Belverdere Pty Ltd (in liq) v Idameneo (No 123) Pty Ltd (No 2) (costs)

Catchwords: COSTS — costs order against non-party — s98(1)(b), Civil Procedure Act 2005 — plaintiff goes into liquidation while judgment reserved — successful defendant seeks order that the plaintiff’s sole director and shareholder be jointly and severally liable for costs — principles at [2]-[6] — whether in the interests of justice to make non-party costs order— director had earlier given undertaking to the Court to meet any adverse costs order against the plaintiff, to avoid an order for security for costs — non-party costs order made.

Legislation Cited: Civil Procedure Act 2005 (NSW)
Corporations Act 2001 (Cth)

Cases Cited: ADH Plumbing Pty Ltd v Glenashka Pty Ltd as Trustee of the Colin Henry Wilson Trading Trust trading as Wilsons Betamix Goonumbla Quarry & Wilsons Betamix Concrete and Another (No 2) [2020] NSWDC 790
Belverdere Pty Ltd v Idameneo (No 123) Pty Ltd [2025] NSWSC 1327
CC Medical Offices Pty Limited [2013] NSWSC 379
FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340
Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34
In the matter of Granite Power Ltd (administrators appointed) [2019] NSWSC 1491
Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28
KSMC Holdings Pty Ltd v Bowden (No 3) [2020] NSWCA 158
Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd – Costs [2020] NSWSC 633
Re Lifestyle Residences Hobsons Bay Pty Ltd (mgrs and recs apptd) [2023] VSC 179
Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2004] QSC 47
Xabregas v The Owners – Strata Plan No 79205 [2014] NSWSC 1027

Category: Costs

Parties: Belverdere Pty Ltd (Plaintiff)
Idameneo (No 123) Pty Ltd (Defendant)

Representation: Counsel:
G O’Mahoney / A Reid (Defendant)
Solicitors:
Johnson Winter Slattery (Defendant)
Keypoint Law (Dr Julie Lukic, a third party)

File Number(s): 2022/275051

JUDGMENT

1. HER HONOUR: On 17 November 2025, I dismissed the plaintiff’s claim with costs: Belverdere Pty Ltd v Idameneo (No 123) Pty Ltd [2025] NSWSC 1327. The defendant now seeks an order under to s 98(1)(b) of the Civil Procedure Act 2005 (NSW) that the plaintiff’s sole director and shareholder, Dr Julie Lukic, be jointly and severally liable with the plaintiff for those costs.

Principles

2. The Court has wide discretion in respect of orders for costs, including “by whom … costs are to be paid”: section 98(1)(b), Civil Procedure Act 2005 (NSW). A costs order can be made against a non-party to the proceedings. In Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28, Mason CJ and Deane J held that circumstances that may warrant the making of a costs order against a third party include, at 193:

… where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.

3. A non-party costs order will not ordinarily be made against directors of corporate parties, unless a director has engaged in particular conduct which would warrant the Court doing so. In FPM Constructions Pty Ltd v Council of the City of Blue Mountains [2005] NSWCA 340, Basten JA (Beazley JA agreeing) cautioned that non-party costs orders should not overrun considerations such as the corporate veil, “Were it otherwise, the corporate veil would, in effect, be nullified at the very point at which it provides protection against personal liability for the shareholders and directors”: at [206]. Basten JA observed at [210]:

… What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:

(a) the unsuccessful party to the proceedings was the moving party and not the defendant;

(b) the source of funds for the litigation was the non-party or its principal;

(c) the conduct of the litigation was unreasonable or improper;

(d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e) the unsuccessful party was insolvent or could otherwise be described as a person of straw.

4. Likewise, in Rushton (Qld) Pty Ltd v Rushton (NSW) Pty Ltd [2004] QSC 47, Muir J rejected an application for a non-party costs order against a sole director and shareholder of the unsuccessful corporate party to a proceeding. At [13]:

… The control of a corporate litigant by a director who is also its sole or majority shareholder is an unremarkable occurrence. It is sanctioned by a long established legislative framework which recognises that a company has an independent legal personality distinct from that of its members and that neither members nor directors, as a general proposition, are personally liable for its acts and defaults.

5. The criteria stated in Knight v FP Special Assets and FPM Constructions are not exhaustive; nor are the categories of case in which a costs order can be made against a non-party closed: Xabregas v The Owners – Strata Plan No 79205 [2014] NSWSC 1027: at [87] (White J (as his Honour then was). In KSMC Holdings Pty Ltd v Bowden (No 3) [2020] NSWCA 158, Payne JA noted at [43]:

The five criteria identified in FPM must not be applied mechanically: Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [81]. The individual criteria are not to be treated as separate and independent factors; they are capable of interacting: Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd – Costs [2020] NSWSC 633 per Hammerschlag J at [23].

