Commissioner of Taxation v Warner

TJT (NO 1) PTY LTD (IN LIQUIDATION) ACN 121 745 711

TJT (NO 2) PTY LTD (IN LIQUIDATION) ACN 002 710 910

TJT (NO 3) PTY LTD (IN LIQUIDATION) ACN 112 054 841

TJT (NO 4) PTY LTD (IN LIQUIDATION) ACN 099 721 203

TJT (NO 5) PTY LTD (IN LIQUIDATION) ACN 100 014 346

TJT (NO 7) PTY LTD (IN LIQUIDATION) ACN 120 124 781

TJT (NO 8) PTY LTD (IN LIQUIDATION) ACN 101 457 970

TJT (NO 9) PTY LTD (IN LIQUIDATION) ACN 101 458 539

TJT (NO 13) PTY LTD (IN LIQUIDATION) ACN 058 455 600

JUDGE: PERRY J DATE OF ORDER: 20 November 2015 WHERE MADE: SYDNEY

1. The first and second respondents are to pay the costs of the applicant as agreed or assessed.
2. The first and second respondents are to pay the costs incurred by the applicant in arranging for counsel to appear as amicus curiae as on a party-party basis. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 573 of 2014

TJT (NO 1) PTY LTD (IN LIQUIDATION) ACN 121 745 711

TJT (NO 2) PTY LTD (IN LIQUIDATION) ACN 002 710 910

TJT (NO 3) PTY LTD (IN LIQUIDATION) ACN 112 054 841

TJT (NO 4) PTY LTD (IN LIQUIDATION) ACN 099 721 203

TJT (NO 5) PTY LTD (IN LIQUIDATION) ACN 100 014 346

TJT (NO 7) PTY LTD (IN LIQUIDATION) ACN 120 124 781

TJT (NO 8) PTY LTD (IN LIQUIDATION) ACN 101 457 970

TJT (NO 9) PTY LTD (IN LIQUIDATION) ACN 101 458 539

TJT (NO 13) PTY LTD (IN LIQUIDATION) ACN 058 455 600

JUDGE: PERRY J DATE: 20 November 2015 PLACE: SYDNEY

REASONS FOR JUDGMENT 1 INTRODUCTION [1] 2 EVIDENCE [5] 3 BACKGROUND [6] 4 CONSIDERATION [18] 4.1 General principles [18] 4.2 The Commissioner's costs [23] 4.3 Costs incurred by the Commissioner in providing for an amicus curiae to appear [32] 4.4 Should costs be awarded personally against the liquidators? [35] 5 CONCLUSION [41]

1. INTRODUCTION 1 The first and second respondents (the liquidators) are the liquidators of the third to eleventh respondents as the result of creditors' voluntary liquidations. The action was commenced by the applicant, the Commissioner of Taxation (the Commissioner), due to the liquidators' refusal, absent a court order, to produce documents in response to a notice to produce issued by the Commissioner under s 264 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) and s 353-10 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA). Those notices were issued in the course of investigations by the Phoenix Team of the Private Groups and High Wealth Individuals Business Line at the Australian Taxation Office (ATO). The liquidators took the position in correspondence that s 264 of the ITAA 1936 must be read as subject to s 486 of the Corporations Act 2001 (Cth) (Corporations Act) and therefore that the Commissioner, in common with any other creditor, must obtain a court order under s 486 before it can inspect the companies' records held by the liquidators. However, the liquidators declined to participate in the substantive proceedings, making a submitting appearance only, save as to costs. In the circumstances and with the leave of the Court, the Commissioner arranged for amicus curiae to appear as a contradictor. While the arguments put by the amicus were ultimately unsuccessful, the amicus provided a valuable contribution that was of assistance to the Court. 2 On 1 July 2015, the Court delivered judgment and made a declaration to the effect sought by the Commissioner: Commissioner of Taxation v Warner [2015] FCA 659. That declaration was in the following terms: The obligation of the First and Second Respondents to comply with the notice dated 19 March 2014 under section 264 of the Income Tax Assessment Act 1936 (Cth) and section 353-10 of Sch 1 to the Taxation Administration Act 1953 (Cth) served on them in their capacity as liquidators of the Third to Eleventh Respondents, is not subject to, or affected by, section 486 of the Corporations Act 2001 (Cth), including as applied by section 511 of that Act. 3 These reasons concern only the question of costs on which the parties subsequently filed separate submissions. 4 While the Commissioner was wholly successful, the question as to how costs should be dealt with in the exercise of the Court's discretion is complicated by a number of factors, as I explain below. In the unusual circumstances of this case, I consider that the liquidators should be liable for the Commissioner's costs and for the costs occasioned by the Commissioner in arranging for amicus curiae to act as a contradictor.

