conclusions made by the Court in respect of payment of fees by Messrs Albarran and Pleash to a consultant, Shalton Investments Pty Ltd ("Shalton Investments"), and deficiencies in their review of invoices rendered by their former solicitors. The Plaintiffs submit that a declaration is appropriate where an account is ordered. However, as I will note below, the relief granted in this case is granted under s 447E of the Corporations Act, by analogy with an accounting, and is not an order for an accounting in equity. 4I do not consider that the declaration for which the Plaintiffs contend should be made, for several reasons. First, the proceedings sought relief under s 447E of the Corporations Act and invoked the Court's supervisory jurisdiction over administrators and deed administrators. The findings that I have made in that regard are recorded in my judgment and are relevant so far as they support the Court's exercise of a statutory jurisdiction to make orders under s 447E of the Corporations Act. Those findings do not establish, for example, any contractual rights of the Plaintiffs, which might have significance for any future relationship between them and Messrs Albarran and Pleash, or anything other than the Court's satisfaction of matters that are necessary to the exercise of its statutory jurisdiction. There is authority that a declaration should not be made where it is merely prefatory to an order for damages: Attorney-General (NSW); Ex Rel Corporate Affairs v Australian Softwood Forests Pty Ltd [1979] 2 NSWLR 73 at 76; PW Young, C Croft and ML Smith, On Equity (2009, Law Book Company) at p 1084. It seems to me that the same principle can be applied, by way of analogy, where any declaration of the kind sought would be merely prefatory to the Court's order made in this case under s 447E of the Corporations Act. Second, it seems to me that a declaration in this form, which records a finding adverse to Messrs Albarran and Pleash, would have the capacity to mislead as to the complexity of the issues addressed in my principal judgment, which also addressed numerous allegations against Messrs Albarran and Pleash that were not established. This also seems to me to be a reason not to grant the declaration sought in the exercise of the Court's discretion. Plaintiffs' proposed order 2, Defendants' proposed order 1 - Payment to Shalton Investments and interest 5It is common ground between the parties that the Court should make orders that the First and Second Defendants pay to the Company the sum of $16,855.91, being the amount of monies paid out by Messrs Albarran and Pleash to Shalton Investments, reflecting the findings as to that issue in paragraph 192 of my principal judgment. It appears to be common ground that Messrs Albarran and Pleash have already repaid that amount to the Company on 29 October 2014, following the delivery of that judgment. 6The Plaintiffs also seek interest from the date of payment to Shalton Investments, 16 June 2009, to the date of payment of the principal sum on 29 October 2014 at the rate published by the Reserve Bank of Australia as the cash rate plus 4%, compounded annually at the end of 31 December in each year. The Plaintiffs submit that interest is sought on the basis set out by the Court of Appeal in Cureton v Blackshaw Services Pty Ltd [2002] NSWCA 187 at [118], which deals with the basis on which compound interest may be awarded. Messrs Albarran and Pleash respond that no claim for interest was pleaded in the Plaintiffs' Originating Process or their Amended Points of Claim and that interest was not sought in their written opening submissions or their final written submissions and that such a claim should not be permitted. Alternatively, they submit that the amount of interest should be calculated on a basis that excludes Goods and Services Tax of $1,532.36 for which the Company obtained the benefit of an input tax credit no later than 28 July 2009, several weeks after the payment was made to Shalton Investments. 7The Plaintiffs' Originating Process identified a claim for such other order as the Court saw fit in relation to the Company's administration by Messrs Albarran and Pleash and there is no suggestion that Messrs Albarran and Pleash would be prejudiced by an order for interest made at this stage, in the sense of being deprived of the opportunity to lead any relevant evidence as to whether such an order should be made. It seems to me that such an order is appropriate where the payment of that amount to Shalton Investments by Messrs Albarran and Pleash was not justified in the hearing before me and has deprived the Company, its creditors and contributories of monies that would otherwise be available to it over an extended period. However, the amount of Goods and Services Tax, for which the Company received an input tax credit, should be excluded in calculating that interest. It will be necessary for the parties to calculate the amount of interest to be included in final orders. Plaintiffs' proposed orders 3 - 5 - Accounting 8The Plaintiffs' proposed order 3 (as amended by Mr Marshall, who appeared with Mr Moujalli for them, in oral submissions) provides that, under s 447E of the Corporations Act, Messrs Albarran and Pleash: "account to the [Company] on the wilful default basis for all amounts paid to [their former solicitors] for that firm's professional fees and disbursements but excluding counsel's fees paid by the [Company] being a total of $709,891.10." The Plaintiffs also seek proposed orders 4 and 5 which provide that Messrs Albarran and Pleash pay to the Company the amount certified by the Court on the taking of the account and pay interest on that amount. 9I do not propose to make the Plaintiffs' proposed order 3. I observed in my principal judgment that the orders which I propose to make under s 447E of the Corporations Act have something in common with an account, but they are not an accounting in equity, whether on a wilful default basis or otherwise, because the claim brought against Messrs Albarran and Pleash was not a claim against them, in any fiduciary capacity, for breach of fiduciary duty. The appropriate orders to be made at this point are orders that will advance the process of justification of the amounts paid out by Messrs Albarran and Pleash as contemplated by my principal judgment, and these are essentially procedural directions in respect of that process. 