Bradley Mark Lum v MV Developments

Third Cross Claim Alexander James Antonios (Cross Claimant) (Applicant to the Notice of Motion) M V Developments (Lane Cove) Pty Ltd (In Liq) (First Cross Defendant) (Respondent to the Notice of Motion) Andrew James Barnden (current liquidator of the First Cross Defendant) (Respondent to the Notice of Motion) Robert Boyce Moodie (former liquidator of the First Cross Defendant) (Respondent to the Notice of Motion) Ta Lee Investments Pty Ltd (Third Cross Defendant) (Respondent to the Notice of Motion) Representation: Counsel: J Knackstredt (Alexander James Antonios) AG Bell SC with K Petch (M V Developments (Lane Cove) Pty Ltd (In Liq) and Andrew James Barnden (former liquidator of the First Cross Defendant) and Robert Boyce Moodie (former liquidator of the First Cross Defendant)

Solicitors: M & K Lawyers Group Pty Limited (Alexander James Antonios) William James Lawyers (M V Developments (Lane Cove) Pty Ltd (In Liq) File Number(s): 2015/266248

Introduction

1. On 8 March 2018, I published reasons (the Principal Reasons) [1] for concluding that the first cross-claim in these proceedings should be dismissed and that the cross claimant on the third cross-claim was entitled to the relief claimed in that cross claim. In these reasons, terms are used as they were defined in the Principal Reasons.
2. These reasons are concerned with the costs incurred by Mr Antonios in relation to the first cross-claim and the third cross-claim. By notice of motion filed on 29 March 2018 (the Costs Motion), Mr Antonios applied for orders that:

• the Company pay the costs of the proceedings incurred by Mr Antonios on the ordinary basis up to 17 September 2015, or in the alternative, up to 26 September 2017, and on the indemnity basis thereafter;
• Mr Andrew Barnden and Mr Robert Moodie (together the Liquidators), being the current and a former liquidator of the Company respectively, pay the costs of the proceedings incurred by Mr Antonios on the ordinary basis up to 17 September 2015, or in the alternative, up to 26 September 2017, and on the indemnity basis thereafter;
• Ta Lee pay costs of the proceedings incurred by Mr Antonios on the ordinary basis up to 17 September 2015, or in the alternative up to 26 September 2017, and on the indemnity basis thereafter.

1. The prayer for costs against Ta Lee in the Costs Motion has been resolved. Ta Lee accepts that an order for costs should be made against it and, on 30 May 2018, orders were made to that effect. Accordingly, there is no need to say anything further about that prayer.
2. The questions remaining are whether the Company should be ordered to pay the costs incurred by Mr Antonios and whether the Liquidators personally should also be ordered to pay those costs. Mr Antonios contends that, while the Company did not take an active role in the proceedings, it was nonetheless the cause of the need for contested litigation and, at all relevant times, the Company was under the control of one or other of the Liquidators. The Company in effect, permitted Ta Lee to stand in its shoes as contradictor and therefore, he says, the Company and the Liquidators should be ordered to pay his costs.
3. Mr Antonios contends that the Liquidators acted unreasonably in failing to cause the Company to submit to such order as the Court may make, except as to costs, in relation to the claims made by Ta Lee in the first cross-claim and the claims made by him in the third cross-claim. Accordingly, he says, the Liquidators should be ordered personally to pay the costs incurred by Mr Antonios. Whether the Liquidators would be entitled to be indemnified out of any assets of the Company is not a question that is presently before the Court.
4. In addition to costs on the ordinary basis, Mr Antonios contends that costs should be ordered on the indemnity basis from 17 September 2015, when an offer was made on behalf of Mr Antonios. Alternatively, Mr Antonios seeks costs on the indemnity basis from 26 September 2017, when Mr Antonios made a formal offer of compromise under r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW).
5. By the first cross-claim, Ta Lee sought a declaration that it had an equitable charge over the Apartment that secured the payment of all moneys payable to Ta Lee by the Company under the Ta Lee Deed. Ta Lee also sought an order that Mr Antonios withdraw the caveat lodged by him in relation to the Apartment. By the third cross-claim, Mr Antonios sought a declaration that a contract for the sale of the Apartment to him by the Company was valid and enforceable and an order for specific performance of that contract. He also sought a declaration that Ta Lee did not have an equitable interest in the Apartment and an order that Ta Lee withdraw the caveat lodged on its behalf in respect of the Apartment.
6. In the Principal Reasons I concluded that the Ta Lee Deed did not create an equitable charge in favour of Ta Lee. However, I concluded that Mr Antonios was entitled to an order for specific performance of the contract for sale entered into with the Company on 15 April 2015. Before dealing with the question of costs, it is necessary to set out in some detail the actions of Liquidators and the Company that led to Mr Antonios resisting Ta Lee's first cross-claim and Ta Lee conducting the defence of the third cross-claim brought by Mr Antonios.

Conduct of the Liquidators

1. The Liquidators and the Company relied on an affidavit sworn by Mr Barnden on 13 April 2018 (the Barnden Affidavit). In the Barnden Affidavit, Mr Barnden recounted the Liquidators' dealings with the Development generally and the Apartment in particular. He also explained his reasons for various actions taken by him as liquidator in dealing with competing claims in relation to the Apartment. In addition, both Mr Antonios and the Liquidators relied on written communications to which I shall refer.
2. Mr Antonios objected to those parts of the Barnden Affidavit in which Mr Barnden purported to explain his reasons for various actions taken by him as liquidator. Mr Antonios contended that, in the absence of any suggestion that the Liquidators had acted dishonestly, the only question is whether the actions in question were, considered objectively, reasonable or unreasonable. On that basis, Mr Barnden's subjective state of mind would be irrelevant. I admitted the relevant parts on the basis that Mr Barnden's subjective state of mind may have some relevance.
3. However, a question arises as to the weight that should be given to the ex post facto rationalisation of his actions by Mr Barnden in the absence of contemporaneous notes by him recording his reasoning for taking or not taking action at any particular time. The best evidence of Mr Barnden's thought processes, to the extent that they are relevant, is to be gleaned from other written communications relied on by both Mr Antonios and the Liquidators, to which I shall refer.

Appointment of the Liquidators

1. On 26 June 2015, the Liquidators were appointed as voluntary administrators of the Company by a resolution of Mr Fong, its sole director. On 31 August 2015, this Court made an order that the Company be wound up and appointed the Liquidators as joint liquidators of the Company. On 31 July 2017, Mr Moodie resigned as a liquidator of the Company and Mr Barnden continued on as the sole liquidator of the Company. During the course of the administration and liquidation of the Company, Mr Barnden has been assisted in his investigations by Mr Moodie and their staff.
2. As indicated in the Principal Reasons, the Development was the main if not the only business of the Company. Following his appointment as administrator, Mr Barnden concluded that 28 of the lots in the Development had been sold (the Sold Lots) and that the Company remained the registered proprietor of 28 lots, including the Apartment (the Unsold Lots). Mr Barnden concluded that the Unsold Lots had not been sold because searches of them recorded the Company as the registered proprietor of each of the Unsold Lots. However, he also found that contracts may have been entered into in relation to some of the Unsold Lots, although he formed the opinion that the circumstances of the sales of many of the Unsold Lots were unusual. For example, in relation to the Apartment two purported purchasers asserted that they had paid substantial deposits to the Company prior to the appointment of the Liquidators. Mr Barnden discovered during his investigations that the funds paid by way of deposit had been dissipated by the Company such that they would not be available on settlement of the alleged contracts for sale.
3. Mr Barnden also found that the Unsold Lots were subject to:

• a first registered mortgage to Westpac;
• a second registered mortgage to Win Mezz No. 75 Pty Ltd (Win Mezz); and
• a third registered mortgage to Win Senior No. 123 Pty Ltd (Win Senior). He also found that caveats claiming various interests were recorded on the titles to various of the Unsold Lots.

1. Mr Barnden took various steps in relation to the Unsold Lots, including the Apartment. Thus, he first reviewed the search of the Apartment. The search of the Apartment disclosed the mortgages in favour of Westpac, Win Mezz and Win Senior together with a caveat lodged by Gold Stone Capital Pty Limited (Gold Stone) and a caveat lodged by Ta Lee. Mr Barnden also reviewed the security documents in respect of the claimed interests of the mortgagees and caveators. Finally, he reviewed the contracts for sale in relation to the Apartment and the evidence of payment of any deposit under the contracts for sale. He obtained legal advice in relation to the contract of sale. However, he maintains legal professional privilege in relation to the contents of any such advice. He also communicated with the registered mortgagees and caveators to ascertain whether they would discharge or withdraw their securities to allow any sale to proceed.
2. On 5 August 2015, all money owing by the Company to Westpac was repaid from the proceeds of the sale of several of the Unsold Lots. Mr Barnden formed the view that the claims by Win Mezz, Win Senior, and possibly the claims by Ta Lee and Gold Stone ranked ahead of unsecured creditors and that the amounts owing exceeded the amounts likely to be realised even if all of the sale contracts that had been entered into in respect of the Unsold Lots were completed. Win Mezz and Win Senior together claimed a total of $14,719,000 and Gold Stone claimed a total of $8,109,948.56. All claimed that their securities covered the Apartment.
3. Mr Barnden found that Win Mezz and Win Senior were unwilling to discharge their mortgages in order to allow the completion of the sale of any of the Unsold Lots unless the purchase price for such unsold lot was a value satisfactory to them and the full sale price was paid on completion. Mr Barnden therefore concluded that, unless Win Mezz and Win Senior received payment of the total purchase price payable in relation to each of the Unsold Lots, they would not release their securities.
4. By 15 February 2016, the total debt owing to Win Mezz had been repaid in full from the sale of various Unsold Lots. By 26 April 2016, the total debt owing to Win Senior had also been repaid from the proceeds of sale of other Unsold Lots.

