Hooke v Bux Global Limited

Federal Court of Australia|2019-05-16|Before: Mr P, Colvin J

Andrew Joseph Webber, Raymond James Webber and Christopher Mark Webber pay the plaintiffs' costs of these proceedings on an indemnity basis.
Liability under these orders be joint and several.
The costs payable under these orders be assessed in the sum of $535,016 (inclusive of GST). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

COLVIN J: 1 On 11 October 2018, I made orders winding up Bux Global Limited on the just and equitable ground provided for by s 461(1)(k) of the Corporations Act 2001 (Cth). At the time I ordered that the costs of the application to wind up be assessed and reimbursed out of the property of Bux Global in accordance with s 466(2) but reserved liberty to apply for further or special orders in relation to costs. 2 On 24 October 2018, the plaintiffs in the winding up proceedings brought an application for an order that costs be awarded on an indemnity basis and be fixed in the sum of $535,016 (inclusive of GST) being the actual costs incurred by the plaintiffs in the proceedings. The application also sought an order that each of Bux Global, Mr Raymond Webber, Mr Andrew Webber and Mr Christopher Webber be jointly and severally liable for the payment of costs. For convenience, I will refer to Raymond, Andrew and Christopher by their first names and refer to them collectively as the Webbers. I mean no disrespect in doing so. 3 There was some delay in effecting service and then in filing submissions. At the hearing of the application for special costs orders I was informed that the liquidator did not wish to be heard on the application. 4 It is important to differentiate between the part of the application that seeks an order that the costs to be reimbursed from the property of Bux Global be assessed on a lump-sum and indemnity basis from the part of the application that seeks orders to the effect that those costs be met by the Webbers. The first part of the application relies upon s 466(2) whereas the second part relies upon the general jurisdiction of the Court to award costs against third parties. Quite different considerations arise on the two parts of the application when it comes to considering whether to make a lump-sum costs order on an indemnity basis.

Section 466 and costs orders on winding up applications 5 As to the first part of the application, s 466(2) provides that the liquidator must, unless the Court orders otherwise, reimburse the applicant for the winding up order out of the property of the company the taxed costs incurred by the applicant in any such proceedings. Costs to be reimbursed under s 466 have a high priority when it comes to distribution in the winding up of a company. They are to be paid second only after expenses incurred in preserving, realising or getting in property of the company or carrying on the company's business: s 556(1)(b). 6 Therefore, an order of the kind sought has the potential to have an effect upon the distribution that might otherwise occur in the liquidation. Absent such an order, the priority afforded by s 466(2) is confined to taxed costs. Further, s 466(2) does not enable the Court to order indemnity costs on the basis that the plaintiffs on the winding up application may stand with ordinary creditors as to payment of costs incurred above taxed costs. The priority afforded by s 566(1)(b) applies to the costs ordered under s 466(2), not some part of those costs. The Court has no power to alter the statutory priority: Re bCode Pty Ltd and bCode Middle East Africa Holdings Ltd [2012] NSWSC 1530. So, if indemnity costs are ordered to be paid by Bux Global they will have the priority afforded by s 466(2). 7 Usually, where an indemnity costs order is sought the consequence of the order falls upon the party against whom the costs order is made. However, as I have noted, that is not the case if the Court 'orders otherwise' under s 466(2). In those circumstances, where the Court is invited to make a different provision in respect of payment of costs to that stated in s 466(2) it would be proper and appropriate to have regard to any material consequence for others. Indeed, it might be considered a matter to which the Court was obliged to have regard given the terms of s 566(1). The Act could have provided for an indemnity to a plaintiff who obtains a winding up order, but did not do so. Instead, it provided for payment of taxed costs. The process of taxation (or its modern equivalents through a process of assessment of a bill of costs) provides a protection for creditors in the winding up. There must be good reason to depart from that provision in those circumstances. 8 Further, s 556(1)(b) describes the subject matter of the payments that are to be afforded the second priority in the winding up as 'the costs in respect of the application for the [winding up] order (including the applicant's taxed costs payable under section 466)'. The terms in which the priority is expressed suggest that s 466(2) is only to allow for taxed costs, not for costs assessed by the Court on a lump-sum basis. On that view, the power to 'otherwise order' would not extend to an order that would have the consequence that the costs to be reimbursed under s 466(2) may be costs that have not been taxed (that is, assessed according to a process that involves the scrutiny of a bill of costs). But for that issue, the Court's preferred process for determining the quantum of costs payable costs is by lump-sum basis, provided it is suitable to do so: Sandalwood Properties Ltd (Subject to a Deed of Company Arrangement) v Huntley Management Ltd (No 2) [2019] FCA 647 at [8]-[11]. 9 The possibility that the discretion conferred by s 466(2) might be exercised to provide for costs to be paid on an indemnity basis has been recognised in a number of cases. 