10I should also address a substantive issue that arises from the form of the Plaintiffs' proposed order 3, which extends beyond the amount of their former solicitor's professional fees to include disbursements (other than Counsel's fees) paid by the Company, being a total of $709,891.10 (as amended by Mr Marshall in oral submissions). As I noted in my principal judgment, the Plaintiffs' Amended Points of Claim filed 11 November 2013 pleaded a claim headed "Failure to assess legal fees and unauthorised disbursements". Paragraphs 74E ff of the Amended Points of Claim pleaded a claim, that was ultimately established by the Plaintiffs, that tax invoices rendered by Messrs Albarran's and Pleash's former solicitors had not been checked or adequately checked by Messrs Albarran and Pleash. Paragraph 74I attacked the itemised charges contained in those invoices but did so expressly by reference to the claims for time spent by the former solicitors and the rates charged by them in those invoices. There was no identification of any challenge to disbursements incurred by Messrs Albarran and Pleash in those paragraphs. Paragraph 74L ff referred to the challenge to a payment by Messrs Albarran and Pleash in respect of services invoiced by Shalton Investments, to which I referred above, which was also successful, but related to a payment made directly by them and not a disbursement incurred by the former solicitors. The expert report on which the Plaintiffs relied in the proceedings was also substantially directed to the fees charged by their former solicitors and the Plaintiffs' cross-examination of Mr Pleash, to which I referred in my principal judgment, was directed to the time spent by the former solicitors on particular attendances, and on occasion to who undertook those attendances, and not to disbursements. 11Messrs Albarran and Pleash submit that they made clear, during the course of the hearing, that the case which they understood to be pleaded against them, and which they were meeting, was a claim in respect of legal costs, being the legal fees of their former solicitors and not disbursements. They pointed out in the course of the hearing that particulars had been requested from, but not provided by, the Plaintiffs of any other expenses that were alleged to have been excessive (T55). They had, in closing submissions, also drawn attention to the amount that was in issue, quantified as $570,973.34, and pointed to the fact that the additional amount of $131,710.56 related to Counsel's fees, filing fees with the Court, and lodgement fees with other organisations. They had observed, in closing submissions, that: "To the extent that there is now an attempt to extend the taking of an account to include anything other than those two items [ie the former solicitors' fees, as distinct from disbursements, and the payment to Shalton Consulting] the Defendants maintain their position which they have steadfastly from the opening of this case, that they are here to meet the case as pleaded and the case as pleaded does not extend that far." (T366) 12I referred to the Plaintiffs' closing submissions as to the relief sought in paragraph 193 of my principal judgment and observed that: "Messrs Albarran and Pleash submitted that the only relief claimed by the Plaintiffs, and open to them in these proceedings, was relief directed to the legal fees charged by their former solicitors and the amount paid in the Shalton Consulting invoice, and that it was not open to the Plaintiffs to seek wider orders in respect of all expenses incurred by Messrs Albarran and Pleash. I accept that [the Amended Points of Claim] did not raise any challenge to those wider expenses." 13I am satisfied that the case brought by the Plaintiffs was limited to the amount of solicitors' fees (as distinct from disbursements) charged by the former solicitors and paid by Messrs Albarran and Pleash without, as I have held, adequately reviewing their former solicitors' invoices, and the process of justification should be limited to those amounts. Any different approach would extend the relief granted beyond the basis on which it was sought and was granted. In any event, Mr Marshall fairly conceded in oral submissions that the large part of disbursements would be Counsel's fees and that the Plaintiffs' pleadings and their cross-examination of Mr Pleash had focussed on time-charging by Messrs Albarran's and Pleash's former solicitors, and accepted that there was no need for review of disbursements (T9). 14The Plaintiffs submit that their proposed order 4, dealing with the payment of the amount due to the Company on an accounting, follows from their proposed order 3 dealing with the accounting, and that is sufficient basis not to make it where I will not make their proposed order 3. Messrs Albarran and Pleash accept, in principle, that an order for payment of the amount arising from the justification process would be made, but submit that it should be made after a referee's report is adopted under r 20.24 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR"). That question does not presently arise, because I am not ordering a reference at this point, but I consider that this order should be deferred in any event. Any order for payment of any balance owing by Messrs Albarran and Pleash to the Company would be premature, not least because it is not yet apparent whether any balance will be owing by them to the Company once the process of justification by them of the amounts paid out to their former solicitors has been completed. 15Messrs Albarran and Pleash resist the Plaintiffs' proposed order 5, relating to interest on the amount of costs repaid, on the basis that a claim for interest was not made in the proceedings and the question of payment of interest should properly await the determination whether there is any amount on which interest should accrue; and they also submit that, so far as a claim for interest rests on an allegation of default by Mr Pleash, the Court had not accepted the submission that it had been shown that he was indifferent to the amount of the fees charged by the former solicitors for Messrs Albarran and Pleash, as distinct from a failure of process having occurred. It seems to me that proposed order is similarly premature, since whether such an order is made may depend, among other matters, upon whether any amount is ultimately payable by Messrs Albarran and Pleash to the Company. I will therefore not make the Plaintiffs' proposed order 5. Plaintiffs' proposed orders 6 - 10, Defendants' proposed orders 2 - 6 - schedule of attendances 16Both parties contemplate that Messrs Albarran and Pleash will prepare a schedule in a specified form, although the consequence of my observations above is that that will be limited to justification of the professional fees charged by their former solicitors in the amount of $570,973.34. It is common ground that schedule will provide specified information which will identify whether, and the basis on which, they seek to justify the fees charged by their former solicitors and the extent to which they are disputed by the Plaintiffs. However, there was some disagreement between the parties as to the form of that schedule, and a broader disagreement as to its function. In respect of the narrower issue as to the form of that schedule, I accept Messrs Albarran's and Pleash's submission that, having regard to the observations in paragraphs 172ff of my principal judgment, the proposed schedule should permit them to include a better description of the work undertaken and sought to be justified than was originally included in their former solicitors' narrative. 