The Claims by Mr Antonios

1. Ta Lee proved in the administration of the Company for a total amount of $3,420,242.64. Ta Lee asserted an equitable charge over all the Unsold Lots, including the Apartment, and lodged caveats over the Unsold Lots, including the Apartment. In June or July 2015, the solicitor for Ta Lee accepted that Westpac, Win Mezz and Win Senior had priority over any security of Ta Lee. An arrangement was made that details of proposed sales of Unsold Lots were to be provided to Ta Lee and if those sales were acceptable to Ta Lee, Ta Lee was to provide withdrawals of caveats to allow the sales to proceed. Thereafter, prior to completing any sales of Unsold Lots under a contract entered into before the administration, particulars of the purchase price and the funds to be paid at settlement were provided to Win Mezz, Win Senior, Ta Lee and Gold Stone.
2. On 7 July 2015, Mr Antonios submitted a proof of debt in the administration in the sum of $1,185,000. Attached to the proof of debt were copies of the Antonios Deed of 15 April 2015, the front page of the contract for sale and the acknowledgement of 14 April 2015 signed by Mr Fong.
3. On 23 July 2015, Cluff & Associates, the solicitors then acting for Mr Antonios, wrote to Mr Barnden asserting that Mr Antonios was a purchaser of the Apartment. They enclosed an unexecuted contract for sale of the Apartment to Mr Antonios for a purchase price of $1,250,000, and gave notice that they intended to lodge a caveat. Special Condition 33 of the sale contract provided as follows: "33.1 The Purchaser shall not lodge a caveat on the title to the Property prior to completion."
4. On 28 August 2015, William James, the solicitors for Mr Barnden responded to the letter 23 July 2015. The letter said that pursuant to "clause 33.1 of the Contract", Mr Antonios was precluded from lodging a caveat over the Apartment and that, if Mr Antonios lodged a caveat, the Liquidators would serve a lapsing notice. The letter also purported to reserve the rights of the Liquidators against Mr Antonios "with respect to any loss suffered by them as a result of any caveat being lodged". Thus, the Liquidators did not deny the existence of a contract for sale between the Company and Mr Antonios. Rather, they purported to rely on the special condition of the contract that Mr Antonios was seeking to enforce against the Company. More significantly, they threatened to serve a lapsing notice.
5. In the Barnden Affidavit, Mr Barnden said that he concluded that, because the contract enclosed with the letter of 23 July 2015 was not executed, he was not satisfied that it was enforceable. Of course, his solicitors did not make that assertion. Mr Barnden said that, regardless of whether the contract was enforceable, he considered cl 33.1 prohibited Mr Antonios from lodging a caveat in reliance upon the contract. Mr Barnden also said that he was conscious of the fact that the front page of the contract enclosed with the letter of 23 July 2015 was inconsistent with the front page of the contract annexed to the proof of debt. While he asserted that no explanation had been given for the inconsistency, there is no evidence that he raised that matter with Mr Antonios or the solicitors. Rather, he gave instructions to his solicitors to write the letter of 28 August 2015 referring only to the clause of the contract.
6. Mr Barnden also said that he was conscious of a Sales Inspection Report for the Apartment signed by Mr Fong on 23 June 2015. In that report, the sales agent expressed the opinion that the estimated selling price or price range for the Apartment was $1,200,000 to $1,350,000. Mr Barnden considered that that report was inconsistent with the existence of a binding contract in respect of the Apartment and contradicted Mr Fong's letter of acknowledgement of 14 April 2015 annexed to the proof of debt. Apart from that letter, Mr Barnden had at that time seen no evidence in the books and records of the Company or receipt by the Company of the sum of $910,000 or the sum of $1,250,000 from Mr Antonios. Further, he asserted, the acknowledgement letter predated the Antonius Deed although cl 5 of the Antonius Deed appeared to provide for payment of the purchase price by instalments "going forwards". Finally, Mr Barnden asserted that, in July 2015, he had regard to emails of 1 May 2015 and 3 July 2015 suggesting that any contract with Mr Antonios might have been abandoned.
7. It is difficult to see how the reasoning asserted by Mr Barnden for instructing his solicitors to write the letter of 28 August 2015 would justify writing that letter without any reference to the considerations that he said he took into account. One might have expected him to raise those matters with Mr Antonios and his advisers, giving them an opportunity to proffer an explanation. In any event, it must have been clear from the letter of 23 July 2015 that Mr Antonios had not abandoned any contract.
8. On 2 September 2015, William James wrote to Cluff & Associates again relevantly saying as follows: "As you may now be aware, any deposit paid by your client under the Contract was not held by the Company as at the date of our client's appointment. The deposit is therefore not available to be paid to the registered mortgagee and caveators at settlement of the sale of the Property. We are instructed that the registered mortgagee has indicated to our clients that it will not be in a position to discharge the mortgage at settlement of the sale of the Property, unless it is provided with the full purchase price (including the deposit) in clear funds at settlement. [Ta Lee] has also indicated that it will not provide a withdrawal of its caveat at settlement unless the full purchase price (including the deposit) is paid at settlement. The other caveators will potentially take the same position. Our clients are therefore not in a position to settle the Contract without the full purchase price being made available (including the missing deposit) at settlement. Our clients hereby put your client on notice that they intend to ignore the Contract and proceed to market the Property for sale after seven days from the date of this letter." It is curious that none of the reasoning now espoused by Mr Barnden in the Barnden Affidavit was set out in the letter of 2 September 2015.
9. Mr Barnden asserted in the Barnden Affidavit that he gave instructions for the letter of 2 September 2015 to be written because he had not been able to locate any evidence in the books and records of the Company that showed the receipt of a deposit for the Apartment from Mr Antonios and because, if a deposit had been received, it had been dissipated by the Company prior to his appointment and would not be available on settlement. He also understood that the prior mortgagees were not prepared to discharge their mortgages and believed that he had a duty to realise the assets of the Company without delay for the benefit of all creditors and believed that a "consistent approach" was needed to be taken in respect of contracts purportedly made prior to the appointment of the Liquidator.
10. Again, it is somewhat curious that, if that was the reasoning that prompted giving instructions for the letter of 2 September 2015 to be written, it was not all set out in the letter. There was no reference to the concern about lack of evidence as to the payment of the price or the deposit. Further, the fact that a mortgagee may not be prepared to discharge the mortgage is hardly a justification for ignoring a binding contract for sale.
11. On 17 September 2015, Cluff & Associates wrote to William James following a telephone conversation on 16 September 2015 confirming the instructions of Mr Antonios: "to hereby offer a further sum of $910,000 for contracted purchase of [the Apartment] under new contract with the Administrator on the usual terms of 10% and 42 day settlement on the express understanding that the existing sum of $910,000 paid by our client for the same purchase may be claimed as creditor under proof of debt in the subject administration separate from the new Contract consideration and on the further understanding that the Administrator will be able to pass title having regard to existing encumbrances." The offer was to remain open for written acceptance within 14 days and on the express basis that all rights under the existing contract were retained pending the new agreement. The letter said that, if the offer was unacceptable, the solicitors were instructed to lodge a caveat claiming "overriding equitable interest as existing purchaser".
12. Following receipt of the letter of 17 September 2015, Mr Barnden sought to ascertain "what position the mortgagors and caveators" took in respect of the offer. An email of 21 September 2015 from Win Mezz and Win Senior confirmed that they were comfortable to proceed with the $910,000 offer in respect of the Apartment and would release their security should the settlement proceed. A letter dated 25 September 2015 from the solicitors for Ta Lee did not specifically object to the sale. After making several observations about the existing contract with Mr Antonios, the letter ended by saying: "Respectfully, before asking caveators whether the caveators would provide withdrawals of their respective caveats, the liquidator should firstly decide whether on the foregoing it is in the interest of the creditors and proper for the Liquidators to: (a) ratify the alleged Contract; or (b) accept the proposal of Cluff & Associates." By email of 28 September 2015, Gold Stone's solicitors indicated that Gold Stone would not agree to withdraw its caveat over the Apartment on the basis of $910,000 being paid unless and until Mr Barnden confirmed in writing that he considered that to be the market value of the Apartment. The email said that Gold Stone believed that the price was below market value.
13. On 29 September 2015, William James replied to the letter from Cluff & Associates of 17 September 2015 saying: "Our clients have made inquiries of the secured parties registered over this lot. Unfortunately our clients are not in a position to provide discharges and withdrawals of all securities in return for your client paying $910,000. All secured parties are not content with that purchase price. Our clients are therefore not in a position to complete your client's contracts and have little option but to realise the property without further notice to your client." Mr Barnden said that he gave instructions for that letter to be written because not all secured creditors agreed to the sale proceeding. Thus, he said, Gold Stone explicitly objected to the sale alleging that it was below market value and querying the enforceability of the contract and Ta Lee, while not expressly objecting to the sale, noted various concerns as to the enforceability of the contract.
14. Mr Barnden did not say, in the Barnden Affidavit, that he believed that $910,000 was below the market price. Rather, he simply based his decision on the fact that the secured creditors would not agree to the proposed new contract. Mr Antonios now characterises the offer of 17 September 2015 as "extraordinarily generous" and asserts that the only reasonable thing for the Liquidators would have been to accept it. He asserts that the decision by the Liquidators not to do so was "bizarre".
15. It is significant that, following the receipt of the proposal contained in the letter of 17 September 2015, no attempt was made by the Liquidators to negotiate with Mr Antonios as to whether he might be prepared to pay a higher price. There is no apparent reason why the Liquidators would not have been prepared to accept an offer to pay an amount that was shown to be a fair market price for the Apartment, even if a term of the proposal put by Mr Antonios was to be that he would be entitled to prove in the winding up of the Company as an unsecured creditor in respect of the price that he asserted had already been paid to the Company.
16. Mr Antonios relies on the letter of 17 September 2015 in support of his claim for indemnity costs against both the Company and the Liquidators, on the basis that it should fairly be characterised as a "Calderbank" offer [2] . The Liquidators point out that no reference is made to cost consequences in the letter and that, at the time when the letter was written, no litigation was on foot. Mr Antonios rejects any suggestion that the offer was not made in contemplation of litigation as being "fanciful". The letter itself said that failure to accept it would result in lodgement of a caveat, implicit in which was the existence of a dispute. By the time of the letter, multiple parties were making claims in respect of the Apartment. In the absence of agreement, the only way of resolving the disputed claims would have been litigation. In any event, there is no requirement that a "Calderbank" offer must be made after the institution of proceedings, [3] however the timing at which an offer is made is a relevant fator in an assessment of reasonableness in refusing the offer [4] .
17. One difficulty for the Liquidators, of course, would have been that the Company, as vendor, would not have been able to give a clear title at that stage if any a holder of security declined to discharge a registered mortgage or withdraw a caveat. Nevertheless, in the interests of attempting to resolve the dispute as to whether or not there was an enforceable contract between the Company and Mr Antonios, it would have been open to the Liquidators to endeavour to negotiate with Mr Antonios as to the terms upon which he might be prepared to enter into a fresh contract to buy the Apartment. In any event, Mr Barnden did not endeavour to ascertain whether Mr Antonios was prepared to pay more than $910,000.

