Plaintiff v Defendant

1. These reasons deal with applications for costs against various parties following the dismissal of the application by the plaintiff, Drummond Carpentry Services Pty Ltd ('Drummond'), for the defendant, Roberts Construction Group Pty Ltd ('Roberts'), to be wound up in insolvency under s 459P of the Corporations Act 2001 (Cth) ('Act').
2. My reasons for dismissing Drummond's application are found in Re Roberts Construction Group Pty Ltd (No 2) ('principal reasons').[1] In short, although I made a finding that Roberts was presumed to be insolvent by operation of s 459C(2)(b) of the Act, on an exercise of the discretion provided by s 467(1)(a) I determined that the application should be dismissed. These reasons assume familiarity with the principal reasons.
3. On the occasion of delivery of judgment and making my orders on 30 September 2025, I made directions in respect of submissions as to what orders for costs should be made.
4. The direction orders were not adhered to and were extended on several occasions. The application in respect of costs was ultimately heard on 30 January 2026.
5. In an annexure to its submissions in respect of costs dated 20 October 2025, Roberts sought the following orders:

(a) Beenak Concrete and Formwork Pty Ltd ('Beenak') pay Roberts' costs of and incidental to Beenak's application to be substituted as the plaintiff in this proceeding (which application was discontinued by Beenak pursuant to leave granted on 5 September 2025), including reserved costs, such costs to be taxed on the standard basis in default of agreement;

(b) Drummond pay Roberts' costs of and incidental to this proceeding (excluding the costs payable by Beenak under sub-para (a) above) including reserved costs, on an indemnity basis;

(c) to the extent that Roberts' costs of the proceeding incurred in the period from 17 February 2025 to 1 September 2025[2] are not recovered from Drummond within 21 days of the taxation of those costs by this Court under Order 63 of the Supreme Court (General Civil Procedure Rules) 2025 (Vic), alternatively within 21 days of agreement being reached on the quantum of Roberts' costs ordered in its favour under this order, whichever comes earlier, Mr David Drummond[3] is to pay those costs of Roberts; and

(d) to the extent that Roberts' costs of the proceeding (payable by Drummond pursuant to sub-para (b) above) are not recovered from Drummond within 21 days of the taxation of those costs by this Court under Order 63 of the Supreme Court (General Civil Procedure Rules) 2025 (Vic), alternatively within 21 days of agreement being reached on the quantum of Roberts' costs ordered in its favour under this order, whichever comes earlier, Merton Law Group Pty Ltd ('Merton')[4] is to pay those costs to Roberts.

1. On 18 December 2025, pursuant to directions made by me on 4 December 2025, Roberts filed a summons directed to Drummond, Mr Drummond and Merton seeking orders in a somewhat different form (but retaining the 'waterfall' provisions in paragraphs 5(c) and (d) above whereby if the costs ordered to be paid had not been paid by the period specified it would be required to be paid by the next party identified - i.e. Mr Drummond or Merton, as the case may be). At the hearing of the costs application, counsel for Roberts, Mr Wolahan, indicated he would seek orders in terms of the proposed orders annexed to the written submissions rather than in the form of the relief set out in the summons.
2. The scheduling of the hearing of the costs application became protracted because of the application by Roberts for costs against Merton, who were Drummond's solicitors; Merton was no longer able to act for Drummond and Mr Drummond by reason of the conflict of interest which arose. Drummond and Mr Drummond were required to obtain other representation and Merton also engaged lawyers to represent it in this costs application. In addition, Roberts' solicitors, Eidelweisz Lawyers, withdrew and Roberts was also required to engage new solicitors.
3. In the course of the hearing on 30 January 2026, the application against Merton was resolved. Roberts and Merton sought orders that the application against Merton be dismissed by consent with no order as to costs.

1. In support of its application for costs, Roberts relies on the affidavit and exhibits of Annette Weisz sworn 20 October 2025. Roberts also relied on written submissions dated 20 October 2025 and supplementary submissions dated 18 December 2025.
2. In resisting the application, Drummond relies on the affidavits of David Drummond dated 2 July 2025 and 9 September 2025. Drummond also relies on written submissions dated 29 January 2026.

