ZAPPIA v GRANT BAINES TRANSPORT PTY LIMITED

ZAPPIA v GRANT BAINES TRANSPORT PTY LIMITED - [2010] NSWSC 98 - NSWSC 2010 case summary — Zoe

[14]

(3) Background 7 GBT claimed that it provided transport services to Zaps Logistics between 30 December 2004 and 15 March 2005 ("the relevant period") in accordance with particulars set out in Schedule 1 to the Amended Statement of Claim. 8 The proceedings have developed a somewhat lengthy history. They were initially listed before the Local Court, Newcastle (his Honour, Magistrate Morahan) who heard and, in due course, in a reserved judgment determined the proceedings on 11 September 2007 in favour of GBT. 9 On 24 October 2007, Mr Zappia appealed to this Court from that judgment and from an earlier decision of 1 June 2007 in which he was ordered to pay the costs of an adjournment on an indemnity basis. 10 The appeal was heard by Hislop J on 8 May 2008. In a judgment delivered on18 June 2008, his Honour concluded that the express finding by the Magistrate was that Zaps Logistics had become insolvent when Mr Zappia became unwilling to inject further funds into the company and appointed a liquidator [sic] administrator. This, it was noted, occurred in or about July 2005. That finding could not support the judgment which was entered and, accordingly, on this basis there had been an error on a matter of law. The relevant period in respect of the issue of insolvency was, in fact, 30 December 2004 to 28 March 2005. The finding as to insolvency, accordingly, fell outside this period. 11 In the course of his judgment, Hislop J stated:- "11. In my opinion, it is appropriate to set aside the judgment in favour of Transport and remit the matter to the Local Court for redetermination of the issue of the date of the insolvency of Zaps and such other matters as remain in issue, once that question is determined." 12 His Honour made the following order (Order 1):- "The judgment in favour of the defendant, Grant Baines Transport Pty Limited, be set aside and the matter remitted to the Newcastle Local Court to be redetermined." 13 The proceedings were listed before the Local Court, Newcastle (her Honour, Magistrate Truscott) on 2 December 2008 and 12 March 2009. Mr Speakman SC then appeared on behalf of GBT. 14 On 2 December 2008, the parties agreed to the new hearing proceeding upon "the papers", that is, upon the evidence that had been before Magistrate Morahan. The transcript of that day records Mr Speakman as follows:- "… evidence that was before his Honour Magistrate Morahan, including the transcript have such evidentiary status before your Honour as it had before Magistrate Morahan. In other words, among other things Mr Zappia's evidence is in but each side is free to make submissions about the weight it should be having regard to the circumstances of how it got in. … Neither party makes a submission about the failure to make witnesses available for cross-examination today. Neither party makes a submission about the failure by the other party to seek to cross-examine a witness today …"

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(b) The grounds of appeal 28 Although the plaintiff, Mr Zappia, raises 22 grounds of appeal, the principal issues were formulated in the Plaintiff-Appellant's Written Submissions on Appeal (p.2) as follows:- "These grounds include that:- (i) Zappia challenges the consent of the liquidator Mr Sleiman in which he purported to (on Grant Baines case), authorise the bringing of the action. (Mr Sleiman swore an affidavit stating to the effect that he never gave consent); (ii) The plaintiff bore the onus as to positively proving insolvency on the basis of the findings of the Court below that the presumption of insolvency would not assist the Court in determining the action in the circumstances of this case; (iii) Grant Baines having filed and read all the affidavits of the defendant in the Court below, (Zappia), is bound to have accepted the totality of the evidence put forward by Zappia as to:- (a) third party funding being available to the company prior to the appointment of an administrator; (b) the defence that the appellant relied on others to keep him informed as to the financial circumstances of the company; (c) the claim of Grant Baines as a creditor of Zaps was not an undisputed claim, and that the reason that its accounts were not attended to was because of issues as to the quality of its service to Zaps; (iv) The Court was obligated to accept the unchallenged evidence of Barry Cook relied upon by Zappia at the trial on the question of solvency; (v) The discretion of the Court miscarried in:- (a) setting aside the orders as to costs by Magistrate Morahan dealing with the expert report of Raymond Tolcher; and (b) in ordering Mr Zappia to pay the costs of the notice of motion on an indemnity basis on the question of consent, where the appellant was relying on fresh evidence being an affidavit of Mr Sleiman to same effect, and was proceeding on a Notice of Motion, regularly filed." 29 Mr Fagan, on behalf of GBT, submitted that no error of law had been demonstrated in relation to the learned Magistrate's determination of the issue of consent. 30 In relation to the remaining grounds of appeal, he contended that they merely raised straight questions of fact, in particular, questions as to how to assess and evaluate certain of the evidence which did not involve any questions of law at all.

