Stone v Melrose Cranes & Rigging Pty Ltd, in the matter of Cardinal Project Services Pty Ltd

relevant facts 7 In their statement of claim the Liquidators, among other things: (1) plead that the relation back day is 15 December 2011 and set out the payments made by CPS to Melrose Cranes in the period commencing 1 July 2011 to 1 December 2011 totalling $308,544.58; (2) plead that Melrose Cranes was a creditor of the company and that the payments to it resulted in it receiving from CPS, in respect of an unsecured debt, more than Melrose Cranes would have received from CPS in relation to the debt if the payments were set aside and Melrose Cranes was to prove for the debt in a winding up of CPS; (3) relevantly, at [13] of their statement of claim, plead that CPS was insolvent at the time when the payments were made to Melrose Cranes; (4) in the alternative and further alternative to [13], plead at [14] and [15] respectively that CPS was insolvent at the time when an act was done or an omission was made for the purpose of giving effect to those payments and that CPS became insolvent by reason of matters including making the payments; and (5) by way of particulars to [13] of the statement of claim the Liquidators say: The Plaintiffs refer to and repeat the Affidavit of Richard Andrew Stone sworn 28 November 2014. A copy of the affidavit has already been provided to the Defendant. An expert report as to insolvency will be filed prior to the hearing. The particulars to [13] are repeated for the purposes of [14] and [15] of the statement of claim. 8 In its defence filed on 7 March 2015 Melrose Cranes pleads in answer to [13] of the statement of claim that: If it is established that each of the payments referred to in paragraph 7 of the Statement of Claim and set out in the Particulars to that paragraph were in fact made to the Defendant by the Company then the Defendant denies that the Company was insolvent at the time that each particular payment was made. Melrose Cranes also denies [14] and [15] of the statement of claim. I note that an amended defence was filed by Melrose Cranes on 30 June 2016. While it makes other amendments it does not change the pleading referred to in this paragraph. 9 In his affidavit sworn 28 November 2014 (the First Stone Affidavit) filed in support of the statement of claim Mr Stone gives evidence in relation to, among other things, the following matters: (1) his belief that CPS was insolvent at the time the payments were made to Melrose Cranes; (2) the fact that CPS is part of a group of companies (the Cardinal Group); (3) the financial performance of the Cardinal Group by reference to consolidated management accounts prepared for the group up to 31 May 2011; (4) that there was a facility held with the National Australia Bank (NAB) for which Cardinal Group Pty Ltd was the primary borrower; (5) a quantity of the Cardinal Group's books and records were destroyed on or about 29 or 30 November 2011 and its electronic record keeping systems had been tampered with; and (6) the particular financial circumstances of CPS. 10 Exhibited to the First Stone Affidavit was a draft report prepared by PPB Advisory who had been retained by the NAB to provide a report on the Cardinal Group for the purpose of providing an assessment of the Cardinal Group's "current financial position, forecast model, short term cash flow need, security position and options available to the Bank". In the executive summary to that report the following is noted: The Group requires a significant restructure and recapitalisation due to unsustainable debt levels and loss making subsidiaries. The best results for the Bank in the short term will be an equity injection sufficient to cover the forecast funding shortfall… Without an equity injection to cover any funding shortfall, or a credible proposal from the directors, we consider the best available alternative for the Bank to be as follows: • ... • CPS, the profitable subsidiary, continues as a going concern to service the reduced debt levels. The directors' equity injection of $900k ideally would be utilised to reduce current debt levels, however, this may be required for working capital for the restructured Group. 11 On 5 June 2015 Foster J made an order requiring the Liquidators to file and serve all further evidence upon which they intended to rely at the final hearing. On 16 July 2015 Foster J extended the time for compliance with that order so that the Liquidators had until 5.00 pm on 31 July 2015 to file and serve the further evidence upon which they intended to rely at the final hearing. 