17Messrs Albarran and Pleash also seek to have their schedule identify any claim for legal professional privilege. The Plaintiffs contend that that is not necessary as the onus rests on an accounting party irrespective of the ability to claim privilege. It seems to me that such an identification is desirable because, as Messrs Albarran and Pleash point out, a question may arise as to the means to address documents which are subject of such a claim in the course of the justification process. That is not a question which needs to be determined at this point. There is no reason why that information should not be provided at this point, where Messrs Albarran and Pleash seek to provide it, in case it is later of utility. The extent of any dispute as to whether additional columns should be included identifying privileged material and the person who undertook the work was reduced in oral submissions, since Mr Marshall accepted that there would be utility in including information in the schedule where Messrs Albarran and Pleash, who would originally undertake the work of preparing that schedule, considered it should be provided, since there was little risk of prejudice from the provision of that information. 18I should also address the broader question of the function of that schedule because it has significant implications for the parties, and they should not misunderstand what is required of them at this stage, although its significance in their submissions was limited to the time it should be permitted for the preparation of that schedule. The Plaintiffs characterised the preparation of that schedule a "detailed clerical exercise" that involved little more than transcribing relevant information, and Messrs Albarran and Pleash submitted that a more substantive approach was required of them. I do not accept the Plaintiffs' characterisation of the function of this schedule. The preparation of this schedule involves, on the one hand, a critical step in identifying the extent to which Messrs Albarran and Pleash now contend that payments made to their former solicitors were justified, as a matter of substance, and in determining the extent to which the Plaintiffs challenge that proposition. 19Messrs Albarran and Pleash propose a further order, their proposed order 5, providing for them to make available for inspection any documents on which they rely to justify the relevant tasks, and to which they do not maintain a claim for client legal privilege, within a specified period. The Plaintiffs respond that that step is not necessary and Messrs Albarran and Pleash should simply proceed to serve their evidence justifying the relevant attendances. I am conscious that, where this process is necessary by reason of Messrs Albarran's and Pleash's failure adequately to review invoices as they were received, it would be unreasonable to shift substantial costs of the process from them to the Plaintiffs. Having said that, it does not seem to me that it is unreasonable for the Plaintiffs to be expected to review documents supporting the claims to remuneration, before they file any schedule identifying the disputed items, and before Messrs Albarran and Pleash are required to justify the items that remain in dispute. This seems to me to be an important step in narrowing the issues in dispute, and there would be no utility, from either party's perspective, in requiring Messrs Albarran and Pleash to incur significant costs in filing evidence to support attendances which would, on a cursory review of the documents relating to them, be self-evidently justified. There is also no advantage to the Plaintiffs in taking that course, to the extent that they are exposed to a potential adverse order for costs, if numerous attendances are disputed by them and ultimately shown to be justified by Messrs Albarran and Pleash. 20The Plaintiffs' proposed order 8 provides for them to respond to the information contained in the schedule prepared by Messrs Albarran and Pleash and their proposed orders 9 and 10 provide for Messrs Albarran and Pleash to serve the evidence on which they rely to prove the items which they seek to justify by 10 April 2015 and serve a revised schedule and affidavits verifying the account comprised in that schedule. I do not understand those orders to be controversial, at least if the matter is not to be referred to a referee at this point. Defendants' proposed orders 8 - 14 - Referral to a referee 21I had indicated in my principal judgment that I would hear the parties as to whether the balance of the proceedings should be referred to a referee. Messrs Albarran and Pleash submit that the most effective means of undertaking the justification process, in accordance with ss 56, 58 and 60 of the Civil Procedure Act 2005 (NSW), is for the justification process to be referred to a referee selected by the Manager, Costs Assessment of the Court. The Plaintiffs indicate that they do not consent to the referral of the account to a referee at this point, and will review their position in this regard after Messrs Albarran's and Pleash's evidence is served. It should be recognised, of course, that the Court does not require the Plaintiffs' consent to refer the matter to a referee, if it is otherwise satisfied that that should occur. The Plaintiffs also submit that a costs assessor is not the most appropriate referee because the justification process involves not only an adjudication on the fairness and reasonableness of the amounts charged for legal work done, but also whether the instructions given by Messrs Albarran and Pleash, if any, to do the work were justified. 22I am not satisfied that the matter should be referred to a referee at this stage and it seems to me preferable that it continue under the Court's control at least until the relevant schedule is completed and the parties' evidence is served. I take that view because, as I have noted above, the preparation of that schedule and the service of that evidence will have significant implications, so far as defining the scope of the balance of the proceedings is concerned, and so far as orders for costs may be made against the parties depending upon the approach they adopt. It seems to me that close case management is required, at this stage, so that the Court can be satisfied that Messrs Albarran and Pleash have in fact undertaken a substantive review of the attendances that they seek to justify and that the Plaintiffs have not adopted an approach of challenging every attendance irrespective of its apparent merit. Neither approach would be consistent with s 56 of the Civil Procedure Act and the Court, rather than a referee, is best placed to deal with any difficulty that might arise in that regard. Messrs Albarran and Pleash have helpfully set out, in their proposed orders, steps which might be taken in a reference. Those matters will need to be addressed, once the schedule and evidence is complete, if the Court then determines that a reference to a referee is appropriate. Mr Smith in turn fairly acknowledged, in oral submissions, that there may be reason to defer any referral to a referee until the justification process is further advanced (T12). 