Ridge Estate Pty Ltd v Fairfield Pastoral Holdings Pty Ltd

The statutory provision - s 86 12 Section 86 of the LPA provides: 86 Voluntary conveyances to defraud creditors (1) Every conveyance of property made with intent to defraud creditors shall be voidable at the instance of the party prejudiced thereby. (2) This section shall not extend to any estate or interest in property conveyed for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the conveyance, notice of the intent to defraud creditors. 13 Similar provisions are found in other State and Territory legislation: for example, s 37A of the Conveyancing Act 1919 (NSW); and s 89 of the Property Law Act 1969 (WA). They are modern equivalents of the Statute of Elizabeth (Fraudulent Conveyances Act 1571, 13 Elizabeth 1, c 5), enacted for the protection of creditors against fraudulent conveyances and dispositions of property. That statute provided to the effect that any conveyance of property was void if made with intent to 'delay, hinder or defraud' creditors. 14 Section 172(1) of the Law of Property Act 1925 (UK) ultimately replaced the Statute of Elizabeth and re-stated the requisite intention in an abbreviated form as being one to 'defraud' creditors. The modern Australian State and Territory legislation follows its text. 15 It is established that the abbreviated term was intended to re-state and reproduce the meaning of the expression 'delay, hinder or defraud' used in the Statute of Elizabeth: PT Garuda Indonesia Ltd v Grellman (1992) 35 FCR 515 at 522 (Wilcox, Gummow and von Doussa JJ); Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546 at [19] (French CJ, Gummow, Crennan and Bell JJ); Westpac Banking Corporation v Bell Group Ltd (in liq) (No 3) [2012] WASCA 157; (2012) 44 WAR 1 at [505]-[512] (Lee AJA) (Westpac v Bell); and Super Vision Resources Ltd v AC Holdings Co Pty Ltd [2020] NSWCA 319 at [3]-[4] (Basten and Meagher JJA), [141] (White JA agreeing). 16 Accordingly, the reference to an intention to defraud in s 86 of the LPA is to be read as a reference to 'delay, hinder or [otherwise] defraud': Marcolongo at [19]. It will be necessary to return to the significance of this in due course. 17 The provision should receive a liberal construction, having regard to its purpose of suppressing fraud: Marcolongo at [20].

The context and the pleaded case 18 In September 2013 Ridge Estate acquired Lot 1, 252 Piney Ridge Road. In around early 2016 the adjoining property, Lot 2, 252 Piney Ridge Road, came on the market. Steven wished to acquire the property but was bankrupt at the time. He asked Dr Hamilton, and through him FPH, to assist Ridge Estate to purchase Lot 2. Steven and Dr Hamilton reached an agreement, summarised at [30]-[31] of the primary judgment (Fairfield Pastoral Holdings Pty Ltd v Ridge Estate Pty Ltd (No 4) [2022] FCA 1 (PJ)), to the following effect: (a) a trust (the PRT) would be established; (b) FPH would be the initial trustee of the PRT; (c) FPH, in its capacity as trustee of the PRT, would: (i) enter into a contract to purchase Lot 2 for a purchase price of $750,000; (ii) pay a deposit of $30,000 from its own funds; (iii) provide a further amount of $59,500 from its own funds towards the purchase price; and (iv) borrow $525,000 from NAB secured by a mortgage over Lot 2 to complete the purchase price. 19 FPH was also to raise $182,130 from NAB by way of an equipment loan and goods mortgage, and Dr Hamilton was to provide a personal guarantee to NAB in respect of FPH's indebtedness to it (PJ [31]). 20 FPH as trustee of the PRT purchased Lot 2. Settlement was completed on 8 April 2016. 21 Consistent with the agreement, the purchase price was $750,000 with a deposit of $30,000. FPH paid the deposit of $30,000 (borrowed from FPH No 1), borrowed $525,000 from NAB secured by a mortgage over Lot 2, provided $59,500 from its own funds and borrowed $182,130 from NAB secured by a mortgage over equipment. In addition, Dr Hamilton provided NAB with his personal guarantee (PJ [357]). Steven apparently had the responsibility for pursuing the financing arrangements (PJ [359]). 22 After settlement, FPH as trustee of the PRT owned Lot 2 and equipment the subject of the equipment mortgage (as to the equipment, PJ [645]-[652]). 23 The primary judge accepted that Steven had agreed that Ridge Estate would effect a refinancing within 90 days in order to repay to FPH the amounts which it had advanced to the PRT (PJ [357]). 24 The refinancing did not occur, and FPH remained the registered proprietor of Lot 2 (PJ [361]). 25 By late 2018 the relationship between Steven and Dr Hamilton had broken down. 26 On 4 October 2018 Brenda, as the named appointor under the deed establishing the PRT trust (Trust Deed), executed a document entitled 'Deed of Appointment and Removal of Trustee' that removed FPH as trustee of the PRT and appointed Ridge Estate as the successor trustee (Removal Deed). 27 Before the primary judge, FPH sought a declaration that the Removal Deed is a conveyance made with intent to defraud creditors within the meaning of s 86 of the LPA and an order that it is void. 28 The respondents contended by their pleaded case (para 110 of the fifth amended statement of claim) that 'The Removal Deed was made with an intent to defraud creditors and therefore is voidable at the instance of [FPH], as a party prejudiced thereby, pursuant to s 86 of the [LPA]'. 29 In particulars to this plea, it is said that the Removal Deed was made by Brenda at the direction of Steven, with the intention of defrauding FPH and Dr Hamilton by preventing them from taking action in relation to the monies owed to FPH in respect of the deposit on Lot 2 of $30,000, the contribution of $59,500 to the settlement on Lot 2 and the other payments it made to meet the Lot 2 purchase price of $750,000, and otherwise to prejudice any attempted recovery of those sums against the assets of the PRT. 30 In other words, insofar as the position of FPH is concerned, it was alleged that its removal as trustee denied it the self-help or other remedies it would otherwise have had as trustee of the PRT with respect to claims to be indemnified against the trust assets for amounts incurred as trustee. 31 The appellants denied the allegation, pleading in their defence that the Removal Deed was not a conveyance of property and FPH was not prejudiced as it retained its right of indemnity over the trust assets. It is apparent from the primary judge's reasons that the appellants put in issue whether FPH was a creditor within the meaning of s 86 (PJ [369]-[373]). 32 After the execution of the Removal Deed, the appellants directed FPH to convey Lot 2 to Ridge Estate. FPH refused to do so, relying on the argument that the Removal Deed is voidable. FPH was the source of funds for mortgage payments to NAB, and asserted its right to exercise its right of indemnity against the trust assets. Accordingly, it sought to direct the sale of Lot 2. This led to further disputes between the parties as to whether FPH was entitled to exercise any power of sale. In the meantime, the liability to service the NAB loan continued and FPH continued to borrow funds in order to meet its obligations as bare trustee with respect to the trust property. FPH could not simply transfer Lot 2 to Ridge Estate, because it was unlikely that NAB, as mortgagee, would have consented to a transfer without a release of its securities. It appears that the respondents did not take any steps to secure the discharge or replacement of NAB's securities. In the end FPH sought an order for judicial sale of Lot 2, with the proceeds to be paid into its solicitor's trust account or into Court to abide the further order of the Court. The primary judge was satisfied that it was appropriate to make orders for judicial sale under s 59B of the Trustee Act 1936 (SA): see generally Fairfield Pastoral Holdings Pty Ltd v Ridge Estate Pty Ltd (No 3) [2021] FCA 292 (Fairfield (No 3)) at [60]-[63], [66], [70], [81], [101]. 33 FPH remained the registered proprietor of Lot 2 until 5 July 2021, when it was sold pursuant to the orders made in Fairfield (No 3). The amount of $375,178.36 by way of the proceeds of sale of Lot 2 was paid into Court.