2. EVIDENCE 5 In addition to the evidence at trial, the Commissioner relied also on the affidavit, affirmed on 27 July 2015, of the solicitor with conduct of the matter on behalf of the Commissioner which annexed additional correspondence between the parties.

3. BACKGROUND 6 Following initial discussions and correspondence between the ATO and the liquidators as to the ATO's authority to require inspection of the respondent companies' books and records, the solicitors for the liquidators wrote to the ATO on 11 November 2013 advising of their position, namely that: (1) the Deputy Commissioner was a creditor of the respondent companies; (2) section 486 of the Corporations Act requires a creditor of a company to obtain an order from the Court should it wish to inspect the companies' records as held by its liquidator; (3) it appears that ss 263 and 264 of the ITAA 1936, on the one hand, and s 486 of the Corporations Act, on the other hand, "are in contradiction to each other. In such a situation, the section that is more specific to the factual situation should prevail. The general law of interpretation is that the general should be read down to the specific. Therefore we believe that the Corporations Act is most applicable in this situation and the DCT should obtain a Court order to inspect the books and records held by our client." 7 The letter concluded that: Our clients do not wish to be difficult. They are happy to cooperate with you but MUST comply with the law. If your view of the law is different or you can point us to a law which overrides the Corporations Act, please let us know. (Emphasis in the original.) 8 On 10 January 2014 the Deputy Commissioner issued a notice pursuant to s 264 of the ITAA 1936 and s 353-10 of Sch 1 to the TAA requiring the liquidators to produce documents and furnish information to the ATO. The solicitors for the liquidators responded by email on 20 January 2014 advising that unless the notice was withdrawn by 24 January 2014, the liquidators may apply to the Court for directions and injunctive relief, together with costs against the Commissioner. In its response on 21 January 2014, the ATO confirmed that: … the Commissioners [sic] notices were issued for a different purpose than that covered by section 486 of the Corporations Act and… there is no conflict of law. The notices were issued for purposes concerning the income or assessment of entities in the TJT Group and for the purposes of the administration or operation of the New Tax System (The Goods and Services Tax) Act 1999. The Commissioners [sic] intent in issuing the notices was NOT to inspect the books of the company as a creditor as dealt with by section 486 of the Corporations Act. Please note that as the Commissioner considers there is no conflict of law the notices will continue to operate and should be complied with by 11th February 2014. 9 In responding by letter dated 11 February 2014, the solicitors for the liquidators reiterated their position including that, unless the notice was withdrawn, their clients will either seek directions from the Court pursuant to s 511 of the Corporations Act in order to resolve the conflict between the legislation or seek orders pursuant to s 486. The letter further stated that: Arguably of course the Commissioner should make that application. It may be preferable for the position to be resolved by the Court so that the conflict is determined once and for all and our client would be quite content to run the matter as a test case if the Commissioner would provide funding. 10 By an email on 25 February 2014, the ATO advised that it was prepared to extend the date for compliance for 21 days from that date but that, absent compliance, the matter would be referred to the ATO's prosecution area. On 17 March 2014, the solicitors for the liquidators advised that they were instructed to apply to the Supreme Court of New South Wales for directions pursuant to s 511 of the Corporations Act to resolve the issue and/or in the alternative for an order pursuant to s 486 that the Commissioner be entitled to inspect. The liquidators' solicitors further stated that: As that is an application which should properly be made by you (if it were, our client would consent to an order being made) our client will seek an order that you pay the costs of the application. (Emphasis added.) 