23I should add that I am not presently persuaded by Messrs Albarran's and Pleash's submission that an appropriate referee would be a costs assessor nominated by the Manager, Costs Assessment, nominated by the Court. Messrs Albarran and Pleash properly identified the nature of the exercise that was required, observing in submissions that: "The process of determination of the reasonable legal fees is a multi-faceted process. It is trite that if a costs assessor concludes that the amount charged for a particular task was unreasonable then ... it would not be justifiable for [Messrs Albarran and Pleash] to have paid that amount from the Deed Fund. It cannot be gainsaid that a costs assessor is not qualified for this task." I accept the former proposition, but am less confident as to the latter. Messrs Albarran and Pleash give priority to costs assessment expertise, although recognising the value of insolvency expertise, whereas I am inclined to regard the latter expertise as more important for the task which is to be undertaken, and consider that any experience in costs assessment may be of advantage to a potential referee, but is not essential, where an experienced solicitor practising in the field of insolvency would be well-placed to make an assessment of the reasonableness of the costs charged. While the costs assessment process has manifest virtues, the issue that arises here will require engagement with the issue whether particular work ought to have been undertaken, not only with whether costs charged for that work were reasonable, and a costs assessor might tend to give priority to the latter question over the former question. It seems to me that the preferable course is likely to be that any referee who is ultimately appointed in this matter be a senior insolvency practitioner, with experience in the conduct of complex administrations and deed administrations, who will be properly placed to engage in an assessment of the substance of the work undertaken, as well as costs charged for that work. Plaintiffs' proposed order 12 - Messrs Albarran's and Pleash's right of indemnity as to the proceedings and justification process 24The Plaintiffs seek a declaration, or more precisely an order, under s 447E of the Corporations Act, that Messrs Albarran and Pleash are not entitled to indemnify themselves from the Company's assets for (1) their legal costs of and incidental to the defence of the proceedings, the payment of the Plaintiffs' costs of the proceedings and their remuneration or expenses incurred in respect of the defence of the proceedings and (2) their legal costs, the payment of the Plaintiffs' costs of the "wilful default accounting" and their remuneration or expenses incurred in or, more precisely, the justification process. It should be noted that no question of repayment of remuneration referable to the costs of the proceedings arises for the period since November 2011, since the evidence of Mr Cook, a senior manager involved in the deed administration, in his affidavit dated 6 November 2014 is that Messrs Albarran and Pleash have not exercised any right of indemnity to claim their remuneration against the deed fund for the Company since November 2011. The amount of remuneration paid to the administrators, in the exercise of their right of indemnity to November 2011, in turn reflected remuneration that had been determined by Registrar Musgrave for the period up to and including 31 December 2010, and is not affected by my judgment in these proceedings. 25There is a distinction between any costs order made against a deed administrator who is party to proceedings (which I will address below) and the exercise of his or her right of indemnity, as noted in Cresvale Far East v Cresvale Securities (No 2) [2001] NSWSC 791; (2001) 39 ACSR 622 at [15] as follows: "The obligation of an administrator to pay costs to another party involved in litigation unsuccessfully defended by the administrator and the company in administration, is a matter distinct from the administrator's entitlement to an indemnity against the company and recoupment out of the company's assets: cf Adsett v Berlouis (1992) 37 FCR 201, 210, as to the analogous position of a trustee in bankruptcy. An order for costs against the administrator imposes a personal obligation on him or her, ordinarily not limited to the assets of the company in administration. Such an order is fully enforceable against the administrator personally by the successful party. The question which then arises, namely whether the administrator is entitled to recoup the amount of costs out of the assets of the company, is a separate question between the administrator and company, not directly involving the successful litigant." 26The Plaintiffs submit that the order excluding Messrs Albarran's and Pleash's right of indemnity is supported by paragraphs 205 and 208 of my principal judgment. I there pointed to the conflict of interest that Messrs Albarran and Pleash would face in respect of any claim to indemnity from the Company's assets against the costs of the justification process contemplated by my principal judgment. That issue has been addressed by an undertaking offered by Messrs Albarran and Pleash, of a kind contemplated by my principal judgment, to which I refer below. I also noted, but did not determine, the issue whether Messrs Albarran and Pleash should be entitled to an indemnity from the Company for their remuneration for the work done in the defence of the proceedings or for the costs of instructing solicitors. 27The Plaintiffs submit that the Company should be put in the position it would have enjoyed had Messrs Albarran and Pleash not breached their duty to the Company and not paid for their defence by using the Company's money. That submission needs to be qualified by a recognition that the conduct which supported the relief ordered against Messrs Albarran and Pleash was, as I will note below in respect of the question of costs, substantially narrower than that which was the subject of attack by the Plaintiffs in the proceedings. The second part of that submission begs the question whether Messrs Albarran and Pleash were justified in claiming an indemnity for their successful defence of substantial aspects of the proceedings. 