Damcevski v Demetriou

Supreme Court of NSW|2018-12-06|Before: Sackar J

Solicitors: Bobi Damcevski, Corporate & Civil (Plaintiff) Somerset Ryckmans (Second Defendant) Marsdens Law Group (First & Third Defendants) MCW Lawyers, J Prowse (Fourth Defendant) V R W Gray (self-represented) File Number(s): 2016/163514

Proceedings

These proceedings involve Bobi Damcevski (Plaintiff), Emilios Demetriou (First Defendant), Janette Linda Ashley (Second Defendant), Georgina Demetriou (Third Defendant), SPC & Co Pty Ltd (Fourth Defendant) and Ventry Gray (Fifth Defendant).
This judgment deals with costs and the appropriate orders to be made arising out of a hearing before me on 21 May 2018 and 13, 14 and 22 June 2018 concerning whether a Heads of Agreement dated 28 October 2016 was a binding agreement between the parties: Bobi Damcevski v Emilios Demetriou [2018] NSWSC 988 (principal judgment).

Background facts

On or about 3 November 2009 the First Defendant, Second Defendant and Third Defendant retained the Plaintiff as their solicitor to act for them to recover moneys in a venture (see for example Demetriou v Gusdote Pty Ltd [2010] FCA 581) (principal judgment [3]).
The Plaintiff subsequently alleged that the First Defendant, Second Defendant and Third Defendant owed him fees as of 12 December 2012 amounting to $224,707 which included the majority of fees owing to counsel Mr Gray (now the Fifth Defendant) (principal judgment [4]).
On or about 16 October 2015, the Second Defendant paid the Plaintiff $25,000 leaving an allegedly outstanding amount of $199,707 plus interest (principal judgment [6]).
This dispute over fees owing culminated in a mediation that occurred on 28 October 2016 where Holding Redlich appeared for the First, Second and Third Defendants (principal judgment [15]). The Plaintiff, First Defendant, Second Defendant and Third Defendant were present at the mediation, as was the Fifth Defendant (principal judgment [15]).
This mediation resulted in a handwritten document entitled "Heads of Agreement" which in my judgment objectively viewed was a binding agreement that the parties intended to be bound as and from that date of 28 October 2016 (principal judgment [261]). As per my reasons this was a legally binding arrangement that was entered into between the Plaintiff and the First, Second, Third, Fourth and Fifth Defendants (principal judgment [285]).
The agreement was set out in the Heads of Agreement with two outcomes still outstanding. First the preparation and signing of a deed of release and settlement by the parties and second a mortgage to be provided by the Fourth Defendant (principal judgment [286]).
On 7 December 2016, the Plaintiff filed a Notice of Motion seeking specific performance of the Heads of Agreement, but did not list the Fourth Defendant or the Fifth Defendant as parties (principal judgment [41]). On 23 March 2017, the First Defendant filed a Points of Defence, again not seeking to join the Fourth Defendant or Fifth Defendant as parties (principal judgment [48]).
On 1 June 2017 the Plaintiff filed an Amended Statement of Claim again seeking specific performance of the Heads of Agreement, as against the First, Second, Third, Fourth and Fifth Defendants (principal judgment [49]).
On 16 June 2017 the Fourth Defendant sold the Willows Golf Course to Willows Country Club Pty Ltd for $1,000,000 (principal judgment [52]).
On 11 July 2017 Mr Darren John Vardy and Mr Jason Lloyd Porter were appointed as the voluntary administrators of the Fourth Defendant, being appointed as liquidators on 17 August 2017 (Plaintiff's orders submissions [7]).
On 21 August the Plaintiff filed a Second Amended Statement of Claim and on 4 September 2017 filed a Third Amended Statement of Claim (principal judgment [54]).
On 30 August 2017 Parker J heard an application by the Fifth Defendant for summary judgment of the proceedings on a cross-claim filed by him (principal judgment [55]).
On 7 September 2017 the Fourth Defendant filed a Defence to the Third Amended Statement of Claim (principal judgment [56]). The Plaintiff and Fifth Defendant's submission state this is the date from which the Fourth Defendant actively engaged in the proceedings, raising new issues and adding a layer of costs to the resolution of the proceedings.
This judgment concerns the question of costs and the final form of any orders sought to give effect to my judgment.
On 19 September 2017 the Plaintiff filed a Fourth Amended Statement of Claim against the First to Fifth Defendants (principal judgment [59]).
On 10 October 2017, the Fourth Defendant filed a Defence to the Fourth Amended Statement of Claim largely denying the Plaintiff's claim, including that the Heads of Agreement was devoid of consideration and did not bind the Fourth Defendant (principal judgment [60]). On 19 October 2017 the First Defendant filed a Defence to the Fourth Amended Statement of Claim (principal judgment [61]).
On 22 February 2018 the Plaintiff filed a Notice of Motion seeking an order pursuant to s 73 of the Civil Procedure Act 2005 (NSW) that the dispute between the parties had been compromised or settled as set out in the Heads of Agreement of 28 October 2017 (principal judgment [65]).
On 16 April 2018 the Fifth Defendant issued and served a subpoena on Mr Vardy one of the liquidators of the Fourth Defendant, with a schedule of 14 numbered items generally limited to bank statements and documents evincing the movement of money in and out of the Fourth Defendant between 1 July 2016 and 30 June 2017, including relating to the transfer of the Willows Golf Course.