1. The circumstances surrounding Beenak's application for substitution as plaintiff in the proceeding and its discontinuance of it are described in paras [11] to [25] of the principal reasons.
2. In short, by reason of the deregistration of the original plaintiff, Drummond, Beenak, who contended that it was a creditor of Roberts and who was also represented by Merton, brought an application by interlocutory process filed 11 July 2025 for substitution as plaintiff in the application to wind up Roberts relying on the same presumption said to arise under s 459C(2)(b) of the Act as to Roberts' insolvency as that relied upon by Drummond.
3. Beenak's application was returnable on 16 July 2025 when directions were made in respect of the filing of evidence. The application was adjourned until 20 August 2025 when I made an order under s 459R of the Act extending the period within which the winding up application was to be determined to 18 September 2025.
4. Roberts appealed the order I made for the extension under s 459R. On 22 August 2025, the appeal was dismissed and Roberts was ordered to pay Beenak's costs of the appeal.
5. On 1 September 2025, despite Mr Drummond's previous indication that he would not be pressing his application to ASIC for Drummond's reinstatement, the registration of Drummond was reinstated and it resumed the carriage of the application. Beenak sought leave to discontinue its application for substitution. Orders were made in that regard on 5 September 2025 and the position as to costs in respect of that discontinuance was reserved.
6. Rule 63.15 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic) provides:

63.15 Discontinuance or withdrawal

Unless the Court otherwise orders, a party who discontinues or withdraws part of a proceeding, counterclaim or claim by third party notice shall pay the costs of the party to whom the discontinuance or withdrawal relates to the time of the discontinuance or withdrawal.

1. Despite the opportunity to do so, Beenak did not seek to displace the position provided for in r 63.15. by making any submissions or filing any evidence in opposition to the application by Roberts for its costs of Beenak's discontinuance of the substitution application.
2. In my view, there are no features of the matter involving Beenak's application for substitution and its discontinuance which would result in the Court 'otherwise' ordering.
3. I will order that Beenak pay Roberts' costs of the discontinuance of its substitution application on a standard basis.

1. Roberts seeks an order that Drummond pay all its costs of the proceeding (excluding the costs payable by Beenak) on an indemnity basis.
2. It contended that where a winding up application is dismissed, the Court will usually order the applicant to pay the respondent company's costs in accordance with the principle that costs follow the event.[5]
3. Roberts submits that special or unusual features will warrant an order for costs on an indemnity basis, including an imprudent refusal of an offer to compromise or where proceedings are commenced or continued for an ulterior motive.[6] Roberts contends that both such features are present in this proceeding.
4. In his oral submissions Mr Wolahan contended that there were two bases upon which he relied for an indemnity costs order.
5. The first, which he placed the most emphasis upon in his oral submissions, relies on a letter his instructors had sent to Drummond's solicitors on 2 August 2024 ('2 August letter'), approximately three weeks after the commencement of the application. The 2 August letter contained an offer to Drummond that if the winding up application was withdrawn, Roberts would consent to an order that there be no order as to costs. It was sent several days before the first return of the application, scheduled for 7 August 2024. At that time, Drummond's originating process identified as the ground for the application the alleged presumption arising from the unsatisfied return of the NAB garnishee order.[7] It was only in Drummond's written submissions filed shortly before the final hearing of the winding up application on 13 November 2024 that it formally gave notice that the Westpac garnishee order would be relied upon as the ground for its application.[8]
6. Roberts contended that the terms of the offer by Roberts were more favourable than the ultimate outcome obtained by Drummond at trial by reason that as a result of the dismissal of its application, it now also faces an order that on an application of the default position that costs follow the event, it will now be obliged to pay Roberts' costs on at least a standard basis.
7. Following a lengthy introductory chronicle, the 2 August letter details what the author considers to be the shortcomings with the winding up application, including the inability to have reliance on the presumption under s 459C(2)(b) alleged to have arisen from the unsatisfied return of the NAB garnishee notice.
8. The 2 August letter stated that Roberts would file evidence which established that it was solvent. Roberts ultimately did not do this, instead mounting a defence which sought to impeach Drummond's reliance on the presumption under s 459C(2)(b) and contending that the Court should exercise its discretion to dismiss the application under s 467(1)(a).
9. The letter stated that in the event Drummond did not accept the offer and:

... should it receive a result no more favourable than the offer contained in [the] letter should the matter proceed to hearing, [Roberts] would rely on [the] letter on the question of costs for (sic) which it shall seek on an indemnity basis pursuant to the principles established in Calderbank v Calderbank ... and Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority ...