28Messrs Albarran and Pleash submit that a deed administrator would, in the ordinary course, have a right to exoneration for remuneration and costs incurred in defending proceedings in which he or she is successful or substantially successful: Re RMGA Pty Ltd [2012] NSWSC 678 at [12]-[14]. They also submit that an unsuccessful defence to proceedings against a voluntary or deed administrator will not necessarily deprive him or her of his or her right of indemnity, although acknowledging that the scope of the Court's powers under s 447E of the Corporations Act would be sufficiently wide to make an order disentitling an administrator to indemnity from the Company's assets for costs associated with such proceedings: Honest Remark Pty Ltd v Allstate Explorations NL [2006] NSWSC 735; (2006) 234 ALR 765 at [78]. They also point out that a discretion to deny indemnity should be exercised with caution and only in exceptional circumstances and that, conversely, a deed administrator who has acted reasonably or properly in defending his or her position in legal proceedings would usually be entitled to retain his or her right of indemnity as to costs, including costs he or she is ordered to pay; and that the focus, in determining whether they should be deprived of costs, should be the conduct of the defence in the proceedings rather than on the underlying conduct of the deed administration: Singtel Optus Pty Ltd v Weston [2012] NSWSC 1002 at [13] - [14], [20]. Messrs Albarran and Pleash also point to Bergin CJ in Eq's recognition in Singtel Optus above at [21], of the relevance of whether the extent of the costs incurred, in respect of the underlying administration, has been shown to be unjustified or inappropriate. 29The question of indemnity for Messrs Albarran's and Pleash's costs of and remuneration for the defence of the proceedings follows from the conclusions that I will reach below as to costs. It seems to me that a finding that Messrs Albarran and Pleash's defence of the proceedings was reasonable and proper, so far as the question of indemnity is concerned, necessarily follows from the extent to which they have been successful in their defence of the proceedings as a whole, although unsuccessful in respect of the particular issues as to review of their former solicitors' invoice and as to the payment to Shalton Investments. There seems to me no basis for an order under s 447E of the Corporations Act depriving Messrs Albarran and Pleash of indemnity in respect of their legal costs of, or their remuneration in respect of, successfully defending the substantial parts of the claims against them as to which orders for costs have also been made against the Plaintiffs. That indemnity will have practical effect to the extent that the costs incurred by Messrs Albarran and Pleash on a solicitor/client basis exceed the costs ordered to be paid by the Plaintiffs on an ordinary basis, and to the extent that any such costs may ultimately not be recoverable against the Plaintiffs. 30Messrs Albarran and Pleash accept that they should not be entitled to indemnity from the deed fund for 20% of their legal costs incurred in defending the proceedings, a figure which reflects their apportionment of costs as between the matters on which they succeeded and the matters on which they failed. The corresponding order, reflecting the apportionment which I have adopted below, would be that they should not be entitled to indemnity from the deed fund for 30% of their legal costs incurred in defending the proceedings. No question as to indemnity for any order as to payment of the Plaintiffs' costs of the proceedings arises at this point since no such amount is presently payable, on the findings that I have reached below. 31I do not propose to make the orders sought by the Plaintiffs, so far as they seek to deprive Messrs Albarran and Pleash of indemnity for their legal costs of and remuneration for the justification process, at this point, since the appropriate orders to be made may well depend upon the outcome of that process. Mr Marshall fairly accepted, in oral submissions, that the question of Messrs Albarran's and Pleash's right of indemnity to costs of the justification process may be premature, where they had offered an undertaking not to exercise such a right of indemnity without further direction of the Court, and that question could be deferred until after the result of the justification process was known (T8). No question of an order depriving Messrs Albarran and Pleash of indemnity as to the Plaintiffs' costs of that process arises at this point since no order has been made against them at this point requiring them to pay the Plaintiffs' costs of that process and whether such an order will be made may well depend on its outcome. Plaintiffs proposed orders 13 - 16 - Costs 32The Plaintiffs seek an order that Messrs Albarran and Pleash pay the Company an amount equal to the sum paid by the Company for Messrs Albarran's and Pleash's legal costs of and incidental to the proceedings and also seek interest on that amount. The Plaintiffs also seek an order that Messrs Albarran and Pleash pay the Plaintiffs' costs of the proceedings up to the date of these orders, such costs to be agreed or as assessed, and that those costs be paid forthwith and that interest be paid on them under s 101(4) of the Civil Procedure Act. 33There is little dispute as to the applicable principles. Both parties refer to s 98 of the Civil Procedure Act and accept that costs normally follow the event unless it appears that some other order should be made, under UCPR r 42.1. Both parties refer to authority as to how the relevant "event" should be identified for the purpose of awarding costs, including the observations of Ward J (as her Honour then was) in Australian Receivables Ltd v Tekitu Pty Ltd (subject to deed of company arrangement) (deed administrators appointed) [2011] NSWSC 1425 at [24]-[26]. Messrs Albarran and Pleash point out that what is the "event" within the meaning of UCPR r 42.1 depends upon the litigation in question and may be characterised in more than one way: Doppstadt Australia Pty Ltd v Lovick & Son Developments Pty Ltd (No 2) [2014] NSWCA 219 at [15]. Messrs Albarran and Pleash also refer to the observation of White J in Short v Crawley (No 40) [2008] NSWSC 1302 at [33] that: "The relevant event or events for the purpose of r 42.1 encompasses both the overall outcome of the litigation and the parties' success on particular distinct issues. Whilst the Plaintiffs enjoyed substantial success, their entitlement to costs is modified having regard to the various issues on which the Plaintiffs were wholly or partially unsuccessful, the extent to which those issues were dominant or severable, their overall significance to the outcome, the time they occupied during the hearing, and so far as can be discerned, in preparation." 