On 3 May 2018 Mr Jonathon Prowse of MCW Lawyers acting for the Fourth Defendant responded (as attached to the Fourth Defendant's submissions of 19 July 2018): I note that, considering the broad scope of the subpoena, Mr Vardy will incur substantial expense in complying with it. I am instructed that a manager will need to spend an estimated 20 to 30 hours at an hourly rate of $325.00 plus GST which has at this stage an upper estimate of $9,750.00. Supervision by Mr Vardy will be necessary at the rate of $595.00 per hour plus GST for an estimated five hours. The present estimate of that time is $2,975.00 plus GST. It is expected that legal advice in respect to issue of compliance with the Subpoena will take around four hours at the rate of $500.00 per hour plus GST with a present estimate of $2,000.00 plus GST. … If production is pressed, I am instructed that Mr Vardy expects to bring a claim for expenses in the vicinity of $15,000 plus GST.
On 19 June 2018 a letter detailing the claim for expenses was forwarded to the Fifth Defendant by Mr Prowse (incorrectly dated 22 May 2018) (as attached to the Fourth Defendant's submissions of 19 July 2018): Alex Tang, Senior Accountant - 11.5 hours @ 325.00 per hour // $3,737.50 Darren Vardy (Liquidator) - 7.5 hours @ $595.00 per hour // $4,462.50 Total // $8,200.00 In addition, my client has incurred expenses to this firm in providing advice on issues in relation to compliance and privilege of 10 hours at $500.00 per hour, totalling $5,000.00. The total expenses incurred in complying with the Subpoena are $13,200.00. Taking into account the swings and roundabouts likely on any assessment, my client is prepared to accept a 20% discount on this figure leaving the claim for expenses at $10,560.00. All of the above figures are exclusive of GST if GST is payable.
Apparently attached to this letter was a file note recording the time and charge incurred.
On 8 May 2018, the Fourth Defendant went into evidence in the affidavits of Mr Darren John Vardy liquidator (and previously administrator) for the Fourth Defendant and solicitor Mr Jonathon Prowse (see for example principal judgment [184]).
On 25 May 2018 the Plaintiff provided Points of Claim, and on 30 May 2018 the Fourth Defendant filed their defence to the Points of Claim (principal judgment [69]-[70]).
On 7 June 2018, the liquidators of the Fourth Defendant provided further evidence in the form of the affidavit of Ms Maria Demetriou (principal judgment [231]).
The matter was heard on 21 May 2018, 13, 14 and 22 June 2018 and I delivered judgment on 29 June 2018 which held, as I have said, that the Heads of Agreement was binding. On 13, 14 and 22 June 2018 it is clear that the Fourth Defendant participated in the proceedings being represented at times by Mr Prowse solicitor and Mr Johnson of counsel.
On 13 June 2018, Mr Vardy was required for cross-examination, including the following cross-examination by counsel for the Plaintiff (T65/17-30). Q: You found that, in your enquiries, that the books and records were deficient, of the company? A: Yes. Q: Did you have or see any minutes of meeting of either the directors or the members of this corporation? A: I don't believe so. Q: Not a single minute that you recall seeing? A: I don't believe so. Q: As you are aware SPC was involved in litigation and the acquisition of a golf course known as The Willows Golf Course, a piece of real property? A: Yes.
On 14 June 2018, I had the following exchange with Mr Prowse (T149/14-36): HIS HONOUR: Okay, look, can you just have a look at any procedural aspects that have not been attended to in that regard and whether or not it's going to be opposed or not? The other thing is if I read Mr Johnson's material - and I don't mean to exclude you, Mr Prowse, you would have had a hand in it, clearly. Do I correctly understand the evidentiary position to say that SPC, (a) has transferred the property interest out of its hands? And does that mean SPC is now just an unhappy little shell sitting somewhere doing very little from an asset point of view? PROWSE: I understand that it doesn't have any other assets. HIS HONOUR: The only asset it ever had, as best I understand the evidence, was the interest in the golf course and I think the point Mr Johnson makes is that SPC, at some point, transferred the interest and there was no attempt to restrain the transfer of the interest. That may not affect relief that's sought if one wants a declaration, let's say, as to who the parties of the contract were and who was bound for any number of reasons but it may affect, ultimately, the utility of certain of the relief that's floated but you'll all give thought to that. So they are the matters I, in broad terms, had in mind. Let me just see if I've forgotten something. No, they are the matters that I had in mind. Is there anything else that's arisen as a result of what I have just said? CHAPMAN: No, your Honour.
On 22 June 2018 I had a further exchange with Mr Johnson counsel for the Fourth Defendant (T165/25-40): HIS HONOUR: Vardy, thank you very much. Mr Vardy nodded furiously with Mr Prowse here the other day when I think I asked the question, "Has the company got any assets?" and I think the answer is, "No, it's got nothing." Your best point, if I may say so - or one of your best points, anyway - is that it was all very interesting, but what's the point of it all? JOHNSON: I was just going to touch on that. That doesn't mean that the liquidators may not take steps in their further investigation to recover money. I make that very clear. HIS HONOUR: Yes, if there's a liability there, then they've obviously got an obligation - a legal obligation - to do certain things. JOHNSON: Or if there's a recoverable transaction, for example - and I say this by way of example. The $65,000 appears to have been SPC's money. A solicitor who holds that money holds it at the direction of SPC.

