Refuse to Lose Pty Ltd as trustee for the Refuse to Lose Trust v Kostakis [2026] VSC 5

1. These reasons deal with two related applications by the defendants pursuant to a summons filed on 12 December 2025. The first application seeks an order setting aside a judgment entered against the defendants on 20 November 2025 in default of a defence. The second application seeks to vary a freezing order made in this proceeding on 10 July 2025 ('Freezing Order') so as to permit the grant of a security interest over the defendants' Australian assets to secure the payment of legal expenses.
2. These reasons assume a familiarity with my earlier reasons involving some of the same parties in Kostakis v Executive Law Group ('Kostakis').0F[1] Amongst other things, Kostakis details interlocutory disputes that took place in this proceeding prior to 17 September 2025.
3. These reasons also assume a familiarity with my reasons delivered on 20 November 2025, whereby I granted leave to the plaintiffs to enter judgment in default of a defence and refused the oral application by the defendants for leave to file and serve a draft defence dated 20 November 2025 ('default judgment reasons').1F[2]

A The application to set aside the default judgment

1. The defendants apply pursuant to r 21.07 of the Supreme Court (General Civil Procedure) Rules 2025 (Vic) for an order setting aside the judgment entered in default of a defence.
2. The legal principles governing the application are those identified by the Court of Appeal in _Lei v Zhang,_2F[3] adopting principal considerations stated by the Full Court in Kostokanellis v Allen ('Kostokanellis'):3F[4]

[A] court dealing with an application to set aside a default judgment has a broad discretion to be exercised according to the circumstances of the particular case. There are no universal rules governing the exercise of that discretion, but ordinarily it will be important to consider whether there is a reasonably arguable defence on the merits of the case, what reasons explain the applicant's default, how promptly the application to set aside was made after the default judgment came to the notice of the applicant, and whether a suitable award of costs or security would suffice to avoid prejudice to the party having the benefit of the judgment if it were to be set aside.4F[5]

1. The decision in Kostokanellis predates by several decades the Civil Procedure Act 2010 (Vic) ('CPA'). In determining the set aside application, s 8(1) of the CPA requires the Court to seek to give effect to the overarching purpose in s 7(1) of that Act.
2. Recently, in Daimleigh Capital Pty Ltd (in liq) v CVS Lane Capital Partners Pty Ltd,5F[6] when determining an appeal against a refusal to reinstate a proceeding, the Court of Appeal made pertinent observations concerning the impact of the enactment of the CPA:

[79] ... [A] court has a wide discretion to relieve a party of the consequences of non-compliance with a self-executing order, and the governing consideration is what justice requires. Since the enactment of the Civil Procedure Act, in determining a reinstatement application, a court must also seek to further the overarching purpose to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute, and the objects set out in s 9 of the Civil Procedure Act. Those objects include the efficient conduct of the business of the court, the efficient use of judicial and administrative resources, minimising delay beyond that reasonably required for necessary interlocutory steps, and the timely determination of the civil proceeding.

[80] The judge was correct to observe that, ultimately, the discretion to order reinstatement is unfettered by conditions or guidelines referred to in other cases. The Court in Jorgensen listed four considerations to which a court should ordinarily have regard:

(a) the circumstances in which the self-executing order was made;

(b) the reasons for non-compliance with it;

(c) the prejudice to the defaulting party if relief were not granted; and

(d) the prejudice to the innocent party if relief were granted.

[81] While this is a useful list of the considerations that are usually relevant on a reinstatement application, it is not a rigid set of criteria or an exhaustive list of the matters that may be considered. Each case is different, and the governing consideration will always be what justice requires in the circumstances of that case.6F[7]

[86] The applicants' proposed ground 4(d) was based on an incorrect premise. The judge did not find that their failure to comply with the self-executing order was inconsistent with the overarching purpose of the Civil Procedure Act. Rather, the judge concluded that the applicants' conduct of the proceeding, from its inception in 2018, was inconsistent with the overarching purpose of the Civil Procedure Act to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute, and the overarching obligation to use reasonable endeavours to act promptly and minimise delay. No error has been demonstrated in respect of that conclusion. To the contrary, it was compelled by the lamentable circumstances of this case.7F[8]

A.1.1 Have the defendants demonstrated a defence on the merits?