Preliminary - the nature and characteristics of a trustee's right of indemnity 50 The challenge made by ground 2 to whether FPH was a creditor goes to the issue of standing. Although s 86 speaks of defrauding creditors, a conveyance is voidable 'at the instance of the party prejudiced thereby'. The application to have the Removal Deed declared void was made only at the instance of FPH. As developed below, the question of how the term 'creditor' is to be understood in this context relates to both whether FPH was a defrauded creditor and whether it was a person prejudiced within the meaning of the section. 51 Whether a trustee can properly be considered a creditor directs attention to the nature of a trustee's indemnity. 52 It is well-established that a trustee who in the discharge of a trust incurs debts by entering into transactions is personally liable for such debts. However, the trustee is entitled to be indemnified out of trust assets for expenses and liabilities properly incurred. 53 The trustee's right of indemnity has two aspects, commonly described as the right of reimbursement (or recoupment) and the right of exoneration. 54 The right of reimbursement entitles a trustee to be reimbursed for liabilities properly incurred in the execution of the trust which it has paid from its own resources. The right of exoneration entitles the trustee to pay or seek payment of such liabilities from the trust assets without first making payment out of its own resources. 55 The nature and characteristics of the right of indemnity have been the subject of a long line of authorities in Australia and the following propositions are well-established. 56 First, a trustee's right of indemnity generates an equitable proprietary interest in the trust property: Octavo Investments Pty Ltd v Knight (1979) 144 CLR 360 at 370; Chief Commissioner of Stamp Duties for New South Wales v Buckle [1998] HCA 4; (1998) 192 CLR 226 at [47]-[48]; and Carter Holt Harvey Woodproducts Australia Pty Ltd v The Commonwealth of Australia [2019] HCA 20; (2019) 268 CLR 524 at [32] (Kiefel CJ, Keane and Edelman JJ). 57 The majority judgment in Carter Holt is that of Bell, Gageler and Nettle JJ, with whom Gordon J agreed in a concurring judgment. Having restated the position in Australian law (at [80]), the majority stated (at [83]) that until the trustee's right of indemnity has been satisfied: … the beneficiaries cannot compel the trustee to exercise the trustee's powers as legal owner of the trust assets for their benefit. A court of equity will assist the trustee to realise trust assets to satisfy the trustee's right of indemnity, in priority to the beneficiaries' interests, and thus it is said that the trustee has an equitable charge or lien over the trust assets. It is not, however, a charge or lien comparable to a synallagmatic security interest over property of another. It arises endogenously as an incident of the office of trustee in respect of the trust assets. (footnotes omitted) 58 The majority continued at [84]: Possibly, the trustee's right of indemnity could be as well described as conferring a personal power (as Professor Ford argued it should be) as a proprietary interest. But the choice of description should conform to, rather than dictate, the application of fundamental principles to 'solving a concrete legal problem'. The trustee's right to apply trust assets in satisfaction of trust liabilities is proprietary in that it may be exercised in priority to the beneficial interests of the beneficiaries. To describe it as constituting a beneficial interest in the trust assets, and so as property, thus acknowledges the characteristic blending of personal rights and obligations with proprietary interests which is the 'genius' of the trust institution. Such a beneficial interest falls naturally and ordinarily within the definition of 'property' in s 9 of the Corporations Act. (footnotes omitted) 59 Second, as is apparent from Carter Holt at [84], the trustee's beneficial interest takes priority over the claims of beneficiaries. 60 Third, the trustee's beneficial interest in trust assets survives the transfer of assets to a successor trustee: Rothmore Farms Pty Ltd v Belgravia Pty Ltd [1999] FCA 745 at [36]-[37]; Re Stansfield DIY Wealth Pty Ltd (in liq) [2014] NSWSC 1484 at [10]; Glazier Holdings Pty Ltd (in liq) v Australian Men's Health Pty Ltd (in liq) [2006] NSWSC 1240 at [38]; Bruton Holdings Pty Ltd (in liq) v Commissioner of Taxation [2009] HCA 32; (2009) 239 CLR 346 at [43]; and Re Glenvine Pty Ltd (In Liq) [2020] NSWSC 866 at [44]. This position has now been resolved by the Judicial Committee of the Privy Council consistently with the Australian position, in Equity Trust (Jersey) Ltd v Halabi [2022] UKPC 36; [2023] AC 877 at [64], [164]. 61 Fourth, although a trustee in possession of funds may apply it in exercise of its right of indemnity without judicial intervention, the right of indemnity does not of itself confer a power of sale. An incumbent trustee may be able to exercise powers of sale under the trust instrument or statute. However, a trustee who has been removed from office but remains in possession of property, or remains the legal owner of property, will not have such powers and will have to apply to court for an order for sale or the appointment of a receiver with a power of sale: Apostolou v VA Corporation Aust Pty Ltd [2010] FCA 64 at [38]-[48]; Jones (Liquidator) v Matrix Partners Pty Ltd, in the matter of Killarnee Civil & Concrete Contractors Pty Ltd (in liq) [2018] FCAFC 40; (2018) 260 FCR 310 at [35]-[36], [44]; and Holden v Kukuy (No 2); Re Jay Invest Property Pty Ltd (in liq) [2023] VSC 54 at [54]. 62 Fifth, equity will grant relief to protect a former trustee to ensure that its successor does not take steps which will destroy, diminish or jeopardise the former trustee's right of exoneration, which subsists in the trust assets after their transfer to the new trustee: Lemery Holdings Pty Ltd v Reliance Financial Services Pty Ltd [2008] NSWSC 1344; (2008) 74 NSWLR 550 at [50]; Pitard Consortium Pty Ltd v Les Denny Pty Ltd [2019] VSC 614; (2019) 58 VR 524 at [9]-[11]; and Jaken Properties Australia Pty Ltd v Naaman [2023] NSWCA 214 (Jaken (FC)) at [4] (Bell CJ), [116] (Leeming JA, Kirk JA agreeing). 63 I should add that two of these recent decisions have added to the discourse in this area. In Equity Trust the Privy Council endorsed the Australian line of authorities as to the nature of the trustees' indemnity, but also considered the further question of competing rights of indemnity and determined that the interests of successive trustees in the trust assets are competing or equal, rather than ranked by priority in time (at [177]). And in Jaken (FC), the majority of the New South Wales Court of Appeal held that a successor trustee did not owe a predecessor trustee a fiduciary duty to not impair the former trustee's right of indemnity (the High Court has granted special leave to appeal). 64 The particular controversy agitated by ground 2 in this case as to the trustee's indemnity is different again. As noted above, the particular controversy is whether the nature of a trustee's right of indemnity is such that a former trustee is a 'creditor' as that term is understood for the purpose of s 86 of the LPA.

Ground 2 - standing as a creditor 65 The primary judge held (at [373]) that FPH was a creditor: First, the term 'creditor' in s 86 is not a word of fixed and rigid meaning: Gibb v Lombank Scotland Ltd [1962] SLT 288 at 290. The amplitude of the term is evident from the reasons of Young JA in Chen v Marcolongo [2009] NSWCA 326, (2009) 260 ALR 353 at [179]-[189]. I do not understand this part of the reasons in Chen v Marcolongo to have been disturbed on appeal. The term includes present, contingent, future and prospective creditors: Chen v Marcolongo at [13]; Hall v Poolman [2007] NSWSC 1330, (2007) 215 FLR 243 at [536]. It is not confined to creditors whose entitlements arise from contract. Those who have tortious claims may be a creditor. In the context of, and having regard to the evident purpose of s 86 of the [LPA], the term 'creditor' is capable of encompassing a range of persons who are, or may be, owed money, the recovery of which may be frustrated by the conveyance of property.