Plaintiff and Fifth Defendant - costs

The Plaintiff and Fifth Defendant submit that their costs should be paid by the First Defendant and the liquidators of the Fourth Defendant personally and on an indemnity basis in accordance with rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") (costs submissions [1]-[7]).
They contend that the Fourth Defendant has played an active role in the proceedings ever since being joined by filing pleadings, evidence and fully participating in the hearing. To this extent they submit the liquidators for the Fourth Defendant should be placed in exactly the same position in relation to costs as any other litigant (costs submissions [8]).
Their position is that the First Defendant must have known at all times that on 28 October 2016 he was acting as a shadow director of the Fourth Defendant because his daughter Ms Maria Demetriou (the real director of the Fourth Defendant) was accustomed to complying with his instructions and wishes. They likewise assert the Fourth Defendant's liquidators did not admit that on 28 October 2016 the First Defendant was acting as a shadow director of the Fourth Defendant. They contend therefore both the First Defendant and liquidators of the Fourth Defendant failed to assist the Court and should be liable for indemnity costs (costs submissions [9]-[16]).
The Plaintiff and Fifth Defendant additionally submit that the First Defendant and Fourth Defendant raised arguments and defences that were not reasonably open to them or arguable, including by denying the First Defendant was a shadow director, raising a Masters v Cameron (1954) 91 CLR 353; [1954] HCA 72 that the Heads of Agreement was not legally binding, and alleging non-performance of Heads of Agreement clauses 8 and 9 (costs submissions [17]-[31]).
Relying on the principles of Mead v Watson [2005] NSWCA 133, the Plaintiff and Fifth Defendant suggest that the Fourth Defendant took an active role in contesting their claims in litigation and must therefore be just as susceptible to costs orders as any other active litigant (costs submissions [32]-[41]). Further they suggest the liquidators' arguments were not reasonably justified, including that the company was insolvent and destitute and had disposed of the Willows Golf Course thereby precluding it from complying with clause 4 of the Heads of Agreement. They suggest it should pay the costs of the proceedings on an indemnity basis (costs submissions [42]-[50]).
With respect to the orders sought by the Plaintiff and the Fifth Defendant, they refer to the following proposed orders (updated and provided to my chambers on 6 December 2018): 1. … (order made 26 October 2018 and amended on [insert date]) 2a. The First Defendant to pay the cost of the Plaintiff and the Fifth Defendant of and incidental to the proceedings, from 28 October 2016, on the indemnity basis. 2b. The liquidators of the Fourth Defendant (SPC & Co), Messrs Darren John Vardy and Jason Lloyd Porter, to pay the cost of the Plaintiff and the Fifth Defendant of and incidental to the proceedings from 7 September 2017, on the indemnity basis, and not limited to the amount of SPC & Co's assets available for the purpose of meeting a costs award. 3. Any and all orders for costs made in favour of any party prior to 28 October 2016 are vacated and discharged. 4. Order that the costs payable by the First Defendant to the Fifth Defendant include the costs payable by the Fifth Defendant to the Fourth Defendant and to Willows Country Club Pty Limited pursuant to orders made by the Court on 20 October 2017. 5. The claim by Darren John Vardy for costs of compliance with the subpoena served upon him dated 16 April 2018 is dismissed, or alternatively that such costs be paid by the First Defendant and the Fourth Defendant. 6. Grant liberty to apply by any party upon 3 days' notice, any such application to be supported with a statement of the relief to be sought and a brief explanation of the reason why the order sought should be made.