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(a) The issue of "consent" 31 The issue was initially raised and decided adversely to Mr Zappia by his Honour, Magistrate Morahan on 11 September 2007. Mr Zappia subsequently applied to her Honour, Magistrate Truscott by Notice of Motion to file an affidavit of Mr Sleiman sworn 20 November 2008 on the issue of consent upon the basis that it constituted "fresh" evidence. He sought an order striking out the plaintiff's claim. Particular reliance was placed upon the fact that consent was a substantive requirement for the maintenance of the proceedings. 32 Mr Fagan raised, as a preliminary point, whether it had been open to Mr Zappia to have re-agitated before Magistrate Truscott the issue of consent previously dealt with adversely to the plaintiff by Magistrate Morahan. Mr Fagan contended that the terms of Order 1 made by Hislop J (extracted in paragraph [12] above) remitted back to the District Court the issues of actual insolvency and what flowed from that issue (in particular, the statutory defences raised) and no other issue. Mr Johnson, on the other hand, contended that, there not having been any specific directions given by Hislop J in respect of Order 1, the committal should be seen as having the effect of a complete re-hearing before her Honour. 33 I do not consider that I should decide the important issue of consent on the basis of the preliminary point, the question of consent being a substantive issue. It is an issue best dealt with on its merits. 34 Mr Fagan contended that the learned Magistrate correctly applied the law in determining that the "consent" by Mr Sleiman was effective and that the proceedings have been effectively commenced when the amended summons in the Local Court was filed on 8 September 2006. 35 Her Honour addressed the evidence on the application, being the abovementioned affidavit of Mr Sleiman in her decision of 9 March 2009 at paragraphs [17] to [26]. In paragraph [21] of that decision, her Honour stated:- "… The only issue I need to decide is whether the letter is consent. That issue has already been decided by me on 2 December 2008. There is nothing in Mr Sleiman's Affidavit that causes me to change my mind in relation to the issue of consent …" 36 Her Honour went on to discuss the evidence at paragraphs [22] to [24] in the decision of 9 March 2009. In paragraph [24], her Honour said there was no distinction to be made between "consenting" and "not objecting". It is to be noted that Mr Sleiman's letter of 7 September 2006 in addition to stating that he had no objection to GBT proceeding under s.588M(3) of the Corporations Act also later added:- "This should allow you to commence proceedings without delay." 37 Her Honour also observed (at [24]) that Mr Sleiman knew the letter was to be used as a liquidator's consent for the plaintiff to take such proceedings. She stated that Mr Sleiman appeared to have a poor recollection as to whether or not he was aware that proceedings had already been on foot, but that that was of no import. Her Honour concluded that the letters from April to June 2006 from Mr Sleiman to Ms Perry made it patently clear that Mr Sleiman was aware of GBT's intentions or attempts to take proceedings against Mr Zappia. She also rejected the argument that Mr Sleiman's consent had been improperly induced by Ms Perry (at [25]). 38 I accept the submission made by Mr Fagan that any complaint by the plaintiff in relation to her Honour's decision on the matters raised by Mr Sleiman's affidavit involved questions of fact and that it was well open to her Honour to determine that the liquidator did give written consent for the proceedings to be taken under s.588M. 39 Even if there could be said to have been a mixed question of law and fact on the interpretation of the Sleiman letter, I consider that no error of law has been identified in relation to this aspect of the matter of consent. It is, in any event, clear that Mr Sleiman, by the terms of his letter, gave written consent to such proceedings. 