1. Consistent with the objectives of the CPA, a defendant must show a prima facie defence on the merits to set aside a judgment. It would serve 'no useful purpose' to set aside a regularly entered default judgment if the defendant has no possible defence.8F[9] The strength or otherwise of that defence will be a relevant consideration in determining where the interests of justice lie.
2. To evaluate the merits of the asserted defence, it is first necessary to identify the three causes of action upon which the plaintiffs rely and in respect of which, pursuant to the default judgment entered, an assessment of damages is scheduled to be heard on 4 and 5 March 2026 ('March hearing').

1. The first defendant, Mr Jim Kostakis, ran and operated a skincare and laser therapy business in metropolitan Melbourne, conducted through entities designated the 'ALSC entities'.9F[10] The plaintiffs allege that in April and May 2021, Mr Kostakis orally represented to Mr Peter Arvanitis, who partly owns and controls the first plaintiff, Refuse To Lose Pty Ltd ('RTL'), that the business conducted by the ALSC entities had historically achieved an EBITDA of $100,000 per month or $1.2 million per year and would easily achieve an EBITDA of $1.2 million per year in the future. Relying on these representations, in July 2021, RTL purchased a 50% interest in each of the ALSC entities. The price paid by RTL was calculated on a multiple of the represented EBITDA. The plaintiffs claim the EBITDA representations, both past and future, were false. The ALSC entities were placed into administration by Mr Kostakis on 4 April 2025.
2. In an affidavit filed in support of the application, Mr Kostakis gave evidence which falls short of a denial that the representations alleged were made:

[29] Peter and I met on or around 27 April 2021 at Peter's residence at 34 Irving Road, Toorak. I do not recall making any representations about the historical or future EBITDA of any of the ALSC entities during this meeting and do not think that I did, including because, while I understood it related to the profit line of the business, I did not know what "EBITDA" specifically meant at the time. During this meeting I did tell Peter that I proposed to restructure the ALSC Business so as to require each franchisee to pay ALSC Australia a royalty calculated at either 8% or 9% of that franchisee's total monthly gross revenue. Prior to this restructure, franchisees were paying a set monthly administration fee of $10,000 to ALSC Australia. I also told Peter the financials of the ALSC Business were conservative because once the COVID-19 pandemic came to an end, the business would continue to open more locations and the proposed changes to the franchise agreements, if implemented, would generate more revenue. I also said that I could not give any assurances, projections or promises about financial performance given the uncertainty about closures due to Covid-19 and the timeline for the proposed restructure of the business.

1. When evaluating the strength of the defence to the first claim, it is important to have regard to two documents upon which the plaintiffs relied at the hearing.
2. The first is a much later text message from Mr Kostakis dated 17 September 2022 which he sent to Mr Luke Brady, CEO of the plaintiffs:

Hey Luke

Sorry to bother you as you know my

income was 1.2m then halved

Now my earnings are around 800k a year.

Based on that what would the banks

lend ?

Is there a rule of thumb I can use ?

Just going back and forth with agent

and Ray is on holidays so I can get no

answers as a guide

The bank would base the interest rate

off 8.5% for serviceability. Cost of living

Say $200K. They should be able to

approve $5.0 - 5.5M

1. The second document is an email from Mr Kostakis to Mr Arvanitis dated 26 April 2021 and an attachment to that email referred to by the parties as 'the Nash document'. The Nash document included actual profit figures for the 2019 financial year and anticipated profit for the 2019 calendar year. The 2019 calendar year anticipated profit was said to be $1,020,300. The actual profit for the 2019 financial year was much less, around $512,690.
2. The defendants submit the EBITDA misrepresentation claim should be treated with scepticism because the actual profit figures provided to Mr Arvanitis, including those for 2019, are inconsistent with the alleged representation.
3. The plaintiffs rely on what they claim are notes made by Mr Arvanitis during the meeting when the representations were made, recording Mr Kostakis as saying: 'don't worry, this thing spits out $100K per month, these numbers are conservative'. The defendants assert the notes are not genuine and were not made contemporaneously.
4. Assuming either that the defendants are unsuccessful in setting aside the default judgment, or that the plaintiffs ultimately succeed in establishing liability at a trial if the default judgment is set aside, the defendants propose to rely on expert evidence in relation to the EBITDA misrepresentation claim directed to the quantum of damages that may be payable.
5. Having regard to the evidence and submissions, and noting the challenge to the authenticity of Mr Arvanitis' contemporaneous notes, I consider that the defendants have demonstrated a possible defence to the first claim. However, having regard to the no doubt careful use of language in Mr Kostakis' affidavit, the defendants' evidence falls well short of establishing a prima facie defence. The making of the representations alleged is not denied.