Plaintiff - orders

The Plaintiff seeks orders 2, 3 and 6 above whilst the Fifth Defendant seeks all the above proposed orders (Plaintiff's orders submissions [1]-[4]).
With respect to order 2, the Plaintiff emphasises personal costs should be made against Mr Darren John Vardy and Mr Jason Lloyd Porter as liquidators of the Fourth Defendant on an indemnity basis because they actively defended the proceedings, raised grounds of opposition that dramatically changed over time and defended proceedings in a manner not to the benefit of the creditors of the Fourth Defendant (Plaintiff's orders submissions [6]-[15]).
The Plaintiff submits order 3 as above is necessary to reflect the agreement between the parties and the terms of the relevant deed of settlement (Plaintiff's orders submissions [16]).

Fifth Defendant - orders

The Fifth Defendant asserts he has a contractual right against the Fourth Defendant to be given a registered first mortgage over the Willows Golf Course (Fifth Defendant's orders submissions [1]-[3]). He denies that the Heads of Agreement has been frustrated, as it is not pleaded, and the Fourth Defendant's sale and transfer of the Willows Golf Course is a unilateral act that does not constitute frustration (Fifth Defendant's orders submissions [4]).
In addition to seeking costs on an indemnity basis against the liquidators of the Fourth Defendant, the Fifth Defendant suggests Mr Vardy as liquidator of the Fourth Defendant has claimed excessive costs for compliance with a subpoena which should not be paid, and should simply be fixed by the registrar. He asserts although he issued the relevant subpoena, Mr Vardy's costs should be paid by the First Defendant and out of the Fourth Defendant's funds (Fifth Defendant's orders submissions [5]-[17]).
The Fifth Defendant further asserts that in the general discretion of the Court, there should be a Bullock order or costs order against the First Defendant, ordering him to pay to the Fifth Defendant the costs ordered against the Fifth Defendant in relation to the hearing before Parker J in relation to the interest claimed in a caveat against both the Fourth Defendant and Willows Country Club Pty Ltd (Fifth Defendant's orders submissions [18]-[40]).

Fourth Defendant - costs and orders

The Fourth Defendant submits that the Willows Golf Club referred to in clause 4 of the Heads of Agreement has been sold prior to the company being placed in administration and liquidation, and that both the Plaintiff and Fifth Defendant were given notice of the liquidators' intention to allow the transfer of the Willows Golf Club be processed by the Queensland Land Titles Office (submissions [1]-[7]). The Fourth Defendant submits its obligation to provide a mortgage over the Willows Golf Course has been frustrated, and both the Plaintiff and Fifth Defendant no longer make any monetary claim against the company (submissions [8]).
The Fourth Defendant contends costs should not follow the event, and the appropriate costs order would be that the Plaintiff pay the Fourth Defendant's costs up to and including the costs of the hearing on 21 and 22 May 2018, and that after that date each party pay their own costs. It denies there ought to be any order that the Fourth Defendant pay the costs of the Fifth Defendant (submissions [9]-[12]).
The Fourth Defendant asserts the Fifth Defendant should be required to pay the liquidator's costs of compliance with a subpoena totalling $10,560 as a lump sum (submissions [13]-[18]).
The Fourth Defendant states there is no possible ground for the liquidators to be personally liable for any costs order, let alone indemnity costs, as there was no element of unreasonable conduct on their part (submissions [19]-[28]).