40 In her decision on the Notice of Motion given on 9 March 2009, Magistrate Truscott set out the history of the matter on the issue of "consent". In paragraph 16, it was recorded:- "The second leg of the Plaintiff's application is that the consent was not consent at all. Mr Holmes pleads that the Defendant is estopped from arguing the consent issue on this Notice of Motion because it is Res Judicata or because Anshun Estoppel applies. The background to the proceedings as they now stand is relevant. The hearing of the this [sic] cause of action was first heard in this court by a brother magistrate in August 2007. His judgment was appealed to the Supreme Court an din 2008 was remitted back to this court to be reheard. At the commencement of proceedings in August 2007, the Defendant sought to amend it's [sic] Notice of Defence to argue that the liquidator's consent was not valid consent because it was induced and/or the liquidator did not have capacity to provide consent as about a month after providing consent he was removed from his position and about a year later he was removed from the Register of Liquidators in September 2006. That argument failed. It was a point taken on appeal to the Supreme Court but was expressly abandoned. After the matter returned to the list for rehearing, a review date was set and a hearing was allocated to 2 December 2008. The parties apparently agreed that the hearing would be by way of reading the transcript of the first hearing and the same exhibits would be tendered. The matter was heard before me. On that day, without any Notice whatsoever to either this court or the Plaintiff, the Defendant again raised the argument about consent on the same basis as argued at first instance. For the same reasons the argument was rejected. It was then again agreed that the exhibits and transcripts would be tendered and that I would read them prior to the next hearing date being 12 March 2009, when the parties would then make their submissions." 41 Mr Sleiman's letter of 7 September 2006 was in the following terms:- "… I refer to our meeting earlier today wherein you requested I wrote to confirm the resolutions passed. Creditors by ordinary resolution appointed a Liquidator and in this regard I was appointed with no alternate being proposed. My fees for the Liquidation were capped to a maximum of $15,000 excluding GST. With regards to the insolvent trading claim, I have no objection to your proceedings against Mr Zappia or Mr Vazquez under Section 588M(3) of the Corporations Act. The liquidation is without funds at this stage with recovery proceedings in progress for the remaining debtors. Mr Zappia will be relying on the defences contained in Section 588H of the Act. You may be familiar with the provisions of Section 588S in which the Court requires that a time period of 6 months elapses from the date of my appointment. Section 513C(b) clearly identifies the Administration as the relation back date for this period. This should allow you to commence proceedings without delay. You have advised that you will discontinue your proceedings against the company and the Administrator which is due for hearing on 12 September 2006. Could you please confirm the same. Should you require any information please do not hesitate to contact this office. …" (emphasis added) 42 Mr J T Johnson of counsel who appeared for the plaintiff on the present appeal observed that "consent" was a substantive requirement for the maintenance of the proceedings in the Local Court. A creditor may only bring an action for recovery of a debt under the Corporations Act with the consent of the liquidator. 43 Mr Johnson stated that, in the present case, the proceedings were commenced or they began with the filing in the Newcastle Local Court of the statement of claim on 16 March 2006. 44 Zaps Logistics was not placed into liquidation until 7 September 2006. Prior to 7 September 2006, no cause of action lay at all as the company was subject to a Deed of Company Arrangement. As earlier noted, the consent of the liquidator had not, and could not, have been obtained. 45 Mr Johnson referred to the judgment of Lehane J in Quick v Stoland (1998) 87 FCR 371. However, he contended that it was not authority that a consent can be given to proceedings that had begun before a company was placed into liquidation "and/or maintained on the bases of putative (retrospective) consent": Written Submissions for the Plaintiff, paragraph 21). 46 Mr Johnson further contended that the position in that regard was not capable of remedy under s.64 of the Civil Procedure Act 2005 "… when the Commonwealth statute prescribed as a mandatory requirement the obtaining of a prior consent" (written submissions, paragraph 25). 47 On the issue of "consent", Mr Fagan on behalf of GBT raised four issues which may be summarised as follows:-