10 In Xat Ky v Australvic Property Management Pty Ltd (No 2) [2007] FCA 1785, Middleton J ordered that certain costs of the plaintiff relating to a winding up proceeding be taxed on an indemnity basis and reimbursed in accordance with s 466(2). In addition, the costs of a supporting creditor and another party were ordered to be costs in the winding up and taxed on an indemnity basis. They were not ordered to be paid under s 466(2). Rather, they were so ordered on the basis that the Court had a general jurisdiction to make such cost orders. As such, the supporting creditor and other party would not be entitled to the priority afforded by s 556(1)(b). I note that s 466 is confined to orders concerning the costs of the applicant for the winding up order. 11 In Re bCode Pty Ltd, Black J declined to make an order limiting the costs that might be recovered in accordance with s 466(2) by the party who obtained the winding up order. In doing so, his Honour made a number of observations as to the significance of the priority afforded by s 556(1) noting that it was not confined to taxed costs under s 466(2). 12 In Vanguard 2017 Pty Limited, in the matter of Modena Properties Pty Limited v Modena Properties Pty Limited (No 2) [2018] FCA 1461, Thawley J ordered that certain of the costs incurred by a plaintiff on a winding up application be paid on an indemnity basis and be reimbursed in accordance with s 466(2). His Honour also ordered that a director of the company the subject of the winding up order pay certain of the costs on an indemnity basis. His Honour considered the relevant authorities concerning the principles to be applied where a costs order is sought against a non-party: at [36]-[49]. As to instances where the third-party against whom the order was sought was a director of the defendant, his Honour agreed with the following statement by Lloyd LJ in Taylor v Pace Developments Ltd [1991] BCC 406 at 409: … The controlling director of a one-man company is inevitably the person who causes the costs to be incurred, in one sense, by causing the company to defend the proceedings. But it could not be right that in every such case he should be made personally liable for the costs, even if he knows that the company will not be able to meet the plaintiff's costs, should the company prove unsuccessful. That would be far too great an inroad on the principle of limited liability. I do not say that there may not be cases where a director may not properly be liable for costs. Thus he might be made liable if the company's defence is not bona fide, as, for example, where the company has been advised that there is no defence, and the proceedings are defended out of spite, or for the sole purpose of causing the plaintiffs to incur irrecoverable costs. No doubt there will be other cases. But such cases must necessarily be rare. In the great majority of cases the directors of an insolvent company which defends proceedings brought against it should not be at personal risk of costs. 13 By reason of such considerations, the award of such costs against a director is exceptional. Thawley J held that the fact that proceedings are winding up proceedings 'does not immunise a director of an insolvent company from a non-party costs order': at [55]. Further, noting the statements to the effect that a non-party costs order is usually made where the unsuccessful party was the moving party, his Honour found that '[i]f there is sufficient responsibility on the part of a non-party for the management of litigation in a way otherwise sufficient to attract an order for non-party costs, the fact that the unsuccessful party was the defendant will not operate to deny any such order being made': at [80]. There being found to be such responsibility, costs were awarded on an indemnity basis against the director. 14 Costs payable under s 466(2) were also ordered on an indemnity basis from a particular date. The order was made because from that date the company had sought to convey that it was solvent on the basis of evidence as to solvency that any litigant properly instructed would have known to be inadequate: at [87]-[88]. However, there was no application for the costs to be assessed on a lump-sum basis. 15 In Mansfield v Thousand Angeles Island Pty Ltd, in the matter of Thousand Angeles Island Pty Ltd [2019] FCA 376, Farrell J ordered that costs of the plaintiff on a winding up application fixed in an amount of just under $6,000 be paid in accordance with s 466(2). 16 In China v Smith [No 4] [2014] WASC 140 Kenneth Martin J contemplated ordering that costs of a winding up application to be reimbursed under s 466(2) be assessed on an indemnity basis but declined to do so. However, an order was also made that the director responsible for the conduct of the defence of the winding up proceedings do pay the costs. 17 Accordingly, to summarise: (1) the Court may order under s 466(2) that the costs to be reimbursed out of the property of the company be costs that are taxed on an indemnity basis; (2) there is some doubt as to whether the Court may assess those costs on a lump-sum basis according to a process that would not meet the statutory description of 'taxed costs' by reason that s 556(1)(b) refers to the costs payable under s 466 as 'the applicant's taxed costs'; (3) in deciding whether to order costs under s 466(2) on an indemnity basis, in addition to the usual principles that are applied when deciding to award indemnity costs, the Court must also have regard to the fact that such costs will be afforded the priority provided for in s 556(1)(b) which may be a reason why indemnity costs would not be ordered in a particular case; (4) a director of a company may be made liable for the costs of a successful winding up application by a third-party costs order made in the exercise of the Court's general jurisdiction but such instances will be exceptional; and (5) if costs are ordered to be paid by a third-party they may be assessed on a lump-sum basis, being the Court's preferred process for determining the quantum of costs payable where it is suitable to do so.