12 On 1 August 2015 an affidavit sworn by Mr Stone on 31 July 2015 was filed (the Second Stone Affidavit). That affidavit was served on Melrose Cranes on 2 August 2015. Relevantly, in the Second Stone Affidavit Mr Stone, among other things: (1) gives evidence about the actual payments made by CPS to Melrose Cranes; (2) provides further evidence under the heading "Insolvency" including referring to and providing copies of correspondence with the NAB; (3) says that there were loans made by related entities to CPS and loans made by CPS to related entities, sets out the net intercompany loan balance owed to CPS and provides an opinion that the intercompany loans are unrecoverable; (4) gives evidence about CPS' financial position and about the Cardinal Group's facility with the NAB including that NAB committed to advance the total sum of $27 million to Cardinal Group Pty Ltd and that the obligations of Cardinal Group Pty Ltd to NAB were guaranteed by all entities within the Cardinal Group including CPS which, as a result, granted charges to the NAB. 13 On 10 September 2015 the proceeding was listed before Gleeson J. The Liquidators were ordered to discover MYOB records that they held and the parties were ordered to exchange proposed categories for discovery and to then exchange lists of documents and give discovery on or before 16 November 2015. On that date Melrose Cranes was also ordered to file and serve its lay evidence on or before 5 October 2015. 14 On 5 November 2015 the proceeding was listed before me. At that time orders were made extending the time within which Melrose Cranes was to file and serve its lay evidence to 27 November 2015 and for Melrose Cranes to provide its proposed categories for discovery within four business days of resolution of an issue that had arisen in relation to access to the MYOB data file provided by the Liquidators. The time by which the parties were to furnish lists of documents and give discovery to each other was extended to 4 December 2015. 15 On 10 December 2015 and 11 February 2016 respectively the proceeding was listed before me for directions. On both those occasions an order was made extending the time for the Liquidators to furnish their list of documents and give discovery ultimately to 10 March 2016. On 11 February 2016 the Liquidators were also ordered to file and serve their lay evidence in reply by 17 March 2016. 16 On 18 March 2016 the Liquidators filed and served an affidavit of Mr Stone sworn on that date and served their list of documents. 17 On 7 April 2016 the proceeding was once again listed before me for directions. An order was made listing the matter for hearing for three days commencing on 27 July 2016. On 4 May 2016 the hearing date was vacated because it transpired that the Liquidators' counsel was unavailable. The proceeding was listed for hearing for three days commencing on 19 October 2016. 18 On 27 June 2016 pre hearing orders were made having regard to the new hearing date. This included orders for the preparation of a court book which required the Liquidators to serve a draft index together with copies of any documents "not yet attached to any affidavit to be relied on in the proceedings or otherwise discovered on or before 29 July 2016" and the defendant to "provide a response to the court book index together with any documents not yet attached to any affidavit to be relied on in these proceedings or otherwise discovered on or before 19 August 2016". 19 In June 2016, upon reviewing Melrose Cranes' amended defence, the timetable leading to hearing and considering the index to the court book, Mr Clayton Allen Davis, the solicitor for the Liquidators (Mr Davis), raised his concern about the solvency information currently in evidence with counsel and his client. Mr Davis says that he was concerned that: (a) the solvency evidence served in the proceedings relied significantly on summaries of the Company's and the Group's business records that were not in evidence; (b) the fact that the Company had cross-guaranteed the Group's liability to the NAB, whilst raised in evidence, may not have been sufficiently evidenced by the Company or the Group's business records; (c) the Company and the Group's total debt to the NAB, whilst referred to in the evidence currently served, may not have been sufficiently evidenced; and (d) the financial position of the Company and the Group at the time of the impugned payments to the Defendant was not expressed with sufficient clarity from documents already discovered to assist the Court to assess the Company's solvency position as at the date of each impugned payment. 