11 Subsequently, by email on 18 March 2014 the Commissioner wrote to advise that he would replace the initial s 264 notice with two separate notices, the first seeking information only and the second seeking documents, and that he intended to institute proceedings in the Federal Court seeking declaratory relief. In line with that communication, the initial notice dated 10 January 2014 was withdrawn, and two new s 264 notices were issued on 19 March 2014. 12 The Commissioner instituted proceedings on 6 June 2014 by an originating application seeking declaratory relief and an order for its costs against the liquidators. 13 On 13 June 2014, the solicitors for the liquidators wrote to the legal representatives for the Commissioner confirming their earlier position that a court order was required under the Corporations Act before they would allow inspection of the companies' books and records, but that they would consent to the Court making an order to that effect. The letter further advised that: Our clients have no objection at all to your client being granted orders which have the effect of allowing our clients to grant access to your client to the books and records of the companies. They do object, however, to a cost order being made against them. If your client confirms he will seek no orders with respect to costs against our clients, then our clients will file a submitting appearance and take no active role in the proceedings, save to the extent that the Court indicates it would benefit from our clients appearing as a contradicter. (Emphasis added.) 14 On 19 June 2014, the solicitors for the Commissioner wrote again, reiterating the Commissioner's position that the liquidators' view as to the operation of s 486 of the Corporations Act was incorrect. In the letter, the solicitors for the Commissioner addressed the concerns raised by the liquidators as to the possibility of an adverse costs order, advising that: Both parties acknowledge that there is no Court authority on this issue that either party is aware of, and both parties agree that this matter needs to be resolved. Our client commenced the proceedings in the Federal Court as he believed that it was the appropriate jurisdiction in which to resolve the issue in relation to the interaction between the Corporations Act and the Commissioner's formal powers under s264 of the ITAA 1936 and s353-10 of the TAA 1953. Accordingly, our client considers that the court would be assisted by the appearance of a contradictor in these proceedings who will make submissions in accordance with your clients' view. If your clients merely file a submitting appearance, there is a risk that the court may decide that there is no justiciable controversy or that the judgment will be less authoritative than one delivered after full argument. Therefore our client will agree to orders that each party pay their own costs on the condition that your clients take an active role in the proceedings. (Emphasis added.) 15 No response was received to this letter from the solicitors for the liquidators. However, on 10 July 2014 the liquidators filed a submitting appearance. 16 On 24 July 2014, the solicitors for the Commissioner wrote again advising that at the directions hearing held that day, the Court had indicated that it would be assisted by having a contradictor appear at the hearing if at all possible, and referred back to the offer which the Commissioner had made not to seek an adverse costs order in its letter dated 19 June 2014. The letter asked the liquidators' solicitors to advise as to whether their clients intended to appear as a contradictor at the trial. Again there was no response by the solicitors for the liquidators to this request. No explanation was given for the failure by the liquidators to respond. 17 In mid-August 2014, the Commissioner arranged for Mr Michael O'Meara of counsel to appear as amicus curiae to make submissions as a contradictor in the proceedings.