1. The plaintiffs' second claim is that from late 2021, after RTL had acquired a 50% interest in the business, Mr Kostakis, as the sole director of the ALSC entities, misused money of those entities for his own purposes. The effect of that misappropriation, which the plaintiffs say amounted to $493,000, was to deprive the ALSC entities of assets which led to the companies being unable to pay creditors and ultimately placed into liquidation.
2. The defences to this claim are variously that the money was repaid, was a loan or was money paid with the plaintiffs' knowledge. The draft defence denies that Mr Kostakis owed any fiduciary duty to RTL.
3. I will proceed on the basis there is a prima facie defence to the second claim based on the matters referred to in Mr Kostakis' affidavit and having regard to the defences proposed to be relied on in the draft defence including the asserted absence of the duty alleged.

1. The third claim relates to the grant of a general security interest over the assets of certain ALSC entities ('the ALSC security entities').10F[11] There is no dispute about the relevant facts. Mr Kostakis and his wife owed $1.3 million to Synochi Pty Ltd, the second plaintiff. To discharge that obligation, finance was obtained from the National Australia Bank Ltd ('NAB') secured over a Brighton property owned by Mrs Kostakis and secured by a General Security Agreement ('GSA') over the assets of the ALSC security entities.
2. During the hearing, the defendants accepted the grant of the general security interest over the assets of the ALSC security entities in these circumstances by Mr Kostakis was a breach of fiduciary duty owed by him to those companies.
3. It is common ground that the plaintiffs did not know about the creation of the security interest, which effectively benefitted only one of the 50% shareholders in the ALSC entities. The plaintiffs allege that if that security had not been given, the companies would have been in a position to raise finance of an equivalent amount (that is, $1.4 million) by providing equivalent security over their assets. They would thereby have been in a position to pay their debts as and when they fell due.
4. I did not find the following explanation provided by Mr Kostakis in relation to the GSA to be persuasive in any respect in establishing a defence on the merits to the proposition that the grant of the GSA was in breach of Mr Kostakis' duty:

[150] Although I was not aware and did not intend to cause any of the ALSC Security Entities to provide security for the NAB Loan, I acknowledge that there are copies of:

(a) Guarantees and indemnities in support of the NAB Loan signed by me on behalf of ASLC Australasia and ALSC Mornington;

(b) General Security Agreements (GSAs) executed by me on behalf of ALSC Australasia, ALSC Mornington and ACLC in support of the NAB Loan ...

[151] I signed these documents without realising what they were at the time. During this time in my life everything was very rushed and stressful. I was finishing a massive build of the house, I was continuing to run the business as well as being in the process of moving overseas.

[152] I have been unable to locate any executed copies of the GSA executed by JKEK and the guarantee and indemnity executed by ACLC.

1. However, there may be substance to the defendants' denial of the plaintiffs' allegation that if the general security interest had not been granted, those assets could have been used to raise $1.4 million for the companies. NAB did not just take security over the companies' assets; it took real property security over the Brighton property.
2. The defendants intend to rely on expert evidence directed to the counterfactual, that is, if the GSA had not been granted, would the ALSC security entities have been in a position to borrow $1.4 million for their own legitimate purposes? If obtained, such expert evidence goes to damages and relief. It can be relied on at the March hearing even if the judgment on liability stands.

1. The defendants say they did not file a defence in accordance with previous orders because they were unable to fund its preparation. The defendants' solicitors, Moray & Agnew, were not willing to prepare a defence themselves and they did not have funds to retain counsel to prepare a defence.
2. The application to vary the Freezing Order is related to this issue. It seeks to take security over deposit monies from the contract of sale of Mrs Kostakis' Brighton property to cover Moray & Agnew's legal costs and disbursements, including counsel's fees.
3. However, this proposal could easily have been advanced at the hearing that took place on 17 September 2025, prior to which all parties were urged to bring any outstanding interlocutory applications so that they could be heard simultaneously and efficiently. Despite those urgings, no application to vary the Freezing Order was made.
4. In the default judgment reasons I made the following comment:

[24] The Defendants themselves have not given any evidence in support of an extension of time for the filing and service of their defence. They have not given any evidence personally about their inability previously or now to fund the preparation of their defence, the key explanation relied on in support of extensions of time. As I mentioned in my earlier reasons (at 157(2)), while the Defendants have made an asset disclosure affidavit, that affidavit has been provided to the Plaintiffs but not filed with the Court. In the absence of such evidence, the Court is not in a position to make an informed assessment based on evidence of the asserted impact of funding difficulties as the reason for the failure to comply with previous orders.

