Lewis, in the matter of Damilock Pty Ltd (in Liquidation) ACN 008 083 985 v A.E. Smith & Son Pty Ltd ACN 004 274 793

REASONS FOR JUDGMENT 1 On 22 January 2009 I made an order by consent for judgment to be entered in favour of the plaintiffs for $20,071.27 plus interest in the amount of $2,010.98. The parties were not agreed as to the appropriate costs order following that judgment. These reasons deal with that question.

Background 2 The plaintiffs are the liquidators of Damilock Pty Ltd (in liquidation) (Damilock). It had previously traded as a retailer of indoor and outdoor furniture for many years until August 2007, shortly before their appointment. 3 For the purposes of ss 9 and 588FE(2) of the Corporations Act 2001 (Cth) (the Act) the relation-back day is 26 June 2007. In the six months prior to that date, that is from 26 December 2006, the defendant had received two payments from Damilock. The first was on 12 January 2007 in the sum of $14,146.00 and the second on 2 May 2007 in the sum of $20,071.27. The latter payment is the same as the judgment sum. 4 On 5 May 2008, the liquidators commenced proceedings against the defendant alleging that each of those payments occurred when Damilock was insolvent within the meaning of s 588FC of the Act, and that by reason of those two payments, the defendant had received more money than it would have received in the winding up of Damilock if those two payments were set aside and the defendant were to prove for its debt. The plaintiffs claimed an order pursuant to s 588F(1) of the Act that the defendant pay to the company the total sum of $34,217.27 (the total of those two payments) as unfair preferential payments plus interest and costs. 5 The defendant did not admit that Damilock was insolvent as at and from 26 December 2006. It also asserted that each of the payments was received by it in good faith and in circumstances where there were no reasonable grounds for suspecting Damilock was or would become insolvent: s 588FG of the Act. 6 At about the same time as those proceedings were commenced, similar proceedings were commenced by the plaintiffs against several other companies also seeking to recover payments as voidable unfair preferential payments under ss 588FE(1) and 588FF of the Act. In some of those proceedings, the defendants did not put in issue that Damilock had been insolvent from 26 December 2006, but in several of them the defendant did put that matter in issue. 7 On 22 July 2008, I ordered that this action, together with the three other actions in which there was a contest about the insolvency of Damilock as at and from 26 December 2006, be heard together only on the question as to Damilock's insolvency. The trial of that issue was listed for hearing on 23 September 2008. Each party was directed to file and serve a list of witnesses to be called at the trial no less than 14 days before the hearing. The defendant filed a list of its proposed witnesses on 10 September 2008. I accept that its list of witnesses as filed did not in fact relate to the issue of insolvency but to the defence to which I have referred, and that the defendant had misunderstood that the only list of witnesses required was that relating to the issue of insolvency. However, that misunderstanding on its part was not apparent to the plaintiffs from the names of its proposed witnesses. 8 The defendant was represented by counsel at the hearing. However, as indicated by correspondence from the defendant's solicitors received immediately before the commencement of the hearing, its counsel indicated that the defendant did not intend to participate in the hearing by adducing evidence or otherwise making submissions. It did not then concede the issue of insolvency, but said it would abide the result of that hearing. 9 As it happened, that hearing then proceeded on 23 and 24 September 2008 and 20 October 2008. Judgment was delivered on that issue on 28 November 2008: Lewis, in the matter of Damilock Pty Ltd (in Liquidation) ACN 008 083 985 v VI SA Australia Pty Ltd ACN 002 433 267 [2008] FCA 1801. Damilock was found to have been insolvent as at and from 26 December 2006. 10 In the meantime, it was recognised by the plaintiffs soon after the commencement of the proceedings that the defence relating to the first payment by Damilock to the defendant of $14,146 on 12 January 2007 was likely to be successful. The focus of the plaintiffs thereafter was upon the second payment of $20,071.27 which is the judgment sum. On 9 May 2008, the plaintiffs filed an offer pursuant to O 23 r 2(1) of the Federal Court Rules offering to compromise the whole of their claim against the defendant upon payment by the defendant of $18,000 plus legal costs then specified at $2,000, provided the defendant pay that sum within seven days of acceptance of the offer, which offer was to expire on 23 May 2008. 11 That offer was not accepted. As the evidence now shows, the defendant responded by a counter-offer on 14 May 2008 and subsequently there was an exchange of offers between the plaintiffs and the defendant. In the meantime, the question of insolvency having been resolved, on 20 October 2008 this matter was listed for hearing on 22 January 2009. On 16 January 2009, shortly before the hearing, the defendant made an open offer to pay the judgment sum and interest plus costs to be taxed. The plaintiffs indicated that they required costs to be paid on a solicitor and client basis from 9 May 2008. 12 That is largely the present area of dispute as to the appropriate order for costs. In addition, the defendant through counsel has put, notwithstanding its open offer of 16 January 2009, the proposition that there should be no order for costs of the proceeding at all. The plaintiffs additionally seek an order that the defendant should pay one third of the plaintiffs' costs "of the insolvency trial".