Discussion of the authorities 68 The reasons of Young JA in Chen v Marcolongo [2009] NSWCA 326 at [193]-[205] provide a convenient starting point. The case involved relief under s 37A of the Conveyancing Act, the NSW equivalent to s 86 of the LPA, and his Honour expressly addressed whether a person must be a creditor to have standing as a person prejudiced, and considered the breadth of the word 'creditor' in this context. 69 Citing Cadogan v Cadogan [1977] 1 WLR 1041, Young JA referred to debate as to whether the words 'any person thereby prejudiced' extended beyond creditors. At first instance, Slade J indicated that the two categories of people who were obviously persons prejudiced are (a) persons who were creditors of the disponor at the date of the conveyance and whose debts remain wholly or partially undischarged at the date of the hearing; and (b) persons who became creditors after that date but whose debts remain wholly or partially undischarged at the date of the hearing. Although Slade J postulated that a person who has a claim which could result in that person becoming a creditor may also be a person prejudiced, his Honour preferred a narrower view and rejected that proposition. 70 On appeal in Cadogan, Buckley LJ considered it was clearly arguable (for the purpose of a strike out argument) that people could come within the category of persons prejudiced even though they were not properly described as creditors and were not prejudiced in the capacity of creditors. Lord Goff considered that 'persons prejudiced' must refer to a member of the class of creditors, having regard to the language of s 172 of the Law of Property Act (UK) which makes the transaction void against creditors and nobody else (earlier statutes had referred to defrauding creditors 'and other persons'). Lord Shaw's brief concurring reasons did not take matters further either way. 71 Having considered the various approaches in Cadogan, Young JA concluded in Chen v Marcolongo as follows: [203] As to locus standi, whilst there is a grey area, which may include claims by liquidators, may include claims by remaindermen etc, it seems to me the authorities support the general proposition that at the date of hearing or at the date of filing the summons, a person prejudiced is a person who is owed a debt, (Cadogan v Cadogan at 1048). I have not seen any case where this has not been so. [204] In my view the person seeking an order under s 37A of the Conveyancing Act must show that he or she is a person prejudiced, whatever the width of that expression, as at the date of the hearing (or perhaps the filing of the application); see eg Griffiths v Falck [2008] NSWSC 998; 220 FLR 278 at 281 [24], a decision of my own on a different factual situation. This is in accordance with what Slade J said in Cadogan's case. [205] In his oral submissions, Mr Pritchard clearly distinguished between the two parts of the section. To show that creditors have been defrauded, one takes into account prospective contingent and other persons including people who have unliquidated claims in tort. That is what happened in Bishopp's case, supra. However, for the purpose of working out who is prejudiced, there needs to be an actual debt as at the date of the action or filing of the statement of claim. 72 Whilst Young JA considered that there must be an actual debt for s 37A to be invoked, Allsop P (at [27], Giles JA agreeing) took a broader view: On the question of the meaning of the phrase 'any person thereby prejudiced', the evidence disclosed that Mrs Marcolongo had a bona fide claim for unliquidated damages and that Mr Mao (a director, or erstwhile director, of Lym International) accepted that the claim had force. I do not think that s 37A requires the proof, by a trial within a trial, that the claim will necessarily or even probably succeed. In advance of a hearing a party with a bona fide claim is prejudiced if a disposition of property by the defendant would leave the claimant without a likely adequate fund against which to proceed. This is consistent with the proposition that prospective creditors are included in the concept of creditors: Green v Schneller [2001] NSWSC 897; 189 ALR 464 at 468 [16]. The statute should be read liberally as one for the suppression of fraud. 73 Standing was also considered in HP Mercantile Pty Ltd v Dierickx [2012] NSWSC 1005. White J referred to Chen v Marcolongo and considered that a person with a damages claim might be a person prejudiced within the meaning of s 37A of the Conveyancing Act, stating: [86] Further, I agree with the submission of HPM that Mr and Mrs Dierickx are not 'persons interested' within the meaning of s 37A. In Chen v Marcolongo; Chan v Lym International Pty Ltd [2009] NSWCA 326; (2009) 260 ALR 353 Young JA observed (at [203]) that at the date of hearing or at the date of filing the summons, a person prejudiced is a person who is owed a debt. The Court of Appeal's decision was overturned on appeal to the High Court (Marcolongo v Chen [2011] HCA 3; (2011) 242 CLR 546). However, the question of standing was not addressed. [87] Prima facie, Mr and Mrs Dierickx as debtors of TROM, would not be 'persons thereby prejudiced'. It may be that if Mr and Mrs Dierickx could also claim as creditors of TROM entitled to prove in the administration or winding-up of TROM, for example, as having claims to damages for breach of the Farming Agreement, then they might be persons prejudiced by an assignment in fraud of creditors. However, in these proceedings Mr and Mrs Dierickx did not assert such a claim. … 74 The issue was also considered in Sutherland v Jot Property Solutions Pty Ltd [2015] QSC 249; [2016] 1 Qd R 353. On a strike out application, Henry J considered whether a liquidator had standing to bring a claim under s 228 of the Property Law Act 1974 (Qld) as a 'person prejudiced by the alienation of property', concluding (at [31]) as follows: Three main difficulties with the plaintiff's argument were raised. Firstly, while s 228 contains no express temporal limitation it is well established that as at the time of the proceeding the person prejudiced must at least allegedly be owed a debt [citing Young JA in Chen v Marcolongo]. It was submitted there is no evidence that the plaintiff is owed a debt by Blue Chip. To the contrary it was submitted the filed evidence showed the liquidator's fees have been paid. … (footnotes omitted) 75 In Israel Discount Bank Limited v ACN 078 272 867 Pty Ltd (in liq) (formerly Advance Finances Pty Ltd) [2019] FCAFC 90, it was claimed that amounts said to represent payments of principal and interest were paid by the disponor plaintiffs to third parties, and that those payments were voidable transactions under s 37A of the Conveyancing Act. Relevantly, the Full Court considered whether the plaintiffs had standing to bring a claim for relief under s 37A. Having referred to the passages in Chen v Marcolongo, HP Mercantile and Sutherland to which I have referred above, it said that a person prejudiced within the meaning of the section is a person who is owed a debt at the time of the hearing or the filing of the proceedings, and said that the plaintiffs are not in this category. The Full Court determined that in the circumstances of that case, on no view were the disponor companies persons prejudiced. However, it also considered whether the standing problem faced by the plaintiffs might be met by joining the liquidator of the plaintiff companies or a third party creditor. Relevantly, the Full Court said: [67] In response, the plaintiffs submit that there is authority for the proposition that a disponer company in liquidation, via its liquidator, is a party prejudiced by the alienation, because its assets have been disposed of to the detriment of its creditors. The plaintiffs rely, in particular, on Williams v Lloyd (1934) 50 CLR 341, which concerned claims by the Official Receiver that certain dispositions were void against him under both s 37A of the Conveyancing Act and s 94 of the Bankruptcy Act 1924 (Cth). In that case, Starke J (at 362) rejected the suggestion that the Official Receiver could not avail himself of s 37A of the Conveyancing Act, stating that the 'official receiver represents the creditors, and dispositions void against creditors are void against trustees or receivers lawfully appointed'. The plaintiffs also rely on Cannane v J Cannane Pty Ltd (in liq) (1998) 192 CLR 557 at [11], where Brennan CJ and McHugh J referred to the avoidance of transactions by the official receiver or a liquidator. The plaintiffs also rely on a number of cases that have applied or followed Williams v Lloyd. Although the liquidator of the plaintiffs is not a party to the present proceeding, the plaintiffs indicated that they would be willing to add the liquidator as a plaintiff. [68] In our view, there is merit in the Banks' submission regarding standing. As presently constituted, the plaintiffs to the proceeding are the disponer companies and not the liquidator of those companies. On no view is the disponer company in the present circumstances a 'person thereby prejudiced' by the disposition. It is the grantor of the transaction to be set aside. For this reason, the Banks' submission regarding standing is correct. [69] The question then is whether, if the liquidator of the plaintiff companies were added as a plaintiff, this would overcome the problem. This is a difficult question. We incline to the view that the answer is 'No'. A liquidator is not directly to be aligned with a trustee in bankruptcy, unless a statutory provision so provides: cf s 565 of the former Corporations Law. Of course, a liquidator can be given standing to pursue statutory Corporations Act claims, but we are not dealing with such provisions. But the matter is arguable and the plaintiffs only have to establish a prima facie case on standing (among other things) as part of establishing a prima facie case on relief. … [70] Further, and in any event, the matter can be put beyond doubt by the plaintiffs joining a creditor (eg, the DCT) as a plaintiff. 76 These cases indicate, consistent with the appellants' argument, that the question of whether a person seeking to have a conveyance declared void is a creditor for the purpose of standing under s 86 has generally been tethered to whether they are a creditor by way of a debt, whether due or contingent or by way a bona fide unliquidated claim. 77 However, I do not consider that the category of creditors with standing must be limited in the manner described by Young JA in Chen v Marcolongo. Nor did the appellants submit that a claim must have distilled to a debt by the time of hearing for the claimant to have standing. Rather, the appellants accepted that Allsop P's reasoning in Chen v Marcolongo was correct, submitting that a person can be a claimant and be prejudiced at the commencement of trial, albeit that the claim has not distilled to a liquidated debt. I consider it clear that persons prejudiced may include persons who are contingent creditors, in the sense that they have a bona fide unliquidated or contingent claim against the disponor, as anticipated by Allsop P in Chen v Marcolongo and by White J in HP Mercantile. As Allsop P observed, those persons have claims which fall within the conventional notion of a creditor as that term is understood more generally for the purpose of the statutory fraudulent conveyance provisions. 78 Further, the above decisions did not require the court to consider the position of a trustee who has an entitlement to be paid from trust assets. In order to assess whether the term 'creditor' might be understood more broadly, it is useful to consider further authorities. 79 For completeness, I will start with certain authorities and commentary relied upon by the respondents, although I do not consider they take matters further. The respondents referred to passages from Lane (Trustee), in the matter of Lee (Bankrupt) v Deputy Commissioner of Taxation [2017] FCA 953; (2017) 253 FCR 46; Agusta Pty Ltd v Provident Capital Ltd [2012] NSWCA 26; and Lewin on Trusts, Vol 1, Twentieth Edition. 80 In Lane, Derrington J at [36] did no more than describe a trustee in bankruptcy's right of recoupment in an orthodox manner, noting that where a trustee is entitled to be indemnified from trust funds then moneys are transferred from the trust funds to the trustee. At [40] his Honour referred to the amount as 'an amount owing'. So much is consistent with the respondents' argument (and is correct), but neither statement indicates without more that the trustee is a creditor for the purpose of a provision such as s 86. 81 In Agusta, Barrett JA considered how a former trustee would enforce its right of recoupment following the appointment of a new trustee. His Honour (with whom Campbell JA and Sackville AJA agreed) confirmed that a trustee's 'preferred beneficial interest' continues to subsist in trust property in the new trustee's hands (see authorities at [60] above). His Honour also cited authority to the effect that for the former trustee to pursue a claim for indemnity where trust property has been paid to beneficiaries, if the new trustee declined to pursue the beneficiaries then it may be necessary to join the new trustee to proceedings and the former trustee may be able to exercise powers by subrogation (at [43]-[44]). The fact that the former trustee may be entitled to exercise the successor trustee's powers by subrogation does not advance the argument in the present case, which is concerned with access to the trust assets for payment without the exercise of subrogated rights. 82 The respondents identified a statement from Lewin on Trusts (at [19-046]) which, it was said, provided an example where an action might be taken for the recovery of money by a former trustee 'standing in the shoes of a third-party trust creditor' against the new trustee. The passage relied on is to the effect that a trustee that discharges an interest-bearing liability of the trust from its own funds is entitled to be subrogated to the creditor in respect of interest on the liability and so may recoup that interest (which would otherwise have been paid to the lender) from trust assets. This is provided by way of an exception to what was said by the authors to be the usual position that a trustee is not entitled to interest on payments made by it pending reimbursement. I accept that, depending on the circumstances, a predecessor trustee exercising a creditor's rights by subrogation may be a creditor of a successor trustee. However, in this case FPH was not claiming to exercise the rights by subrogation of a third party creditor to recover payment. This specific example does not assist more generally with the status of a trustee exercising its rights of indemnity. 83 There are, however, cases that provide some basis justifying a broader approach to how the word 'creditor ' might be understood under s 86 and analogous provisions. 84 For example, a trustee in bankruptcy who 'represents the creditors' has been recognised as having standing (Williams v Lloyd (1934) 50 CLR 341 at 362), although doubt has been expressed as to whether it follows that a liquidator of a disponor would also fall into that category (Israel Discount Bank at [68]). 85 In particular, there is some (albeit limited) authority that appears to accommodate the position of a trustee. In my view this is not surprising. Viewed objectively, the replacement of a trustee, in circumstances where trust assets vest in the successor trustee and may be dissipated, has the appearance of a disposition to defraud creditors. Even if assets are not dissipated, the predecessor trustee may still be deprived of rights of self-help and may be obliged to seek judicial orders including the appointment of a receiver. 86 Rothmore Farms was a first instance decision of Mansfield J. Rothmore had been the trustee of a family company carrying on a farming business. It ceased to be trustee on 10 February 1993 when a replacement trustee, Belgravia, was appointed and became the legal owner of the trust assets, being personal assets such as plant and equipment. Mansfield J concluded that the relinquishment of the trust assets effected by the replacement did not result in Rothmore's equitable interest being lost (see [60] above). His Honour did not consider the effect of the replacement of the trustee in the context of s 86 of the LPA. 87 After the successor trustee was in place, it carried on business for some time before it was resolved in May 1998 to bring forward the vesting date and vest the trust assets in a family member (Andrew) (referred to as the 'second transaction'). That vesting was within power. The vesting of the trust assets in Andrew was considered in the context of s 86. Mansfield J found that Rothmore was not prejudiced by the second transaction, because it did not have the effect of impairing or otherwise reducing Rothmore's equitable interest in the trust assets. Andrew held his interest in the trust assets subject to Rothmore's equitable interest. His Honour continued (at [124]): … However, if the contrary were the case, then Rothmore Farms would clearly be prejudiced by the second transaction by the loss of that equitable interest. In that event I would find that the second transaction was avoidable by Rothmore Farms (subject to the operation of s 86(2) of the Law of Property Act 1936 (SA)) because it was undertaken by Belgravia in breach of s 86(1), and has been avoided by Rothmore Farms. … 88 His Honour was clearly satisfied that provided there is prejudice, a predecessor trustee would have standing under s 86(1). That is, the fact that the claim arose out of a right of indemnity and not in any traditional debtor-creditor relationship did not dissuade his Honour from a prospective grant of relief under that provision. However, it does not appear that the point was specifically argued. 89 Further, it is appropriate to give some attention to the decision in Jaken (FC) and also the decision at first instance (Jaken Properties Australia Pty Ltd v Naaman [2022] NSWSC 517 (Kunc J) (Jaken (PJ)). 90 Mr Naaman was a judgment creditor of a former trustee (JPG) and was entitled by way of subrogation in equity to the rights of JPG to be indemnified out of the assets of a trust for liabilities incurred by it. By a deed of appointment and retirement, JPG was removed as trustee and Jaken was appointed in its place. Trust assets included real property, and the legal title to those properties was transferred to Jaken as new trustee. Jaken then entered into a number of transactions which diminished the trust assets. Some of those transactions were impugned under s 37A of the Conveyancing Act and declared void. 91 The primary judge considered the nature of relief available to a former trustee such as JPG and, by subrogation to JPG's rights, to Mr Naaman, in relation to trust assets that had been transferred by Jaken to third parties. 92 It was common ground before the primary judge that claims under s 37A were available to Mr Naaman. Mr Naaman had submitted, for example, that a transfer of property to a third party was made with the intention to defraud Jaken's creditors and was therefore voidable pursuant to s 37A. Mr Naaman was not relevantly a creditor of Jaken and it is apparent that the s 37A claims were brought by Mr Naaman by subrogation to JPG's rights. 93 The main issue in Jaken was that Mr Naaman also sought to pursue the recipients of the property that had been conveyed away by Jaken, and sought to engage the principles in Barnes v Addy to secure equitable compensation from them. The question then was whether Jaken, as successor trustee, owed a fiduciary duty to JPG not to deal with trust assets so as to destroy, diminish or jeopardise the entitlement to be indemnified. Although it was accepted that a trustee has an entitlement to apply for judicial sale or the appointment of a receiver over the trust assets in order to discharge its liability to a third party, and can obtain interlocutory injunctive relief in that regard, the question was whether those were the only rights to which Nr Naaman was subrogated. A finding that there is a fiduciary duty may expand the relief that a former trustee (and so a creditor exercising rights of subrogation) might obtain. 94 The primary judge found that there was such a fiduciary duty. That part of the decision was reversed on appeal (Leeming and Kirk JJA, Bell CJ dissenting). The question of what additional assistance equity may give a trustee having regard to any fiduciary duty is not relevant to this appeal. 95 What is relevant is that orders were made under s 37A at first instance on Mr Naaman's application. The primary judge found that each of the impugned transactions was undertaken with the intention, or at least had the effect, of destroying, diminishing or jeopardising JPG's right of indemnity from the assets of the trust and, among other things, was liable to be set aside pursuant to s 37A of the Conveyancing Act: Jaken (PJ) at [8(5)], [508]. 96 Mr Naaman's standing under s 37A was assumed: Jaken (PJ) at [288]. I accept that little can be drawn from an assumed position: CSR Ltd v Eddy [2005] HCA 64; (2005) 226 CLR 1 at [13]. Having said that, in a case where Mr Naaman's rights and standing (by subrogation to JPG's rights) were clearly the subject of dispute, it is no small thing that there was some agreement, at least on this point. Mr Naaman's rights by subrogation could be no greater than those of the trustee. 97 Moreover, on appeal, although standing under s 37A was not argued, both Leeming JA and Kirk JA assumed that a predecessor trustee may be able to invoke provisions such as s 37A. 98 Leeming JA described the issue before the Court as follows (at [35]): … The significance of the obligation being fiduciary as the primary judge found was that when the successor trustee transferred trust assets to third parties who were not bona fide purchasers for value without notice in order to defraud creditors including the former trustee, not only were the transfers voidable under statute, but the recipients and those involved were personally liable under either or both limbs of Barnes v Addy. … 99 Having referred to transfers being voidable under statute, his Honour also observed (at [220]): However, JPG and through it Mr Naaman is a creditor of the trust who is entitled to have recourse to trust assets including land alienated contrary to s 37A of the Conveyancing Act and its Victorian equivalent. 100 Kirk JA said (at [233]): The vulnerability of a person in the position of the respondent should also not be overstated. The previous trustee has proprietary rights. This case also illustrates the potential application of provisions such as s 37A of the Conveyancing Act 1919 (NSW). Further, there was no dispute in this case that the respondent's interest in the realty held by the trust was capable of being protected by a caveat on title. That is more than can be said of some other valuable equitable interests: note Thynne v Sheringham [2023] NSWCA 181. 101 What can be drawn from Rothmore Farms and Jaken (FC) is support for the view that s 86 of the LPA may be invoked by a former trustee who has a right to be paid from trust assets, and so, it follows, for the view that a trustee may be a creditor for the purpose of s 86 of the LPA and analogous provisions. 102 I turn now to consider against that backdrop whether a broad interpretation of 'creditor' is justified so that it includes a trustee who is entitled to have recourse to trust assets.