1. Neither of the affidavits filed by Mr and Mrs Kostakis in support of the current applications contain any evidence whatsoever about their previous inability to fund the preparation of their defence. The observation in the last sentence of the default judgment reasons reproduced above remains apposite.
2. There is no evidence of any change in the defendants' financial position between 20 November 2025 and the date of the hearing of these applications. Rather, what appears to have occurred, is that new counsel or Moray & Agnew have identified and sought to pursue a practical proposal for funding legal costs.
3. Further, as the plaintiffs submit, it is clear a defence could have been prepared much earlier. The evidence now relied on to substantiate the proposed defence was evidence that had been collated by the previous solicitors acting for the defendants, Executive Law Group ('ELG'), and was or should have been available to Moray & Agnew.
4. For example, senior counsel for the plaintiffs during the hearing compared an affidavit of the defendants' prior solicitor, Ms Clarisse Lam, filed on 3 July 2025 with Mr Kostakis' affidavit filed in support of this application on 10 December 2025, showing that the earlier affidavit dealt with the vast majority of issues and subject matter in corresponding terms to those now relied on to substantiate Mr Kostakis' proposed defence. In a similar vein, the affidavit of Mrs Kostakis in support of her defence reproduces paragraphs from Ms Lam's affidavit and confirms their contents as true and correct.
5. While it is true that ELG claimed a lien over its file from August 2025 when Moray & Agnew was appointed to act for the defendants, the affidavit of Ms Lam, if not held by the defendants personally, was available from the Court file. A copy of that affidavit was able to be obtained by Moray & Agnew once they were the solicitors on record for the defendants.
6. Why the affidavits of Mr and Mrs Kostakis and the defence now sought to be put forward by the defendants could not have been put forward by them much earlier is not explained in the evidence or submissions. The close correlation between Ms Lam's affidavit and the affidavit evidence of Mr and Mrs Kostakis now relied on in support of their proposed defence makes it all the more puzzling why the defendants did not file a defence in accordance with the orders and extensions of time granted by the plaintiffs for them to do so, the last extension of which expired on 24 October 2025.
7. In Kostokanellis, the Full Court said:

... Martin J said in Collins Book Depot Pty. Ltd. v Bretherton [1937] VicLawRp 64; [1938] VLR 40, at p. 44 ... that "In general, where default is due to the carelessness of a party's solicitor, the party is not penalised to the extent of being shut out from litigating his claim or defence." This statement was referred to with approval by Jordan, CJ, in Vacuum Oil Co. Pty. Ltd. v Stockdale, ... and we ourselves think that it is correct.

We do not consider that this case requires any further examination of the question whether a party to an action should be held responsible for the conduct of his solicitor although it is a question which in other areas has on a number of occasions engaged the attention of the Court at first instance and before the Full Court ... We consider that, in the present case, the solicitor's conduct was not such that even if one identified the appellant with his solicitor would be sufficient to persuade us that the Court's discretion should be exercised against the appellant. The solicitor's decision was a "deliberate" one, but at worst against him it was an error of judgment and there are no compelling reasons for depriving the appellant of his right to defence because of this.11F[12]

1. This is not a case where the failure on the part of the defendants to comply with previous orders and extended periods of time within which the plaintiffs agreed that a defence could be served was due to carelessness on the part of the defendants' solicitors. As the plaintiffs submit, in this case, the defendants' solicitors acted deliberately, determining not to file a defence until they were placed in funds to do so, and the defendants proceeded accordingly.
2. In relation to funding, the defendants rely on the affidavits of their solicitor, Ms Melissa Kincaid. Her evidence indicates that without access to funding, Moray & Agnew, together with counsel at that time engaged on behalf the defendants, would not accept instructions to prepare a defence. Despite this, Moray & Agnew did not formally apply for leave to be removed as solicitor on the record, as was foreshadowed in an email to my Chambers on 2 October 2025.
3. The plaintiffs submit that the absence of funding did not excuse the defendants or their solicitors from complying with deadlines in Court orders, referring to the comments of Habersberger J in Blue Cross Properties (Toorak) Pty Ltd v Mackie & Staff Pty Ltd:12F[13]

Parties are required to comply with orders of the Court. It is not a matter of choice whether or not the steps set out in an interlocutory order are observed. If an order cannot be complied with for some good reason then application should be made to the Court for variation of the order. At the very least, the consent of the other parties to the variation, such as an extension of time, should first be sought ... If solicitors cannot obtain instructions or funding from the client then they are entitled to file a notice that they have ceased to act. But whilst they remain the solicitors on the record they are, in my opinion, required to comply with the orders of the Court even if they have no funding ...13F[14]