20 Mr Davis was concerned that if the issues that he had identified were not addressed the Court would not be in a position to best assess whether CPS was insolvent as at the date of each of the impugned payments and the Liquidators' case could be significantly prejudiced at trial, potentially fatally. Mr Davis says the additional material that the Liquidators now propose to rely on at the hearing is required to discharge their onus of evidencing CPS' insolvency at the time of each of the impugned payments and to make good the factual premises asserted by Mr Stone in the affidavits filed and served to date. 21 Mr Davis gives the following explanation for the delay in identifying this issue and serving Mr Stone's Additional Affidavit: (1) first, he says it took some time to arrange a mutually convenient time for a conference with the Liquidators' counsel and the Liquidators to discuss the solvency evidence. The conference could not take place until 22 July 2016; (2) Mr Davis was on leave from 26 June 2016 until 5 July 2016. He was also away from the office for five days between 26 July 2016 and 5 August 2016 for business reasons unrelated to this proceeding; (3) whilst Mr Davis was away he arranged for his staff, throughout the period and following the conference with counsel on 22 July 2016, to obtain any additional documents and prepare the further evidence that had been identified as being necessary to address his concerns. In relation to documents from the NAB: (a) there was limited correspondence between the Liquidators' office and the NAB in December 2011 and early 2012. There was then no further attempt to obtain documents from the NAB until July 2016. At that point, the Liquidators contacted Dibbs Barker, the previous solicitors for the NAB and for the receivers appointed by the NAB to the Cardinal Group, requesting additional documents; (b) because Mr Stone has a professional relationship with Dibbs Barker he did not anticipate that there would be any difficulty or delay in obtaining the necessary documents in a timely manner. Mr Stone was also concerned not to issue a subpoena to the NAB as it was the largest creditor in the winding up of the Cardinal Group and the Liquidators did not wish to put that creditor to the expense and inconvenience of complying with a subpoena if the NAB documents could be obtained quickly through a direct personal approach to Dibbs Barker; (c) in about mid July 2016 Mr Davis was instructed by the Liquidators that NAB had failed to provide all the relevant documents. Mr Davis realised that it was increasingly urgent to obtain any documents from the NAB. He acknowledges that it was an error of judgment on his part and that the preferred course would have been to issue a subpoena to the NAB earlier. On 15 July 2016 Mr Davis caused an email to be sent to Dibbs Barker requesting copies of documents relating to the NAB facility; and (d) there was then correspondence between Mr Davis' office and Dibbs Barker in relation to the provision of documents by NAB. Ultimately, documents were provided on 10 and 18 August 2016. It also appears that the Liquidators' solicitors were able to obtain copies of charges granted by Cardinal Group companies to the NAB via searches conducted of the relevant registers. 22 On 1 August 2016 Mr Davis caused a draft index to the court book to be served on the solicitors for Melrose Cranes. At the time of doing so he had not had the benefit of counsel's advice on the draft index but, given the orders made that the draft index be served by 29 July 2016, he proceeded to serve it in that form. At that time the Liquidators also put Melrose Cranes on notice that they proposed to serve a further affidavit providing further evidence about the solvency position of CPS. 23 On 12 August 2016, pursuant to orders made by the Court on 11 August 2016, the Liquidators served an amended draft index to the court book which, according to the covering email, set out "all of the documents on which the plaintiffs propose to rely, subject to the issue of leave to rely on further evidence as contemplated by" the orders made by the Court on 11 August 2016. Copies of the additional documents included in the draft index provided on 12 August 2016 were provided to Melrose Cranes. 24 On 24 August 2016 Mr Stone's Additional Affidavit was filed. Exhibited to that affidavit are the additional documents that were included in the amended draft court book index provided to Melrose Cranes on 12 August 2016 as well as further additional documents.

