Costs - first defendant and Mr McAuliffe
22 In support of the cost orders set out above the plaintiff read two affidavits of Mr Catchpoole, each affirmed on 9 December 2024. The first affidavit (and exhibit MRC-19), sets out the conduct of Mr McAuliffe complained of in relation to costs thrown away, which are sought on the indemnity basis, and to be determined by way of a lump sum. The second affidavit is a cost summary, which it is submitted conforms with this Court's practice note GPN-COSTS.
23 The plaintiff notes that it has only had dealings with Mr McAuliffe in relation to the first defendant in these proceedings. He is the largest, but not the sole shareholder of the first defendant (see transcript 15 November 2024 at p 11 - p 53 of CB).
24 Mr McAuliffe has relied on matters falling from Lee J in earlier case management proceedings, where his Honour indicated that he should seek pro bono assistance. In doing so, Mr McAuliffe says he has identified "a number of other potential interlocutory applications", such as a derivative action against the current directors of the plaintiff, and a "substantial cross-claim". Those claims were notified to the plaintiff as being claims, not of the first defendant but of Mr McAuliffe personally (see paragraphs 11 and 12 of Mr Catchpoole's first affidavit) and they were intended to be filed in late October 2024. They have not been filed in this Court.
25 In an interlocutory hearing on 15 November 2024, Mr McAuliffe noted that he might file those proceedings in the Supreme Court of Queensland. Lee J made it clear to both Mr Aardoom and Mr McAuliffe on 13 June 2024, that:
A corporation can only appear in this court by a lawyer, and in the event that they seek relief from the rules, they need to make application. … [t]hat has to be fixed up, otherwise, I will entertain an application for judgment to be filed against the first defendant and the fourth defendant by the plaintiff.
(paragraph 21 of Mr Catchpoole's first affidavit).
26 His Honour made notations that the parties had been informed of the necessity to take legal advice, and to regularise the position of the representation of the two companies.
27 The matter was then administratively transferred to my docket.
28 Despite the clear warning from Lee J, Mr McAuliffe did not immediately file any application. He did not appear on the case management hearing on 5 September 2024. On that day, I made orders providing for the plaintiff to file an application for default judgment against the first defendant, and a timetable, with a hearing of the interlocutory application on 18 October 2024. The application was served on the first defendant by email to Mr McAuliffe on 16 September 2024. The plaintiff served its submissions in support of the default judgment application on 1 October 2024, also by email to Mr McAuliffe.
29 On 24 September 2024, ASIC gave notice that it proposed to deregister the first defendant after two months.
30 The matter came before me on 18 October 2024 at 2.30 pm. The plaintiff had not heard from Mr McAuliffe between 10 July 2024 and 18 October 2024 at 1.24 pm, when Mr McAuliffe sent an email to my Associate and to the representatives of the plaintiff, attaching "a sealed copy of the affidavit of the first defendant". He noted that he had also filed "an Interlocutory application for self-representation" but had not yet received sealed copies.
31 The supporting affidavit did not mention the notice by ASIC of the proposal to deregister the first defendant, nor did Mr McAuliffe raise it in submissions on that day.
32 The late service of the application resulted in an adjournment, by which Mr McAuliffe accepted that a condition of which was that the costs of the plaintiff thrown away would be paid (see transcript of that day at p 5, lines 6 - 12).
33 The matter was stood over to 19 December 2024, at which time it became clear that the first defendant had been deregistered, and that the proceedings against the first defendant were accordingly abated.
34 The plaintiff submitted that Mr McAuliffe filed the leave application on 17 October 2024, after having known of the requirement to do so since 13 June 2024, and of the intention to seek default judgment since 13 July 2024, and in circumstances where he, as a director of the first defendant, must have known of the first defendant's forthcoming deregistration.
35 Mr Catchpoole says in his affidavit that his counsel indicated to me that the position of the plaintiff on the leave application was that:
There's no prejudice which would not be capable of remedy by a costs order.
36 Mr Catchpoole says in paragraph 35 of his first affidavit that:
If I had known about the proposed deregistration of JBL, I would have caused counsel to be instructed to strongly oppose any adjournment of the default judgment application to 19 December 2024.
37 Mr Catchpoole was not cross-examined, and I accept his evidence. Clearly, the imminent deregistration of the first defendant was a relevant matter when determining whether to instruct counsel to take a stand against the adjournment or not. Mr Hynes submitted on this hearing that:
Where we have JBL seeking what is an indulgence from the court ... the failure to raise the ASIC notice was material in the extreme.