Claims by Ms Yuan

1. Thereafter, William James entered into correspondence with Barrak Lawyers, who were acting for Ms Erica Yuan in relation to an alleged contract between her and the Company in relation to Lot 25 in the Development. It appears that William James asserted in correspondence that is not in evidence that Lot 25 was subject to an earlier contract with Mr Poh Ng. Barrak Lawyers responded by letter of 6 November 2015 that Ms Yuan's "equity" pre-dated that of Mr Ng, which was based on a deed of loan dated 30 July 2013. They asserted that, on 2 December 2011, Ms Yuan had entered into a contract with the Company for the purchase of the Apartment for a consideration of $850,000 under a contract signed by Mr Fong and that, on 16 July 2014, Mr Fong advised Ms Yuan that the Company could no longer proceed with the sale of the Apartment and requested that contracts be exchanged for the sale of Lot 25 instead. Barrak Lawyers contended in their letter that, on that basis, Ms Yuan's "equity" arose on 2 December 2011, before the "equity" of Mr Ng.
2. The letter from Barrak Lawyers of 6 November 2015 attached the front page of a contract bearing the date 2 December 2011 for the sale by the Company to Ms Yuan of the Apartment for a price of $850,000, with a deposit of $500,000, leaving a balance of $350,000 payable. The letter asserted that the deposit had been paid and that Ms Yuan would be prepared to settle for either Lot 25 or the Apartment for the consideration shown in the contract. The letter confirmed that Ms Yuan was prepared to pay the full consideration, including repayment of the missing deposit, and called on the Liquidators to confirm their readiness to settle.
3. Mr Barnden said in the Barnden Affidavit that he formed the view that, until he had more evidence, he would have to take Ms Yuan's claim into account when dealing with the Apartment. However, nothing appears to have happened in that regard until September 2016. In the meantime, the principal proceedings were commenced by Mr Bradley Lum, who had entered into a contract with the Company for the purchase of one of the other lots in the Development.

Renewed Claims by Mr Antonios

1. By September 2016, all of the amounts secured by the mortgages in favour of Win Mezz and Win Senior, as well as the mortgage in favour of Westpac, had been repaid from the sale of various of the Unsold Lots. The Company was therefore entitled to discharges of each of those mortgages, although it is not clear whether and when discharges in registrable form had been provided to the Liquidators.
2. On 14 September 2016, MacPherson Kelley, who by then were acting for Mr Antonios, wrote to William James saying that they acted for Mr Antonios in relation to the purchase of the Apartment. MacPherson Kelley referred to the claim by Mr Antonios that he had entered into a contract for sale with the Company to purchase the Apartment, saying that a full copy of the contract had been sent to the Liquidators by Cluff & Associates under cover of their letter of 23 July 2015. MacPherson Kelley asserted that, by about 17 April 2015, Mr Antonios had paid the entire deposit and purchase price of $910,000 and that he was ready, willing and able to complete the contract.
3. MacPherson Kelley then said that they had been provided with a copy of the letter from William James to Cluff & Associates of 2 September 2015 asserting that any deposit paid was no longer held by the Company, that the mortgagees and caveators would not provide discharges of their mortgages and withdrawals of their caveats and that the Liquidators intended to ignore the contract and proceed to market the Apartment for sale. They asserted that the views of the mortgagees whose mortgages remained on the title were irrelevant given that they had been repaid in full and no longer had any interest in the Apartment.
4. MacPherson Kelley also asserted that the views of the other caveators were also irrelevant to the issue of completion for reasons that they set out in their letter of 14 September 2016, relevantly saying as follows: "Gold Stone … Gold Stone did not lodge the caveat until 15 June 2015. Accordingly, our client had notice of Gold Stone's interest on 15 April 2015, when the Contract was entered into and our client's interest was created. Accordingly, Gold Stone's interest should be postponed in favour of our client's interest. Ta Lee … The equitable interest claimed by Ta Lee is a right to caveat arising from the operation of cl 7.2 of the [Ta Lee Deed]. Clause 7.2 does not create any caveatable interest in the [Apartment]. However, if cl 7.2 did create a caveatable interest in the [Apartment], that interest was not, on the terms of the [Ta Lee Deed] created until there was an event of default under the [Ta Lee Deed]. Given that Ta Lee did not lodge any caveat until 6 July 2015, we consider it unlikely that the [Ta Lee Deed] was in default until that time. Accordingly, if Ta Lee does hold an interest in the [Apartment], we consider that it is likely that it post-dates our client's interest in the [Apartment] and ranks lower in priority. Further, even if Ta Lee holds a caveatable interest in the [Apartment], that predates our client's interest, Ta Lee failed to lodge a caveat at that time, which we consider to be postponing conduct, as it allowed our client to create his interest in the [Apartment], without notice of Ta Lee's interest. It follows that our client's interest in the [Apartment] is likely to take priority to any interest held by Ta Lee, if it has any interest at all. Erica Yuan In the caveat lodged by Erica Yuan, she claims that she has an equitable interest in the [Apartment] as purchaser, under a contract for sale dated 2 December 2011. We were informed by Mr Fong that Ms Yuan did, in fact, enter into a contract with [the Company] to purchase the [Apartment]. However, following inspection of the [Apartment], she stated that she did not like the three bedroom units, preferred the two bedroom units, and abandoned the contract in order to enter into an alternate contract to purchase a two bedroom unit in the [Development] and directed the [Company] to transfer the deposit to the new contract. We are not aware of whether the initial contract was terminated or rescinded. However, it appears that Ms Yuan repudiated the initial contract by entering into the contract for sale of the two bedroom unit and transferring the deposit to that contract. … Further, Ms Yuan failed to lodge a caveat until 6 October 2015, which we consider to be postponing conduct, as it allowed our client to create his interest in the [Apartment], without notice of Ms Yuan interest. It follows that our client's interest is likely to take priority to any interest held by Ms Yuan, if she has such an interest at all. Completion In circumstances in which there is a binding contract between our respective clients, our client has paid the entire purchase price under the contract, and our client is ready, willing and able to complete, our client demands that completion of the contract occur by 5pm on 28 September 2016. If completion of the contract does not occur by 5pm on 28 September 2016, our client may commence proceedings for specific performance of the contract and, if successful, will rely on this correspondence on the issue of costs, including indemnity costs." William James did not respond in terms to the assertions made in that letter.
5. On 20 September 2016, Rutland's Law Firm, who were acting for Ta Lee, wrote to William James, referring to earlier communications concerning the Apartment that are not in evidence. The letter said that it appeared to Ta Lee that, having regard to several matters, the sale to Mr Antonios may be voidable as an uncommercial transaction entered into during the relation back period in relation to the Company under s 588FE(2) or s 588FE(3) of the Corporations Act 2000 (Cth). The matters relied upon were the fact that it appeared that as at 15 April 2015 the Company was insolvent and a reasonable person in the Company's position would not have entered into the contract because the price of $910,000 was substantially lower than the market value of the Apartment. They also asked William James whether the Liquidators took the view that the contract with Ms Yuan was binding and took precedence over the contract with Mr Antonios and, if not, why not. Finally, the letter also asked whether the Liquidators were satisfied that Mr Antonios had paid the full purchase price of $910,000 as he alleged.
6. On the same day, 20 September 2016, Rutland's Law Firm wrote to MacPherson Kelley saying that Ta Lee accepted that, if the contract for the sale of the Apartment by the Company to Mr Antonios is enforceable, the interest of Mr Antonios in the Apartment by reason of that contract would take priority over the interest claimed by Ta Lee under its caveats. The letter said that, if the Liquidators agreed, or were ordered by the Court, to complete the contract with Mr Antonios, Ta Lee undertook to provide withdrawals of its caveats to enable completion to occur. The letter said that the interests of Mr Antonios were therefore sufficiently protected by that undertaking to obviate any need for Mr Antonios to issue lapsing notices or commence proceedings against Ta Lee.
7. On 7 October 2016, William James wrote to Rutland's Law Firm, Ren Zhou Lawyers, who were acting for Gold Stone, MacPherson Kelley and Barrak Lawyers in relation to the Apartment. There were apparently errors in the addressees of that letter and a letter in substantially the same terms was "re-issued" on 17 October 2016. The letter confirmed that the Liquidators were in possession of discharges of the registered mortgages, which they were able to provide upon resolution of the matters affecting the Apartment as between Ta Lee, Gold Stone, Mr Antonios and Ms Yuan. The letter said that the Liquidators had received demands on behalf of Mr Antonios that the Company complete the contract with him and copy of the correspondence from MacPherson Kelley was enclosed, in which it was indicated that Mr Antonios was ready to proceed with completion of the sale and indicating that he would commence proceedings for specific performance. That was a reference to MacPherson Kelley's letter of 14 September 2016. William James then went on to say that, at that stage, no notice had been received of any such proceedings and that "the Liquidators' position in respect of the contract will not resolve the issues affecting the sale". The letter asked whether the clients of the respective solicitors to whom the letter was addressed would remove their caveats to enable settlement of the contract with Mr Antonios.
8. In the Barden Affidavit, Mr Barden said that his reasons for sending the letter of 7 October 2016 that was re-issued on 17 October 2016 were that Ta Lee and Gold Stone had already filed cross-claims that were inconsistent with the asserted rights of both Mr Antonios and Ms Yuan and that Ms Yuan's claim to purchase the Apartment was inconsistent with the claim by Mr Antonios to purchase the Apartment. He said that, as an officer of the Court and as liquidator of the Company, he was conscious that he had a duty to all creditors and that he could not prefer one to another. He said that he was concerned that the claims of Ta Lee, Gold Stone, Mr Antonios and Ms Yuan were competing claims in respect of the Apartment and that he did not want to appear to be preferring the asserted entitlement of one of those claimants over another. He considered that, since the proceedings had been commenced, he could not complete any sale to Mr Antonios that was inconsistent with the claims of Ta Lee and Gold Stone made in the first cross-claim the second cross-claim or any potential claim to be made by Ms Yuan that could frustrate the Court's processes in resolving the disputes between the parties.
9. Mr Barnden also said that he was concerned that there were many unusual features about the assertions made by Mr Antonios as to the alleged contract that remained unresolved. Thus, he had not been able to locate in the books and records of the Company the signed counterpart of the contract for sale with Mr Antonios and Mr Antonios had not provided a full signed copy of the contract or other evidence of the contract that showed it was enforceable. He said that, even if he could have been satisfied that Mr Antonios had signed a copy of the sale contract, there was a discrepancy in the material that had been provided to him as to whether the purchase price was $1,250,000 or $910,000 and whether a deposit had been paid and, if it had been, the amount of the deposit. He said that he considered that the Antonios Deed did not clarify those inconsistencies but exacerbated them.
10. On 14 October 2016, William James wrote to the same four firms of lawyers, noting that the principal proceedings, together with the first cross-claim and the second cross-claim, had been listed for hearing on 31 October 2016. After summarising certain of the issues in the proceedings, they said that the Liquidators considered that Ta Lee and Gold Stone should give notice of the proceedings to Ms Yuan and Mr Antonios and should ensure that Ms Yuan and Mr Antonios were joined to the proceedings.
11. On 17 October 2016, Rutland's Law Firm wrote to William James and Ren Zhou Lawyers saying that Ta Lee accepted that none of the issues in relation to the Apartment could be determined unless all parties claiming an interest were joined in the proceedings. They observed that William James had not responded to their letter of 20 September 2016 and said that Ta Lee took the view that the appropriate course was to seek an adjournment of the hearing fixed for 31 October 2016 to enable the sale of the Apartment, to be completed. The letter recognised that, if the completion of the sale reached an impasse, that impasse may be conveniently resolved in proceedings to be heard in conjunction with the existing proceedings.
12. The fixture for 31 October 2016 was vacated. On 9 December 2016, Mr Antonios was joined as a cross defendant in the first cross-claim, brought by Ta Lee.
13. On 22 December 2016, MacPherson Kelley wrote two letters to William James. In the first letter, they said that the Company had an obligation to provide to Mr Antonios clear title to the Apartment immediately and that the Company had failed or refused to take any steps to comply with that contractual obligation. The letter said that, notwithstanding the breach, Mr Antonios was willing to proceed to settlement on the basis that the Company provide him with:

• an executed transfer in registrable form;
• the certificate of title; and
• discharges of the registered mortgages in registrable form. The letter said that, following settlement, Mr Antonios would take steps to secure a clear title to the Apartment, including dealing with the caveators. William James were requested to provide the documents by 5pm on 10 January 2017.

1. The first letter said that, if the documents were not provided by that time, Mr Antonios may commence proceedings for specific performance of the contract and would rely upon the correspondence, if successful, on the issue of costs, including indemnity costs, from the date of that letter. The second letter was marked "without prejudice except as to costs". After referring to the previous correspondence with Cluff & Associates and the rejection of the offer made on 17 September 2015, the second letter said that, if Mr Antonios was required to commence specific performance proceedings and was successful, the correspondence would be relied upon to seek personal costs orders against the Liquidators on the basis of their unreasonable conduct.
2. On 10 January 2017, William James sent an email to MacPherson Kelley acknowledging the two letters of 22 December 2016 and requested an extension to 16 January 2016 to respond to the letters. On 11 January 2017, MacPherson Kelley confirmed that they would allow the Liquidators until 5pm on 16 January 2017 to respond to the two letters. On 16 January 2017, William James wrote to MacPherson Kelley in response to the letters of 22 December 2016.
3. After referring to the earlier correspondence and their letter of 2 September 2015, William James said that, since that letter, the Liquidators and the Company had not proceeded to sell the Apartment and that the Liquidators were seeking to resolve the "equitable claims" to the Apartment by Mr Antonios, Ms Yuan, Gold Stone and Ta Lee. The letter asserted that the Liquidators had been attempting to sell the Apartment "by consensus", having regard to the various competing interests claimed by Gold Stone, Ta Lee and Ms Yuan. The letter of 16 January 2017 then referred to the demands made by MacPherson Kelley in their open letter of 22 December 2016 and said that, unless they had consent from the caveators, "the position taken by our clients is not causing your client prejudice". They requested information as to the basis upon which Mr Antonios was optimistic in obtaining the consent of the caveators since that was not consistent with the position presented to William James. The letter said that, given the orders sought by Ta Lee in its cross-claim, even if the Liquidators were able to provide MacPherson Kelley with the requested documents, the sale could not be completed and, if Ta Lee obtained the orders it was seeking, the documents demanded by MacPherson Kelley would have to be recovered.
4. The letter from William James then said that the Liquidators had been provided with the following documents in relation to the alleged sale of the Apartment to Mr Antonios:

• copy of the acknowledgement letter of 14 April 2015 signed by Mr Fong;
• copy of an unsigned contract for the sale of the Apartment to Mr Antonios for the sum of $1,250,000;
• copy of the Antonius Deed;
• copy of contract for the sale of the Apartment for the purchase price of $910,000 with a deposit of $910,000 and the balance of nil. The letter said that the Liquidators had not located from their investigations the original or a copy of a counterpart of a contract bearing the signature on behalf of Mr Antonios. The letter asserted that there were many "unusual features" in the documentation relating to the purported contracts for sale of the Apartment to Mr Antonios. Further, the letter said, Ms Yuan was maintaining her claim to purchase the Apartment as evidenced by her caveat.

1. The William James letter then asserted that the documents provided to the Liquidators in respect of the claimed interest by Mr Antonios in the Apartment raised doubt as to whether a signed contract was exchanged and whether the alleged purchase price of $910,000 was paid. The letter requested evidence of how, when and where contracts for the sale of the Apartment to Mr Antonios for $910,000 were exchanged and how and when the purchase price of $910,000 was paid by Mr Antonios to the Company, together with documents recording payment. The letter said that, subject to the Liquidators being satisfied that a contract for the sale to Mr Antonios for $910,000 had been exchanged and that the purchase price had been paid to the Company, the Liquidators were not proposing "to stand in the way of a legitimate sale". The letter asserted that the information requested was necessary for the Liquidators to assess whether there has been a legitimate sale to Mr Antonios and that, subject to that and if the other caveator consented, the Liquidators were happy to attend to settlement and would not "stand in the way of the sale" to Mr Antonios. It said, however, that they understood that the caveators did not consent.
2. The letter ended by saying that the Liquidators did not propose "at this point" to take an active role as to the issues between Mr Antonios and the other parties. The letter proposed that Gold Stone, Ta Lee, Ms Yuan, the Liquidators and Mr Antonios meet on a without prejudice basis and that, if the matter could not be resolved informally, the interest of Mr Antonios in the Apartment be determined in the proceedings that were then on foot.
3. The Barnden Affidavit asserted that Mr Barnden's reasons for giving instructions for the letter of 16 January 2017 were that Mr Antonios had "still failed to provide satisfactory evidence" that his asserted contract was enforceable and that the deposit had in fact been paid. Mr Barnden said that there had been no material change since he had instructed his solicitors to send the letter of 7 October 2016 (re-sent on 17 October 2016) and his reasons for sending that letter were still of concern to him. Further, he considered that, as the caveats remained on the title in respect of the Apartment, there was no prejudice to Mr Antonios by the Company taking the position that it did in the letter of 16 January 2017.
4. On 1 February 2017, William James sent an email to MacPherson Kelley asking them to provide the information requested in the letter of 16 January 2017. The letter also sought confirmation as to whether Mr Antonios would be willing to meet on a without prejudice basis with the Liquidators, Ta Lee, Gold Stone and Ms Yuan in an attempt to resolve the dispute concerning the Apartment.