Costs generally

The above discretion as to costs is relevantly provided by s 98 of the Civil Procedure Act 2005 (NSW): 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. (2) Subject to rules of court and to this or any other Act, a party to proceedings may not recover costs from any other party otherwise than pursuant to an order of the court. (3) An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings. (4) In particular, at any time before costs are referred for assessment, the court may make an order to the effect that the party to whom costs are to be paid is to be entitled to: (a) costs up to, or from, a specified stage of the proceedings, or (b) a specified proportion of the assessed costs, or (c) a specified gross sum instead of assessed costs, or (d) such proportion of the assessed costs as does not exceed a specified amount. (5) The powers of the court under this section apply in relation to a married woman, whether as party, tutor, relator or otherwise, and this section has effect in addition to, and despite anything in, the Married Persons (Equality of Status) Act 1996. (6) In this section, costs include: (a) the costs of the administration of any estate or trust, and (b) in the case of an appeal to the court, the costs of the proceedings giving rise to the appeal, and (c) in the case of proceedings transferred or removed into the court, the costs of the proceedings before they were transferred or removed.

Bullock orders

Bullock v London General Omnibus Co [1907] 1 KB 264 is broadly speaking authority for the making of costs orders known as "Bullock Orders" in which courts exercise their costs discretion where it is just to do so to oust the general rule that a plaintiff who succeeds against one defendant but fails against the other must pay the costs of the successful defendant. The courts may order the unsuccessful defendant to reimburse the plaintiff for the costs of the successful defendant.
In Sze Tu v Lowe (No 2) [2015] NSWCA 91 Gleeson JA (with Meagher and Barrett JJA agreeing) said (at [55]-[58]) (citations omitted): The power to make a Bullock order is found in the Court's statutory discretion as to costs: Civil Procedure Act, s 98. In G E Dal Pont, Law of Costs (3rd ed, LexisNexis Butterworths, 2013), the author suggests at [11.18] the following rationale for a Bullock order: At a basic level, the rationale for a Bullock order is that in some circumstances it will be just for a successful plaintiff who has sued two (or more) defendants to be indemnified by the unsuccessful defendant for the costs he or she incurred in proceeding against the successful defendant. This may be a just outcome where the allocation responsibility between the potential defendants is uncertain, making it a reasonable course for the plaintiff to proceed through to trial against more than one defendant. In support of the making of a Bullock order, Geoffrey and Mary relied upon the following passage in Council of the City of Liverpool v Turano (No 2) [2009] NSWCA 176 at [15], in which this Court (Beazley, Hodgson and McColl JJA) said, in the context of the making of a Sanderson order, but relevantly also for a Bullock order: In determining whether it is fair to make such an order, two matters are usually considered to be relevant. First, it must have been reasonable for the plaintiff to have brought the proceedings against the successful defendant: see Gould v Vaggelas [1985] HCA 85 [sic]; (1985) 157 CLR 215 per Gibbs CJ (at 230); Wilson J (Murphy J agreeing) (at 247); Brennan J (at 260); Lackersteen v Jones (No 2) [1988] NTSC 72; (1988) 93 FLR 442 (at 449); Stevedoring Industry Finance Committee v Gibson [2000] NSWCA 179; (2000) NSWCCR 417 (at [128]) per Mason P (Stein and Heydon JJA agreeing). … Secondly, there must be some conduct on the part of the unsuccessful defendant which would make it fair to impose liability on it for the costs of the successful defendant: Gould v Vaggelas (at 230; 247 and 260). What constitutes relevant "conduct" of the unsuccessful defendant which makes it a proper exercise of discretion to make a Bullock order may be seen from Gould v Vaggelas [1985] HCA 75; 157 CLR 215 and the other cases referred to in Council of the City of Liverpool v Turano (No 2) at [16]-[22]. It is sufficient to refer to one of the cases. In Almeida v Universal Dye Works Pty Ltd (No 2) [2001] NSWCA 156, the plaintiff's husband was injured on a building site. The defendants were under common control and the plaintiff was unable to ascertain who was the occupier or head contractor in charge of the work on the site. These matters were denied by the defendants in the proceedings. Priestley JA at [8] stated the relevant consideration in these terms: … any conduct by the defendant or state of affairs in which the defendant is an integral part which makes it fair and reasonable for other parties to be joined as defendants will be relevant to deciding on fair costs orders.