Narrowing of the application 18 In the course of oral argument, Mr Penrose for the plaintiffs did not press for the indemnity orders against Bux Global. He adopted that course on the basis that the financial circumstances of the company were such that an indemnity order would make no practical difference for the recovery of costs by the plaintiffs. As the material in support of the application as to quantification of costs was presented on the basis of a claim to indemnity costs, the application proceeded on the basis that the application was really about seeking an order that the Webbers meet the costs of the winding up proceedings on an indemnity basis. I will deal with the application on that narrower basis.

Matters materially relevant to costs order sought against the Webbers 19 The general jurisdiction to award costs against a non-party is to be exercised in the interests of justice and the circumstances in which it may be exercised are not to be arbitrarily limited. There is a general category of case in which an order for costs should be made against a non-party which '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 matter of the litigation': Knight v FP Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 at 192-193 (Mason CJ and Deane J, Gaudron J agreeing). 20 The principles to be applied where a costs order is sought against a non-party were carefully reviewed by Thawley J in Vanguard 2017 at [36]-[49]. For present purposes, those cases recognise that such an award may be appropriate where the non-party is a real party to the litigation because: (1) the party to the litigation is an insolvent person; (2) the non-party has played an active part in the conduct of the litigation; and (3) the non-party, or some person on whose behalf the non-party is acting has an interest in the subject matter of the litigation. 21 Where, as here, the basis for reaching such conclusions includes conduct undertaken by the third-party in the role of director of a company, the matters stated by Lloyd LJ in Taylor (quoted above) should be borne in mind.

Factual basis for the application 22 I dealt with the basis for the winding up application when making the winding up orders: Hooke v Bux Global Limited (No 6) [2018] FCA 1545. The following factual matters, being unanswered claims made on the winding up application that I found at [8] to be supported by evidence before the Court on the winding up application, were not disputed on the present application: (1) Bux Global was established to conduct a business in relation to an application for mobile devices whereby funds may be transferred in different currencies from one Bux account to another to facilitate the international transfer of funds (Bux App); (2) investors in the business have contributed at least $65 million over a period of a number of years; (3) Bux Global was the latest in a series of companies which had been used to raise funds from investors for the development of the Bux App on the basis that there would be a public listing of a company conducting the business in which the investors would have shares that could be publicly traded; (4) despite representations over a number of years by those involved with the companies and Bux Global, that listing has not occurred; (5) in relation to the establishment of Bux Global as an Australian publicly listed company, those involved as its controllers disseminated offers of shares without complying with the prospectus provisions of the Corporations Act; (6) responses provided by Mr Andrew Webber, as a director of Bux Global, to inquiries by the Australian Securities and Investments Commission concerning its fundraising activities were of a character that are properly described, as submitted, as being not candid; (7) in the weeks prior to this hearing, those in control of Bux Global took steps which support the conclusion that the business relating to the Bux Apps was, to use the modern parlance, phoenixed into another company. Indeed, this is a view which Mr Beattie, in the affidavits that he has provided, has identified evidence to support in the course of the administration that has been conducted to this time; (8) a licence agreement entered into by the directors of Bux Global with 2WayWorld as part of recent activities by directors allows that company the right to take over the assets of Bux Global if certain costs were not met by the company; (9) some of the investments made in the Bux App were deposited into Australian bank accounts and those funds have been used to meet the personal expenses of those associated with the company. In particular, between 2007 and 2011, a total of about $1.2 million was transferred to Mr Raymond Webber's wife, Roslyn Webber; (10) Bux Global has received minimal earnings from the Bux App; (11) on the evidence before me, as I noted on the application for the appointment of a provisional liquidator, there is an issue as to whether the Bux App works. Since his appointment as administrator Mr Beattie has made inquiries about these matters. He says: I have not been able to test the mobile phone app because I have not been able to locate the apps on either the Android and Apple App Stores … I am informed that the app was removed as a result of my appointment … Andrew Webber informed me, in effect, that, (a) as a result of my appointment, he turned off the company's website with download links to the app due to the freezing of the company's bank accounts subsequent to my appointment and the loss of the company's Australian Financial Services licence as authorised representative of Flexewallet, (b) there was a third party audit conducted in June 2017 showing that the app was working. The affidavit of Mr Beattie also says that he is informed and believes that Mr Webber advised his staff, that is Mr Beattie's staff, that there are hardly any active users of the App given that there has not been sufficient advertising conducted with funds being spent on defending the current litigation. As to the truth of that explanation, Mr Beattie says: However, upon review of the financial records, the company recorded advertising expenditure of circa $1.5 million for the financial year ended 30 June 2018 as opposed to legal fees of circa $621,000 paid to K&L Gates in defending the current proceedings. These records do not accord with the comments made by Mr Webber and further investigation is required. (12) Mr Beattie, as administrator, supports the appointment of a liquidator of Bux Global and does not seek an adjournment of the winding up application under s 440A(2) of the Corporations Act in the interests of creditors; and (13) the majority of the staff of Bux Global have resigned. 23 I accept that the plaintiffs have, on the material before me on the present application, also established each of the following matters which are advanced in support of the application for orders that the Webbers pay the costs of the winding up proceedings on an indemnity basis, namely: (1) Andrew was a director of Bux Global at all relevant times; (2) Christopher was a director of Bux Global from 24 November 2017 until 1 July 2018; (3) Raymond has been a director of Bux Global since 1 July 2018; (4) on 24 November 2017 solicitors acting for certain of the plaintiffs wrote to solicitors acting for Bux Global enclosing a draft affidavit prepared for the purposes of an application to wind up Bux Global on the ground that it was just and equitable to do so because Bux Global 'is a "bubble company", fraudulent in its inception, further or alternatively that control or management of Bux [Global] is characterised by fraud, misconduct and/or oppression'; (5) the letter of 24 November 2017 invited a substantive response stating 'any contended and fundamental basis for opposition to winding up'; (6) since November 2017, neither Bux Global nor its directors have ever advanced a substantive response to the concerns raised by the plaintiffs as to the substantive basis for the application to wind up the company; (7) the application to wind up Bux Global was brought in December 2017; (8) Shampagne Australia Pty Ltd provided funding to Bux Global at all relevant times until shortly prior to the making of the winding up order; (9) Shampagne Australia was a substantial shareholder in Bux Global at all relevant times; (10) Andrew and Christopher were directors of Shampagne Australia at all relevant times; (11) on 4 October 2018, the directors of Bux Global appointed Mr Graeme Beattie, a registered liquidator, as administrator to the company; (12) on 10 October 2018, Mr Beattie deposed, amongst other things, to the following matters concerning Bux Global: (a) Andrew had told him that Bux Global had entered into a licence agreement with 2Way World Technologies (2WW) prior to the appointment of Mr Beattie to allow the directors to explore new ways of generating revenue given that Bux Global did not have funds for marketing and advertising because monies meant for those purposes had been spent on defending the winding up proceedings; (b) Andrew told him that there was a setup fee of $25,000 payable under the licence agreement and anticipated revenue of $150,000 to $200,000 over five years; (c) Mr Beattie considered the circumstances in which the agreement came into existence to be 'suspicious and deserving of close scrutiny'; (d) the main funding entity of Bux Global was Shampagne Australia and it ceased funding support shortly prior to Mr Beattie's appointment; (e) Mr Beattie had received limited funding from Shampagne Australia; (13) in a further affidavit dated 11 October 2018 Mr Beattie produced the agreement with 2WW by which it was entitled to acquire all of the source code if there was an insolvency event in respect of Bux Global which meant that 2WW was entitled to the technology held by Bux Global if the agreement was enforceable; (14) as late as 26 September 2018, Raymond indicated to the Court that the directors intended to appoint new solicitors for Bux Global for 'ongoing enthusiastic representation' of Bux Global in opposing the winding up when meetings had already been held with Mr Beattie concerning the possibility of his appointment and the agreement had been entered into with 2WW; (15) it was Shampagne that had been providing the funds for the legal proceedings which were a considerable part of its expenditure; (16) Bux Global had very