1. The letter was sent by email on 2 August 2024 (a Friday) and was open until 4.00pm on Monday, 5 August 2024 - i.e. allowing only one business day to Drummond to consider the proposal. This seems a short period for Drummond to consider its position, but although the comparison is perhaps not particularly apt, I observe that it was the same time frame imposed by Drummond for Roberts to respond to Drummond's offer in the 2 July email, symptomatic of the aggressive manner in which this litigation has been conducted throughout.[9]
2. As to the contention that the proceeding was commenced for an ulterior purpose, Roberts asserts the intent was to exert commercial pressure on Roberts to meet a series of disputed claims made by entities represented by Merton. It says this is evident by the proceeding being issued shortly after the sending of the 2 July email.[10] Reference was made to my observation in the principal reasons that the 2 July email contained disingenuous statements and was cast in terms designed to threaten Roberts with the winding up application.[11] Drummond objected to the admission of the 2 July email into evidence, contending that it was protected by without prejudice privilege,[12] but such objection was overruled.
3. Roberts says that after making what it contends were 'illegitimate threats', Drummond issued the winding up application without having made a demand that identified the quantum of the statutory interest debt payable to Drummond.[13]
4. Roberts submits that Drummond relied on a ground that its solicitors knew could not be established because Merton had been informed by NAB of facts which meant that there was no possibility of establishing a presumption of insolvency on the basis of the unsatisfied return of the NAB garnishee order.[14]
5. Roberts contends that Drummond then caused the determination of the proceeding to be unduly protracted by reason of its deregistration, exacerbated by the failure by its director or solicitors to notify Roberts or the Court that this had occurred. It contended that this resulted in Roberts incurring further costs to prepare for the hearings to address whether the proceeding had become irregular by reason of the deregistration of Drummond as plaintiff as well as confronting Beenak's substitution application. Roberts submits that Drummond was ultimately reinstated without notice and in circumstances that have not been properly explained.

1. Roberts contends that Drummond's director, Mr Drummond, should also be ordered to pay its costs but limited to those associated with Drummond's deregistration. In its proposed order which is extracted at para [5] above it contends that, to the extent that its costs of the proceeding are not recovered from the plaintiff within 21 days of the taxation of those costs, Mr Drummond should pay Roberts' costs of the proceeding incurred in the period when the company was deregistered, from 17 February 2025 to 1 September 2025. I asked Mr Wolahan to identify what the nature of those costs was and he pointed to the events and steps taken during the period of Drummond's deregistration which are described in Ms Weisz's affidavit of 20 October 2025.[15] He contended that the costs of those steps only arose because of the deregistration and that Roberts should not have been exposed to them.
2. Mr Wolohan was not able to identify any authority which considered the operation of the 'waterfall' aspect of the order he sought, whereby resort would only 'cascade' to Mr Drummond after Drummond had failed to meet such costs after the identified interval.
3. Mr Wolohan observed that after Mr Drummond initially advised the Court and Roberts that he would reinstate Drummond, the Court was subsequently informed in Mr Drummond's affidavit of 2 July 2025 that an application for reinstatement would not be pursued because of Mr Drummond's concerns about having to make a declaration to ASIC that Drummond was solvent. Drummond was then reinstated without notice to the Court or Roberts. The affidavit of Mr Drummond of 9 September 2025 did not refer to any relevant change in the circumstances of Drummond between 2 July 2025, when it was said that reinstatement was not possible, to 13 August 2025, when an application for reinstatement was said to have been lodged with the requisite declaration.
4. Roberts submits that where a party to litigation (here, Drummond) is liable to pay the costs of the successful party but is unable to do so because of insolvency, justice may require the costs to be paid by a non-party if it can be shown that the non-party played an active part in conducting the litigation and stood to benefit from the successful outcome.[16]
5. Mr Wolohan referred to the decision of Thawley J in Vanguard 2017 Pty Ltd; Re Modena Properties Pty Ltd v Modena Properties Pty Ltd (No 2) ('Vanguard')[17] which identified the principle that it is 'necessary to look at the causal connection between the non-parties conduct or management of the litigation and the costs of the litigation'.[18]
6. Reference was made to the following passage from Vanguard:

[T]here may be situations where the director's conduct is such that a non-party costs order is appropriate. The question might arise, for example, where the director's management of the litigation was in breach of a duty to the company or was in some material way improper, or where the director caused the litigation to be conducted in a manner intended to increase irrecoverable costs of the opposing party. Such circumstances are potentially capable of warranting the exercise of the discretion to award costs against a non-party director.[19]

1. It was submitted that this is such a case; Drummond was the moving and unsuccessful party. It was contended that in the period of its deregistration the proceeding was irregular, causing Roberts to incur costs unnecessarily. This was attributable to Mr Drummond, the sole director of Drummond, and Roberts should not be out of pocket for those costs.

1. Ms McIvor, counsel for Drummond and Mr Drummond, accepted that costs should follow the event. She consented to an order that Drummond pay the costs on a standard basis but opposed an order for indemnity costs. She emphasized that Drummond had established the existence of a presumption of insolvency which it was entitled to do and the application had been dismissed only because the Court exercised its discretion under s 467(1)(a), not because there was a finding of solvency. She pointed to the presence of several supporting creditors who would have sought to be substituted if Drummond had sought leave to discontinue the application. Ms McIvor contended that Roberts bore the onus in establishing that there should be an order for indemnity costs and there was no sufficient evidence to support such an order.
2. In her written submissions, Ms McIvor focused on why there should not be an award of costs directed personally against Mr Drummond. In determining whether to make a personal costs order, she submitted the Court considers several factors, including:

(a) whether the non-party controlled or funded the litigation;

(b) whether the non-party acted in bad faith or for an improper purpose;

(c) whether the non-party's conduct caused unnecessary costs to be incurred; and

(d) whether the non-party is the real party in interest in the litigation.

1. Ms McIvor submitted that costs orders against non-parties are exceptional and are only made in rare circumstances. The Court must be satisfied the non-party engaged in misconduct, acted unreasonably or improperly conducted the litigation, the threshold for which is high.
2. It was submitted that the mere fact that Mr Drummond is a director and shareholder of Drummond does not justify a personal costs order; he is entitled to the protection of limited liability through the corporate structure of Drummond and there is no evidence that he acted outside the scope of his role or used the company as a vehicle for improper purposes. She submitted that a personal costs order being made against Mr Drummond would undermine the principle of limited liability, which is a fundamental feature of corporate law. Further, it was submitted that a personal order being made against Mr Drummond would unfairly prejudice him given the lack of clear evidence of wrongdoing. She contends this would set a dangerous precedent and discourage individuals from serving as directors of companies.
3. Ms McIvor submitted that the financial position of Drummond is not a sufficient basis for a personal costs order. Roberts has not demonstrated that Mr Drummond acted improperly in relation to Drummond's financial status, that he used the company's financial position to frustrate the litigation process nor that Mr Drummond caused unnecessary costs to be incurred or acted in bad faith.
4. She submitted that Roberts has not provided evidence of any specific misconduct or improper behaviour by Mr Drummond. Rather, Roberts' submissions rely on general assertions without identifying any actions by Mr Drummond that meet the high threshold for a personal costs order. Counsel contends the Court must exercise caution in making such orders and in the absence of clear evidence of impropriety, Mr Drummond should be given the benefit of the doubt.

1. Section 467A(1) provides that the Court may dismiss a winding up application with or without costs, even if a ground has been proved on which the Court may order the Company to be wound up, or to make any other order that it thinks fit. The provision provides that where the Court exercises the discretion to dismiss a winding up application even if a ground for winding up has been proved (as here) it may order that such dismissal be 'with or without costs'.
2. Section 24(1) of the Supreme Court Act 1986 (Vic) provides for a broad and unfettered discretion to award costs, providing that 'the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid'. The Court is entitled to examine the realities of the case and will attempt to impose 'substantial justice' as between the parties on matters of costs.[20]
3. In Slodyczka, Hetyey AsJ observed:[21]

An award of costs is usually on a standard basis unless there are special or unusual features warranting an order for costs on an indemnity basis. Such circumstances include where:

(a) proceedings are commenced or continued for an ulterior motive;

(b) proceedings are commenced or continued in disregard of known facts or clearly established law;

(c) a defendant raises issues that could not succeed in establishing a defence and the proceeding was entirely unnecessary; or

(d) there is an imprudent refusal of an offer to compromise.