Mr Stone's Additional affidavit 25 It is necessary to consider the nature of the evidence which the Liquidators now seek to rely on as set out in, and exhibited to, Mr Stone's Additional Affidavit. The evidence given and documents exhibited to that affidavit fall into four broad categories but only three remain relevant as the Liquidators have indicated that they no longer intend to rely on the evidence contained in Mr Stone's Additional Affidavit relating to the Environment Protection Authority liability. That is, they will not, if they are given leave to rely on Mr Stone's Additional Affidavit, rely on the evidence given at [13] to [18] inclusive of that affidavit and the documents at pages 271 to 289 inclusive of exhibit RAS3. The balance of the evidence and the documents in Mr Stone's Additional Affidavit fall broadly into the following categories: (1) documents relating to the facility provided by NAB to Cardinal Group Pty Ltd and other entities in the Cardinal Group (Facility Documents); (2) financial reports for each business, trust and/or entity in the Cardinal Group for each month from June 2011 to the relation back day extracted from the MYOB accounting records, summaries of the net intercompany loans for each business, trust and/or entity in the Cardinal Group for each month from June 2011 to the relation back day and adjusted consolidated balance sheet summaries for each business, trust and/or entity in the Group and for the Group for each month from June 2011 to the relation back day (the Group Financial Material); (3) bank statements for the Cardinal Group. These bank statements, which comprise approximately 200 pages, are for various companies in the Cardinal Group and relate to accounts held with the NAB as well as the ANZ and the Commonwealth Bank (Bank Statements); and (4) copies of demands made against companies in the Cardinal Group (Demands). 26 The Facility Documents comprise 270 pages. The First Stone Affidavit mentions the existence of a facility with the NAB and the Second Stone Affidavit provides evidence that the facility to the NAB was guaranteed by other companies in the Cardinal Group including CPS. Melrose Cranes has thus been aware of the existence of the facility, its quantum, the fact that it was cross collateralised and the Liquidators' reliance on its existence for some time. 27 The Group Financial Material has been prepared using MYOB records. CPS' MYOB records were provided to Melrose Cranes on 15 October 2015 and a further copy provided on 10 November 2015 in each case with a password. MYOB records for other companies in the Cardinal Group and a password were provided to Melrose Cranes on 11 March 2016 in the Liquidators' discovered documents contained on a USB device which itself contained 65,000 emails. While Melrose Cranes has had the material in its possession for some time it has not, perhaps understandably given the volume of the material provided, been conscious of it nor has it, until receipt of Mr Stone's Additional Affidavit, considered it to be relevant. It is not clear on the evidence before me how it came to pass that this volume of emails, which seem to be emails provided by the receivers of the Cardinal Group to the Liquidators, came to be provided to Melrose Cranes but I infer that there was an agreement for that to occur and that, at least based on the evidence before me, Melrose Cranes made no complaint about the volume of material received and the way it was provided. I note that Melrose Cranes has always been aware that CPS is part of the Cardinal Group and of the existence of intercompany indebtedness. Mr Stone's evidence has been clear in that regard. 28 The Bank Statements are provided without any explanation given by Mr Stone as to their relevance. They emanate from three banks. The Liquidators' counsel informed the Court that the statements from the banks other than the NAB had been discovered. The Liquidators' counsel also submitted that what is sought to be extracted from the Bank Statements is the balances of the accounts for each of the relevant companies at the end of the relevant period. To the extent there is no explanation of why these documents are relied on counsel for the Liquidators submitted that could be dealt with by a notice to admit facts, a summary of facts and contentions or a brief submission outlining with precision what is sought to be proven. In other words the issue could be met and dealt with in a consensual and cooperative fashion. 29 According to a summary annexed to the Liquidators' submissions, the Demands comprise some of the additional source documents to support the summary of demands which is included at p 486 of RAS 1 to the First Stone Affidavit.