4.1 General principles 18 The Court has power to award costs in all proceedings under s 43 of the Federal Court of Australia Act 1976 (Cth) (Federal Court Act). While the question of costs is a matter for the Court's discretion, the general rule is that a successful party is entitled to its costs: Ruddock v Vadarlis (No 2) [2001] FCA 1865; (2001) 115 FCR 229 at 234-235 [11] (Black CJ and French J); Scott v Secretary, Department of Social Security (No 2) [2000] FCA 1450 at [2] (Beaumont and French JJ). In Hughes v Western Australian Cricket Association (Inc.) (1986) ATPR 40-748 at 48,136, Toohey J observed that the discretion must be exercised judicially and identified three principles as to the exercise of the discretion evident from the authorities: 1. Ordinarily, costs follow the event and a successful litigant receives his costs in the absence of special circumstances justifying some other order. Ritter v. Godfrey (1920) 2 K.B. 47. 2. Where a litigant has succeeded only upon a portion of his claim, the circumstances may make it reasonable that he bear the expense of litigating that portion upon which he has failed. Forster v. Farquhar (1893) 1 Q.B. 564. 3. A successful party who has failed on certain issues may not only be deprived of the costs of those issues but may be ordered as well to pay the other party's costs of them. In this sense, "issue" does not mean a precise issue in the technical pleading sense but any disputed question of fact or of law. Cretazzo v. Lombardi (1975) 13 S.A.S.R. 4 at p. 12. 19 In this case, the liquidators filed a submitting appearance save as to costs, as permitted by r 12.01 of the Federal Court Rules 2011 (Cth) (Federal Court Rules). By doing so, the liquidators indicated that they did not intend to put any argument to the Court on the substantive issues, but reserved their right to argue the matter of costs. 20 As is the case under the Uniform Civil Procedure Rules 2005 (NSW) (UCPR), no rule of court or other provision deals with the cost consequences of the filing of a submitting appearance. However under the UCPR, while the making of some other order lies within the court's discretion, the prima facie rule that costs follow the event is contained in r 42.1 of the UCPR. While the Federal Court Rules do not expressly contain the prima facie rule as to costs, the difference is not a material one given that the same general principle is applied by this Court in any event. 21 The issue is whether, in the principled exercise of the discretion conferred by s 43 of the Federal Court Act, the Court should make an order depriving the Commissioner of his prima facie entitlement to costs: see by analogy Kisimul Holdings Pty Ltd v Clear Position Pty Ltd (No 2) [2014] NSWCA 317; (2014) 86 NSWLR 645 (Kisimul Holdings) at 647 [12] (the Court). As to the proper approach where a submitting appearance has been filed, the Court of Appeal held in Kisimul Holdings that: 13. In approaching that issue, one immediately encounters what has been said to be another prima facie expectation. In China Shipping (Australia) Agency Co Pty Ltd v D V Kelly Pty Ltd (No 2) [2010] NSWSC 1557 at [8], Rein J noted that "a defendant who files a submitting appearance except as to costs is prima facie only liable for costs up to the time of service of the submitting appearance and not thereafter". His Honour referred, in that connection, to Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 where Bignold J (at [42]) extracted the following proposition from decided cases: "In my judgment, the effect of the Respondent's submitting appearance in the present case, where that appearance has not been challenged or impugned, is that the submitting party is generally to be regarded as immune from any liability for costs incurred in the proceedings after the filing of the submitting appearance save as to costs (although conformably to principle and case law, the submitting party will be liable for costs incurred by the plaintiff up to the date of the filing of the submitting appearance)." 14. The true position is that the question should be approached not by reference to prima facie expectations but according to an appraisal of the circumstances of the case. In particular, attention must be paid to the context in which the submitting appearance was filed. Pertinent, in that connection, are the following observations of Beazley JA (as she then was) in Nyman v Valmas [1997] NSWCA 235: "In my opinion, the filing of a submitting appearance does not denote consent to the orders sought. A submitting appearance (both at first instance and in this Court) may be filed for a variety of reasons. The typical situation is where a party has no vested interest in the outcome of proceedings. This typically occurs in statutory appeals where a necessary respondent is the Court or Tribunal from which the appeal is brought. Another is where a party holds funds as a stakeholder or on trust. However, the occasions where a submitting appearance is filed are by no means limited to such obvious circumstances. A party might submit where the costs of appeal outweigh the amount in dispute so that it was too prohibitive or simply not worth the while of a party to contest the matter. The procedure provided by the submitting appearance is a means of facilitating notice to the Court that the party does not propose to put any argument to the court." 22 It follows, therefore, that I agree with the Commissioner's submission that the filing of the submitting notice did not immunise the liquidators against an adverse costs order. However, that does not mean that the question is answered simply by an application of the general rule that the Commissioner, being wholly successful, should be awarded his costs. In line with Kisimul Holdings, the question of whether it is appropriate to award costs, including those incurred in arranging for amicus curiae to appear, should be approached having regard to the individual circumstances of the case including, in particular, the context in which the submitting appearance was filed.