The Third Cross Claim

1. Mr Antonios filed the third cross-claim on 23 March 2017. Under cover of a letter of 7 April 2017, MacPherson Kelley served on William James copies of the affidavits of Mr Antonios affirmed on 7 April 2017 and of Mr Fong affirmed on 7 April 2017. Those affidavits purported to state the circumstances of the entry into of the contract for the sale of the Apartment by the Company to Mr Antonios for the purchase price of $910,000 and the payment of the whole of the price. Those circumstances are set out in detail in the Principal Reasons.
2. In particular, Mr Fong's affidavit corroborated the affidavit by Mr Antonios concerning entering into the contract for sale between the Company and Mr Antonios and the payment of the purchase price. Mr Fong, of course, was the only director of the Company. It is significant that no attempt appears to have been made by the Liquidators to speak to Mr Fong to ascertain whether a contract for sale had been entered into between Mr Antonios and the Company or to determine whether the price alleged to have been paid by Mr Antonios had in fact been received by the Company.
3. By letter of 12 April 2017, MacPherson Kelley responded to the letter from William James of 16 January 2017. In response to the request for evidence as to how, when and where the contracts for sale were exchanged and how and when the purchase price was paid, the letter referred to the evidence contained in the two affidavits of 7 April 2017. The letter asserted that the evidence then served established the existence of a legitimate sale of the Apartment to Mr Antonios and again requested that the Liquidators provide an executed transfer, the certificate of title and discharges of the registered mortgages in registrable form. The letter said that, if the documents were not provided by 5pm on 20 April 2017 and the Company and the Liquidators did not file a submitting appearance by that time, the letter would be relied upon on the issue of costs, including indemnity costs, if Mr Antonios was successful in the proceedings. Significantly, the letter also said that the assertion that the claim by Mr Antonios in respect of the Apartment was unresolved with the other caveators was not quite correct. Enclosed with the letter of 12 April 2017 was a copy of the letter from Rutland's Law Firm of 20 September 2016 in which Ta Lee undertook to provide withdrawals of its caveats if the Company agreed or was ordered to complete the contract with Mr Antonios.
4. On 21 April 2017, William James replied to the letter of 12 April 2017 asserting that there was no proper basis for the deadline demanded. The letter asserted that it was plainly unreasonable to demand that the Liquidators come to a final view in less than two weeks in circumstances where it had taken Mr Antonios almost three months to explain how he claimed to have paid the price for the purchase of the Apartment. The letter said that, in any event, there was no prejudice to Mr Antonios in the Liquidators requiring time to consider the evidence, as Mr Antonios was in no position to complete the purchase. The letter also asserted that the position of Gold Stone, Ta Lee and Ms Yuan had to be taken into account.
5. On 7 July 2017, MacPherson Kelley wrote to William James again referring to the letter of 16 January 2017 and to their intimation that, if the Liquidators were satisfied that the contract for sale had been exchanged and that the purchase price had been paid, they were not proposing to stand in the way of a legitimate sale. The letter asserted that the Liquidators should be satisfied by the evidence in the affidavits filed on behalf of Mr Antonios and that, in those circumstances, the Liquidators should file a submitting appearance to the third cross-claim. The letter asked for the basis upon which the Liquidators intended to defend the claim if, for whatever reason, that they did not intend to file a submitting appearance.
6. In the meantime, on 14 July 2017, Mr Barnden, as one of the Liquidators, sent a circular to the creditors of the Company (the Circular), which reported on the present status of the Development, funding to challenge the security asserted by Ta Lee and Gold Stone and the potential dividend that might be paid to creditors. The Circular said that the Liquidators had completed the sale of all but two units in the Development and that they held funds of approximately $3 million after costs incurred to date. After saying that the claims lodged by Ta Lee and Gold Stone as to their alleged security interest may be open to challenge, the Circular said that litigating those matters would be expensive and time consuming and that, in that regard, the Liquidators were in negotiations with Ta Lee and Gold Stone with a view to resolving their claims "in a commercial and practical manner".
7. The Circular then said that, at that stage, the Liquidators were without sufficient funds to challenge the security asserted by Ta Lee and Gold Stone and could not use the funds that they currently held to fund litigation against them. The Circular estimated that the cost to litigate a challenge to the security claimed by Ta Lee and Goldstone would be in the vicinity of $1,100,000. The Circular ended by saying that, in the opinion of the Liquidators after taking into account the inherent risks of litigation, the costs associated with such litigation and the prospects of success, it was not commercial for creditors to fund an action against Ta Lee and Gold Stone.
8. MacPherson Kelley followed the letter of 7 July 2017 with an email of 25 July 2017 asking whether the Liquidators would be filing a submitting appearance. They repeated that their request to be told of the basis on which the Liquidators intended to defend the claim if, for whatever reason, they did not intend to file a submitting appearance.
9. On 15 August 2017, MacPherson Kelley sent another email to William James noting that William James had been expecting to be in a position to file a submitting appearance by 11 August 2017, which had not occurred. The email said that, if a submitting appearance or satisfactory response to the letter of 7 July 2017 had not been received by 18 August 2017, they would restore the proceedings for the purpose of seeking directions regarding particulars of the Liquidators' defence.
10. On 25 August 2017, Mr Barnden instructed William James to write to MacPherson Kelley saying that the Liquidators were prepared to submit to the third cross-claim on the following basis:

• the Company would file a submitting appearance in respect of the third cross-claim;
• if Mr Antonios is held by the court to be entitled to a transfer of the Apartment, whether by way of judgment or by way of settlement with all of the other parties asserting interests in the Apartment, then the Company would give to Mr Antonios a transfer in registrable form and the relevant certificate of title and discharges of the registered mortgages; and
• there would be no order as to costs as between Mr Antonios and the Company and Liquidators. The letter then said: "For the avoidance of doubt, the intention of the above proposal is to submit to your client's claim but take no position as between your client and the other parties asserting claims to [the Apartment]. It is a matter for your clients to deal with those other parties."

1. Mr Barnden's Affidavit said that Mr Barnden's reasons for giving instructions for that letter to be written were that, while he expected that the settlement with Ta Lee and Gold Stone would proceed, he was conscious that a significant period of time had elapsed since the commencement of negotiations. He considered that, since all parties interested in the Apartment had been joined in cross-claims, they were "well placed" to resolve the dispute as between themselves and there was generally no further need for the Company to take an active role in the cross-claims. He proposed that a submitting appearance be filed on the basis that it did not require the Company to provide a transfer, the certificate of title and discharges of mortgages "until the proceedings were resolved". Mr Barnden was only willing to cause the Company to file a submitting appearance "in circumstances which would not affect the rights of the other parties to the proceedings as between themselves". He expected that, if accepted, the offer would prevent Mr Antonios from seeking costs from the Company and provide further certainty and protection for the Company.
2. It is difficult to see precisely what Mr Barnden's rationale for the proposal outlined in the letter of 25 August 2017 might have been. It is no offer of compromise to say that the Liquidators and the Company would do what they were required by the Court to do. That is tantamount to saying that they would not do anything until ordered to do so by the Court. In any event, it appears that Mr Barnden decided not to file a submitting appearance. Had he done so, he would have been completely protected in relation to costs, at least as to costs incurred after the filing of the submitting appearance. By failing to file a submitting appearance, the Company and the Liquidators were requiring Mr Antonios to prove his claim as against the Company, apparently in the expectation that, to the extent that if any of the other claimants disputed the claim by Mr Antonios, they would do so in the interest of the Company.

The Compromise Offer

1. On 26 September 2017, a formal Offer of Compromise under r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) (the Compromise Offer) was filed on behalf of Mr Antonios, whereby Mr Antonios offered to resolve the whole of the third cross-claim against the Company on the basis that the following orders were made:

• the Company specifically perform the contract between Mr Antonios and the Company dated 15 April 2015 by providing an executed transfer and executed discharges of the registered mortgages;
• the third cross-claim be otherwise dismissed as against the Company; and
• Mr Antonios and the Company bear his or its own costs of third cross-claim. The offer remained open for acceptance for 28 days after the date on which it was made. By covering letter of 26 September 2017, MacPherson Kelley said that, if for whatever reason the Compromise Offer did not comply with r 20.26, it should be treated as an offer made in accordance with the principles of Calderbank v Calderbank [5] .