34Both parties also refer to authorities dealing with the Court's exercise of its discretion to apportion costs including Hughes v Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748, Cretazzo v Lombardi (1975) 13 SASR 4 at 12, Short v Crawley (No 40) above at [31] and Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38]. In Hughes v Western Australian Cricket Association (Inc) above at 48,136, Toohey J noted, with reference to authority, that where a litigant had succeeded only upon a portion of its claim, the circumstances may make it reasonable that it bear the expense of litigating that portion upon which it failed, and that a successful party who had failed on certain issues may not only be deprived of the costs of those issues but may also be ordered to pay the other parties' costs of them. In Short v Crawley (No 40) above, White J also referred (at [33]), again after reference to authority, that the entitlement to costs, even of a plaintiff which enjoyed substantial success was potentially: "modified having regard to the various issues on which the Plaintiffs were wholly or partially unsuccessful, the extent to which those issues were dominant or severable, their overall significance to the outcome, the time they occupied during the hearing, and so far as can be discerned, in preparation." 35Messrs Albarran and Pleash point to my review of the principles applicable to a mixed result in Re Metal Storm (subject to deed of company arrangement) [2014] NSWSC 1170 at [47], as follows: "Costs are awarded to compensate the successful party for the expense of being put to the necessity of litigation; a wholly successful defendant should ordinarily receive its costs unless good reason is shown to the contrary; and the discretion to order costs must be exercised judicially and not against the successful party except for some reason connected with the proceedings: Milne v Attorney-General (Tasmania) [1956] HCA 48; (1956) 95 CLR 460 at 477; Oschlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at 97-98 per McHugh J, at 119-123 per Kirby J; Ruddock v Vardalis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234. In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], the Court of Appeal noted that, where there are multiple issues in a case, the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed. However, the Court also pointed to several circumstances in which a different approach might be justified, and noted (at [38]) that: "Whether an order contrary to the general rule of costs follow the event should be made depends on the circumstances of the case viewed against the wide discretionary powers of the Court, which powers should be liberally construed." Similarly, in Corbett Court Pty Ltd v Quasar Constructions (NSW) Pty Ltd [2008] NSWSC 1423 at [28]-[31], in a passage recently approved by McDougall J in The Owners - Strata Plan 61162 v Lipman [2014] NSWSC 622 at [241], Hammerschlag J referred to the general rule and to cases where its application may be displaced. In particular, the Court may deprive a successful party of the costs relating to an issue on which it lost when that issue is clearly dominant or separable: Monie v Commonwealth of Australia (No 2) [2008] NSWCA 15 at [64]; Doppstadt Australia Pty Ltd v Lovick & Son Development Pty Ltd (No 2) [2014] NSWCA 219 at [17]. Where there has been a mixed outcome in proceedings, and costs should be apportioned as between different issues, the Court will generally take a relatively broad brush approach, largely as a matter of impression and evaluation: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 at 22." 36I have subsequently addressed those principles in a further decision in Re Colorado Products Pty Ltd (in prov liq) [2014] NSWSC 1509 and I afforded the parties the opportunity to make brief further submissions as to that judgment. I there noted (at [11]) that: "Some cases have also expressed the view that the principle that a successful party may be deprived of costs and ordered to pay the other party's costs, in respect of issues lost by the successful party which are clearly dominant or severable, operates more strongly against a successful plaintiff" [citations omitted]. 37The Plaintiffs seek to distinguish the decision in Re Colorado Products above on the basis that they have achieved the relief they sought, namely orders under s 447E of the Corporations Act, notwithstanding that they were not successful on the wider basis on which such orders were sought. They also rely on the proposition, to which I will refer below, that the documentary evidence in the proceedings was relevant to Messrs Albarran's and Pleash's failure to review the accounts received from their former solicitors. They also submit, as I will note below, that this is not a case where the issues on which they failed were dominant or separable or took up a significant part of the trial. I do not accept these propositions, for the reasons noted below. The Defendants conversely submitted that the principle set out in Re Colorado Products above at [11] should be applied in this case. 38The Plaintiffs support their proposed order 13, that Messrs Albarran and Pleash repay to the Company an amount equal to the sum paid by the Company for their legal costs of and incidental to the proceedings, on the basis that it follows from paragraph 208 of my principal judgment. I there noted only that the Court had jurisdiction to address the question of costs under s 447E of the Corporations Act and that I would hear the parties further as to that question, rather than expressing any view as to the outcome. I should also add that no question of repayment of legal costs referable to the proceedings since April 2014 presently arises, since Mr Cook's evidence by his affidavit dated 6 November 2014 is that Messrs Albarran's and Pleash's legal costs since that date have been paid by their firm on its own account, pending resolution of the proceedings, payment to creditors and, now, the justification process. 39The Plaintiffs seek to answer the question posed by the English Court of Appeal in Roache v News Group Newspapers [1992] TLR 551 and cited by Ward J in Australian Receivables above, namely, "who, as a matter of substance and reality, had won?" with the submission they have succeeded in the proceedings. It seems to me that that submission substantially oversimplifies the result of the proceedings, where substantial parts of their criticisms of the deed administrators' conduct were not established. They submit that they were successful in invoking the Court's jurisdiction to grant relief under s 447E of the Corporations Act; that their entitlement to that relief was strongly contested by Messrs Albarran and Pleash; and that, as a matter of substance and reality, they have won in respect of the issues joined in the proceedings. That also seems to oversimplify the position, because the extent of their success depended upon not only whether they obtained under that section but also, obviously enough, on its content. 