Consideration 103 It is important to return to the purpose of provisions such as s 86, observing that it is to counter the defrauding of creditors. It facilitates the intervention of a creditor to frustrate a disposition so that the property is available for distribution to them: Cannane v J Cannane Pty Ltd (in liq) [1998] HCA 26; (1998) 192 CLR 557. The focus is on assets that would otherwise have been available to a debtor's creditors, and the diminution of their position in that regard: Lloyds Bank Ltd v Marcan [1973] 1 WLR 1387 at 1390-1391, cited in Marcolongo at [32]. 104 As explained in Carter Holt, a trustee's right of indemnity generates an equitable proprietary interest, but it is a right to have the trust property applied in indemnifying the trustee. The equitable proprietary interest in the trust property is not security for payment of any debt, because there is no debt payable by any party to the trustee. I accept that a trustee is not a creditor in the ordinary sense of having a 'debt'. The right of indemnity does not impose any personal liability on any party to make a payment. The new trustee incurs no personal liability to the former trustee in respect of the expenses of the former trustee. 105 However, the right to indemnity carries with it a right to payment out of the trust assets. Whilst that right is distinct from a conventional debt due, having regard to the purpose and terms of s 86 of the LPA, I consider it extends to an application by a trustee whose right to payment from trust assets is diminished by a transaction executed with the requisite intention to defraud. To limit the operation of the section to a traditional debtor-creditor relationship is to restrict the meaning of the word 'creditor' in a manner that the section does not otherwise require. 106 It is to be recalled that Young JA in Chen v Marcolongo acknowledged there may be grey areas when it comes to standing under s 86 or its equivalents. Acknowledging the text of the statutory provision and the centrality of that text to its construction, the cases have indicated support over the years to an approach whereby some breadth is to be given to the term 'creditor' in the context of those provisions. So much is apparent from Chen v Marcolongo. There are also indications (and I do not put it more highly) in both Rothmore Farms and, more recently, Jaken (FC) that the provisions should be understood as encompassing a claim that a particular transaction may defraud a former trustee with respect to its right of indemnity. To my mind, however, the observations of both Leeming JA and Kirk JA in Jaken (FC) are consistent with the proper and beneficial construction of a provision such as s 86. 107 I do not consider that any of the authorities prohibit this conclusion. 108 Although a trustee has other remedies and rights, and its indemnity and beneficial interest in assets survives removal, those matters do not compel its exclusion from the concept of a creditor for the purposes of s 86. Because removal deprives a former trustee of its powers and places the assets of the trust under the control of others, the scope for a trustee to be prejudiced in exercising its right to payment or to have those rights diminished is apparent. 109 If conduct is undertaken by or at the direction of the successor trustee with intent to interfere with the trustee's right to payment, then there is no obvious reason why a trustee ought not be able to rely on s 86. 110 As emphasised by the High Court in Marcolongo, a provision such as s 86 is to be given a liberal construction in effecting the purpose of suppressing fraud - the construction I prefer is consistent with this approach. 111 It follows that a trustee with a right of indemnity who has an entitlement to payment out of trust assets may be considered a creditor for the purpose of s 86. The primary judge did not err in this regard.