legal principles 30 The Court's discretion to permit reliance on a late filed affidavit must be exercised in a way that promotes the overarching purpose of the civil practice and procedure provisions which is to facilitate the just resolution of a dispute according to law and as quickly, inexpensively and efficiently as possible: see s 37M of the Federal Court Act. Section 37M(2) provides that the overarching purpose includes: (a) the just determination of all proceedings before the Court; (b) the efficient use of the judicial and administrative resources available for the purposes of the Court; (c) the efficient disposal of the Court's overall caseload; (d) the disposal of all proceedings in a timely manner; (e) the resolution of disputes at a cost that is proportionate to the importance and complexity of the matters in dispute. 31 Section 37N(1) of the Federal Court Act requires the parties to a civil proceeding to conduct the proceeding in a way that is consistent with the overarching purpose. 32 Section 37P(2) provides that in a civil proceeding the Court or a Judge may give directions about the practice and procedure to be followed in relation to a civil proceeding. Section 37P(5) provides that, if a party fails to comply with a direction given by the Court or a Judge under subs (2), the Court or Judge may make such order or direction as they think appropriate. Subsection (6) provides that the Court or Judge may do any of the following: (a) dismiss the proceeding in whole or in part; (b) strike out, amend or limit any part of a party's claim or defence; (c) disallow or reject any evidence; (d) award costs against a party; (e) order that costs awarded against a party are to be assessed on an indemnity basis or otherwise. 33 Rule 5.22 of the Federal Court Rules 2011 (Cth) (the Rules) provides, among other things, that a party is in default if it fails to comply with an order of the Court and r 5.23(1) of the Rules provides that if an applicant is in default a respondent may apply to the Court for an order that a step in the proceeding be taken within a specified time or the proceeding be stayed or dismissed for the whole or any part of the relief claimed by the applicant either immediately or on condition specified in the order. Melrose Cranes does not seek an order of that nature. Rather, it moves pursuant to s 37P of the Federal Court Act for an order that the Liquidators not be entitled to rely on any affidavit filed after 29 July 2016 or on any document not listed in the Liquidators' draft court book index provided on 1 August 2016. In effect, they seek an order the Liquidators not be entitled to rely on Mr Stone's Additional Affidavit. 34 In Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm), in the matter of Tamaya Resources Limited (in liq) [2015] FCA 1098 (Tamaya Resources) at [127] Gleeson J summarised the principles enunciated by the High Court in Aon Risk Services Australia Limited v Australian National University (2009) 239 CLR 175 (Aon) which apply to this Court: see Cement Australia Pty Ltd v Australian Competition and Consumer Commission (2010) 187 FCR 261 at [43]. Her Honour said: … Relevant matters the Court is to consider include: (1) The nature and importance of the amendment to the party applying for it: Aon at [102]; (2) The extent of the delay and the costs associated with the amendment: Aon at [102]; (3) The prejudice that might be assumed to follow from the amendment, and that which is shown: Aon at [5], [100] and [102]; (4) The explanation for any delay in applying for that leave: Aon at [108]; and (5) The parties' choices to date in the litigation and the consequences of those choices: Aon at [112] and Luck v Chief Executive Officer of Centrelink [2015] FCAFC 75 ("Luck") at [44]; (6) The detriment to other litigants in the Court: Aon at [93], [95] and [114] and Luck at [44]; and (7) Potential loss of public confidence in the legal system which can arise where a court is seen to accede to applications made without adequate explanation or justification: Aon at [5], [24] and [30]. 35 A Full Court of this Court (Gilmour, Perram and Beach JJ) approved the statement of Gleeson J at [127] of Tamaya Resources: see Tamaya Resources Limited (in liq) v Deloitte Touche Tohmatsu (A Firm) [2016] FCAFC 2 at [125]. While in that matter the Full Court was considering the exercise of the discretion when dealing with parties seeking to make a late amendment to its case, which is not the position here, the principles enunciated as distilled from Aon are of relevance in considering the present application which, in effect, concerns the question of whether I should permit the Liquidators to rely on the Additional Stone Affidavit. 36 In TSG Franchise Management Pty Ltd v Cigarette & Gift Warehouse (Franchising) Pty Ltd (No 1) [2015] FCA 739 Davies J allowed the respondent to call a new witness on day four of the trial, despite an earlier deliberate decision not to call that person to give evidence. At [5] her Honour noted that in determining the application to call the witness to give evidence at that late stage it was relevant to take into account the requirements of ss 37M and 37N of the Federal Court Act and the principles of case management set out by the High Court in Aon. Her Honour articulated the question to be resolved as whether the "interests of justice nonetheless require that the application be allowed". Her Honour concluded that the witness may be a "key and critical witness whose evidence is likely to be material to the determination" of the case.