4.2 The Commissioner's costs 23 On the one hand, it is true to say that this is not a case where the liquidators had a vested interest in the outcome of the proceedings. It is not a case, for example, where the respondent was ultimately concerned with their own economic welfare, as in Kisimul Holdings where the costs of the appeal were awarded against the respondent despite the respondent having filed a submitting appearance on the appeal. 24 On the other hand, I accept the Commissioner's submission that the liquidators' conduct in maintaining that only a court order would change their position left the Commissioner with no real option in terms of enforcing the notices but to institute and maintain these proceedings: cf Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 at [46] (Bignold J). In this regard, it is no answer, in my view, for the liquidators to say that they were prepared, and communicated their preparedness, to consent to an order permitting access. As no court order is required for a s 264 notice, this could only have been a reference to an order under s 486 of the Corporations Act. As such, their position wrongly denied the Commissioner his right to require production under s 264 of the ITAA 1936, the purpose of which is to enable the Commissioner to undertake wide-ranging inquiries in the discharge of her or his obligation to administer the taxation laws. By contrast, an order under s 486 of the Corporations Act would be premised on the view that the Commissioner's purpose was a different one, namely, that of a creditor only, as the Commissioner pointed out in correspondence prior to instituting the proceedings. The case put for the liquidators in the correspondence relied only upon a bald assertion as to the more specific provision taking precedence over the more general. There is, with respect, little that could be said to commend that assertion without more. The amicus curiae was, however, ultimately able to put an available argument in an endeavour to support the liquidators' position but that complex, albeit unsuccessful, argument bore little resemblance to that put by the liquidators in correspondence. 25 Moreover, while in submissions the liquidators asserted a lack of funds and that it would not have been in the best interests of creditors to participate, no evidence was led as to why the liquidators, having insisted that the question be determined judicially, offered but then declined to take an active role in the proceedings. That was so notwithstanding the Commissioner's offer that the parties bear their own costs to address the concern expressed by the liquidators about the risk of an adverse costs order contained in correspondence to which no response was ever received. 26 The liquidators also contend that the case was a test case or public interest litigation and for this reason also they should not be liable for the Commissioner's costs. However, that submission overlooks the fact that the litigation was occasioned by the liquidators' conduct in refusing to comply with the notices on the basis that s 486 of the Corporations Act applied - a position which to the knowledge of the Commissioner had never been taken by any other liquidator. Notwithstanding that the parties agreed in correspondence that the issue needed to be resolved, it is apparent that that was only insofar as the issue was live between them. It was open to the liquidators at any time to comply with the notices thereby rendering the litigation moot. 27 Conversely, the position adopted by the liquidators did not relieve the respondent of the need to prove its case for the grant of declaratory relief. For example, Young J stated in Trust Co of Australia Ltd v Perpetual Trustees WA Ltd (1995) 36 NSWLR 654 at 660: Courts of Equity have adopted a practice over a long period of time not to make certain types of orders on admissions or without proper examination. This practice manifests itself in many ways. For instance, equity does not make declarations without a proper contradictor. However, this is a discretionary rule as is made clear by Territory Insurance Office v Kerin (1986) 42 NTR 15; 89 FLR 257. Again, a declaration will not be made by consent, at least in a situation where rights other than the rights of the parties might be affected. An affectation will occur if the Court considers that other people might be induced by the fact that the Court has made a declaration in a particular matter to assume that that declaration has been made after full consideration: Myer Queenstown Garden Plaza Pty Ltd v Port Adelaide City Corporation (1975) 11 SASR 504 at 509-510. 28 It follows that the consequences of the liquidators' stance for the conduct of the litigation would have been no different if the liquidators had simply ignored the proceedings (see by analogy Kisimul Holdings at [16]). 29 In essence, therefore, notwithstanding the liquidators' lack of a financial interest in the outcome and submitting appearance, I consider that the liquidators' position in the proceedings was effectively adversarial, and that the proceedings are not properly characterised as public interest litigation or as a "test case" which the ATO had determined to run. 30 As to the latter, I also do not accept the liquidators' submission that, the fact that the Commissioner did not accept the liquidators' "offer" to institute proceedings seeking an order under s 486 of the Corporations Act, and instead commenced these proceedings, suggests that "[t]hese proceedings were for all intents and purposes a test case commenced by the Applicant to gain clarity on a previously untested point of law". Quite apart from the points already made, it was the liquidators' position that it was the Commissioner who should bring proceedings. Thus, on the first occasion when the liquidators made the so-called "offer" to bring proceedings, they also expressed the view that it was arguable that the Commissioner should make the application, and later that it was an application that "should properly be made by [the Commissioner]". 31 Furthermore, a party cannot avoid costs because she or he has acted on a mistaken view of the law, even if that view was not unreasonable or untenable as the liquidators submit. Once the Commissioner's position was explained to the liquidators, it was open to them to accept that view and avoid litigation. There was no need for declaratory relief aside from the need created by the position taken by the liquidators in response to the s 264 notice. 32 Finally, the liquidators appear to contend that the award of costs in this case would be punitive because the position taken by them in not complying with the notice was reasonable. The submission is misconceived. An award of costs is compensatory in the sense that it is intended to indemnify the successful party (Oshlack v Richmond River Council (1998) 193 CLR 72 at 89 [44] (Gaudron and Gummow JJ) and 122 [134(6)] (Kirby J); see also ibid at 75 [1] (Brennan CJ) and 97 [67] (McHugh J) (in dissent but not on this point)). There is nothing to suggest that the award of costs on a party-party basis would do more than achieve that end. The fact that the amicus curiae was ultimately able to put a tenable argument does not alter the character of the award of costs. 33 In all of the circumstances, I do not consider that the submitting appearance ought to insulate the liquidators against an award of costs in favour of the Commissioner whose position was wholly vindicated in the proceedings.