Ground 3 - reliance on Dr Hamilton's position 112 I have considered, having regard to Boensch v Pascoe [2019] HCA 49; (2019) 268 CLR 593 at [7]-[8], [101], whether it is necessary to address this ground as it is not dispositive of the appeal. I have decided to do so, but it only requires brief reasons. 113 To recall, by ground 3 Ridge Estate asserted that the primary judge erred in having regard to Dr Hamilton's position as a creditor in circumstances where he was not a party to the proceeding. 114 As noted above, the question of whether a person is a creditor relates to both whether the person is prejudiced and so has standing to bring a claim under s 86, and whether the conveyance in question was made with the intent to defraud creditors. 115 The primary judge found that Dr Hamilton was at least a prospective creditor of FPH, given that he provided a personal guarantee of FPH's obligations to NAB (PJ [374]). The appellants do not challenge this finding. 116 Between PJ [369] and PJ [373] the primary judge considered the question, 'Is FPH a creditor to whom s 86 may apply?'. His Honour did so expressly in the context of whether Steven had an intention to defraud creditors (at [369]). At [370]-[371] his Honour considered the argument that FPH was not a creditor because of the nature of the trustee's indemnity. At [372]-[373] his Honour rejected the contention that FPH was not a creditor, as addressed above in respect to ground 2. His Honour then stated (at [374]): Secondly, the respondents' submission assumes, incorrectly, that it is only FPH in its capacity as trustee of the PRT which is the subject of the applicants' allegations. As [110.13] of the [statement of claim] indicates, the applicants allege an intention by Steven to defraud both FPH and Dr Hamilton. The latter was at least a prospective creditor of FPH given his provision of a personal guarantee to NAB of FPH's obligations. Steven knew of the loans taken out by FPH and knew that Dr Hamilton had provided a personal guarantee. 117 It became apparent from the appellants' submissions that it is the first sentence of this paragraph which underlies this ground of appeal. The appellants contend that they were right to assume that whether or not Dr Hamilton was a creditor was not to the point, because only FPH sought to bring a claim under s 86. 118 A number of matters arise from this. 119 First, his Honour concluded that FPH was a person prejudiced by the fraudulent conveyance and entitled to bring a claim under s 86. His Honour proceeded on the basis that there was no submission by the respondents (now appellants) to the contrary (addressed further in relation to ground 5). Therefore, on those findings, FPH could seek to have the Removal Deed declared void under s 86. 120 Second, the claim by the applicants (now respondents) was that the Removal Deed was voidable 'at the instance of FPH'. It was not said to be voidable at the instance of Dr Hamilton and no claim was made by Dr Hamilton to set it aside. He was not a plaintiff in the main action. The primary judge did not go so far in PJ [374] as to suggest that absent FPH having standing to bring the claim, the relief could in any event be granted merely because Dr Hamilton was a creditor. 121 Third, however, his Honour was entitled to take into account the position of Dr Hamilton as a creditor when considering whether Steven had the relevant intent to defraud creditors. It is established that 'to show that creditors have been defrauded, one takes into account prospective contingent and other persons including people who have unliquidated claims in tort': Chen v Marcolongo at [205]. 122 Fourth, the respondents seek to infer from [374] that the primary judge concluded that Dr Hamilton was a person prejudiced, had standing to bring an application under s 86 and in effect was bringing an application. They submitted that if there had been doubt about this, then they should have been permitted to remedy the situation by seeking to have Dr Hamilton joined in the proceeding. They contend that the appellants should not now be able to 'attack Dr Hamilton's standing', and submitted that the appellants are seeking to run a new case. I reject the respondents' submissions as to the effect or potential effect of the findings at [374]. The respondents framed their case at all times as one being advanced by FPH. If they had concerns about FPH's standing to do so, they could have joined Dr Hamilton, but it was not for the appellants to suggest this course to them. As ground 2 makes clear, the status of FPH as a creditor who could bring a claim under s 86 was always in issue. 123 Regardless, there is no error disclosed by the manner in which the primary judge had regard to the position of Dr Hamilton as a creditor, and ground 3 is not made out. 124 Dr Hamilton's position as a creditor remained relevant to the broader question of whether Steven had the requisite intent to defraud creditors.