1. His Honour comprehensively canvasses the authorities and principles to be applied when considering what orders should be made following dismissal of a winding up application, in particular a consideration of Calderbank offers in that context. He observed:

The Court therefore has a wide discretion in relation to costs. That discretion is unconfined and unfettered but must still be exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations. Although not designed to control the exercise of the Court's discretion, there is a general rule that, in the absence of good reason to the contrary, a successful litigant should recover his / her costs. Where a winding up application is dismissed, the Court will usually order the applicant to pay the respondent company's costs in accordance with the principle that costs follow the event, however, each case will turn upon its own facts. [22]

1. As to question of whether there should be an order for indemnity costs and the relevance of the Calderbank offer contained in the 2 August letter, the authorities indicate that in general, where the recipient of an offer does not achieve an outcome at trial more favourable than that contained in the offer and the refusal to accept the offer was unreasonable in the circumstances, it provides a basis for the award of indemnity costs.[23] The fact that a party ultimately failed to make good its case does not mean it acted unreasonably in rejecting the Calderbank offer.[24]
2. In Hazeldene's Chicken Farm, the Court of Appeal identified factors which were relevant to whether the rejection of a Calderbank offer was unreasonable, including:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(c) the extent of the compromise allowed;

(d) the recipient's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed; and

(f) whether the offer foreshadowed an application for an indemnity costs order in the event of its rejection.

1. I now turn to the various factors mentioned in Hazeldene's Chicken Farm relevant to the consideration of the question of indemnity costs and the Calderbank offer contained in the 2 August letter. The reasons which follow are also relevant to the second limb of why Roberts contends that there should be an order for indemnity costs - i.e. the conduct of the proceeding, including the manner by which Drummond went about obtaining a presumption of insolvency and that the proceeding was commenced for an ulterior purpose.

Stage of proceeding at which offer was received

1. As I have mentioned, the offer contained in the 2 August letter was made approximately three weeks after the application was commenced. At that time, the originating process relied on a presumed act of insolvency constituted by the non-satisfaction of the NAB garnishee order. As the principal reasons observe,[25] Drummond through its solicitors was clearly aware, by reason of what it had been informed by NAB, that it was not possible for it to establish the existence of that presumption but it nonetheless proceeded to issue the originating process several days later, identifying it as the presumption of insolvency and relying upon it as the ground for its application. It was not until the final hearing of this matter that it was indicated in open court and in its written submissions that that presumption would not be pressed and, instead, Drummond would be relying on the unsatisfied return of the Westpac garnishee and the Warrant.
2. It was not contended by Roberts that there were any factual inaccuracies in the chronology set out in the letter.[26] The proceeding was in its infancy. It seems clear that viewed as of the date of the offer, 2 August 2024, the criticisms made by Roberts in the letter had much validity. It squarely raises the reasons why the NAB garnishee order did not give rise to a presumption of insolvency. The letter is in some ways quite prescient as to the ultimate outcome of the application in voicing its criticisms as to how Drummond and Merton had gone about establishing a presumption of insolvency.
3. On 6 August 2024, Roberts' solicitors wrote to Merton offering to pay Drummond $15,524, the balance owing after applying the amount recovered under the Westpac garnishee order ($108.28).[27] The letter making such offer indicated that it was open until 9.30 am the following day, which was the first return of the application. The letter repeated the statement that the letter would be produced on the question of costs, including indemnity costs, and again making reference to Calderbank and Hazeldene. It is not clear whether Drummond reacted to this letter but Roberts made payment of this amount to Merton on 7 August 2024 and it was accepted.
4. Drummond pressed on with its winding up application, contending that it had standing as a creditor of Roberts as it was still owed unpaid court costs of the Warrant of approximately $1,400 and maintaining it could establish a presumption of insolvency and, therefore, had grounds.[28]
5. The position of Drummond and its advisor Merton is curious; it seems clear that the funds paid on 7 August 2024 would be a voidable transaction under Pt 5.7B of the Act in the event of a winding up order being obtained (as would any payments to the other supporting creditors represented by Merton in the application). The agenda appeared to be that the winding up application would be pursued on behalf of all the creditors represented by Merton, including Beenak, despite the fact that if one of them remained unpaid for their alleged debt and obtained a winding up order, all the creditors who had been satisfied would have to disgorge those payments to the liquidator as unfair preferences.
6. The 2 August letter observed that Drummond had not made any demand for the amount claimed in the garnishee orders prior to their issue in New South Wales, a jurisdiction with which Roberts had no relationship. Drummond had gone to another jurisdiction[29] to obtain the issue of the garnishee orders without prior notice or demand being made of Roberts in order to surreptitiously establish a presumption of insolvency before Roberts could take steps to discharge the debt, which it did shortly afterwards. This feature of the matter was prominent in my consideration to exercise the discretion to dismiss the application.