Consideration 37 Melrose Cranes opposes any grant of leave to the Liquidators to rely on Mr Stone's Additional Affidavit because, in summary: (1) since August 2015 the proceeding has been conducted on the basis that all the Liquidators' material in chief was in evidence; (2) the new material substantially expands the scope of the factual enquiry into the solvency of CPS, in particular, by requiring a detailed analysis of the financial position of each of the other companies in the Cardinal Group, there is insufficient time between now and the trial date to allow Melrose Cranes a fair opportunity to deal with the new material and, if it was allowed, the trial date would need to be vacated for the second time at the Liquidators' request; (3) Melrose Cranes has been deprived of the opportunity to obtain discovery on the wider basis now covered by the evidence and seek the advice of its retained expert in relation to it; and (4) almost all of the additional material is either material that the Liquidators have had available to them since well before they were first ordered to serve their evidence or would have had available had the Liquidators exercised even a "modicum of diligence in their prosecution" of the proceeding. 38 Melrose Cranes submitted that this case is being conducted on the basis that the entirety of the Liquidators' material in chief was in evidence since August 2015. They submitted that the delay in filing Mr Stone's Additional Affidavit is 14 months dating back to the orders made by Foster J in June 2015, rather than 25 days, being the time between when the Liquidators were to provide the draft index to the court book and the date on which that affidavit was filed and served. 39 Given the nature of the content of Mr Stone's Additional Affidavit and the content of the exhibit it should have been filed and served at an earlier date. So much is admitted by the Liquidators both in Mr Clayton's evidence and in submissions made by their counsel. Mr Davis has been candid in his explanation for the delay. Indeed, he has admitted a failure to consider the state of the evidence any earlier than June 2016 and, having done so at that time, immediately identified a potential gap in the Liquidators' evidence which he formed the view should be addressed. From that time he took steps to address the gap as expeditiously as he could. In my opinion the reason for the delay has been sufficiently explained. 40 Melrose Cranes submitted that the Liquidators' evidence about the importance of the further material is couched in generalities and that no rigor has been applied to identifying whether the introduction of the further evidence is necessary as opposed to merely desirable. I do not accept that submission. Mr Davis has explained the need for the material in some detail. He says that without it the Liquidators' case could be significantly prejudiced at trial, potentially fatally. The relevance of each category of document is set out in an annexure to the Liquidators' submissions. Leaving aside the Demands, the documents essentially go to the question of the solvency of CPS and/or the Cardinal Group. The Demands constitute some of the additional source documents relied upon for the summary of demands which is annexed to the First Stone Affidavit. 41 Melrose Cranes submitted that it is now not possible for it to properly deal with Mr Stone's Additional Affidavit if the trial is to proceed commencing on 19 October 2016. If that were to occur it says it would be prejudiced because it would be deprived of the opportunity to properly defend the claim. Melrose Cranes' solicitor sets out in some detail the steps she would have taken to properly prepare for hearing had Mr Stone's Additional Affidavit been available at an earlier date. They include providing the material to counsel and the expert retained on behalf of her client, potentially seeking further discovery or issuing subpoenas or notices to produce, reviewing any further documents received and, if considered necessary, retaining and briefing an independent expert to provide a report as to solvency. 42 Melrose Cranes also submitted that Mr Stone's Additional Affidavit will expand the case so that it cannot be completed in three days. Melrose Cranes is a family owned business. It contended that if the trial date is vacated and the trial goes over for a significant time, it would be subject to a further significant period of both financial and emotional stress entirely caused by the Liquidators. 43 The evidence given by the solicitor for Melrose Cranes is that if the Liquidators are permitted to rely on Mr Stone's Additional Affidavit then they will not be able to consider and meet that evidence in the time between now and the commencement of the trial on 19 October 2016. So much is accepted. It is clear that if the Liquidators are permitted to rely on Mr Stone's Additional Affidavit then the trial date will need to be vacated, orders will need to be made to allow Melrose Cranes to meet it and the matter will have to be set down for hearing at a future time. 44 Melrose Cranes submitted that the Liquidators had made a choice either to run with the evidence they had served in August 2015 or alternatively not to consider the state of the evidence before setting the matter down for trial. It further contended that the Court was in a position where it could not determine which of those choices were made but that neither choice portrays the Liquidators in a favourable light. 