1. Mr Barnden obtained legal advice in respect of the Compromise Offer but has reserved his rights of legal privilege in respect of the advice. That is to say, it is a matter of speculation as to whether Mr Barnden acted in accordance with legal advice or whether he completely ignored the legal advice. In one sense, it does not matter. If, as Mr Antonios contends, the question of whether the Liquidators should personally be ordered to pay costs depends upon whether their conduct of the proceedings, judged for a purely objective point of view, was reasonable or not, their reliance on legal advice would be irrelevant. Even if they did so, that would not be an answer if the advice was wrong or irrational.
2. Ultimately, Mr Barnden said in the Barnden Affidavit, he decided that he could not cause the Company to accept the offer made by the Compromise Offer because he was not satisfied on the evidence supplied that Mr Antonios was entitled to an order for specific performance. Further, he was aware that there were competing claims in relation to the Apartment and was conscious of his duties to the creditors of the Company as a whole and believed that he could not prefer one creditor over another creditor.
3. That reasoning is somewhat curious. Thus, Mr Barnden was not satisfied by the evidence. That is tantamount to saying that he was not prepared to file a submitting appearance but required Mr Antonios to persuade the Court that he was entitled to specific performance of the contract that he alleged he had made with the Company. It is difficult to understand the proposition that, by submitting to such order as the Court may see fit to make, the Liquidators would be preferring Mr Antonios over other claimants, such as Ta Lee, Gold Stone and Ms Yuan.
4. On 24 October 2017, orders were made by consent that the second cross-claim, filed by Gold Stone, be dismissed as against Mr Antonios. Gold Stone was directed to file and serve a submitting appearance in relation to the third cross-claim filed by Mr Antonios. Gold Stone undertook to the Court to provide a withdrawal of its caveat at any eventual settlement of the sale of the Apartment to Mr Antonios. Finally, Gold Stone and Mr Antonios agreed to bear their respective costs of the second cross-claim and third cross-claim.

The Settlement Deed

1. On 14 November 2017, the Company, the Liquidators, Ta Lee and Gold Stone entered into a Deed of Settlement and Release (the Settlement Deed). Mr Antonios attached some store to the terms of the Settlement Deed, which he characterised as "most imprudent".
2. The Settlement Deed recited the history of the appointment of the Liquidators, first as voluntary administrators of the Company and then as liquidators. It then recited that the Liquidators had incurred remuneration and expenses in caring for, preserving and realising various units in the Development (described as the Appointment Properties). Next, it recited that the Liquidators had sold all of the Appointment Properties except for Lot 25 and the Apartment (described as the Remaining Properties) and had partially distributed the proceeds of sale.
3. The Settlement Deed then recited that MV Developments (Aust) Pty Ltd (MV Aust) had been the former owner of three properties situated at Manly (the Manly Property) and that the Liquidators had been appointed as voluntary administrators and then official Liquidators of MV Aust on 1 July 2015 and 31 August 2015 respectively. It then recited that MV Aust had previously been a debtor of Win Senior, that the Company had guaranteed the obligations of MV Aust to Win Senior and that, as security for the performance of its obligations under the guarantee, the Company had provided a mortgage over the Development in favour of Win Senior. It was recited that the Company paid the proceeds of sale of several lots in the Development to Win Senior in satisfaction of its obligations as guarantor and that, upon the sale of the Manly Property by MV Aust, the proceeds of sale were retained by MV Aust.
4. The Settlement Deed then recited that Ta Lee and Gold Stone had taken issue with certain of the acts or omissions of the Liquidators during the voluntary administration and liquidation of the Company and that to avoid the expense of litigation and without admissions to liability, other than as set out in the Settlement Deed, the parties had agreed to resolve the following matters (the Matters in Dispute):

• the rights and interests of the parties in any of the properties and the proceeds of sale of the properties;
• the asserted rights of Ta Lee and Gold Stone as secured creditors of the Company;
• whether Gold Stone's claim in relation to the proceeds of sale arose from a voidable transaction within the meaning of Pt 5.7B of the Corporations Act;
• the rights of the parties to the proceeds of sale of a property at Manly owned by a related company;
• the quantum of the remuneration and expenses incurred by the Liquidators in the administration and liquidation of the Company that the Liquidators were entitled to draw in priority to Ta Lee and Gold Stone; and
• any act or omission of the Liquidators in the voluntary administration or liquidation of the Company.

1. By cl 2.1, the parties to the Settlement Deed agreed that:

• Gold Stone had an equitable interest in the Apartment;
• Ta Lee had an equitable interest in the Remaining Properties; and
• The Liquidators had an equitable lien on the proceeds of sale (the Fund) and on the Remaining Properties securing payment of remuneration, expenses and liabilities incurred by them in the administration and the liquidation. The parties then agreed on the priorities of their respective interests in the Fund and the Remaining Properties.

1. By cl 2.2(a)(iii), the Company and the Liquidators agreed to file submitting appearances in respect of the active cross-claims in the proceedings, other than the third cross-claim brought by Mr Antonios and the fourth cross-claim brought by Ms Yuan. However, by cl 2.4(a), the Company agreed that it would file a submitting appearance in respect of the third cross-claim and the fourth cross-claim within one week of being requested in writing to do so by Ta Lee, so long as that request was made at least one week before the date that is three months after the Settlement Deed was entered into. The Company agreed that it would not incur costs in respect of the conduct of those cross claims that could reasonably be avoided, so long as Ta Lee was reasonably conducting the defence of those cross claims. Finally, they agreed that it would not otherwise compromise or file a submitting appearance in respect of either of those cross claims without the written consent of Ta Lee or unless the cross claimant confirmed that the filing of the submitting appearance would not be relied upon as affecting the rights of the other parties to the cross claim.
2. Clause 2.2 of the Settlement Deed dealt with the "Payment, Assignments and Releases". Under cl 2.2(a), the sum of $445,000 was to be paid to Gold Stone and the sum of $2 million was to be paid to Ta Lee. Both payments were to be made from the proceeds of sale of various Unsold Lots in the Development, together with any further net proceeds of sale of lots 25 and the Apartment.
3. Under cl 2.2(b), upon receipt by Gold Stone of the sum of $445,000, Gold Stone released the Liquidators from all claims arising out of the Matters in Dispute, assigned to Mr Barnden all of Gold Stone's rights in respect of the Manly Surplus and was required to file submitting appearances in each active cross claim in the proceedings and take all reasonable steps to discontinue its cross claim.
4. Under cl 2.2(c), upon receipt by Ta Lee of the sum of $2 million, Ta Lee agreed that the Liquidators may draw from the Fund the sum of $1,196,425.43, representing the unpaid remuneration expenses and liabilities reasonably incurred by the Liquidators in connection with the proceedings and assigned to Mr Barnden all of Ta Lee's rights in respect of the Manly Surplus and released the Liquidators from all claims arising out of the Matters in Dispute. By cl 2.2(d), the Liquidators and the Company released Ta Lee and Gold Stone from all claims arising out of the Matters in Dispute.
5. There is a lack of mutuality in relation to the releases contemplated by cl 2.2. Thus, on the one hand, releases are given to Gold Stone and Ta Lee by both the Liquidators and the Company. On the other hand, while releases are given by Gold Stone and Ta Lee to the Liquidators, no release is afforded to the Company. A release of Ta Lee may have hindered Ta Lee's prosecution of the first cross claim.
6. Clause 4 of the Settlement Deed dealt with Mr Barnden's "capacity and liability". Under cl 4.1, it was agreed that all references to Mr Barnden or the Liquidators in the Settlement Deed were references to them in their capacity as Liquidators of the Company or, where expressly specified, Liquidators of MV Aust. By cl 4.2, Mr Barnden acknowledged that, to the extent that Gold Stone or Ta Lee assigned any property or rights to him pursuant to the terms of the Settlement Deed, he would hold that property and those rights for the benefit of the creditors of the Company generally.

• the effect of the Settlement Deed was that none of the Company, the Liquidators or Gold Stone had any further direct interest in the outcome of the balance of the proceedings;
• the Company and the Liquidators did not propose to take any further active role in the balance of the proceedings, save to the extent that they might be called upon by a party to give evidence;
• while ordinarily the Company and the Liquidators would file submitting appearances, it had been suggested that the filing of a submitting appearance in respect of the claim for specific performance by Mr Antonios "may somehow amount to an affirmative acceptance of that contract and/or affect the inter-partes rights relating to [the Apartment]";
• while the Company and the Liquidators did not agree with the allegation by Mr Antonios that, if the Company entered a submitting appearance to the third cross-claim, Ta Lee was bound to accept the existence of his contract, the Company and the Liquidators could not be seen to be engaging in any conduct that would affect the inter-partes rights of any other parties to the proceedings;
• the Company and the Liquidators did not and could not properly accept, in a binding manner, the existence or priority of the alleged contracts of Ms Yuan or Mr Antonios, that being a matter appropriately to be litigated;
• the Company and the Liquidators intended to file submitting appearances in respect of the cross-claims by Ta Lee, Gold Stone and Mr Ng;
• the Company would file a submitting appearance if Ms Yuan or Mr Antonios confirm in writing that they would not rely upon the filing of a submitting appearance by the Company as affecting the position of any other party to their cross-claims, including, by precluding Ta Lee from disputing their alleged contracts to purchase the Apartment;
• otherwise the Company could not file submitting appearances in respect of the claims of Ms Yuan or Mr Antonios;
• to the extent that the Liquidators and the Company did not file submitting appearances by reason of the refusal of Mr Antonios or Ms Yuan to give the above confirmation, the Company and the Liquidators proposed to: ○ inform the Court of their intention not to take an active role in the hearing of the balance of the proceedings, ○ explain the inability of the Company and the Liquidators to file submitting appearances for the reasons set out above, and ○ seek to be excused from further attendance in the proceedings.