little in the way of assets to be protected by opposing the winding up proceedings; (17) the revenue for Bux Global in the year ended 30 June 2017 was $17,268 and in the year ended 30 June 2018 was $12,957; (18) Bux Global failed on a number of occasions to comply with court orders as to the conduct of the proceedings thereby generating additional costs; (19) objection was taken by Bux Global to the production of documents produced on subpoena by the Commonwealth and ANZ banks when those documents, to a large extent, were found to have potential relevance to the claim; (20) Bux Global adopted an approach to disclosure that was obstructive and dilatory; (21) Shampagne registered a security interest on 28 September 2018 over all the property of Bux Global with Andrew being stated to be the contact person for Shampagne; (22) there was evidence to show that substantial amounts of money received from investors in the Bux App had been spent on payments to the Webbers and their family members and significant amounts had been paid to 1World Cash a company registered in the Philippines of which both Andrew and Raymond are directors and substantial shareholders. 24 It was also claimed that Bux Global's concise statement contained material that was false concerning the state of its share register and contained non-admissions of facts which ought to have been admitted. I do not find it necessary to reach a concluded view on this aspect of the case as advanced by the plaintiffs. 25 The Court was asked to infer from all of the above that a tactical approach had been adopted by those in control of Bux Global to avoid or delay having to address the substance of the allegations made in support of the winding up application. It was further submitted that there was no real benefit to shareholders in defending the proceedings and the Court should find that the real reason why the winding up proceedings were defended for so long was to conceal the misconduct of the Webbers for as long as possible. 26 It was submitted that by the time the winding up orders were finally made the evidence before the Court showed that Bux Global had been insolvent throughout, but for the support provided by Shampagne and it had not been demonstrated, in effect, that the support was for genuine commercial reasons. In summary, the contention for the plaintiffs was that the state of Bux Global was so parlous, its extent of expenditure on legal costs was so great compared to its other expenditure and it was generating so little revenue and had so little assets (its intellectual property being sold to 2WW on the terms that provided for relatively modest payments) that the only available inference was that there was some other purpose behind the funding provided by Shampagne and it should be inferred on the evidence that the purpose was to conceal the wrongdoing of the Webbers in dealing with the monies invested in the Bux App and encouraging investors to believe that there would be a public listing through which their investment could be recovered when that was not a real possibility.

Response to the application by the Webbers 27 The Webbers were served with the application and made written and very brief oral submissions opposing the orders. They provided no affidavit evidence in answer to the matters raised in support of the application. 28 They advanced the following matters by way of answer. 29 First, they said that the issue of standing to seek the relief was a live issue until Dr Crawford was joined as a plaintiff on the application which occurred just before the winding up order was made. It was asserted that until then it was 'entirely appropriate' to oppose the application on the basis that the plaintiffs did not have standing. This fails to engage with the evidence relied upon by the plaintiffs. Accepting that there was a valid argument to be advanced about standing, the material question on the present application concerned the purpose behind opposing the winding up application. This was not addressed by submissions or by evidence on behalf of the Webbers. 30 Second, reliance was placed upon a finding made by Banks-Smith J in dealing with legal professional privilege claims maintained by Bux Global in respect of certain documents. This submission fails to engage with two important matters concerning disclosure. First, the complaint made by the plaintiffs was that there was an obstructive and dilatory approach to discovery. I have upheld that submission as being established. It relates to discovery in general. By way of illustration, at one point in the course of the proceedings I found it necessary to order that the solicitors for Bux Global file an affidavit explaining the steps that had been taken to comply with the Court's orders as to disclosure. Second, before dealing with the privilege claim by inspecting the documents Banks-Smith J stated (Hooke v Bux Global Ltd (No 4) [2018] FCA 1210 at [11]): In my view, the affidavit of 26 June 2018 does not sufficiently define or particularise the privilege claims. The authorities emphasise the need for focused and specific evidence in order to ground a claim of privilege. It is not enough for a party to merely assert the existence of the privilege, deliver the documents to the presiding judicial officer and request him or her to analyse and determine whether there is a proper basis for the claim. It seems to have been assumed by Bux Global that any deficiencies as to the evidentiary basis or particularisation can be cured by an inspection of the documents. (citations omitted) As the above quotation makes clear, the basis for the claim to privilege was not properly stated. This is a manifestation of the dilatory approach to such matters. It may be that the objection to the claim to privilege would not have been maintained if there had been a prompt and proper claim to privilege. 