1. As has been observed, the time allowed for Drummond to respond was only one business day, taking into account the weekend. As the principal reasons reveal, this was highly charged and aggressively conducted litigation; in my view, Drummond and its advisors Merton would not have been unduly disadvantaged or unable to react in the time frame stipulated and I would not markedly discount the significance of the offer by reason alone of the short interval allowed for response. The facts laid out in the 2 August letter were uncontroversial and there were no 'surprises' to be investigated. The first return of the application was to take place shortly after, on 7 August 2024, so it was time critical.

1. The proceeding had been underway for several weeks by 2 August 2024 and it would be expected, having regard to correspondence and documentation required to be filed with the Court, that considerable costs were starting to incur. By reason of its offer, Roberts was offering to give up its ability to look to Drummond for the costs that it had expended. It is a winding up application, not a conventional money claim case, so the extent of the compromise is not otherwise measurable as it is, for example, by an offer to accept of a lower sum in a liquidated money claim.

Recipient's prospects of success, assessed as at date of offer

1. Consideration of this factor is complex. The offer was made prior to the first return of the application and before much substantive evidence was filed in the proceeding. If the matter had proceeded to a contested hearing on 7 August 2024, Drummond was in a weak position as the presumption it then relied upon in its application could not be proven and it knew this (however, the unsatisfied return of the Westpac garnishee order had occurred by then).[30] Although Roberts did not indicate in the letter it would be seeking dismissal by calling on the Court to dismiss the application on an exercise of the Court's discretion under s 467(1)(a), Drummond and its advisor Merton were aware of all the factual elements upon which that discretion was eventually exercised.

Clarity with which offer terms was expressed

1. The offer was clear in its terms; discontinuance of the application with each party being responsible for their own costs.

Whether offer foreshadowed application for indemnity costs in event of rejection

1. The final paragraph of the 2 August letter is clear in its terms. It is extracted at para 28 above.

1. There are other features of the matter in addition to the rejection of the offer in 2 August letter which I consider to be relevant in the present context and these go to the conduct of Drummond in issuing and maintaining the application, and these matters go to whether an order for indemnity costs from the outset of the proceeding is warranted.
2. While Drummond established, in a technical sense, that it was entitled to rely on the existence of the presumption arising from the unsatisfied return of the Westpac garnishee order, as has been observed towards the conclusion of my principal reasons and repeated above, Drummond went about establishing a presumption of insolvency in such a way that Roberts was not put on notice so as to enable it to satisfy the Westpac garnishee order and prevent the presumption arising. While Roberts was not obliged under the relevant court rules to give notice to Drummond of the application for the garnishee order, the process appeared to be designed to enable Drummond to surreptitiously create events giving rise to the presumption without providing Roberts with an opportunity of reacting to it before the presumption arose. This was against a background of Drummond's previous unsuccessful deployment of statutory demands;[31] I am prepared to infer that the reason that the path of obtaining the issue of garnishee orders was pursued because Drummond had been thwarted when it had used the statutory demand regime.
3. It will be recalled that Roberts paid out the amount of the unsatisfied Warrant very shortly after becoming aware of it, on 7 August 2024. All of this was occurring against a background where Roberts had served two statutory demands and had come to the realisation that by reason of offsetting claims which would be raised by Roberts that it would be frustrated in its quest to obtain a presumption by that method. In addition, it proceeded to issue the originating process at a time when it was clearly aware that the NAB garnishee order could not give rise to a presumption of insolvency. As such, it had no grounds to file the application on the date it was filed and it knew this. My criticisms of the manner in which Drummond conducted this matter are the principal reason that I determined to dismiss the winding up application, despite the technical existence of the presumption of insolvency by reason of the Westpac garnishee order and the fact that Roberts had filed no evidence as to its solvency. These criticisms are detailed at paras [228] to [244] of the principal reasons.
4. As mentioned, Ms McIvor emphasised that Roberts only succeeded because of the exercise of the discretion to dismiss the application, despite it being established that it was presumed insolvent and it not filing evidence as to its solvency. While this may be so, my reasons for exercising the discretion were based on the way in which Drummond and Merton commenced and conducted the proceeding from the outset which I consider to be 'sharp'. Despite this being pointed out to Drummond and Merton in the 2 August letter the application was maintained. In my opinion, the position was objectively clear from the time the application was commenced; the 2 August letter spelt it out in writing. It was also submitted that if Drummond withdrew the application in response to the offer that one of the supporting creditors would have sought to be substituted. I think that that was improbable. Merton acted for all the supporting creditors and it is quite unlikely that Merton would advise one of their number to be substituted if Drummond withdrew.