1. In Investec Bank (Australia) Ltd v Mann,14F[15] Pagone J referred to this passage and then stated:

His Honour's reasons make clear that a lack of funding does not absolve a solicitor from an obligation to comply with court orders made in respect of a proceeding in which the solicitor continued to be on record ...15F[16]

1. The default judgment reasons includes the following finding:

[26] In this case the Defendants have failed to comply with two separate orders of the Court concerning the date by which their defence was required to be filed and served. Those failures have occurred in the context of the Defendants and parties related to them being involved in a variety of interlocutory disputes which have taken up much Court time and resources.16F[17]

1. On the hearing of this application, the defendants did not address the failure by them personally and by their legal practitioners to issue a summons seeking an extension of time when advised by my Chambers on two separate occasions to do so. However, they were able to issue the set aside summons on 12 December 2025 that gives rise to these reasons. One might ask rhetorically, what has changed? The affidavit evidence relied on by the defendants does not contain an explanation and no changed circumstances were identified in submissions.
2. It is difficult to resist the proposition that throughout the history of this and the related proceeding, the defendants and their advisers actively determined what steps they would take in the litigation and what steps they would not. The defendants and those advising them determined not to devote their resources to complying with the orders previously made for the filing and service of a defence. They chose instead to devote their energies and resources to other aspects of the dispute including those discussed in Kostakis. It was only the entering of default judgment that motivated the defendants and their legal advisers to prepare a defence and propose a funding plan.
3. To elaborate briefly on the choices that were made, although Moray & Agnew was not funded, it filed an amended summons in this proceeding on 27 August 2025 seeking the transfer of deposit monies. It also commenced a separate proceeding by originating motion on 11 September 2025, once again seeking the transfer of the deposit monies. These steps were undertaken, but the filing and service of a defence was not undertaken. As these actions show, deliberate decisions were made concerning what work would be performed without funding and what work would not, noting that the purpose of the work that was performed was to secure the release of funds.
4. While the defendants submit they are 'now in a position to defend these proceedings', I agree with the plaintiffs that nothing has changed. Four affidavits from Mr and Mrs Kostakis and two affidavits from Ms Kincaid have been filed in support of the set aside application. A detailed defence has now been prepared by senior and junior counsel. All of these steps have been taken without funding. All of these matters have occurred without any variation to the Freezing Order which is sought by the second application.

1. The set aside application was made promptly, approximately 21 days after the judgment in default was entered. However, the delay between 20 November 2025 and 12 December 2025 cannot be viewed in isolation from the conduct of the defendants that pre-dated 20 November 2025 and which led to my decision to grant leave to the plaintiffs to enter judgment in default of a defence.
2. The delays that occurred prior to 20 November 2025 reflect poorly on the defendants and their advisors. Such delays are not consistent with obligations owed by both the solicitors and their clients pursuant to s 10 of the CPA.

1. The defendants submit significant delay in the matter coming to trial is unlikely if the set aside application is allowed. The hearing currently fixed for 4 and 5 March 2026 would be vacated and replaced by a trial on liability and damages, for which the defendants say they would be ready in July 2026. The defendants submit most of the lay evidence is complete. While the plaintiffs assert there has been a lack of production of documents by the defendants, those documents are in the possession of liquidators. It would be necessary to subpoena those documents once pleadings close. Following that, the defendants anticipate that expert evidence would be filed on their behalf.
2. The defendants propose to rely on expert evidence concerning:

(a) the plaintiffs' first claim, that is, damages which may be payable in relation to the alleged EBlTDA misrepresentation claim; and

(b) the plaintiffs' third claim, that is, whether the ALSC security entities would have been able to raise around $1.4 million had the general security interest not been granted in favour of NAB.