Costs against non-parties

In Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28 Mason CJ and Deane J said (at 192-3) (citations omitted): Obviously, the prima facie general principle is that an order for costs is only made against a party to the litigation. As our discussion of the earlier authorities indicates, there are, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. Thus, for example, there are several long-established categories of case in which equity recognized that it may be appropriate for such an order to be made. For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.
In PM Works Pty Ltd v Management Services Australia Pty Ltd trading as Peak Performance PM [2018] NSWCA 168 Leeming JA, with McColl and Basten JJA agreeing, said (at [35]): It is thus quite plain that the "exceptional" nature of a non-party costs order means that courts must be astute not to permit its availability to expand to the general run of cases where non-parties have played an active role in unsuccessful litigation. It is important to bear that steadily in mind when considering the criteria which were identified in FPM (and which were prominent in the parties' submissions in this appeal), which were identified at [210] as follows: "What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw."
In In the matter of J A Westaway Pty Ltd (in liq) [2016] NSWSC 868 Black J made a personal costs order against liquidators. In this case, the liquidators had attempted to hold a final meeting of members and creditors of the company in their control, which Black J held was unreasonable and premature. His Honour said (at [9]-[10]): The question as to whether such an order should be made against the liquidator personally is to be determined by reference to the principles identified by the Court of Appeal in Silvia v Brodyn Pty Ltd [2007] NSWCA 55; (2007) 25 ACLC 385 ("Silvia v Brodyn"). Hodgson JA there noted (at [52]-[54]) that a liquidator will ordinarily not incur personal liability beyond the amount of the Company's assets available for the purpose of meeting a costs award, unless the liquidator has acted unreasonably in defending litigation. Mr Karam also refers to Maylord Equity Management Pty Ltd v Reel Time Media Ltd (No 2) [2008] NSWSC 1133, where a costs order was made against an administrator personally where he had unreasonably valued a proof of debt of the company's largest creditor in a nominal sum. Palmer J there referred to Silvia v Brodyn above and noted that (at [12]): "Administrators, like liquidators, must realise that they have personal liability for actions which cannot reasonably be regarded as taken in the interests of the creditors of a company as a whole. The remaining assets of an insolvent company are not to be exhausted by litigation undertaken by, or provoked by, administrators or liquidators acting unreasonably."
In this case, his Honour concluded (at [17]): On balance, it seems to me that there was a degree of unreasonableness in the liquidator's conduct, sufficient to support an order for costs of the initial application for interlocutory relief against the liquidator personally. It seems to me that, in the particular circumstances, it was unreasonable for the liquidator to convene the final meeting of the Company's creditors and members, given the potential size of the Owners Corporation's claim, without at least making an inquiry whether it still sought to lodge a proof of debt, as it had previously foreshadowed, and at least allowing it a short further opportunity for it to do so. That position was exacerbated by the fact that the liquidator gave notice of the final meeting to members and other creditors, but initially not the Owners Corporation, although he had been advised of its intent to lodge a proof of debt. It also seems to me that the liquidator too readily assumed that he was not bound to determine the Owners Corporation's proof of debt, unless he was funded to do so, without giving adequate consideration to whether that was an aspect of his statutory duties. The liquidator also did not respond to the Owners Corporation's initial concerns as to the holding of that meeting, as he might well have done, by promptly indicating that he would not oppose any Court relief in respect of the conduct of that meeting, if, as it appears, he did not believe that he had power to adjourn it if a quorum did not attend it. It seems to me that it can be properly be said, consistent with the authorities, that this course forced the Plaintiff to bring its interlocutory application and likely also caused the application to be more expensive than it would otherwise have been.