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(4) On the substantive questions on the issue of "consent" :- (a) The terms of the letter written by Mr Sleiman on 7 September constituted a valid written consent. (b) The proceedings validly raised a claim under s.588M, a valid consent having been given on 7 September 2006 and the Statement of Claim having been amended on 8 September 2006. 48 The power authorising amendments in s.64 of the Civil Procedure Act extends to amendments that have the effect of adding or substituting a cause of action that has arisen after the commencement of proceedings: s.64(3). The broad nature of the power in that respect is very different from that which permitted amendments under the provisions of Part 15 Rule 16 of the Supreme Court Rules 1970 that were considered in Baldry v Jackson (1970) 2 NSWLR 415, 418 to 419. 49 In determining whether the provisions of s.64 operated in the present case so that the amended statement of claim pleaded a valid cause of action, there is a distinction made by the terms of that section between a document in proceedings, proceedings and a cause of action. The document said to have been amended (the Statement of Claim filed on 16 March 2006), of course, constituted the process by which the proceedings were commenced: see definition of "originating process" in s.3 of the Civil Procedure Act: "… the process by which proceedings are commenced …". 50 The fact that, as contended for the plaintiff in the present appeal, no cause of action lay when the proceedings were commenced or were begun at a time when Zaps Logistics was not in liquidation does not detract from the fact that, on and after 16 March 2006, "proceedings" had been initially instituted on 16 March 2006 and were on foot as at 8 September 2006 even if the document or process (the Statement of Claim) by which the proceedings were commenced, suffered from a defect. 51 The provisions of s.64 in the above circumstances empowered the Court to permit any "document" to be amended. The power of amendment may be exercised to cure a defect or a deficiency in a pleading, including amendments that had the effect of adding or substituting a cause of action that has arisen after the commencement of the proceedings. By an order, a party may be permitted in existing proceedings to discard a defective cause of action and to substitute for it a viable one rather than being required to discontinue the proceedings and commence separate or new proceedings. 52 Following the liquidator's consent on 7 September 2006 and the filing of the Amended Statement of Claim on 8 September 2006, the commencement of the proceedings in relation to the latter cause of action is, by s.64(3), "taken to be the date on which the amendment is made", in this case, 8 September 2006. 53 The amendments having been made after the liquidator's consent, the position was as occurred in Stoland (supra). As Lehane J observed in that case (at 288):- "… it became, by virtue of the amendments, a proceeding under s.588M only after the liquidator's written consent had been given. In that sense, at least, the proceeding, to the extent that it acquired the character of a claim under s.588M, acquired that character only after the consent was given. That being so, it seems to me no misuse of language to say that Stoland began proceedings under s.588M with the written consent of the company's liquidator." 54 The conclusion I have expressed does not run counter to the purpose and object of s.588R(1). Lehane J, in that respect, observed that the purpose and object of the section, with stated exceptions, is that a creditor should not take proceedings against a director of a company in liquidation to recover a debt owed by a company, unless the liquidator consents. His Honour added:- "… In circumstances such as the present, that purpose is served equally if, with the liquidator's consent, a claim is added in proceedings already on foot as by the commencement of separate proceedings. There can be no doubt, in this case, that once the liquidator's consent had been given, Stoland might have commenced a separate proceeding in which it claimed relief under s.588M in precisely the same terms as it has done by the amendment … the literal words of the section do not, in my view, mean that only a new application will suffice, and there is nothing in the purpose of s.588R(1) which indicates that such a construction is to be preferred …" 55 Whilst the proceedings in Stoland (supra) included a claim as to debts incurred before 23 June 1993 under s.592 of the Corporations Law apart from the claim made under s.588M and s.588R, those facts do not, in my opinion, prevent the application of the principle stated by Lehane J to a case such as the present. 56 The broadly expressed powers authorising amendments of documents under s.64 of the Civil Procedure Act permitted the amendments that were made to the Statement of Claim on 8 September 2006 in the present case. Those amendments were consonant with and gave effect to the above stated purpose and object of s.588R.