31 Third, it was maintained that the defence of the winding up proceedings was not abandoned. It was said that the standing issue was live until Dr Crawford was joined as a plaintiff on 11 October 2018. Accepting that to be the case, it is a submission that does not engage with the plaintiffs' submission which points to the involvement of Shampagne Australia as funder throughout the course of the proceedings for no apparent commercial reason in circumstances where Bux Global was otherwise hopelessly insolvent. 32 Fourth, as to the failure to provide a substantive response to the winding up application by way of affidavits it was said that there was no obligation to file responsive affidavits. It was said that the only consequence of the failure to provide affidavits was that the Court would have been in a better position to make findings of fact in favour of the plaintiffs. There would still have been an obligation to prove standing. Again, this does not engage with the basis upon which the costs orders against the Webbers are sought. It is not claimed that there was no merit in the standing point. Rather, it is claimed that the interests of shareholders were not served by opposing the application and it should be inferred that the defence of the winding up application was being run to prevent or delay the scrutiny of the Webbers conduct. 33 Fifth, it was submitted that the concise statement as filed for Bux Global was not the subject of criticism by the Court. Further, it was said that there was no finding by the Court that the matters stated in the concise statement were untrue. Both those statements are correct. However, there was no occasion for the Court to express a view as to those matters in the course of the proceedings. As I have already stated, I express no view on those aspects of the application. It is not a matter that I take into account. 34 Sixth, it was said that there was no evidence to support the conclusion that Shampagne funded the proceedings. This is to raise a semantic point. The evidence shows that the only source of funding throughout was Shampagne. Further, Bux Global had no revenue to speak of during the course of the winding up proceedings. One of the major expenses of Bux Global was for legal costs in defending the winding up proceedings which Mr Beattie said were $621,000. In those circumstances, the evidence shows that Shampagne was the only source of funding for Bux Global during a time when it was defending the winding up proceedings. Further, as Bux Global had no revenue or assets there was no commercial reason for Shampagne as a shareholder to fund the defence of the winding up proceedings. There was nothing that it stood to gain from doing so. Even if the support from Shampagne meant that Bux Global was solvent, the issue on the present application concerns the purpose behind Shampagne providing that support. 35 Seventh, it was said that there should not be a broad brush approach to ascribing liability to the Webbers when the evidence shows that they were directors at different times. This submission does not engage with the fact that it is all the evidence taken together as to the interest of each of the Webbers that is the basis for the present application not simply the fact that they were directors. Indeed, as I have noted, the fact that they were directors is not, of itself, enough to provide a basis for an third-party costs order. 36 Eighth, it was said that the Court did not make any finding when winding up the company that it was insolvent at any time prior to 4 October 2018. However, there was no need to consider that position on the winding up application because of the timing of the application to wind up on the grounds of insolvency which was brought after the appointment of the administrator. 37 As I have noted, what is significant for the purposes of the present application is that it is claimed that no evident commercial purpose was to be served by opposing the winding up application on the just and equitable ground because of the parlous financial circumstances of Bux Global throughout. It is not so much that Bux Global is said to have been insolvent, but rather that there was no purpose to be served by Shampagne funding Bux Global (and arguably keeping it solvent) given its financial circumstances. As I have noted, this point is not addressed by submissions for the Webbers. 