First Defendant

In my view both the Plaintiff and Fifth Defendant should get their costs on an indemnity basis with respect to the First Defendant.
This is because in my view the First Defendant had no reasonable basis for denying that the Heads of Agreement was not binding and raised unreasonable arguments which warrant indemnity costs. At trial I rejected in large part the First Defendant's evidence, including his denial that he was not shown the trust account statement at the mediation. I also rejected his account of what happened at the mediation (principal judgment [272]-[274]). Indeed I was satisfied that at the mediation the First Defendant was acting as a "shadow director" of the Fourth Defendant, and attempted to utilise the Fourth Defendant to provide a safety net of security for himself (principal judgment [284]).
In my view the First Defendant's submissions and denials were wholly unreasonable and I rejected his evidence almost in its entirety. He should be liable for an indemnity costs order with respect to the Plaintiff and the Fifth Defendant.

Fourth Defendant

With respect to the liquidators of the Fourth Defendant in my view and in the exercise of my discretion both should be liable personally for the costs of the Plaintiff and the Fifth Defendant from the date of 7 September 2017 being the date in which the liquidators filed a Defence to the allegations of the parties.
It is uncontroversial that a liquidator of a company, once appointed, has an obligation to the company and its creditors not to engage in activity that is useless save for producing fees for the liquidators. The Fourth Defendant's main if not only asset was the Willows Golf Course and this was sold for $1,000,000 on 16 June 2017 (principal judgment [52]) prior to the appointment of the liquidators (previously as administrators on 11 July 2017 and then as liquidators on 17 August 2017).
With the minimum amount of investigation that would be expected of liquidators it must have been immediately apparent to them that the Fourth Defendant had little to no assets, having sold its primary asset the Willows Golf Course. Indeed, on two occasions I was informed by solicitor and counsel for the Fourth Defendant on 14 June and 22 June 2018 that indeed the company had no money (T149/14-36, T165/25-40).
Consequently, in my view, the moment it was apparent to the liquidators of the Fourth Defendant that the company was now ostensibly a shell, the only reasonable course was to inform the Court that the company had no money and that the other parties in the litigation should be aware of this fact in formulating their respective forensic strategies, and in effect to proceed at their own risk and cost. The liquidators did not do that, but from 7 September 2017 proceeded to defend the case, advancing issues such as frustrated contracts, opposing an argument of "shadow director", and suggesting that the Fourth Defendant was not a party and/or bound by the Heads of Agreement or mediation, indeed calling Ms Demetriou to give evidence in the trial. Legal representatives for the Fourth Defendant (be they Mr Prowse solicitor or Mr Johnson of counsel) actively participated in the defended hearing.
Furthermore, Ms Demetriou had indeed signed the mortgage over the Willows Golf Course referred to in clause 4 of the Heads of Agreement (principal judgment [39], [276]) and to this end it was always going to be a difficult case for the Fourth Defendant to run that it was not a party to the Heads of Agreement.
This active participation in the litigation offered nothing in terms of positive gains to the creditors of the Fourth Defendant, because whatever was going to be available to the creditors was not going to be increased as a result of the proceedings even if successfully defended. All that the liquidators could hope to achieve from a successful defence of the case was that there would be an order for costs in the Fourth Defendant's favour.
I do not go so far as to say the conduct of the liquidators amounted to "churning and burning" or dishonesty, but their conduct in my view was wholly unreasonable. This is in my view a degree of unreasonableness in the liquidators' conduct sufficient to support an order for costs from 7 September 2017 against the liquidators personally. It follows that this degree of unreasonableness likewise warrants indemnity costs, as in my view and in the exercise of my discretion indemnity costs is the appropriate order in all the circumstances.
It seems to me that, in the particular circumstances, it was unreasonable for the liquidators to contest the proceeds as the proceedings would not have benefited the company or its creditors. To suggest somehow the Fourth Defendant was appearing solely to "assist" the Court is entirely untenable given the adversarial nature of the company's pleadings and its active defence and participation at the trial.
In ordering indemnity costs against the liquidators personally, I make it clear that the liquidators have no right to indemnify themselves from the assets (if any) of the Fourth Defendant.