4.3 Costs incurred by the Commissioner in providing for an amicus curiae to appear 34 The Commissioner submits that the liquidators should be liable for the costs (as if on a party-party basis) incurred by the Commissioner in arranging for the amicus curiae to appear "because, having insisted upon judicial resolution they then chose not to make submissions; it was therefore appropriate for the amicus to be briefed for the Court to benefit from submissions opposing the application." 35 The only argument put by the liquidators against the making of any such order which differs from those already considered in the context of a costs order in favour of the Commissioner, is the proposition that an amicus is not entitled to costs. On this basis, the liquidators submit that it is inappropriate for any order as to costs to be made with respect to the amicus curiae, citing Blackwood Foodland Pty Ltd v Milne and The Superintendent of Licensed Premises [1971] SASR 403 at 411 (cited in turn with approval in Wilson v Manna Hill Mining Company Pty Ltd [2004] FCA 1663) (Wilson v Manna Hill). However, despite the terms in which the principle is stated in Wilson v Manna Hill, the principle is not absolute. For example, in Federal Commissioner of Taxation v Administrative Appeals Tribunal [2011] FCAFC 37; (2011) 191 FCR 400, Keane CJ and Gordon J ordered that the Commissioner, who was unsuccessful in obtaining the relief sought, was to pay the amicus curiae's costs of the appeal. In that case, the respondents were not interested in resisting the Commissioner's appeal and counsel was given leave to appear as amicus curiae to assist the Court, his submissions being found to be of considerable assistance. 36 The present case is similar, save that costs are sought to compensate the Commissioner, having succeeded on the application, for the cost which he incurred in arranging for the amicus to appear as a contradictor. Further, this occurred in circumstances where the Court had indicated that it would be of assistance if a contradictor were to appear, and in fact the Court derived much assistance from the careful and considered submissions of Mr O'Meara. As the Commissioner contends, those costs were of a kind which the liquidators would have incurred (and, having been unsuccessful, would have borne) had they participated in the proceeding and defended their stance. I consider in those circumstances that the Commissioner is entitled to his costs (calculated as on a party-party basis) in arranging for counsel to appear as amicus curiae.