I consider that the circumstances warrant an order that, save for the costs which I will specifically order be payable by Beenak and Mr Drummond, Drummond pay the costs of the application from the commencement of the proceeding, including costs reserved and the costs of this application, which are specifically attributable to the application for costs against Drummond, on an indemnity basis.

1. The claim against Mr Drummond is confined to the period from 17 February 2025 to 1 September 2025 - i.e. the period when Drummond was deregistered; no claim is made against Mr Drummond in respect of the costs of the proceeding generally. I do not consider that cases such as Vanguard and Gdankski v Palms Court Management Pty Ltd[32] have particular application or are of assistance in the current context. Those were cases directed to circumstances where it was sought to visit costs on a director of a company who was the 'real party' to the litigation, which is not this case. While Mr Drummond is the sole director and directing mind of Drummond, I do not think he was in the proper sense of the expression described in the case law the real party who stood to benefit from the litigation. Here, the real basis for seeking to visit indemnity costs on Mr Drummond for the period of the deregistration of Drummond are based on his delinquency in the conduct of Drummond's affairs, more particularly the failure to file annual returns and to react to notices sent by ASIC in respect of that failure, of which he was apparently aware, resulting in Drummond's deregistration three months after the expiry of ASIC's notice.
2. The chronology surrounding the deregistration and the subsequent reinstatement, and the disruption that ensued are detailed in the principal reasons. In her affidavit affirmed 20 October 2025, the solicitor then acting for Roberts, Ms Weisz, deposed to the costs impact that the deregistration, the proposed substitution of Beenak and the reinstatement of the registration of Drummond had on Roberts.[33]
3. Mr Wolahan contended in his submissions that during the period of the deregistration the proceeding was irregular and caused Roberts to incur material costs unnecessarily. He submitted that that state of affairs was attributable to Mr Drummond, Drummond's sole director, who also controlled Drummond's status as trustee of the trust.
4. Mr Wolahan tendered a current and historical company extract for Drummond as of 29 January 2026. That document is prima facie evidence of the matters recorded in it under s 1274B of the Act. It records that the registered address of Drummond is still at the Myrtleford address, which commenced in July 2017, and it is yet to be updated. I enquired of Mr Wolahan what the nature of the costs were which were sought to be visited on Mr Drummond. His response was that it included the reaction to the deregistration, any submissions filed with the Court concerning it, attendance at directions hearings and things of that nature. He referred to the evidence in Ms Weisz's affidavit in the paragraphs to which I have referred.
5. Ms McIvor, in her written submissions, contended that to make a personal order for costs against Mr Drummond would infringe the principle of limited liability and there is no evidence that Mr Drummond abused the corporate structure of Drummond or used it as a shield for improper conduct. She contended that there is no evidence to establish that Mr Drummond engaged in any misconduct or acted unreasonably in the conduct of the litigation; the evidence did not support a finding that Mr Drummond caused unnecessary costs to be incurred or acted in bad faith.
6. In the exchanges between Ms McIvor and I in oral argument, Ms McIvor stated that there was no evidence of any wrongdoing that would enliven the jurisdiction for the costs order which is being sought against him. She accepted that Mr Drummond should not have let Drummond become deregistered but described him as a carpenter, running a carpentry business, not a large commercial concern.
7. I do not accept that submission. There are very significant commercial advantages to trading through an incorporated entity including limited liability and taxation concessions and this brings with it certain fundamental obligations by directors, particularly in respect of regulatory compliance. Directors are assumed to be aware of these obligations.
8. Justice Brooking, in his opening remarks in the matter of Re Immunosearch Pty Ltd,[34] an application for reinstatement of a company, observed in this regard:

The two dollar company really demands very little of life. Often it does not aspire to solvency, let alone wealth. Lodge an occasional return in the Corporate Affairs office, have your accountant provide a few minutes now and then, and the company will shield you from your creditors and serve you faithfully and well. But even the two dollar company requires a modicum of attention once in a while or you will one day find that it is perished from your neglect - that it has been treated as defunct and struck off the register.