40The Plaintiffs also submit that their case depended to a large degree on the documentary record and that it was necessary to review the documentary record to properly assess the aspects of the case on which they succeeded. I do not accept their submission that the documentary record needed to be placed before the Court, at least to the extent that it was, in respect of their attack on Messrs Albarran's and Pleash's review of the relevant invoices. The Plaintiffs acknowledge that many of the documents relevant to that claim were extracted in Ex P11, and submit that that extract could not have been compiled unless the full suite of the documentary record before the Court could be reviewed in its entirety. Again, I do not accept that submission, so far as the attack made on the attendances recorded in Ex P11 did not ultimately depend upon the substantial bulk of other documents in evidence in the proceedings. The Plaintiffs also submit that the issues on which they succeeded were not clearly separable from those on which they failed, and would have been necessary to be traversed in order to make out their claim in respect of the payments made by Messrs Albarran and Pleash to their former solicitor. The Plaintiffs submit that it would have been potentially unfair to the Defendants to review their conduct in relation to legal expenses "in a vacuum". While that proposition may be true, so far as it goes, it does not seem to me that it supports the proposition that the tender of the substantial volume of documents necessary to the substantive parts of the case on which the Plaintiffs failed can be justified on that basis. 41The Plaintiffs also submit that it cannot be said that the issues on which they failed were clearly dominant or took up a significant part of the trial, and they contend that their cross-examination of Messrs Albarran's and Pleash's witnesses largely focussed on payments made to the former solicitors and Shalton Investments, and that evidence of expert witnesses and their cross-examination also went (I interpolate, at least to some extent) to those issues. The difficulty with this proposition, however, is that the parties, and particularly Messrs Albarran and Pleash, devoted substantial efforts to addressing the wider issues raised by the Plaintiffs in affidavit evidence and submissions. Messrs Albarran and Pleash were plainly entitled to do so, given the seriousness of the allegations made against them. Their Counsel was necessarily required to cross-examine Mr Elias in respect of the substantial parts of the Plaintiffs' claim that were pursued without success, and that cross-examination took up a significant part of the second day of the hearing and about half of the fourth day of the hearing. Mr Smith also pointed out, in oral submissions, that a substantial part of Mr Elias' evidence and his cross-examination was directed to matters prior to the appointment of Messrs Albarran's and Pleash's former solicitors in early March 2009, as to which no question of the adequacy of the review of their invoices could arise. Mr Marshall fairly conceded, in oral submissions, that Mr Elias' cross-examination (and, it might be added, his evidence) went to factual issues raised in the Plaintiffs' claim that were not focussed on the case on which the Plaintiffs succeeded and that, if some of the allegations raised by the Plaintiffs had not been advanced, then the cross-examination required to be undertaken by Counsel for Messrs Albarran and Pleash "may have been less" (T7). 42In my principal judgment, I had referred to the "mixed result" in the proceedings. The Plaintiffs were successful in establishing that there had been a failure by Messrs Albarran and Pleash adequately to review invoices received by them from their former solicitors, prior to paying those invoices, and the payment of the invoice to Shalton Investments was not justified. However, the Plaintiffs' case was by no means restricted to those matters, and they had pleaded and did not abandon multiple other allegations of breach, of a much wider and arguably more substantial character, as to which they were unsuccessful. The extensive list of other allegations which were made, and not established, emerges from my principal judgment and is summarised in paragraphs 12.2 and 12.3 of Messrs Albarran's and Pleash's submissions as to costs, and I need not repeat them here. By way of illustration, the Plaintiffs failed as to matters of significance within both the wider case which they put, and their narrower case as to the costs of the deed administration, including failing to establish serious allegations that Messrs Albarran and Pleash or their former solicitors were primarily responsible for the delay in the deed administration or had treated the parties unequally during the administration. As Mr Smith pointed out in oral submissions, the Plaintiffs were also unsuccessful in serious allegations which they had made, and as to which they had sought declaratory relief, as to a proposition that a suggested deed of release involved conduct that was prejudicial to creditors' interests. Mr Smith also pointed out that damages were sought against Messrs Albarran and Pleash up to and including the end of the trial, and that the Defendants' approach to the defence of the proceedings was informed by the fact that no part of the case against them had been abandoned. The Plaintiffs also failed in a narrower aspect of their claim in respect of the costs of the administration, where they sought to establish, by reliance on expert evidence, that the fair and reasonable legal fees incurred by Messrs Albarran and Pleash were no greater than $127,000. 43Messrs Albarran and Pleash submit, and I accept, that the fact that the Plaintiffs brought, and failed on, numerous allegations, and succeeded on two narrower allegations, supports an apportionment of the costs or a reduction of the costs payable to them. I accept that, as Messrs Albarran and Pleash point out: "To award costs to the Plaintiffs in the manner they propose would result in significant injustice to [Messrs Albarran and Pleash] by compensating the Plaintiffs for their unsuccessful claims and concurrently penalising [Messrs Albarran and Pleash] by denying them recompense for the ... resources (including costs) they directed to their successful defence of ... allegations of breaches of duties and alleged prejudicial conduct by [them]." I also accept Messrs Albarran's and Pleash's submission that that conclusion is reinforced by the fact that several of the substantive claims pursued by the Plaintiffs were pursued in circumstances that Messrs Albarran and Pleash had previously identified that they were subject of res judicata and Anshun estoppel arising from previous aspects of the proceedings, and I so held in my principal judgment. It seems to me clear that the case would, in fact, have been substantially shorter and the costs incurred by both parties would have been substantially less had the allegations on which the Plaintiffs failed not been pursued. 