4.4 Should costs be awarded personally against the liquidators? 37 The Commissioner contends that: In resisting the compulsory notices and demanding legal proceedings, the Liquidators acted in their own capacity and not in the interests of, or with the consent of, the creditors. It would be unfair on the creditors for the costs to be payable as expenses of the liquidation. The applicant's costs and the costs of engaging the amicus should be paid by the Liquidators. The Liquidators have the option of applying for an indemnity against these costs out of the companies' assets. They have not done so to date, and if they do the issue will turn on whether or not the Liquidators acted reasonably: Silvia v Brodyn Pty Ltd (2007) 25 ACLC 385 at [51]; In Re Silver Valley Mines (1882) 21 Ch D 381. 38 The liquidators, however, contend that any order as to costs should specify that costs be paid as an expense in the liquidations of the companies and not by the liquidators personally. 39 The relevant principles, as identified by Hodgson JA (Ipp and Basten JJA agreeing) in Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385 (Silvia) at [49]-[54], may be summarised as follows: (1) There is a dichotomy between a case where the liquidator is sued, on the one hand, and a case where the liquidator initiates proceedings, on the other hand. (2) In the latter case, the liquidator, like a trustee or personal representative, litigates at her or his own risk. Thus, if proceedings brought by a liquidator in relation to a company's affairs are unsuccessful, then generally an order for costs will be made against that liquidator. (3) The position is different where proceedings are brought against the liquidator. Generally in those circumstances, a costs order will be made in such a way that the liquidator does not incur any personal liability. This may be achieved by ordering that the company in liquidation pay the costs (if the company is also a defendant), or by ordering that the liquidator's liability for costs be limited to the amount of assets of the company available for that purpose. As Oliver J explained in Re Wilson Lovatt & Sons Limited [1977] 1 All ER 274 at 285 (in a passage which Hodgson JA (Ipp and Basten JJA agreeing) approved in Silvia at [50]): I can quite see that there may be very powerful reasons of policy for a rule that a liquidator, when carrying out his functions and thus subjecting himself to the possibility of proceedings against him by parties who are discontented with the way in which he has carried out those functions, must be entitled to defend himself without being subjected to the risk of having costs awarded against him personally, because of course he cannot protect himself against claims being made. Unless there were some such rule it might be very difficult to get persons to take on the heavy responsibility of the liquidation of companies. It seems to me that it is quite a different matter where the liquidator himself takes it on himself to institute proceedings, whether they be proceedings in the winding-up or otherwise. (4) The liquidator would generally be entitled to an indemnity from the assets of the company, although that may be denied if the liquidator has acted unreasonably. (5) If the liquidator has acted unreasonably in defending the litigation, the liquidator may be made personally liable. 40 In the present case, while an available argument was able to be put by the amicus curiae, that argument did not correspond with the bald assertion given by the liquidators for their stance which undertook no analysis of the text or context, including the purpose, of the provisions in question. In those circumstances, it may be said that the end construction for which the liquidators contended in the correspondence was not untenable, even though there seems little merit in the liquidators' explanation for that construction. However, as the Commissioner contends, it was open to the liquidators to discuss their stance with the creditors before refusing to comply with the s 264 notice and to decide, having regard to the interests of the creditors and potential costs of mounting an argument against the compulsory notices and risk of an adverse costs order, whether or not to adopt that course. That course was not, however, adopted by the liquidators. It is also difficult to see, as the Commissioner contends, how the liquidators' stance furthered the interests of the creditors. 41 Furthermore, while ultimately the Commissioner instituted proceedings, his hand was forced by the conduct of the liquidators in refusing to comply with the s 264 notice absent a court order notwithstanding that there was no authority in the liquidators' favour. The liquidators also insisted in correspondence that if the Commissioner did not institute proceedings, then the liquidators would do so. In those circumstances, in my view the liquidators' role in this case was more akin to that of a liquidator who has instituted proceedings. I consider, therefore, that they ought to be taken to have assumed the risk that their construction of the relevant provisions was wrong and that they should comply with the s 264 notice. I am reinforced in this view by the fact that there was no material benefit to the creditors in the liquidators maintaining their stance against a reasonable construction of the provision which was ultimately upheld. In so saying, I am not suggesting that liquidators should act otherwise than in accordance with the law and are not entitled to test the validity of the exercise of compulsive powers by government; nor that they may not, in appropriate cases, be entitled to indemnity from the assets of the liquidated company. 42 In the unusual circumstances of this case, therefore, I have reached the view that the course which best serves the interests of justice, bearing in mind the interests of the creditors, is to award costs against the liquidators personally. It will then be for the liquidators to establish the reasonableness of their conduct in all of the circumstances in due course, should they ultimately seek indemnity against these costs out of the companies' assets.

5. CONCLUSION 43 For the reasons set out above, I consider that an order should be made that the liquidators personally pay the costs of the Commissioner in the proceedings and the costs incurred by the Commissioner in arranging for counsel to appear as amicus curiae. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Perry.