PART B - SECRET COMMISSIONS CLAIM 172 I have had the opportunity to read Feutrill J's draft reasons in relation to grounds 6-10. I respectfully agree generally for the reasons given by Feutrill J that those grounds are to be dismissed. 173 I add that I have been persuaded that those grounds should be dismissed having regard in particular to the following matters: (a) it was the appellants (the respondents below) who raised in para 35 of their defence a question as to who was able to pursue recovery of the secret commissions from Steven, asserting that 'if (which is denied) Steven had received any secret commissions, the proper plaintiff is AusPods, not [FPH No 1] …' (AusPods being AusPods Property Pty Ltd, the principal on the relevant redevelopment project); (b) the amended defence did not disclose why what was asserted in para 35 was said to be the case; (c) the deed of assignment was subsequently executed on 31 July 2021; (d) it is recited in the deed of assignment that by para 35 of the amended defence the appellants asserted that FHP No 1 was the wrong party to recover the secret commissions, and that although that plea is denied, for the avoidance of doubt Auspods thereby assigned any interests in the chose of action relating to the secret commissions to FPH No 1 - therefore the purpose of the deed of assignment would have been immediately apparent to the appellants on reading it; (e) it was also apparent from the tender of the deed of assignment, and having regard to its terms, that the respondents intended to rely upon it to address the claim made in para 35 of the defence; (f) the relevance of the deed of assignment to that pleaded issue is readily apparent, and the primary judge's ruling that it was admissible was correct and unsurprising; (g) how the respondents intended to deploy the deed of assignment was also readily apparent; (h) the issue of the assignment was therefore clearly 'in play' at trial; (i) the primary judge left it open to the parties to make whatever submissions they wished to make about the deed of assignment in final submissions; and (j) the deed of assignment was clearly also central to the matter of law raised for the first time by the appellants in oral closing submissions based on Powell & Thomas v Evan Jones & Co [1905] 1 KB 11 and Novoship (UK) Ltd v Mikhaylyuk [2014] EWCA Civ 908; [2015] QB 499. 174 In these circumstances I do not consider that failure to plead the deed of assignment denied the respondents the ability to rely upon it as they did: that is, in response to matters raised by the appellants. There was no denial of procedural fairness in the primary judge's decision to place reliance on the unpleaded deed of assignment. The appellants were not taken by surprise. There was no question as to the evidentiary value of the deed of assignment. The appellants had the opportunity to make whatever submissions they wished to make in relation to the deed and no practical prejudice was established. 175 I agree that it is therefore unnecessary to deal with the notice of contention, and endorse Feutrill J's observation that it is arguable that neither Powell & Thomas nor Novoship are to be understood as proposing a general rule that an agent is not entitled to recover secret commissions obtained by a sub-agent.