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(ii) Actual insolvency 59 In the principal judgment, her Honour proceeded with a detailed examination of the issue of actual insolvency. Her Honour, at paragraph 62, stated:- "Mr Tolcher said 'I am unable to accurately establish the trading losses of the Company as at the relevant dates without financial statements as at those dates, or a general ledger as at those dates'. For the same reasons he was unable to accurately calculate working capital ratios for the Company at the relevant dates." 60 Her Honour, with respect, correctly observed that the onus of proof of actual insolvency was on GBT and that Mr Zappia's evidence adduced on the rebuttal of the presumption under s.588E was also what he relied on to show that the company was not insolvent. Her Honour proceeded to analyse the evidence and make findings on the insolvency issue and the defences raised under s.588H of the Act (at pp.31 to 46 of the principal judgment). 61 Her Honour considered at length the question of third party support referred to in the judgment as "a primary issue" (paragraph 66). Her Honour undertook a detailed analysis of the evidence on financial matters concerning the resources of the company and those available to it in meeting its liabilities as they fell due in the relevant period. The evidence of particular matters that pointed to the absence of company resources were also identified. 62 Mr Cook's report stated:- "In my opinion that cash flow depended almost entirely on the financial support of the Company by Mr Zappia/and [sic] or related parties, and Mr Tolcher's analysis of its solvency does not adequately consider that financial support." 63 Her Honour also observed at paragraph 73 of the judgment:- "Before any discussion of the 'indicia of insolvency', having reviewed the experts' reports and documents it is clear to me that the Company was not 'able to pay all its debts as they became payable by reference to the commercial realities. The Thornton Report clearly set out that funds far in excess of what were being provided by any third party would need to be available for Zaps to move forward to its break even position. The Overdraft Facility whilst increased to $2.2 million as at 2 December was not increased beyond that point despite Zaps incurring monthly losses of at least $100,000. During the relevant period debts owing to trade creditors amounted to in excess of $150,000. The ATO Superannuation $132,209 ATO $133,359 owing at the time of 13 July must have been significant at the relevant period given that the Company was apparently not running an operation within 6-8 weeks of the last of the Plaintiff's invoices being due and payable. I note that the projected P&L account ended 30 September 2004 (Annex S Tolcher Report) has the projected Superannuation payments as being less than $16,000 per month. Accordingly, it would appear that Zaps was behind in its Superannuation contributions during the relevant period which would add to the unpaid debts. Mr Cook concedes that Zaps was in arrears with its obligations to ATO (including superannuation) at the relevant dates. He says that that [sic] payments of these arrears and depended on third party funding support which had not been withdrawn. My view is that it can't be withdrawn when in reality it has not been provided - as evidenced by the fact that Zaps was in arrears and was not paying its debts during the relevant period." 64 In summary, her Honour made the following findings:-

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(9) Although the $2.2 million overdraft was not extended, the company's debts accumulated and losses continued unabated. 65 In addition to the above, a number of other findings on the financial position of the company were made in the judgment (from p.37). 66 The learned Magistrate also considered Mr Zappia's evidence as to third party support in evaluating the evidence as a whole:- "84. Apart from the Defendant's bald and general statement in his evidence, there is no evidence of third party support which did not rely on loans being repaid unless Zaps was in a position to do so. The Defendant's Affidavit was particularly 'loose' about when he provided the funding to support the company. I note that the payments of the overdraft was apparently just prior to the Defendant's resignation as director. That payment was not in support of the company continuing at all." 67 Her Honour went on to state:- "85. … I do not think that Lewis v Doran creates a precedent for Directors to simply assert a claim of related or third party access to funding without an identification of what that funding was and when it was provided rather than a loose and overly broad claim as that made by the Defendant. Particularly, in circumstances in this case where there is simply a laguna of financial records of the kind that Zaps or its Director would be expected to keep and provide upon Statutory request, Subpoena or Court Order. 86. Zaps was not paying its debts as they fell due because they did not have the funding to do so over the relevant period. The lack of cash flow was not temporary, the Company had always relied on related party funding particularly evident between June and December 04. It's [sic] dependence upon the related party funding and its accrual of monthly losses continued as it had been and would continue to be was endemic as evidenced by the analysis of Zap's history and what limited financial records there are. The Thornton Report shows that the [sic] Zaps was in dire trouble with unreliable unrealistic and unattainable projections."

