Pascoe v Voukidis Holdings Pty Ltd

1. The Second and Third Respondents are jointly and severally liable to pay 90% of the costs of the Applicant on an indemnity basis, to be taxed if not agreed.
2. There be no order as to costs against the First Respondent. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

BUTTON J: 1 On 16 August 2024, I handed down judgment following the trial of this proceeding: Pascoe v Voukidis Holdings Pty Ltd [2024] FCA 915 (which I will refer to as the principal judgment). Final orders were made on relief, other than costs, on 23 August 2024. These reasons address the costs consequences. They assume familiarity with the principal judgment. 2 The Court's power to award costs is broad and discretionary: Federal Court of Australia Act 1976 (Cth) s 43. In the ordinary course, costs will follow the event and an order for costs will be made "as between party and party": Federal Court Rules 2011 (Cth) (Rules) r 40.01. While the Court will usually award costs to the successful party on a party and party basis, indemnity costs may be awarded where the circumstances of the case warrant a departure from the usual course: Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 (Treasury Wine) at [4] (Jagot, Yates and Murphy JJ). See also r 40.02(a) of the Rules, providing that a party who is entitled to costs may apply to the Court for a costs order "other than as between party and party", including on an indemnity basis. 3 The discretion of this Court to depart from the ordinary course of awarding party and party costs will usually not be exercised unless some special or unusual feature arises: Treasury Wine at [5] (Jagot, Yates and Murphy JJ), citing Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). 4 For the reasons set out below, I consider that this proceeding does exhibit special or usual features that warrant the imposition of costs on an indemnity basis but exempting Voukidis Holdings Pty Ltd from the costs order. I address first why no costs order should be made against Voukidis Holdings Pty Ltd, even though it is the First Respondent, before addressing why I have concluded that the costs order should be on an indemnity basis. 5 The Applicant is the trustee in bankruptcy of Peter and Kathy Voukidis. As a result of the orders made following the trial, 1003 of the 1004 ordinary shares in Voukidis Holdings Pty Ltd, which were transferred to Christos Voukidis (the Third Respondent) by ZV Asset Management Pty Ltd (the Second Respondent), are to be restored to the bankrupt estates of Peter and Kathy Voukidis. Those shares are now an asset in the bankruptcies. 6 Throughout the course of the trial, Voukidis Holdings Pty Ltd was controlled by Christos Voukidis, who was the company's sole director. 7 The main objects of the proceeding brought by the Applicant were: to have the shares in Voukidis Holdings Pty Ltd restored to the bankrupt estates of Peter and Kathy Voukidis; for the bankrupt estates of Peter and Kathy Voukidis to be relieved of an onerous loan advanced by Voukidis Holdings Pty Ltd (then controlled by Christos Voukidis); and to have the loans made by that company to Peter and Kathy Voukidis declared not to be secured against real property held by the bankrupts (including by setting aside a registered mortgage). 8 Some aspects of the case advanced by the Applicant included alternative factual and legal pathways to the same end point. 9 The Applicant was successful in securing the relief he sought. The only issue of any substance (in terms of occupying time at trial) on which the Applicant did not succeed related to whether the 2010 Loan Agreement was entered into in 2010 or 2020. In my view, it is appropriate that there be some recognition of the Applicant's failure on this issue in the costs order. 10 In my assessment, the proper outcome is that the costs order in the Applicant's favour be set at 90% of his costs. 11 The costs order will be made against the Second and Third Respondents. Although Voukidis Holdings Pty Ltd was a respondent to the proceeding, it would be perverse for Voukidis Holdings Pty Ltd to bear the burden of an adverse costs order. That is because a costs order against Voukidis Holdings Pty Ltd would burden that company with a significant liability for costs when that liability would only have arisen due to the company, while controlled by Christos Voukidis, having fought the litigation in circumstances where the benefit of success in defending the proceeding would have accrued to either: Christos Voukidis personally, as the director and holder of all 1004 ordinary shares in Voukidis Holdings Pty Ltd at the relevant time (or 1003 ordinary shares, if the purported transfer of one ordinary share and one dividend variable share by Olga Sclavenitis to Christos Voukidis on 15 May 2020 is disregarded); or Christos Voukidis and his family via family trust arrangements (if the contention that Voukidis Holdings Pty Ltd acted in its trustee capacity were accepted). The imposition of a costs liability on Voukidis Holdings Pty Ltd, when those who stood to benefit from the defence being run by that company were Christos Voukidis and/or his family, would, as I have said, be perverse. Such an outcome would render the Applicant's success in the proceeding a hollow victory and would be manifestly unjust. 12 The Applicant contended that the award of costs should be on an indemnity basis. I am satisfied that the costs order should be on an indemnity basis to reflect the Court's opprobrium for the conduct of Christos Voukidis, which is laid out in detail in the principal judgment and which included the creation of false documents in the interlocutory phases of the proceeding. The Applicant was put to considerable trouble and expense in the litigation to restore assets to the bankrupt estates of Peter and Kathy Voukidis and avoid transactions orchestrated by Christos Voukidis. Had the litigation not been pursued with such dogged determination by the Applicant, those transactions would have seen a large part (if not the whole) of the assets in the bankruptcies of Peter and Kathy Voukidis taken up to meet an inflated and ostensibly secured liability of Peter and Kathy Voukidis to Voukidis Holdings Pty Ltd, all to the benefit of Christos Voukidis (who then held the shares in Voukidis Holdings Pty Ltd). 13 Accordingly, I will order that the Second and Third Respondents are jointly and severally liable to pay 90% of the costs of the Applicant on an indemnity basis, to be taxed if not agreed. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Button.