1. On 24 November 2017, MacPherson Kelley wrote to William James in relation to their letter of 14 November 2017, highlighting the fact that the Liquidators did not propose to take any further active role in the balance of the proceedings except to the extent that they might be called upon by a party to give evidence. MacPherson Kelley noted that the reason given by William James as to why the Liquidators did not propose to file a submitting appearance in relation to the third cross claim was that they could not be seen to be engaging in any conduct that would affect "the inter-partes rights of any other parties to the proceedings". They said that that reason was "disingenuous" in circumstances in which the Liquidators had expressly agreed with Ta Lee that they would not compromise, or file a submitting appearance in respect of the third cross claim, without the written consent of Ta Lee and that Mr Barnden and would provide Ta Lee with all assistance reasonably requested by Ta Lee to prosecute its cross claim and to defend any cross claim brought against Ta Lee, including the third cross claim brought by Mr Antonios. MacPherson Kelley referred to the various provisions of the Settlement Deed, including the provisions in cl 2.4, by which the Company agreed that it would not file a submitting appearance in respect of the third cross claim by Mr Antonios without the written consent of Ta Lee. The letter ended by saying that, if Mr Antonios was successful in the proceedings, MacPherson Kelley intended to rely on the letter in any relevant application regarding costs against the Company, including against the Liquidators personally.
2. On 1 December 2017, MacPherson Kelley wrote again to William James as well as to the solicitors acting for the other parties in the cross claims, referring to affidavits recently filed in the proceedings. After complaining about the lateness of service of evidence, MacPherson Kelley asserted that the filing of a submitting appearance was irrelevant to the question of whether or not Ta Lee's undertaking could be enforced. They asserted that, in the circumstances, the Liquidators should immediately file a submitting appearance. They then went on to say that, should Mr Antonios ultimately be successful in the proceedings, he would seek indemnity costs orders against the Liquidators personally for their baseless resistance to the claim by Mr Antonios, together with their continued active involvement in the proceedings by using Ta Lee "as a proxy for advancing their opposition to that claim".
3. On 8 December 2017, MacPherson Kelley wrote again to William James saying that they understood that the specific confirmation sought in the letter of 14 November 2017 was that, if the Liquidators filed a submitting appearance, Mr Antonios would not rely on it to seek to enforce the undertaking provided by Ta Lee in the letter from Rutland's Law Firm of 20 September 2016. MacPherson Kelley confirmed that, if the Liquidators filed a submitting appearance, Mr Antonios would not rely on it to seek to enforce the undertaking provided by Ta Lee. The Liquidators were again requested to file a submitting appearance.

• there was little likely benefit to unsecured creditors from challenging the claims by Ta Lee and Gold Stone and there were insufficient funds in the liquidation estate with which to do so;
• if the Liquidators could enter into an agreement with Ta Lee and Gold Stone, they would be able to proceed with distributing the proceeds of the sales of other Unsold Lots that had been retained pending resolution of the claims by Ta Lee and Gold Stone and that would assist the sale of the remaining Unsold Lots;
• the claims by Ta Lee and Gold Stone against the Company would be resolved;
• the risk of a costs order against the Company would be reduced;
• the Liquidators would be able to take an assignment of, and prosecute for the benefit of unsecured creditors of the Company, rights of Ta Lee and Gold Stone in respect of the proceeds of the sale of a property owned by a related company of the Company;
• the Liquidators had informed Mr Antonios and Ms Yuan of the cross-claims by Ta Lee and Gold Stone and they had responded by filing their own cross-claims;
• while the Settlement Deed required the Liquidators to provide Ta Lee with all assistance reasonably required by Ta Lee to prosecute its cross-claim, that explicitly excluded actively participating in the proceedings other than as a witness or otherwise required by law;
• the Settlement Deed permitted the Company to file a submitting appearance if written confirmation was received by Mr Antonios that it would not be relied upon as affecting the rights of the other parties to his cross-claim; and
• Mr Barnden considered that the stance taken was consistent with his duties as a liquidator for the proper, care, preservation and realisation of the Company.

1. Mr Barnden asserted in the Barnden Affidavit that he did not consider that it was desirable to seek directions under s 479 of the Corporations Act as to entering into the Settlement Deed. He was concerned that he needed to collect the assets of the Company as quickly and efficiently as possible and that he needed to minimise expenses in the estate and to make a distribution to creditors. He said that he was conscious that he had to balance those objectives while honouring any contracts entered into by the Company before the Liquidators were appointed.
2. Mr Barnden said that he was constantly considering how most efficiently and quickly to resolve the competing claims in respect of Unsold Lots and ultimately decided not to seek directions under s 479 because the issues in relation to each of the Unsold Lots were disparate and highly factual, even where there was a disagreement between Purchaser and secured parties as to priorities. He did not consider that there was a common question in respect of which he could usefully ask the Court for directions. Further, he did not consider that he could approach the Court only in relation to the Apartment, because the costs of such an application would be significant and may have been ordered to be borne by the assets of the Company. He did not consider that that would be fair to other creditors because the Company was already very low on funds and he did not consider it to be a good use of those funds to seek directions in relation to only one lot.
3. Finally, the Barnden Affidavit said, as at late October 2016, Mr Barnden was attempting "to guide the parties to reach their own agreement about their respective entitlements" to the Apartment, although he was concerned that it was possible that no agreement would be reached. He took the view that the issues as to priority could be resolved by the cross-claims and that that would obviate the need for an application for directions.

Conduct of the Proceedings

1. As I said in the Principal Reasons, Ta Lee was the effective contradicter of the contentions advanced on behalf of Mr Antonios in the third cross-claim. Although no contentions were advanced by the Company or the Liquidators, Ta Lee, as it was authorised to do by the Settlement Deed, stood in the shoes of the Company in disputing the claims by Mr Antonios that he had entered into a binding contract with the Company for the purchase of the Apartment. Ta Lee had an interest in doing so because, if it succeeded in its first cross-claim in demonstrating that it had a security interest in the Apartment by reason of the Ta Lee Deed, it had conceded that any interest of Mr Antonios under his alleged contract with the Company took priority over any security interest that it had. Mr Antonios was the only contradicter Ta Lee's claim to a security interest in the Apartment, since the Company and the Liquidators had agreed by the Settlement Deed not to dispute Ta Lee's claim to be entitled to a security interest in respect of the Apartment. Mr Antonios was entirely successful in the proceedings. Hence his claim for costs not only against Ta Lee but also against the Company and the Liquidators.

Relevant Legal Principles

1. The relevant legal principles are not in dispute. Where proceedings are brought by a company in liquidation, and its liquidator is not a party, a defendant will generally be entitled to an order against the company for security for costs in advance of the hearing. If the company in liquidation is unsuccessful in such proceedings, an order for costs will generally be made against the Company. However, an order for costs will not generally be made against the liquidator personally, unless the liquidator has acted unreasonably [6] .
2. Where a liquidator brings proceedings in relation to the affairs of the company of which he is a liquidator, an order for security for costs will generally not be made against the liquidator. However, if the proceedings are unsuccessful, an order for costs will generally be made against the liquidator personally. In such a case, the liquidator will generally be entitled to an indemnity from the assets of the company, unless the liquidator has acted unreasonably [7] .
3. Where proceedings are brought against the liquidator of a company and the proceedings are successful, while costs may be ordered against the liquidator and the company in liquidation, the liquidator's personal liability for costs will generally be limited to the assets of the company available for that purpose. However, if the liquidator has acted unreasonably in defending the proceedings, an order for costs may be made against the liquidator personally [8] . Further, in a case where the liquidator of a company in liquidation is not the moving party in proceedings but, by his action, the liquidator has forced a party to take proceedings to enforce a right to which the party is clearly entitled, it may be appropriate to treat the liquidator as the moving party and not as a defendant. In such a case, there will be no unfairness in requiring the liquidator personally to pay that other party's costs [9] .