44Messrs Albarran and Pleash submit, and paragraph 16 of their proposed orders proceed on the basis that, the Plaintiffs should pay 80% of their costs of the proceedings on an ordinary basis. They contend that that percentage reflects the time spent in preparation and conduct of the proceedings proportionate to the results contained in the principal judgment. Ultimately, any assessment of that kind is necessarily a matter of impression which cannot be addressed with mathematical certainty. It seems to me that, approaching the matter in a broad way, the range of matters on which the Plaintiffs failed, covering much of the period of the administration, would have taken up in the order of 70% of the time taken to prepare the case for hearing and the time taken at the hearing, and the matters as to solicitors' cost on which the Plaintiffs succeeded would have taken up in the order of 30% of that time. Applying the usual rule that costs follow the event to those different events, it would follow that, if the recoverable costs of each party to the proceedings was $100 (assuming, as I think I properly can in the circumstances of these proceedings, that those costs would have been of a similar magnitude for each party), the Plaintiffs should be ordered to pay the Defendants' costs in the amount of $70 (being 70% of the Defendants' costs of $100) and the Defendants should be ordered to pay the Plaintiffs' costs in the sum of $30 (being 30% of the Plaintiffs' costs of $100), and those costs orders should be offset against each other, so that the Plaintiffs would be required to pay the Defendants a net amount of $40 against the Defendants' costs of $100. On that basis, I consider that the proper order is that the Plaintiffs should pay 40% of Messrs Albarran's and Pleash's costs of and incidental to the hearing before me, excluding the justification phase, as agreed or as assessed. 45Messrs Albarran and Pleash point out that the claim in respect of the disbursement of $16,855.91 (inclusive of GST) payable to Shalton Investments was a discrete matter, which was narrowly pleaded, and occupied little time at the hearing. I accept that submission. Messrs Albarran and Pleash also submit that any claim for the costs by the Plaintiffs in respect of that issue should be capped at a specified maximum amount. I do not consider it necessary to make such an order, where I have not made orders as to costs referable to specific issues in the proceedings. 46The Plaintiffs also seek an order that costs be paid forthwith, although that order was plainly sought in anticipation that costs would be ordered in their favour rather than against them. They point to familiar principles noted in Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 in that regard, and I have recently reviewed other relevant authorities as to that question in Re Elsmore Resources Ltd [2014] NSWSC 1390. It does not seem to me that orders should be made that any party's costs be paid forthwith. I recognise, as the Plaintiffs point out, that the costs incurred to date are likely to be significant, having regard to the length of the hearing before me; it will be some time before the proceedings are concluded, because of the complexity of the justification process which will now need to be undertaken; and the issues involved in this aspect of the proceedings are largely discrete from those which are likely to be involved in the scrutiny of particular attendances in the justification stage. However, an order for payment of costs forthwith would have the capacity to operate unjustly so far as it required the Plaintiffs now to pay a significant proportion of Messrs Albarran's and Pleash' costs, prior to the determination of the justification process in which costs orders may ultimately be made in their favour. 47The Plaintiffs also seek interest on costs payable to them under s 101(4) of the Civil Procedure Act. That question need not be determined since an order has not been made in the Plaintiffs' favour in respect of costs at this point. Defendants' proposed order 21 - Undertaking offered by Messrs Albarran and Pleash 48I had, in my judgment, noted the need to address the potential conflict of interest facing Messrs Albarran and Pleash in respect of any right of indemnity for the costs of the justification process. Messrs Albarran and Pleash offer undertakings to the Court, by their Counsel, that they will not exercise any right of indemnity to claim against the deed fund for their remuneration and/or expenses of and incidental to the "reference" without first obtaining a direction or order from the Court that they would be justified in doing so. 49By his affidavit dated 6 November 2014, Mr Cook, led evidence of further steps that had been taken to ensure that costs for work undertaken by Messrs Albarran and Pleash and their partners and employees in respect of the justification process would not be charged to the deed administration, including the creation of new files to record time spent on that process and directions given to staff as to the recording of the time spent in an appropriate manner. Messrs Albarran and Pleash have also, properly, instructed their present solicitors to open a new matter in respect of their retainer in respect of the justification process, which is documented by a further letter of engagement dated 3 November 2014, and Counsel has provided a separate costs agreement in respect of that process. Those steps appear to be sensible and appropriate and support the undertaking that Messrs Albarran and Pleash have given. Mr Cook's affidavit dated 6 November 2014 also confirms that Messrs Albarran and Pleash will not exercise any right of indemnity against the deed fund for remuneration and expenses, consistently with the proposed undertaking to the Court, without first obtaining a direction or order from the Court. 50I would, in principle, accept such an undertaking and consider that it is an appropriate means to address the issue of conflict to which I had referred in my judgment. That undertaking will need to be amended to make clear that it is directed to the justification process contemplated by my judgment, and not only to a reference, since I have not yet determined that the matter should be referred to a referee. Orders 51The parties should now be in a position to prepare agreed orders to give effect to this judgment, having regard to the determination of the substantive issues between them in this judgment. I direct the parties to submit orders to give effect to this judgment within 7 days, or such further time as is agreed between them. I have listed the matter in the Corporations List for further directions on 15 December 2014, but the parties may approach my Associate in Chambers if another date is more suitable for them.