38 He noted that the intention was that the costs would be determined on 19 December 2024, at which time it was likely that the first defendant would have been, as it indeed was, deregistered.
39 The second affidavit of Mr Catchpoole is a costs summary, which it is submitted and I concur, complies with the requirements of GPN-COSTS in relation to a lump sum costs order.
40 There is no correspondence between ASIC and the first defendant or the directors of the first defendant, including Mr McAuliffe, going to the reasons for, or the directors knowledge or understanding of the deregistration in evidence, nor is there any evidence of Mr McAuliffe actually attempting to get the company re-registered, despite the assertions in oral submissions that that was underway.
41 Mr McAuliffe suggested that it lay on the plaintiff as a "person aggrieved" by the deregistration to reinstate the registration (see section 601AH (2)(a)(i)) but that is not to the point.
42 I accept the submission that Mr McAuliffe knew of the company's risk of deregistration. He admitted in submissions that he knew that was a possibility in March. It is not credible to say that he did not know, as at 18 October 2024, that the company had, in fact, been given notice of deregistration (despite making submissions that he was not aware of that fact). He did not raise the matter to this Court, and allowed the adjournment of the default judgment application, and the leave application, to a time when deregistration was likely to have then been actioned by ASIC.
43 It seems to me that the plaintiff's submission that it should have its costs thrown away paid by Mr McAuliffe is properly founded. I also agree that the costs should be assessed on the indemnity basis given the plaintiff's submission as to the "delinquent nature of the conduct at issue" - see Lowe v Mack Trucks Australia Pty Limited (No 2) [2008] FCA 711 at [7].
44 The plaintiff also seeks that the Court dispense with the usual principle, that an interlocutory costs order not be taxed until the conclusion of the proceedings; FCR r 40.13. I take note of cl 4.1 of GPN-COSTS, and the Court's preference, where practical and appropriate to do so, is that a lump sum costs order is the preferable course of action. There is a general warning in the footnote to cl 4.1 about lump sum costs not applying generally to interlocutory costs orders, unless otherwise ordered.
45 A number of factors raised by the plaintiff - in particular the facts that Mr McAuliffe is not a party but has taken the running of the proceedings by correspondence and has done so in a way which has caused delay and prejudice - are relevant to the consideration of whether r 40.13 should be dispensed with. The plaintiff raises the fact that the costs incurred are more significant than they would have been, had the first defendant acted with competence and diligence, citing Watson v Criticos (Costs Payable Forthwith) [2022] FCA 4 at [7].
46 Mr McAuliffe served an unsworn affidavit on the morning of the hearing, despite my orders that he file any evidence and submissions by 16 December 2024. The affidavit does not depose to any evidence; it was instead treated as a submission pursuant to s 136 of the Evidence Act 1995 (Cth).
47 In that submission, and in his oral submissions, Mr McAuliffe resisted the costs order sought saying "It's not enough to just say that I'm a director (Gardiner v FX Music Limited)" to ground a personal costs order. (The citation of that case appears to be Gardiner v FX Music Limited (2000) WL 33116500 (27 March 2000, unreported)). He also contended that:
There is no scope to order a non-party costs order, unless or until a costs order has been made against the main defendant (Zanussi v Anglos-Venezuelan, an English case that is persuasive).
(This is seemingly a reference to Zanussi v Anglos-Venezuelan Real Estate and Agricultural Development Limited Real Estate and Agricultural Development Limited [1996] EWCA Civ J0307-5). The principle contended for is clearly not the case under the Rules of this Court.
48 Mr McAuliffe did not deal with his acceptance of the plaintiff's entitlement costs after the adjournment of the hearing on 18 October 2024, and submitted that costs should follow the cause. He said in his oral submissions that he and his fellow director were unaware of the deregistration, given that they had paid the $49 fee outstanding (see transcript 6 February 2025 at p 29). He says that later, ASIC gave a reason for deregistration that the company needed a third director, which had not been flagged in any way in any correspondence (see the same transcript reference). Nor did Mr McAuliffe raise anything but the most general of objections to the issue of whether the costs should be a lump sum order or payable forthwith.
49 In the circumstances, and given the factors set out above, I am of the view that it is appropriate to dispense with the usual principles in relation to costs being payable forthwith. In the circumstances, and given the factors set out above, I am prepared to order that the costs thrown away of 18 October 2024:
(a) be paid by Mr McAuliffe, on the indemnity basis;
(b) be determined to be paid as a lump sum fixed in the sum of $14,297.40; and
(c) be payable forthwith.
50 The costs of this application should also be paid by Mr McAuliffe, on a lump sum basis fixed in the sum of $6,870, payable forthwith.