1. The defendants submit the entry of default judgment means that each defendant is liable without the ability to address their potential liability and the different causes of action against them on an individual basis. They submit to set aside the judgment is to ensure the real issues in dispute are heard and determined.
2. The defendants submit there is no real prejudice to the plaintiffs if the default judgment is set aside and that the prejudice to them of not being able to contest liability is substantial. They submit that the plaintiffs have the benefit of the Freezing Order and the defendants are willing to act expeditiously to bring the proceeding to trial.
3. The plaintiffs submit they would suffer prejudice if the default judgment is set aside. The prejudice would not be met by an order for security for costs. The defendants are unlikely to satisfy such an order given their asserted impecuniosity. In any case, any satisfaction of an order for security for costs will come out of funds that could otherwise be used to meet the judgment for damages. Any security granted (for the costs liability) over the defendants' assets will need to compete with the earlier lien claimed by ELG and the latest security interests which Moray & Agnew propose to acquire.
4. At the hearing the plaintiffs submitted they remain on track to file their evidence in relation to the assessment of damages, albeit with a slight delay because of the diversion of resources to deal with the current applications. If there is to be a trial on liability, the delay is likely to be substantial both in terms of the trial date and also in relation to the receipt of a monetary award of damages. Delay will be prejudicial to the plaintiffs.
5. Reference was made by the plaintiffs to the observations by Pagone J in ABL Nominees Pty Ltd v Brakatselos:17F[18]

This is a proceeding in which what is sought is essentially the payment of money. It is a commercial dispute and in Aon Risk Services Australia Ltd v Australian National University Heydon J said:

The litigation thus commenced was commercial litigation. While in general it is now seen as desirable that most types of litigation be dealt with expeditiously, it is commonly seen as especially desirable for commercial litigation ... [C]ommercial litigation does have significant claims to expeditions. Those claims rest on the idea that a failure to resolve commercial disputes speedily is injurious to commerce, and hence injurious to the public interest.

His Honour then set out a passage from what Rogers J had said in Collins v Mead and went on:

Commercial life depends on the timely and just payment of money. Prosperity depends on the velocity of its circulation. Those who claim to be entitled to money should know, as soon as possible, whether they will be paid. Those against whom the entitlement is asserted should know, as soon as possible, whether they will have to pay. In each case that is because it is important that both the claimants and those resisting claims are able to order their affairs ...

It follows that a further delay in the proceeding would be a substantial prejudice to the plaintiff ...18F[19]

1. The interests of justice and s 8(1) of the CPA require the Court to facilitate the just, efficient, timely and cost-effective resolution of the real issues in dispute when exercising any of its powers or interpreting those powers. That includes, in the present circumstances, the power to set aside the default judgment for which leave was given on 20 November 2025.
2. The defendants and their solicitors have failed to comply with Court orders to file and serve a defence, have failed to take advantage of extensions of time agreed to for that purpose by the plaintiffs, and have failed to file applications seeking an extension of time despite being reminded by my Chambers. Despite putting forward a lack of funding as the explanation for the failure to file a defence, another summons and another proceeding, each relating to the deposit monies, were filed and issued in the same time period, with counsel engaged to appear at hearings. Resources were not directed to the preparation of a defence, even though most of the work had already been done by previous solicitors who had laid the foundations for the defence belatedly sought to be relied on. The amount of work required and therefore the costs of filing and service would not have been as substantial as the preparation of a defence starting from scratch.
3. When determining where the interests of justice lie, I proceed on the basis that the defendants, who have not themselves given any evidence explaining why they did not file a defence, made a deliberate strategic choice, in conjunction with their legal advisors, not to file a defence. Clearly the solicitors were prepared to engage in substantial work and to engage counsel to appear on behalf of their clients to agitate applications relating to the deposit monies without being in funds. They were not prepared to take the same approach in relation to the filing and service of a defence. That was a deliberate strategic decision taken by the defendants and their legal advisors.
4. Judgment having been entered in default, the defendants seek an indulgence. Even in that context:

(a) It remains the case that Mr and Mrs Kostakis themselves have given no evidence to explain why they did not file and serve a defence in accordance with the previous orders.

(b) While Mr and Mrs Kostakis have given evidence that the defendants do not have any funds or assets by which to fund their defence of the proceeding except for funds received by way of the deposit and licence fee for the sale of the Brighton property, neither of them have given any evidence about the businesses apparently being conducted by them via corporate entities in Dubai where they currently reside. Mr and Mrs Kostakis have adduced no evidence concerning the financial circumstances of those businesses either as matters currently stand or in the period from July 2025 when they were obliged to file a defence.