Leave to appeal 186 Leave to appeal from the costs orders is required: see generally Harvard Nominees Pty Ltd v Dimension Agriculture Pty Ltd (in liq) [2023] FCAFC 140 at [13]. Prior to the hearing of the appeal, it was ordered that the application for leave to appeal be heard and determined at the same time as the main appeal. 187 The Ridge Estate parties therefore must satisfy the principles concerning leave to appeal. In short, those principles require an applicant for leave to demonstrate that the decision in respect of which leave to appeal is sought was 'attended with sufficient doubt to warrant its being reconsidered' and that 'substantial injustice would result if leave were refused, supposing the decision to be wrong': Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398.

Costs and discretion 188 The Court has a broad discretion under s 43(2) of the Federal Court of Australia Act 1976 (Cth) when determining appropriate costs orders, a discretion which must be exercised judicially, that is, not arbitrarily, capriciously, or so as to frustrate the legislative intent: Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [22] (Gaudron and Gummow JJ). 189 The Ridge Estate parties accepted that it would be incumbent upon them to establish an error of the nature identified in House v The King (1936) 55 CLR 499 in the exercise of the discretion as to costs. As Dixon, Evatt and McTiernan JJ held in House v The King at 504-505: It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. 190 In the present case, the Ridge Estate parties submitted that error was to be inferred from the overall result, which was said to be unreasonable or plainly unjust.

The primary judge's reasons 192 His Honour commenced with this acknowledgement: [Costs] could be an issue of some complexity, bearing in mind, a) the number of issues in the proceedings; b) the capacity in which the applicant has brought those claims; c) the capacity in which respondents have been found liable on those claims on which the applicants have succeeded; d) the number of claims on which the applicants have failed; and e) some interrelationship - by no means complete - between the various claims. This is a trial in which issues of credit on the part of the applicants and the respondents loomed large, and those issues have had relevance to more than one of the issues in the proceedings. 193 Having referred to the discretion under s 43 of the Federal Court Act, his Honour observed that the FPH parties had succeeded on the fraudulent conveyance claim, the indemnity claim, the conversion claim, the secret commissions claim and the cattle purchase claim. His Honour also observed that on the other hand, the FPH parties had lost on significant claims, including the misleading or deceptive conduct claim. The FPH parties also lost on the restitution claim, the sham arrangements claim, the recovery of loans claim and 'minor' claims, being the agistment and Lot 2 licence claims. The Ridge Estate parties lost on their counterclaim. 194 His Honour said that although the task was not easy, having regard to the different claims and capacities in which some of the parties acted, he would proceed on the basis that it would be desirable to make orders which facilitate the ready quantification of costs. 195 His Honour then observed that: (a) the greater part of the trial was taken up with issues associated with a claim on which the FPH parties failed, namely the misleading or deceptive conduct claim; (b) the FPH parties' lack of success on that claim should be reflected in the costs order; (c) there are many cases in which the courts have cautioned against descending into an analysis of the issues upon which the parties have succeeded or failed in determining costs, but similarly the courts have recognised that fairness, efficiency and good sense might require such an approach, referring to the principles on apportionment of costs that his Honour collected in Hockey v Fairfax Media Publications Pty Limited (No 2) [2015] FCA 750; (2015) 237 FCR 127 at [84]-[91]; and (d) late amendments relating to the secret commission claim and the indemnity claim had little role to play in considering costs in the proceeding, because the parties were already 'locked in' so that trial was inevitable, and liability did not rest on any late amendments. 196 His Honour concluded: I am satisfied that, looked at overall, given that the applicants were the successful parties, that they should obtain some order for costs in their favour, but that it should be very much reduced, given their failure on those claims on which they were unsuccessful and in particular their failure on the claim which was the principal claim in the proceedings. Exercising what is no doubt a somewhat of a broad brush, I consider that a just result on costs is … [orders made].

Submissions on costs 198 Submissions on the leave application and proposed costs appeal were invited from the parties. 199 The Ridge Estate parties submitted that the proper starting point for the primary judge in assessing costs was that they had succeeded on the point that occupied some 60% of the trial and other claims that occupied 10%, and so they should have 70% of their costs paid, with a reduction to take into account that the FPH parties succeeded on some claims and so should notionally be entitled to some costs. On that basis they said the appropriate order was that the FPH parties pay 50% of the Ridge Estate parties' costs. 200 The Ridge Estate parties submitted that the various claims that were litigated were separate and distinct, with the only relevant commonality being the identity of the protagonists. They submitted that in circumstances where proceedings raise disparate claims which have differing outcomes, the 'correct approach' is that the Court should assess which party has succeeded on the claims that have caused the most costs, and then make a deduction to reflect the issues that the other party succeeded on. In support of this submission they referred to Aussiegolfa Pty Ltd (Trustee) v Commissioner of Taxation (No 2) [2018] FCAFC 156, where it is said such an approach was adopted. 201 They also referred generally to Sandvik Intellectual Property AB v Quarry Mining & Construction Equipment Pty Ltd (No 2) [2017] FCAFC 158 (Greenwood, Rares and Moshinsky JJ) where it was said: [9] Section 43(3)(e) of the Federal Court of Australia Act 1976 (Cth) provides that an award of costs may be made in favour of, or against, a party whether or not that party is successful in the proceeding. The approach usually taken is that costs follow the outcome of an appeal: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (2015) 327 ALR 192 at [6] per French CJ, Kiefel, Nettle and Gordon JJ; see also Les Laboratoires Servier v Apotex Pty Ltd (2016) 247 FCR 61 at [303]; Oshlack v Richmond River Council (1998) 193 CLR 72 at [66]-[68]. [10] In Queensland North Australia Pty Ltd v Takeovers Panel (No 2) (2015) 236 FCR 370, Dowsett, Middleton and Gilmour JJ, after referring to Ruddock v Vadarlis (No 2) (2001) 115 FCR 229 and State of Victoria v Sportsbet Pty Ltd (No 2) [2012] FCAFC 174, said at [11] that these decisions treat the success or failure of the relevant party as being the starting point in consideration of the question of costs, but contemplate at least three distinct categories of situation in which a successful party might be deprived of costs, or even ordered to pay the costs of the other side. These were identified as follows: One such category is where the applicant has been only partially successful in that it has not obtained all of the relief sought. The second category is where a party has succeeded in obtaining the relief sought, but has not succeeded on all bases (factual or legal) upon which it sought such relief. Of course, it is possible that a particular outcome will fall into both categories. A third category involves consideration of the successful party's conduct of the case. [11] After referring to the decision of Finkelstein and Gordon JJ in Bowen Investments Pty Ltd v Tabcorp Holdings Ltd (No 2) [2008] FCAFC 107, Dowsett, Middleton and Gilmour JJ in Queensland North Australia then said at [18]: [Section 43 of the Federal Court of Australia Act] does not mention costs following the event. In Ruddock, Bowen Investments and Sportsbet, the Court proceeded on the basis that ordinarily, the successful party may reasonably expect to receive its costs, whether that outcome be described as costs following the 'event' or otherwise. The question of costs is within the Court's discretion. As we have said, relevant factors include the extent of a party's success, the extent of its success or failure on individual issues and its conduct of the proceedings. 202 I also note that before the primary judge the Ridge Estate parties relied on an affidavit of Mr Mark Gowans, one of their legal representatives, which sought to analyse the time at trial allocated to each of the 13 claims. This included analysing the respective parties' witness statements, the transcript of the trial and the parties written closing submissions, allocating the cumulative page numbers of those documents to each issue, and then assessing on a percentage basis the proportion of trial allocated to each issue. The Ridge Estate parties contend that Mr Gowan's task identified (for example) that about 60% of time was spent on the misleading or deceptive conduct claim and about 13% was spent on the indemnity claim. 203 The Ridge Estate parties in their leave application relied on Mr Gowan's subjective analysis for the purpose of asserting that 70% of the trial was spent on the misleading or deceptive conduct and 'other minor' claims. They then then built on this submission to contend that they were the successful parties, and so the starting point should have been their success, rather than that of the FPH parties. 204 The Ridge Estate parties submitted that his Honour 'fairly identified the principles' but the result does not reflect the analysis that was undertaken. Key to their position is that they contended that they were the successful parties, and not the FPH parties. They accepted that it was appropriate to fashion a single costs order, rather than multiple costs orders 'moving in different directions' that would add to the complexity of any taxation. They contended that House v The King error is apparent from the outcome, submitting that the outcome is plainly unjust and outside the boundaries upon which a reasonable decision-maker might have concluded in the circumstances.