6. The fact that the non-party has given an undertaking to the Court to be personally liable for any adverse costs order made against the unsuccessful party supports the making for a non-party costs order: see, for example, CC Medical Offices Pty Limited [2013] NSWSC 379 at [35] (Brereton J); Re Lifestyle Residences Hobsons Bay Pty Ltd (mgrs and recs apptd) [2023] VSC 179 at [75]-[76] (Hetyey AsJ). As Judge Dicker noted in ADH Plumbing Pty Ltd v Glenashka Pty Ltd as Trustee of the Colin Henry Wilson Trading Trust trading as Wilsons Betamix Goonumbla Quarry & Wilsons Betamix Concrete and Another (No 2) [2020] NSWDC 790, “the undertaking noted by the Judicial Registrar … is significant and strongly indicates that a third party costs order is appropriate”: at [34].

Facts

7. The plaintiff, Belverdere Pty Ltd (in liquidation), was an incorporated medical practice providing specialist IVF services through Dr Lukic. The defendant, Idameneo (No 123) Pty Ltd, is a large national operator of medical centres. The plaintiff, defendant and Dr Lukic signed a contract for the doctor to provide medical services. But the defendant terminated the contract in August 2018.

8. Four years later, these proceedings were commenced in September 2022. The plaintiff sought damages for breach of contract. Although Dr Lukic was a party to the contract, she did not become a party to the proceedings.

9. The plaintiff had issued share capital of $1. In November 2022, the defendant filed a motion seeking security for costs. I heard the motion in May 2023. The defendant complained that it had thrice sought financial information in respect of the plaintiff, but had not been favoured with a substantive response. According to the transcript, I indicated to the parties that I inferred from these matters that the Court’s jurisdiction to order security for costs was enlivened.

10. The plaintiff’s counsel invited me to infer instead that, as Dr Lukic was now in employment again, “she was generating income, in my submission your Honour would infer that that is a valuable practice”. I declined to do so, where I had “nothing to go on”. I invited Dr Lukic to come out from the corporate veil and give a guarantee for payment of any costs order made against the plaintiff, in which case no order for security would be made. The plaintiff’s counsel gave an undertaking to the Court on behalf of Dr Lukic to meet any adverse costs order made against the plaintiff in these proceedings. I made orders noting the doctor’s undertaking.

11. I now know from the evidence at trial that, while the plaintiff was a $1 company, its tax returns for the 2015 to 2019 financial years reported total income of $12,292,913 and nett income of $2,906,632. That is, on average, the plaintiff earned $1,973 in net income each day. But the plaintiff did not undertake any other business after its contract with the defendant was terminated: Belverdere at [298]. There were no tax returns after 2019.

12. Further, it took Dr Lukic nearly three years to resume medical practice. In May 2021, Dr Lukic began practising again. But the “valuable practice” referred to by the plaintiff’s counsel was conducted through a new corporate entity: Belverdere at [287].

13. That is, the plaintiff had not earned income for four years before commencing these proceedings. I infer that, in the absence of income for a protracted period, its financial position was not good. While nothing is known of the plaintiff’s financial state during the three years in which these proceedings were litigated, it is unlikely to have improved in the absence of any income.

14. In February 2025, the matter was listed for trial in July 2025. In May 2025, the Deputy Commissioner of Taxation commenced proceedings against the plaintiff in the Federal Court of Australia, seeking to wind up the company. I heard the matter in July 2025 and reserved judgment.

15. On 7 November 2025, a winding up order was made; Henry Kazar and Simon Cathro were appointed as liquidators of the plaintiff. On 17 November 2025, I gave judgment and made orders. Relevantly, in the event that a special costs order was sought, I directed the party seeking that order to serve any affidavits and submissions by 24 November 2025, with any affidavits in reply and submissions to be served by 1 December 2025 and the application to be determined on the papers. Having made these orders, I was informed that the plaintiff had gone into liquidation.

16. On 24 November 2025, the defendant provided its submissions and supporting affidavit in support of the special costs order now sought. No submissions or affidavits in reply were served by 1 December 2025. On 4 December 2025, I enquired of the parties as to whether the defendant’s submissions and affidavit had been served on Dr Lukic (as the order sought affected her). In the event that the plaintiff’s solicitor did not agree to accept service on behalf of the doctor, then I asked that the material be personally served on Dr Lukic under cover of a letter requesting that she advise me by email whether she wished to make any submission or put on any evidence, in which case such material should be provided within seven days of service.