38 Ninth, as to the agreement with 2WW it is said that there was no evidence to support a finding that the Webbers benefitted from the agreement or from payments made to another entity Click Virtual. To the extent that the application sought to establish that the payments were to benefit the Webbers, I have not made a finding to that effect. Indeed, in their written reply submissions the plaintiffs made clear that the chief source of complaint as to these matters was their timing and nature rather than a claim about the beneficiaries of the payments. Nothing was said about this in oral submissions for the Webbers. 39 Tenth, it was said that the plaintiffs 'appear to be asserting' that Shampagne registered its security interest with a view to leaving very little by way of assets that might be used to meet a costs order. There was said to be no evidence to support such a finding. The submission advanced was that the effect of Shampagne registering that interest was that there would be little by way of assets to meet a costs order. On the evidence, that submission for the plaintiffs should be upheld. 40 Eleventh, it was submitted that there was prejudice to the Webbers by reason of a failure to give timely notice of the non-party costs application. It is common ground that notice was not given until after the winding up proceedings were concluded. It some instances, it may be appropriate to have regard to delay in raising the issue in determining whether to make such an order. However, it is not a matter to be given weight in every case. As was said by the Full Court in Yates v Boland [2000] FCA 1895 at [34]: … the question of warning has been treated as a material consideration in certain circumstances. Whether such a requirement arises in a particular case depends on the facts and circumstances of the individual case. The necessity to warn a non-party of an intention to claim costs is not a principle applicable in every case in which costs are sought against a non-party. Rather it may be a material consideration depending on the situation disclosed in the case under consideration. 41 The basis upon which the order is sought in this case is a claim that the winding up proceedings were opposed in the personal interests of the Webbers to avoid their own conduct being investigated. If that basis is accepted then it does not count too much that the basis for the claim was not raised earlier. The present case is to be distinguished from instances where a party provides funding to assist a party to advance a claim. There is no suggestion that the purpose is of a kind that a warning of the risk of exposure to a third-party costs award may have led to a different course. The Webbers put on no evidence that a different course would have been followed if the matter had been raised earlier. 42 Finally and generally, it was submitted that there were no findings by the Court in the winding up proceedings to support the assertion concerning the reason for the defence of the winding up proceedings. It was said to be 'in the realm of conjecture'. These submissions are unhelpful expressed at such a level of generality. Despite requesting that there be an oral hearing on the application, counsel appearing for the Webbers made no further submissions by way of amplification. There are a number of matters raised that provide a proper basis for the submission advanced by the plaintiffs. Principal among them are (a) the lack of any evident commercial rationale for the funding provided by Shampagne; (b) the considerable extent of that funding; (c) the evidence concerning the failure to develop the Bux App and the failure over a number of years to arrange a listing as represented; (d) the evidence of the failure by Andrew to provide candid responses to enquires from the Australian Securities and Investment Commission; (e) the evidence of payment of investor funds to Andrew and other family members; (f) the directorships held by each of Andrew, Raymond and Christopher; (g) the manner in which the proceedings were defended; (h) the timing of the steps taken concerning 2WW just prior to the appointment of an administrator; (i) the evidence as to the use for their own purposes by the Webbers of monies raised from investors in the Bux App; and (j) the failure to provide a substantive response at any time (including on the present application) to the substantive allegations made as the basis for the winding up application. Based on the findings I made on the winding up application (quoted above) and the further findings I have made on the present application I infer that the defence of the winding up proceedings was directed by the Webbers in their own interests to avoid scrutiny of their conduct in relation to dealing with the funds of investors in the Bux App.

The claim to indemnity costs 43 The Court may order costs to be paid on an indemnity basis where there has been conduct that was 'unjustifiable and unwarranted': Colgate-Palmolive Company v Cussons Pty Limited [1993] FCA 801; (1993) 46 FCR 225. 44 Given the findings that I have made, the defence of the winding up proceedings was unjustified and unwarranted. It was undertaken for a collateral purpose in the interests of the Webbers. The basis for costs to be ordered on an indemnity basis has been demonstrated.