(c) Mr and Mrs Kostakis have continued to decline to file a copy of the asset disclosure affidavit previously made by them and referred to in Kostakis.19F[20]

1. In the absence of evidence addressing these topics from Mr and Mrs Kostakis personally, I am sceptical about the proposition that they were not, from resources available to them, able to fund lawyers to file and serve a defence prior to 24 October 2025.
2. Turning to the question of prejudice. The judgment that has been entered in this proceeding is a judgment for the assessment of damages and compensation. The defendants suffer prejudice from the fact that unless the judgment is set aside, it will not be open to them (or to any of them) to contest liability.
3. The older cases to which the defendants referred in their submissions dealing with applications to set aside a default judgment proceeded on the basis that the primary consideration is whether the defendant can show the existence of a prima facie defence. If there are merits, the Court would not usually let a judgment pass on which there has been no proper adjudication.20F[21] However, it is clear that the governing consideration is what justice requires in the circumstances of each case.
4. In respect of the plaintiffs' first claim, the EBITDA misrepresentation claim, while Mr Kostakis' evidence establishes a possible defence, it falls short of a denial that the representations alleged were made. The text message, while much later in time, appears to corroborate the plaintiffs' allegation, central to liability, that the representation was made. Currently it is not open to the defendants to contest causation or to contest the liability of other defendants for the representations made by Mr Kostakis. That is a relevant prejudice. However, the defendants are able to contest quantum at the March hearing, as it appears they propose to do relying on expert evidence.
5. Concerning the second claim, it appears there is no factual contest that the payments or loans were made by Mr Kostakis. The critical question is whether the making of those loans or payments meant that the financial downfall of the ALSC entities could not be averted. The defendants propose to adduce expert evidence directed to that topic. That evidence will likely be relevant at the March hearing. Individual defendants may be prejudiced by their inability to contest their liability for actions that might otherwise have only been established against Mr Kostakis.
6. The same position applies concerning the third claim, the grant of security in favour of NAB. The critical question is whether the grant of that security meant the ALSC security entities were not in a position to obtain funding following which they went into liquidation. The defendants propose to rely on expert evidence in relation to this issue.
7. The proposed expert evidence to which I have referred is directed to damages and relief which the defendants remain able to contest at the March hearing. In those circumstances, while there is prejudice suffered by the defendants, it is less than what would be the case if the judgment was for a specified sum, rather than for damages and compensation to be assessed.
8. When determining where the interests of justice lie, the prejudice to the defendants must be weighed against the failure by the defendants and their legal advisors to file a defence, and their acts and omissions inconsistent with the overarching purpose in s 7 of the CPA and the overarching obligation in s 25 of the CPA to act promptly and to minimise delay.
9. The prejudice to the defendants must also be weighed against the prejudice to the plaintiffs arising from delays which are inevitable if the judgment is set aside. Given the desire of the defendants to issue subpoenas to the liquidator, I am sceptical about the case being ready for trial on all issues by July 2026 if the judgment is set aside.
10. If the disclosure in the defendants' affidavits of their assets in Australia is complete, the asset pool against which the plaintiffs may recover pursuant to the judgment that currently stands in their favour, or which might be available to them if the judgment is set aside and they succeed at trial on all issues, is limited. That asset pool will be further diminished by the costs which the defendants seek to be secured in favour of Moray & Agnew.
11. As the terms of the proposed security document show, security is proposed to be granted in respect of all past work performed by Moray & Agnew. That is, legal work not limited to this proceeding but also the proceeding in which Mrs Kostakis was the unsuccessful plaintiff and all other legal work performed for Mr and Mrs Kostakis or for the defendants in this proceeding, together with future work.
12. Taking into account all of the circumstances, including each of the matters discussed in paragraphs 58-72, it is not in the interests of justice to set aside the default judgment. It is in the interests of justice to refuse the set aside application.

B The application to vary the Freezing Order

1. As is conventional, the Freezing Order includes a carveout permitting the defendants to pay the reasonable legal expenses of the proceeding. The defendants propose a variation to that order so that the carveout reads:

paying your reasonable legal expenses or payment of the reasonable legal expenses of one or more of the other defendants in this proceeding, and/or granting a security interest over any of your Australian assets to secure the payment of such legal expenses.