Consideration 205 It is appropriate to comment first on Mr Gowan's analysis. It is not clear from the costs reasons what use the primary judge made of the analysis. According to counsel for the FPH parties, his Honour had regard to it at the hearing. I note that his Honour in an earlier decision said that exercises of the nature of such an analysis are to be deprecated, and that attempts at mathematical precision are not appropriate: Lucas Earthmovers Pty Limited v Anglogold Ashanti Australia Limited (No 2) [2019] FCA 1864 at [33]-[35]. I endorse his Honour's comments in that regard. 206 Great care must be taken not to elevate the value or role of such an analysis. It has the potential to treat as divisible the evidence in the trial that may in fact inform the resolution of a number of issues or questions of reliability or credit. It may tend to reward the prolix rather than the focused. It is not an approach that is generally considered helpful, the court generally proceeding to apportion or allocate costs relating to issues as a matter of impression, and endorsing a broad brush approach. 207 The primary judge did not find that 70% of the trial time was spent on the misleading or deceptive conduct and other claims the FPH parties failed on, and nor was it necessary to make such a finding. Nor was his Honour obliged to accept the percentages allocated by Mr Gowans. His Honour was entitled to take into account his own assessment of the manner in which the issues had occupied the Court's time, together with matters such as the interaction of such issues and their impact upon credibility findings. In contrast to the Ridge Estates parties' submission, his Honour did not consider the only relevant commonality was the identity of the protagonists. Having managed the proceeding, conducted the trial and written a long and detailed judgment addressing the various claims, his Honour was well informed as to all of those matters. 208 As the summary of the numerous claims above indicates, a detailed assessment by the Court of the manner in which the costs relating to various claims should fall would itself be a considerable and somewhat artificial task. Further, this course would have the potential disadvantage in terms of costs and time that the costs for all parties and for a range of issues would need to be taxed. 209 Regardless, it is clear that his Honour took into account that the FPH parties had lost on a significant claim. His Honour recognised that there had been mixed success. His Honour took into account the submission that the greater part of the trial was taken up with the issues associated with the claim on which the FPH parties failed. However, his Honour concluded that the FPH parties had been successful in the proceedings and that such success (albeit incomplete) should be reflected in a costs order in their favour. Their success was not nominal. The FPH parties succeeded in obtaining orders and declarations granting them relief with respect to a number of claims (and separately I observe that the fact that an appeal was pursued with respect to some of the claims tends to suggest that they were not claims of minor significance to the parties). 210 This was not a case where the parties were equally successful, or where one was almost wholly successful. The outcome was more nuanced than that in Aussiegolfa, a case where the parties agreed that a costs assessment should be issue-based, but where there were only two issues and each party was successful in relation to one issue. 211 Having regard to the principles, his Honour's approach of commencing with the position that the applicants at trial were successful in obtaining relief and so were successful parties is an approach consistent with the authorities. In particular, it is consistent with the Full Court's explanation in Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128; (2015) 236 FCR 370 at [11], cited in Sandvik Intellectual Property and extracted above. Although the FPH parties were successful in obtaining orders for certain payments and declarations, his Honour did not order simply that costs follow the event. Rather, his Honour adopted an approach that had regard to the issues and the extent of success, and expressly took into account that the success of the FPH parties was only partial. His Honour properly had regard to the overlap of issues - for example, his Honour referred to the inter-relationship between the claims, and the relevance of issues of credit to more than one of the issues in the proceedings. 212 His Honour was not obliged, as the Ridge Estate parties in effect submitted, to start with the position that they were to be regarded as the successful parties because they successfully defended the (significant) misleading or deceptive conduct claim. His Honour's approach acknowledged that there were various degrees of success on the part of both groups of parties. 213 There may well be different costs orders that the primary judge may have made that would also fall within the scope of the proper exercise of discretion. However, that does not establish error on his Honour's part. 214 Returning to the proposed appeal grounds, for the reasons I have given, I do not consider it is sufficiently arguable that the primary judge was obliged to start from the position that the Ridge Estate parties were the successful party in the proceeding. His Honour had regard to the principles relating to the apportionment of costs by a consideration of issues, and it is not sufficiently arguable that the manner in which his Honour applied those principles was in error. The FPH parties made no submissions with respect to the proposed ground of appeal that raised the impact of late amendments and, in any event, it is not sufficiently arguable that his Honour erred in concluding that those amendments had little role to play in considering costs in the proceeding, having regard to the entrenched position of the respective parties. Nor, having regard to all of the circumstances, is it sufficiently arguable that the order for costs was unreasonable or plainly unjust so as to disclose error within the principles explained in House v The King.

[2023] VSC 54

[2022] QSC 279

[2019] VSC 614

[2015] QSC 249

[1988] HCA 12

[2012] WASCA 157

(1990) 169 CLR 279

(2010) 189 FCR 356

(2019) 268 CLR 593

(2009) 239 CLR 346

(1998) 192 CLR 557

(2019) 268 CLR 524

(1998) 192 CLR 226

(2005) 226 CLR 1

(1991) 33 FCR 397

(2015) 237 FCR 127

(1936) 55 CLR 499

(2008) 73 NSWLR 653

(2018) 260 FCR 310

(2016) 329 ALR 625

(2017) 253 FCR 46

(2008) 74 NSWLR 550

(2011) 242 CLR 546

(1979) 144 CLR 360

(1998) 193 CLR 72

(2019) 58 VR 524

(1992) 35 FCR 515

(2015) 236 FCR 370

(1986) 161 CLR 141

(2018) 368 ALR 607

(1988) 180 CLR 491

(2012) 44 WAR 1

(1934) 50 CLR 341

(2009) 260 ALR 353

(2007) 215 FLR 243

(2015) 327 ALR 192

(2016) 247 FCR 61

(2001) 115 FCR 229

(1991) 217 ALR 171

(1987) 13 FCR 413

(1916) 22 CLR 490

(2009) 237 CLR 638

[1999] FCA 781

[1990] HCA 11

[2019] HCA 20

[2005] HCA 64

[2021] FCA 292

[2006] NSWSC 1240

[2016] FCAFC 20

[2015] FCAFC 128

[2014] NSWSC 1484

[2017] FCAFC 158

[1986] HCA 54

[2012] FCAFC 15

[2008] NSWSC 998

[2012] NSWCA 26

[2010] FCA 64

[2009] HCA 32

[2012] NSWSC 1005

[2008] NSWCA 206

[2019] FCAFC 90

[2022] NSWSC 517

[2023] NSWCA 214

[2018] FCAFC 40

[2017] FCA 953

[2008] NSWSC 1344

[2016] FCAFC 98

[2020] NSWSC 866

[1999] FCA 745

[2018] FCAFC 31

[2020] NSWCA 319

[2007] NSWSC 1330

[2001] NSWSC 897

[2023] NSWCA 181

[2012] FCAFC 174

[2008] FCAFC 107