The Stance of the Company and the Liquidators

1. There is a tension between the stance adopted by the Liquidators in relation to the third cross claim and the stance adopted in relation to the first cross claim. Thus, in relation to the first cross claim, the Liquidators agreed to file a submitting appearance on behalf of the Company. It was not suggested that, by so doing, preference would be given to Ta Lee as against Mr Antonios. On the other hand, the Liquidators contend that, by filing a submitting appearance in the third cross claim, they may have been giving a preference to Mr Antonios.
2. As I indicated in the Principal Reasons, there was considerable disputation as to whether Ta Lee should be permitted, in effect, to stand in the shoes of the Company in resisting the claim by Mr Antonios in the third cross claim for specific performance of the alleged contract for sale with the Company. The stance adopted by Mr Antonios was that, if Ta Lee had not acted as "proxy" for the Company, and the Company had filed a submitting appearance, the hearing of the third cross claim would have been reduced to less than half a day. That is to say, while it would have been necessary for Mr Antonios to adduce evidence as to the existence of his alleged contract for sale with the Company, that would have involved no more than the reading of several affidavits and would not have involved the extensive cross examination and other evidence that was adduced on the hearing of the third cross claim.
3. By the third cross claim, Mr Antonios sought an order that the alleged contract for sale between him and the Company be specifically performed by the Company. Ta Lee, of course, was not a party to the alleged contract between the Company and Mr Antonios and was not a necessary party to the third cross claim, in so far as the relief sought was limited to specific performance of that contract. However, Ta Lee had lodged a caveat in respect of the Apartment and, in addition to specific performance, Mr Antonios sought an order for the removal of the caveat. To that extent, Ta Lee was a necessary party to the third cross claim.
4. Ta Lee's entitlement to maintain the caveat in respect of the Apartment depended upon the effect of the Ta Lee Deed, in terms of creating a security interest over the Apartment in favour of Ta Lee. The question of the effect of the Ta Lee Deed was, of course, the subject of the first cross claim. Thus, the outcome of the first cross claim, as between Ta Lee and the Company, would resolve the question of whether Ta Lee was entitled to maintain its caveat in respect of the Apartment. In the result, I concluded that it was not so entitled, because the Ta Lee Deed did not create a security interest in respect of the Apartment.
5. Had the first cross claim been decided prior to the commencement of the hearing of the third cross claim, there would have been no justification for Ta Lee participating in the third cross claim. However, for so long as there was a question as to whether or not Ta Lee had a security interest in the Apartment, Ta Lee had an interest in establishing that, in circumstances where it accepted that its hypothetical security interest priority was after any interest of Mr Antonios under the alleged contract for sale, there was no such binding contract for sale in existence. Whether or not a valid contract for sale between the Company and Mr Antonios existed, Ta Lee was entitled to maintain its caveat. That is to say, even if there was no binding contract for sale between Mr Antonios and the Company, and the effect of the Ta Lee Deed was to create a security interest in the Apartment, Ta Lee was entitled to maintain the caveat.
6. On the other hand, the standing of Mr Antonius to seek an order for removal of Ta Lee's caveat might be regarded as dubious. If he was entitled to an order for specific performance of the alleged contract, it would be necessary for the Company, as the registered proprietor of the Apartment, to have Ta Lee's caveat removed, so that it could give title to Mr Antonios in accordance with any order for specific performance that may be made by the Court. In fact, the Company had taken no steps for the removal of Ta Lee's caveat. Indeed, as a consequence of the Settlement Deed, the Company filed a submitting appearance to the first cross claim brought by Ta Lee. That is to say, the Company, while it would be obliged under the contract for sale with Mr Antonios to have Ta Lee's caveat removed, bound itself to submit to Ta Lee's claim that it had a security interest in the Apartment that would support the caveat.
7. It may have been preferable to excise from the third cross claim the question of whether or not Ta Lee's caveat should be removed. Since that question depended upon the outcome of the first cross claim, the proper plaintiff to seek removal of the caveat was the Company, for so long as the Company remained the registered proprietor of the Apartment. That is to say, the proper course would have been for the Company to dispute Ta Lee's entitlement to maintain the caveat by opposing the relief sought by Ta Lee in the first cross claim. In order to be in a position to perform the contract for sale between Mr Antonios and the Company, the Company should have opposed the relief sought by Ta Lee in the first cross claim. If it did so successfully, it would then have been entitled to have Ta Lee's caveat removed. However, the Company at no time sought removal of Ta Lee's caveat.
8. The participation of Mr Antonios in the first cross claim is also dubious. Mr Antonios had lodged a caveat in respect of the Apartment. Just as Mr Antonios had no direct standing to have Ta Lee's caveat removed, Ta Lee had no direct interest in having Mr Antonios' caveat removed. Ta Lee claimed an interest in the Apartment as against the Company. If Mr Antonios did not have a binding contract for sale with the Company, he had no entitlement to maintain his caveat on the Apartment. If Ta Lee had a security interest as it claimed, it was entitled to require the Company to take proceedings for the removal of Mr Antonios' caveat.
9. However, Ta Lee had long since conceded that, if there was a binding agreement between Mr Antonios and the Company, that agreement took priority over any security interest claimed by Ta Lee. On that basis, Ta Lee would have had no entitlement to require the Company to have Mr Antonios remove his caveat. Nevertheless, under the Settlement Deed, the Company agreed to submit to Ta Lee's claim that it had a security interest in the Apartment.
10. Mr Antonios was joined as a cross defendant in the first cross claim at the behest of the Liquidators. The relief claimed in the first cross claim was a declaration that the Ta Lee Deed and Ta Lee's caveats gave rise to security interest in the Apartment in favour of Ta Lee. In circumstances where Ta Lee conceded that any interest of Mr Antonios under the alleged contract for sale with the Company took priority over its alleged security interest, there was no justification for Ta Lee seeking the removal of Mr Antonios' caveat. The only proper moving party for that relief was, in those circumstances, the Company. However, the Company eschewed that relief and agreed to submit to Ta Lee's claim that it had a security interest. . In those circumstances, there is every reason why the Company should be ordered to pay the costs incurred by Mr Antonios in resisting Ta Lee's claim to have his caveat removed.
11. The somewhat convoluted analysis undertaken above leads to the conclusion that it is the conduct of the Company that led to the situation where Ta Lee acted as the Company's proxy in disputing the entitlement of Mr Antonios to specific performance of his alleged contract with the Company and putting Mr Antonios in a position where he was compelled to resist the removal of his caveat by a party who had no interest in the removal of the caveat, other than by reason of the Settlement Deed.
12. The evidence presently before me indicates that the remaining funds available to the Liquidators amount to approximately $390,000. That is to say, if an order for costs were made against the Company, there would be funds from which such an order could be met. In the light of the determination that has been made that Ta Lee has no security interest under the Ta Lee Deed, those funds would otherwise be available for unsecured creditors. If an order were to be made against the Liquidators personally, they may be entitled to be indemnified out of those funds. That is not presently a question before the Court.
13. While there has been no suggestion of dishonesty or impropriety on the part of the Liquidators or Mr Barnden and in particular, the conduct of the Liquidators in submitting to the orders sought by Ta Lee in the first cross claim and refusing to submit to the orders sought by Mr Antonios in the third cross claim has resulted in the incurring of costs by Mr Antonios. I consider that both the Company and the Liquidators should be ordered to pay Mr Antonios' costs of the first cross claim and third cross claim.
14. That then leaves the question of indemnity costs. As I said, the Liquidators rejected the offer made on behalf of Mr Antonios on 17 September 2015 without making any endeavour to negotiate a better bargain on behalf the Company. They did so without consulting Mr Fong as to whether or not a binding contract had been entered into between the Company and Mr Antonios and as to whether the price had been paid. However, I do not consider that the rejection of that offer was unreasonable in circumstances where the evidence as to the existence of a binding contract and the payment of the purchase price left a great deal to be desired as at that time.
15. The compromise offer of 26 September 2017, however, is of a different character. Mr Antonios was prepared to forego his costs to date. That was a not insignificant concession.
16. Mr Barnden obtained legal advice in relation to the compromise offer but has declined to disclose the advice that he received. Thus, it is not known whether he acted in accordance with the advice or ignored it completely. In the light of the analysis outlined above, it appears that that the stance then adopted by Mr Barnden was misconceived. He appears to have proceeded under a complete misapprehension of the position insofar as he asserts that he could not prefer one creditor over another creditor yet within two months entered into the Settlement Deed, which did just that.

Conclusion

1. I consider that it was unreasonable for Mr Barnden not to have accepted the Compromise Offer in circumstances where, by that stage, he had evidence from both Mr Antonios and Mr Fong, a former director of the Company, as to the alleged contract between Mr Antonios and the Company and the payment by Mr Antonios of the total purchase price payable under that contract. I consider that the Company and of the Liquidators personally should be ordered to pay Mr Antonios' costs of the third cross claim and the first cross claim on the ordinary basis up to 24 October 2017 and on the indemnity basis thereafter.

Orders

1. The Court orders that:
2. The first defendant and first-cross defendant to the third cross-claim, M V Developments (Land Cove) Pty Ltd (in liquidation) ACN 152 347 012 (the Company), is to pay the costs of the proceedings incurred by the cross-claimant on the third cross-claim and the seventh cross-defendant on the first cross claim (Mr Antonios) on the ordinary basis up to 24 October 2017, and on an indemnity basis thereafter.
3. Andrew James Barnden and Robert Boyce Moodie, respondents to the Notice of Motion, being the current and former liquidators of the Company respectively, are to pay Mr Antonios' costs of the proceedings on the ordinary basis up to 24 October 2017, and on an indemnity basis thereafter.

Endnotes

1. Bradley Mark Lum v MV Developments (Lane Cove) Pty Ltd (in liquidation) [2018] NSWSC 247
2. See Calderbank v Calderbank [1975] 3 All ER 333.
3. See Spagnolo v Body Corporate Strata Plan 418979Q [2007] VSC 423 at [99] and [100], Vollmer v Hauber-Davidson [2005] NSWCA 237.
4. See Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 [146] and [147].
5. [1975] 3 All ER 333
6. See Silvia v Brodyn Pty Ltd [2007] NSWCA 55 at [49].
7. See Silvia v Brodyn Pty Ltd at [51].
8. See Silvia v Brodyn Pty Ltd [52]-[54].
9. See AMC Commercial Cleaning (NSW) Pty Ltd v Code [2013] NSWSC 332 at [10]; and Lum v MV Developments (Lane Cove) Pty Ltd (in Liquidation) [2016] NSWSC 1248 at [18]-[19]. 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: 24 July 2018