1. The draft security document to which this aspect of the defendants' application relates is expressed broadly. It covers past costs which are unsecured and costs incurred by one or more of the defendants in relation to other proceedings or other legal costs.
2. By this application the defendants seek to provide priority in favour of Moray & Agnew over the deposit monies paid in respect of the sale of the Brighton property and the sum of $27,000 paid as a license fee and held in trust. As matters currently stand, ELG asserts a lien over those moneys for an amount of approximately $508,000. Otherwise those funds are potentially available to unsecured creditors of Mrs Kostakis, who is the registered proprietor and vendor of the Brighton property.
3. Although I have some misgivings about making an order that provides security because of the lack of meaningful information about the financial position of Mr and Mrs Kostakis and entities associated with them in Dubai, it is important that the defendants are able to conduct their defence in relation to the forthcoming damages and compensation hearing. In the circumstances I propose to agree to a variation to the Freezing Order but not as submitted on behalf the defendants.
4. To the extent there are existing costs orders in favour of the plaintiffs or any of them in this proceeding which are required to be met by the defendants or any of them, whether the amount of those costs has yet been agreed or fixed, and to the extent costs are awarded in favour of the plaintiffs pursuant to or as a result of this application, the security proposed to be granted to Moray & Agnew, must rank behind those amounts.
5. The variation order needs to be reframed so that what is permitted to be secured are legal costs of the defendants or any of them of this proceeding from 12 December 2025, the date of their application to vary the Freezing Order. To be clear, I do not agree that the previously unsecured legal costs of the defendants, whether relating to this proceeding or other legal work, should be secured. Whatever arrangements the defendants or any of them had with Moray & Agnew previously, that position has now changed. It is appropriate that security be permitted in respect of future costs of this proceeding, but not otherwise.
6. The parties should confer and provide a proposed draft variation to the Freezing Order which gives effect to these reasons. The solicitors for the defendants should provide a proposed form of security documentation consistent with these reasons for the consideration by the solicitors for the plaintiffs within seven days from the date of these reasons. The solicitors for the plaintiffs should respond within four business days of the provision of a copy of that document. If there is any dispute about the form and content of the security document giving effect to these reasons, the parties should notify my Chambers. Unless otherwise advised, I will expect to determine any such dispute on the papers.

1. The relief sought in paragraphs 1-3 of the summons dated 12 December 2025 is refused.
2. Paragraph 9(b) of the Freezing Order attached as Annexure A to the Order made by Connock J on 10 July 2025 be amended to give effect to these reasons.
3. In relation to the defendants' application seeking an order setting aside the judgment entered against the defendants on 20 November 2025 in default of a defence, the circumstances referred to above require that the defendants pay the plaintiffs' costs of that application forthwith on an indemnity basis.
4. In relation to the defendants' application seeking to vary to the Freezing Order and in respect of which they have sought an indulgence, although they have been partially successful in their application, the appropriate order is that the defendants pay the plaintiffs' costs of that application on a standard basis.

REFUSE TO LOSE PTY LTD (ACN 646 189 924) as trustee for the REFUSE TO LOSE TRUST

SYNOCHI PTY LTD (ACN 638 794 206) as trustee for the SYNOCHI TRUST

JKEK INVESTMENTS PTY LTD (ACN 613 230 676) as trustee for the J&E INVESTMENTS TRUST

PREMIER LASER HAIR REMOVAL PTY LTD (ACN 107 928 370) in its own capacity and as trustee for the PREMIER LASER DISCRETIONARY TRUST

[1] [2025] VSC 605 ('Kostakis').

[2] Refuse to Lose Pty Ltd as trustee for the Refuse to Lose Trust v Kostakis (Unreported, Supreme Court of Victoria, Delany J, 20 November 2025).

[3] [2020] VSCA 123 ('Lei v Zhang').

[4] [1974] VicRp 71; [1974] VR 596 ('Kostokanellis').

[5] Lei v Zhang (n 3) [21] (citations omitted).

[6] [2025] VSCA 320.

[7] Ibid [79]-[81] (citations omitted).

[9] See, eg, Gunns Finance Pty Ltd (R & M Appntd) (In Liq) v Storey [2014] VSC 260, [7]-[9] ('Gunns Finance').

[10] As at April 2025 the ALSC Entities comprised ALSC Admin Pty Ltd, ALSC Australasia Pty Ltd, ALSC Mornington Pty Ltd and Australian Cosmetic & Laser Clinic Pty Ltd as trustee for the Australian Cosmetic & Laser Clinic Unit Trust.

[11] ALSC Australasia Pty Ltd, ALSC Mornington Pty Ltd and Australian Cosmetic & Laser Clinic Pty Ltd as trustee for the Australian Cosmetic & Laser Clinic Unit Trust.

[13] [2007] VSC 304.

[15] [2012] VSC 81.

[17] Refuse to Lose Pty Ltd as trustee for the Refuse to Lose Trust v Kostakis (Unreported, Supreme Court of Victoria, Delany J, 20 November 2025), [26].

[18] [2012] VSC 265.

[21] Gunns Finance [2014] VSC 260, [7].