Lump-sum assessment 45 Where costs are awarded, a lump-sum order may be made: Rule 40.02(b) of the Federal Court Rules 2011 (Cth). The circumstances in which the power has been exercised were reviewed by Markovic J in Fewin Pty Ltd v Burke (No 3) [2017] FCA 693. The preference of the Court is for making lump-sum orders although utilisation of the procedure is in the discretion of the Court. I recently summarised the relevant principles in Sandalwood Properties noting at [15] that: Where the party liable to pay the costs was legally represented in the proceedings then it may be appropriate to bring to account the actual costs incurred by that party (or the failure by that party to provide any evidence of those actual costs). Due allowance must be made for the fact that usually a greater cost burden falls upon the party seeking to advance a case than the party seeking to defend it, but an evaluation as to whether there is a general alignment between the two sets of costs (allowing for the different forensic tasks faced by each party) may assist in reaching a conclusion as to whether the costs of a particular party were reasonable. 46 For the Webbers it was submitted that if a non-party costs order was made then it should be 'determined by way of taxation'. It was said that the case was not complex and did not involve numerous issues. It was submitted that because the Webbers were not individually represented in the proceedings they should be given the opportunity to explore the costs claimed in more detail and assess whether the charges are fair and reasonable. 47 These submissions fail to recognise that the preference of the Court is for the making of lump-sum orders. The plaintiffs advanced material to support the claim for lump-sum orders. The Webbers did not engage with that material. There was no attempt to engage with the quantum of costs claimed. 48 Given the finding I have made as to the role of the Webbers in the proceedings, I do not accept that they are unaware of the course of the proceedings nor that they are not in a position to provide instructions that would enable submissions to have been made as to the general quantum of costs claimed in the event that the third-party costs were ordered to be paid on an indemnity basis. 49 Where costs are awarded on an indemnity basis there is still a need to review for reasonableness the costs actually incurred by the party making the claim. 50 The affidavit in support of the application states that an amount of $535,016 (including GST) is sought to be assessed on a lump-sum basis. This is said to comprise $347,225 for professional fees and $187,790 for disbursements including counsel fees. This is the full amount that has been charged to the plaintiffs. 51 It is broken down into a number of categories as follows: (1) investigatory work including obtaining and assessing evidence: 11%; (2) preparation of court documents including affidavits, subpoenas, submissions and court book: 17%; (3) dealing with disclosure: 6% (4) responding to application for summary dismissal: 7% (5) attending court hearings including preparation (other than those relating to specific matters stated above): 5%; (6) correspondence, including with plaintiffs, counsel, solicitors for Bux Global, the Court and witnesses: 12%; and (7) consideration of legal issues and research into legal issues: 8%. 52 There is no aspect of the breakdown that suggests to me as the case managing judge that any part of those fees was inappropriately high as a proportion of overall costs. Put another way, the percentages reflect what would be expected on a broad brush assessment of the forensic course of the proceedings. The balance of costs are for counsel fees and other disbursements which are considered below. 53 The hourly rates of the solicitors involved are stated. They are above the rates that would be applied to an assessment on a party and party basis, being an amount not exceeding $580 per hour (inclusive of GST). In the case of the partner who had the conduct of the matter and whose fees account for 29% of the charges for solicitors' work the rate is $726 per hour (inclusive of GST) and the senior associate whose fees account for 26% of those charges the rate is $616 (inclusive of GST). However, there is no suggestion that they are outside applicable market rates. Also, it is important to consider the overall costs claim that results from the application of those rates. The issues involved on the application were of some complexity and the forensic task quite significant and not without difficulty given the basis for the application. A court book comprising some seven volumes was produced for the purposes of the application advanced on the just and equitable grounds. There were also a number of affidavits. It was only at the eleventh hour that an administrator was appointed and the contested hearing to wind up Bux Global on the just and equitable ground did not proceed. 54 The fees for junior counsel totalled $42,593 and for senior counsel $115,397. These amounts account for 27% of the total amount claimed. The hourly rate for senior counsel is marginally outside the upper rate in the range for senior counsel in the Federal Court's National Guide. However, it is important to consider the overall amount claimed. Having regard to the considerable number of court appearances and the nature of the legal issues raised on those applications, the total amounts claimed are reasonable. 55 As I have noted, the evidence before the Court is to the effect that Bux Global incurred around $620,000 in its defence of the proceeding. Significantly, it did not have to make the running on any of the factual issues. Further, as I have noted, it did not put on any evidence. Its case focussed upon dealing with the standing issue. There were also contested issues between the parties in relation to disclosure and documents produced on subpoena. This amount provides considerable support for the reasonableness of the fees and disbursements claimed by the plaintiffs on an indemnity basis. 56 I note that the costs claimed by the plaintiffs do not include an additional amount for the costs of the present application. Taking that amount into account as a form of modest discount that applies to the overall costs to be paid, I would make no other adjustment to the amount claimed.

Conclusion 57 For the reasons I have given, there should be an order for the costs of the winding up proceedings to be paid on an indemnity basis by each of the Webbers jointly and severally. There should be a further order assessing those costs on a lump-sum basis in the amount of $535,016. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.

Corporations Act 2001(Cth)ss 461, 466, 556

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