45 It is beyond question that, at least until June 2016, the Liquidators were running the case on the basis of the evidence as filed. They had made that choice but, as I have already noted, they have been frank in their disclosure that the gap in their evidence only came to light when their solicitor undertook his review of the state of the evidence. While that occurred late in the piece, they notified Melrose Cranes that they would need to file further evidence some ten weeks prior to trial and the further evidence was provided approximately nine weeks prior to trial. 46 Ultimately the question for the Court is whether the interests of justice require that the Liquidators be allowed to rely on Mr Stone's Additional Affidavit. There is evidence before me that Mr Stone's Additional Affidavit is critical to the Liquidators' case. Essentially, it annexes a volume of material which goes to the question of solvency, a key issue in the proceeding. It is largely a tender of business records in categories that could not come as a surprise to Melrose Cranes given the evidence filed by the Liquidators to date. True it is that some of these records would have been available to the Liquidators for some time and, to the extent that the records were not available, they could have, and should have, been sourced earlier using the compellable processes of the Court available to a party to proceedings. However, that did not occur. The Liquidators concede that they should have identified the need for the further evidence earlier and, to the extent they needed to obtain the material from other parties, they should have obtained it by way of those compellable processes. 47 I accept that some prejudice may flow to Melrose Cranes if the Liquidators are permitted to rely on Mr Stone's Additional Affidavit. However, it is clear that the evidence is highly relevant to the matters in issue and that it is critical that the Liquidators be permitted to lead the evidence so as to plug a perceived gap in their case. Bearing in mind that the Liquidators are bringing the proceeding for the benefit of all creditors in my opinion they should be permitted to rely on Mr Stone's Additional Affidavit and the interests of justice are best served if they are permitted to do so.

the consequences of permitting the liquidators to rely on Mr Stone's additional Affidavit 48 Given the prejudice that will be visited on Melrose Cranes as a result of permitting the Liquidators to rely on Mr Stone's Affidavit at the hearing, I propose to accede to Melrose Cranes' request that, in the event that I decline to make the orders in its interlocutory process and I permit the Liquidators to rely on that affidavit, the trial date should be vacated. In my view, Melrose Cranes should not be put in a position where it cannot, in the time available between now and the commencement of the trial, consider and properly meet the additional evidence. 49 While the evidence filed on behalf of Melrose Cranes suggested that it might need as much as two to three months to address the issues raised by the evidence, that assessment was made without, what I understand to be, a full and proper consideration of the evidence. Upon further consideration by the solicitors for Melrose Cranes that may or may not be the case. However, in the meantime the trial date should be vacated.

costs 50 That then leaves the question of costs. Melrose Cranes submitted that if the Liquidators are given leave to rely on Mr Stone's Additional Affidavit then its costs thrown away by reason of that leave and by reason of the vacation of the hearing date should be paid by the Liquidators on an indemnity basis and forthwith. 51 Counsel for the Liquidators accepted that, in circumstances where the Liquidators are given leave to rely on Mr Stone's Additional Affidavit, Melrose Cranes is entitled to its costs thrown away by reason of that leave and by reason of the vacation of the hearing date on an indemnity basis but that there should not be an order that those costs be payable forthwith. 52 The Court's power to award costs is found in s 43 of the Federal Court Act. It is a broad power which gives the Court a wide discretion. The discretion must be exercised judicially. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136, Toohey J set out three principles on the exercise of the discretion based on the decided cases at the time: (1) in the absence of special circumstances costs follow the event; (2) the costs order should reflect the degree of success attained; and (3) a successful party may be ordered to pay some costs in respect of unsuccessful aspects of the case. 53 The Court also has power to award indemnity costs: s 43(3)(g). That will usually occur when there is some special or unusual feature to justify the exercise of the discretion in that way. Here the Liquidators agree that costs thrown away by reason of the leave they seek and the vacation of the hearing date, which is occasioned by that leave, ought to be awarded on an indemnity basis. Even absent that consent I am of the opinion that this is an appropriate case for an award of indemnity costs. The late filing of Mr Stone's Additional Affidavit was caused by an admitted oversight or omission on the Liquidators' part. Had their attention been turned to the proceeding at an earlier date, as required by orders of this Court, the gap in their evidence would have been identified and addressed much earlier and Melrose Cranes would have been in a position to consider and meet that evidence and prepare its case on the basis of the additional evidence now sought to be relied on rather than on the basis of the now admitted incomplete evidence. 54 As noted Melrose Cranes seeks an order that those costs be payable forthwith. Rule 40.13 of the Rules provides that if an order for costs is made in an interlocutory application the party in whose favour that order is made must not tax those costs until the proceeding in which the order is made is concluded. A party seeking a forthwith costs order needs to obtain an order pursuant to r 1.35 of the Rules which permits the Court to make an order which is inconsistent with the Rules in which event the order will prevail. 55 In McKellar v Container Terminal Management Services Limited [1999] FCA 1639 Weinberg J, in considering an application for an order for costs payable forthwith under the former O 62 r 3, summarised the authorities in relation to the rule as it then stood. The principles taken from those authorities and the circumstances in which such an order might be made were that: (1) the discretion should be exercised in favour of a party who establishes that the demands of justice require a departure from the general practice and that it might be appropriate to use the rule where the final determination of the proceeding was far away: at [15] citing Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd (unreported, 22 May 1998) per Branson J; (2) where there had been a long delay in close of pleadings by the pursuit of an ill-considered and perhaps unnecessary claim: at [16] citing Harris v Cigna Insurance Australia Ltd (1995) ATPR [41,445] per Kiefel J; (3) where the effect of an interlocutory application might be to remove a cause of action from the dispute between the parties: at [18] citing from Mitanis v Pioneer Concrete (Vic) Pty Ltd & Ors (1988) ATPR [41,623] per Goldberg J; (4) where an applicant had failed to file an amended statement of claim, despite a respondent's suggestion that it do so and where the filing only occurred after a successful strike out application: at [19] citing Vasyli v AOL International Pty Limited & Anor (unreported, 2 September 1996) per Lehane J; and (5) where there had been an omission to plead certain matters in the absence of which the matter could not proceed: at [20] citing Batten v CTMS Ltd [1999] FCA 1576 per Kiefel J. 56 In my opinion it is not appropriate to make an order that the costs be payable forthwith. This is not a case where the interests of justice require such an order. While there has been delay and perhaps significant delay on the part of the Liquidators, there has not been a complete failure by them to prosecute the proceeding, they have not changed the nature of their case, they have not failed to plead a part of their case and nor is the conclusion of this case so far away that an order of this nature ought to be made at this stage. 57 That then leaves the costs of the interlocutory process itself. The outcome requires me to dismiss that application but it does not follow, in these circumstances, that the Liquidators should have their costs of the interlocutory process. In my opinion, the filing of the interlocutory process was necessitated by the late notification by the Liquidators of the need to file further evidence. Had the interlocutory process not been filed the Liquidators would certainly have had to seek the Court's leave to rely on Mr Stone's Additional Affidavit. Whilst they have been successful in achieving an order of that nature, in my view, they have sought an indulgence from the Court which has been granted. The Liquidators should pay Melrose Cranes' costs of the interlocutory process.

conclusion 58 As a consequence of the matters set out above I made orders that: (1) the plaintiffs have leave to rely on the affidavit of Richard Andrew Stone sworn 23 August 2016; (2) the hearing of this matter scheduled to commence on 19 October 2016 be vacated; (3) the matter be listed for directions on 8 September 2016 at 9.30 am; (4) the plaintiffs to pay the defendant's costs thrown away by reason of the order made granting leave to the plaintiffs to rely on the affidavit of Richard Andrew Stone sworn 23 August 2016 and by reason of the vacation of the hearing date on an indemnity basis; (5) the plaintiffs to pay the defendant's costs of the interlocutory process filed on 8 August 2016; and (6) the interlocutory process filed on 8 August 2016 be otherwise dismissed. I certify that the preceding fifty-eight (58) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Markovic.