17. The plaintiff’s solicitor advised that he did not hold instructions to act for Dr Lukic. The defendant personally served Dr Lukic with the relevant material on 9 December 2025. On 16 December 2025, the plaintiff’s solicitor advised that he was now instructed to act for Dr Lukic in relation to the matter. An extension of time was given for the doctor to provide any submissions or evidence. Written submissions were received on 23 January 2026.

Submissions

18. The defendant submitted that the special costs order was in the interests of justice given Dr Lukic’s undertaking to the Court to meet any adverse costs order made against plaintiff, the fact that the proceedings were brought for her benefit and that the plaintiff was, at all material times, a “person of straw” and had since been wound up in insolvency.

19. Dr Lukic opposed the order as she was not a party to the proceedings. There was said to be no evidence that the plaintiff was "at all material times a person of straw". (There was: see [11]-[13]). Nor was there said to be any evidence that the proceedings were for Dr Lukic’s benefit. (The fact that Dr Lukic is the sole shareholder of the company does suggest this). It was submitted that the conduct of Dr Lukic and the plaintiff in pursuing the proceedings did not meet the category of case referred to in Knight v FP Special Assets or FPM Constructions.

20. Dr Lukic submitted that she was an expense that reduced the damages that the plaintiff would have otherwise been entitled to. I take this to be a reference to my conclusion that, if I had awarded damages to the plaintiff, then it would have been on the basis of lost nett profit rather than gross profit, and where Dr Lukic’s wages were an expense of the plaintiff. Otherwise, this does not appear to me to be a relevant consideration on this application.

21. Dr Lukic further submitted that there was no evidence that she funded the litigation. (I accept this). Finally, Dr Lukic submitted that the proceedings were conducted reasonably and properly. (I accept this too).

22. Finally, Dr Lukic submitted that no costs order should have been made against the plaintiff either. Further, the costs order already made ought be set aside as no leave had been sought by the defendant to proceed against the plaintiff prior to the handing down of the judgment on 17 November 2025: s 471B, Corporations Act 2001 (Cth).

Conclusion

23. There is no application by the plaintiff to set aside the costs order made against it. Nor is there a formal application by Dr Lukic to do so, assuming for the moment that she has standing to make such an application. In any event, s 471B of the Corporations Act 2001 provides: (emphasis added)

Stay of proceedings and suspension of enforcement process

While a company is being wound up in insolvency or by the Court, or a provisional liquidator of a company is acting, a person cannot begin or proceed with:

(a) a proceeding in a court against the company or in relation to property of the company; or

(b) enforcement process in relation to such property;

except with the leave of the Court and in accordance with such terms (if any) as the Court imposes.

24. The defendant is not bringing a proceeding against the plaintiff, but defending a proceeding brought by that company. Section 471B does not stay proceedings brought by a company in liquidation but proceedings brought against that company: In the matter of Granite Power Ltd (administrators appointed) [2019] NSWSC 1491 at [40]‑[42].

25. The remaining question is whether it is in the interests of justice to make a non-party costs order. The plaintiff was the moving party in these proceedings. For reasons already given, I am satisfied that the plaintiff was in a poor financial state when it commenced these proceedings. That position did not improve.

26. Whilst there is no evidence as to who was funding the plaintiff’s legal representatives, it is unlikely that these proceedings were done pro bono. The most likely source of funding was Dr Lukic. Dr Lukic also likely had an interest in the outcome of the litigation as, being the sole shareholder of the plaintiff company, any damages awarded were likely to ultimately benefit her.

27. A significant consideration in the exercise of my discretion is that, if Dr Lukic had not given an undertaking to meet any adverse costs order made against the plaintiff, then I would have ordered the plaintiff to provide security for costs in May 2023. The source of that security would have been, most likely, Dr Lukic. If the security had been provided, then the defendant would now be entitled to call on those funds. If the security had not been provided, then these proceedings would have been stayed. In that event, the defendant would not have incurred the likely substantial costs which it has incurred over the ensuing two and a half years of this litigation.

28. Either way, I consider that it would be unjust in all of these circumstances if the defendant was now limited to the plaintiff’s assets to meet the costs order now made in its favour. For these reasons, I consider that both the plaintiff and Dr Lukic should be responsible for the defendant’s costs of these proceedings.

Orders

29. For these reasons, I make the following orders:

30. Pursuant to s 98(1)(b) of the Civil Procedure Act 2005 (NSW), order that Dr Julie Lukic is jointly and severally liable with the plaintiff for the defendant’s costs of the proceedings.

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