1. In his two affidavits dealing with the deregistration of Drummond, Mr Drummond does not, to my mind, satisfactorily explain the circumstances of the deregistration of the company and its aftermath. In my view, he ought to pay any costs of Roberts which are attributable to Drummond's deregistration - in this regard, I observe that there is to be no duplication with the costs payable by reason of the order against Beenak.
2. There will be separate identifiable costs to which Roberts has been exposed to, to which it should be fully compensated by an order for indemnity costs. I decline to make an order of the 'waterfall' type proposed by Roberts as there are practical difficulties with implementing an order in such form. Mr Drummond was the only person responsible for Drummond's compliance with regulatory matters and I consider that, because of his dilatory performance in that regard as the director of Drummond, he should pay those costs on an indemnity basis.

(a) Beenak Concrete and Formwork Pty Ltd ('Beenak') pay the defendant its costs of Beenak's discontinuance of its application for substitution ('Substitution Application'), including the costs of the defendant's summons for costs filed 18 December 2025 ('Costs Application') on a standard basis.

(b) The plaintiff pay the defendant's costs of the proceeding, including reserved costs and its costs of the Costs Application, on an indemnity basis, excluding the costs ordered to be paid by Beenak pursuant to sub-para (a) of these orders and by Mr Drummond pursuant to sub-para (c) of these orders.

(c) Mr David Drummond pay to Roberts its costs incurred in the period the plaintiff was deregistered (17 February 2025 to 1 September 2025) on an indemnity basis, excluding the costs payable by Beenak pursuant to sub-para (a) of these orders.

(d) The application by the defendant against the non-party, Merton Lawyer Group Pty Ltd, is dismissed by consent.

DRUMMOND CARPENTRY SERVICES PTY LTD (ACN 618 422 549) AS THE TRUSTEE FOR THE DRUMMOND FAMILY TRUST (ABN 38 730 031 289)

[1] [2025] VSC 620 ('principal reasons').

[2] Being the period during which Drummond was deregistered.

[3] Being the sole director of Drummond.

[4] Being the solicitors for Drummond in the winding up application.

[5] Re Slodyczka & Farren Pty Ltd (Costs) [2022] VSC 102 [9] ('Slodyczka') and the authorities appearing in footnote 13 of the judgment.

[7] There is passing reference in the letter to the Westpac garnishee order at [26].

[15] Affidavit of Ms Weisz sworn 20 October 2025 [16]-[21] ('Weisz affidavit').

[16] Citing Gdankski v Palms Court Management Pty Ltd [2017] VSCA 348 [66].

[17] [2018] FCA 1461.

[20] See Slodyczka [8], quoting Chen & Ors v Chan & Ors [2009] VSCA 233 [10] (Maxwell P, Redlich JA and Forrest AJA).

[23] See Hazeldene's Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2) [2005] VSCA 298; 13 VR 435, 441 [23] ('Hazeldene's Chicken Farm').

[24] Slodyczka [12]. See footnote 25, citing Alpine Hardwood (Aust) Pty Ltd v Hardys Pty Ltd (No 2) [2002] FCA 224; (2002) 190 ALR 121, 127 [28] (per Weinberg J)

[25] See principal reasons [92]-[95].

[26] In paras [3]-[29] of the letter.

[29] In his oral submissions, counsel for Roberts, Mr McAloon, colourfully made reference to Merton 'going up to the Tweed' to obtain the order - i.e. the New South Wales District Court at Murwillumbah.

[31] Principal reasons [70], [72], [79]-[82], [233]-[235].

[32] [2017] VSCA 348.

[33] See Weisz affidavit [16]-[22].

[34] [1990] 2 ACSR 455, 456.