Bullock order and subpoena costs

As per his written submissions of 11 October 2018 the Fifth Defendant seeks a Bullock order for costs against the First Defendant as follows: "[o]rder that the costs payable by the First Defendant to the Fifth Defendant include the costs payable by the Fifth Defendant to the Fourth Defendant and to Willows Country Club Pty Limited pursuant to orders made by the Court on 20 October 2017".
This relates to the Fifth Defendant's costs resulting from his application by motion for a freezing order restraining the Fourth Defendant from taking any action to dispose of the Willows Golf Course on 4 July 2017, lodging a caveat on 19 July 2017, the hearing of the freezing order before Parker J on 30 August 2017 and the dismissal of the Fifth Defendant's claim with costs of the Fourth Defendant and Willows Country Club on 12 September 2017 (Fifth Defendant's orders submissions [27]).
In my view consistent with the authorities it was reasonable for the Fifth Defendant to have brought the above proceedings, and given the First Defendant's conduct as a shadow director of the Fourth Defendant transferring the golf club land to the Willows Country Club, the First Defendant was indeed the motivating cause and driver of the proceedings. Moreover, in my view the First Defendant's conduct was entirely designed to escape the effect of the binding Heads of Agreement of 28 October 2016 by transferring the golf club land out of the control of the Fourth Defendant, subverting and reneging on the agreement. The only immediately available step open to the Fifth Defendant to protect his right to a mortgage over the Willows Golf Course was to engage in the above proceedings. In my view it is only fair that the First Defendant's attempt to subvert his prior agreement by selling the Willows Golf Course justifies the making of a Bullock order as sought by the Fifth Defendant.
Having carefully considered the materials available and including those provided as attached to the Fourth Defendant's written submissions (T22/31-43), apart from the mere assertion that a number of work hours had to be undertaken in compliance with the Fifth Defendant's subpoena, accompanied by a schedule, in my view there is not sufficient evidence provided on this issue. That is, there is not enough information before the Court as to the tasks taken and why the total of 19 hours of work and 10 hours of legal advice had to be undertaken by the liquidators of the Fourth Defendant to comply with the subpoena. This level of generality is unsatisfactory in the extreme, and without further expense being incurred it is impossible to determine what or was not reasonable in the circumstances, beyond simply letters documenting the various positions taken by the parties on this issue.
Ordinarily recipients of a subpoena are entitled to money for compliance with a subpoena to attend as conduct money (UCPR r 33.6(1)) and the Court may order costs for a subpoena for "any reasonable loss or expense incurred" (UCPR 33.11(1)).
Nothing short of an explanatory affidavit would suffice in my view given the state of the materials presently, as without further detail the Court is placed in a position that without further information it cannot do justice between the parties on this issue. On the basis of the evidence, I would reject the claim for costs by Mr Vardy entirely, but accept some work was necessary to respond to the subpoena. I would therefore grant leave to the Fourth Defendant and/or Mr Vardy to provide evidence within 7 days to provide precise details as to what was charged and what work was done in complying with the subpoena dated 16 April 2018. It is regrettable further expense has to be incurred, especially over an apparent issue that has been in dispute for some time.

Conclusion

I am inclined to make the following orders as provided by the Plaintiff and Fifth Defendant on 6 December 2018, with an amendment to order 1 reflecting the date which the order made on 26 October 2018 was amended to read "declared" instead of "declare". There is also an amendment to order 5: 1. Order made 26 October 2018 and amended on 6 December 2018. 2a. The First Defendant to pay the cost of the Plaintiff and the Fifth Defendant of and incidental to the proceedings, from 28 October 2016, on the indemnity basis. 2b. The liquidators of the Fourth Defendant (SPC & Co), Messrs Darren John Vardy and Jason Lloyd Porter, to pay the cost of the Plaintiff and the Fifth Defendant of and incidental to the proceedings from 7 September 2017, on the indemnity basis, and not limited to the amount of SPC & Co's assets available for the purpose of meeting a costs award. 3. Any and all orders for costs made in favour of any party prior to 28 October 2016 are vacated and discharged. 4. Order that the costs payable by the First Defendant to the Fifth Defendant include the costs payable by the Fifth Defendant to the Fourth Defendant and to Willows Country Club Pty Limited pursuant to orders made by the Court on 20 October 2017. 5. Dismiss the claim by the Fourth Defendant for costs of compliance with the subpoena served upon him dated 16 April 2018, subject to leave granted to the Fourth Defendant to provide such affidavit material as necessary in support of the costs of compliance within 7 days. 6. Grant liberty to apply by any party upon 3 days' notice, any such application to be supported with a statement of the relief to be sought and a brief explanation of the reason why the order sought should be made.

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