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(i) Failure to cross-examine Mr Zappia 68 The affidavit of Mr Zappia was in evidence before Magistrate Monahan. On the re-hearing before her Honour Magistrate Truscott, GBT tendered Mr Zappia's affidavits. 69 As Mr Johnson observed Mr Zappia's affidavit (minus the annexures) was in evidence for all purposes: s.60 of the Evidence Act 1995. 70 The evidence given by Mr Zappia was extracted in the written submissions for the plaintiff as follows:- "30. In his affidavit Mr Zappia gave the following evidence: '35. Over the period from about November 2004 to about July 2005, I placed $2,657,877.57 into Zaps Logistics to assist the Company to pay its debts. The $2,657,877.57 was obtained through the facility at the Bendigo Bank as well as a Loan Agreement over my wife's property, (5 Unsworth Street, Abbotsbury), with RAMS Home Loans ($406,250). 36. My wife assisted and mortgaged her property at 5 Unsworth Street, Abbotsbury as security for the Loan Agreement … 38. In about July 2005, as a result of a decline in sales, profits and the loss of customers …, I decided to appoint an administrator of the Company. 39. At this time , I decided that I was no longer prepared to financially support the Company and contribute money to it. As is indicated, I have already contributed over $2,600,000 cash injection via Bendigo Bank and through money obtained from RAMS Home Loans. As I was not prepared to support the Company any further, that (sic) it was thereby insolvent.' (emphasis added)." 71 The submissions then made, in paragraph 31 of the written submissions for Mr Zappia, was as follows:- "31. The implication of the first sentence in paragraph 39 of Mr Zappia's affidavit is that until about July 2005 Mr Zappia was 'prepared to financially support the Company and contribute money to it'. Further the paragraph states that the Company was 'thereby insolvent' once Mr Zappia was not prepared to support the company , ie that his withdrawal of support was the cause of insolvency, such that with his support the company was not insolvent." 72 Mr Johnson submitted that, as Mr Zappia was not cross-examined, his evidence on the above points is to be dealt with in the manner considered by Tobias and McColl JJA in Ali v Nationwide News Pty Limited [2008] NSWCA 183 at [110] to [112]. 73 However, in HSH Hotels (Australia) Limited v Multiplex Constructions Pty Limited [2004] NSWCA 302, Tobias JA, with whom Mason P and Hodgson JA expressed agreement, stated as follows:- "86. I would interpolate here a reference to the following passage from the judgment of Newton J in Bulstrade v Trimble [1970] VR 840 where, at 849, he said:- 'I know of no case where it has been held that where evidence of a witness upon a particular matter is allowed to pass without cross-examination, but evidence of a substantial character is called by the opposite party in direct contradiction thereof, the judge or jury is required in law to accept the former. And, in my view, this is plainly not the law. 87. In my opinion, there is no inconsistency between this statement of the position and that stated by Rolfe AJA in Hull . The critical issue where there is no cross-examination of a particular witness, including an expert witness, is whether, as in the present case, there is a credible body of evidence of a substantial character in direct contradiction of non-cross-examined evidence." 74 In Ali (supra), having cited the dicta of Newton J, observed:- "112. There can be no doubt that where factual evidence is not cross-examined upon prima facie it should be accepted. However, it ought not necessarily be accepted where, as Tobias JA said in Multiplex, there is a credible body of evidence of a substantial character in direct contradiction of the non-cross-examined evidence …" (emphasis added) 75 The fact that Mr Zappia was not cross-examined on the point, in my opinion, was of no consequence in the present case in which the learned Magistrate, in effect, proceeded upon the basis that there was a substantial amount of evidence, which her Honour accepted, which was in direct contradiction to his evidence. 76 As indicated in the passages quoted from Ali (supra) and from the authorities quoted therein (as set out in the plaintiff's written submissions), the issue of the failure to cross-examine a witness is to be considered in light of evidence of a substantial character called by the opposite party in direct contradiction thereof. 77 I accordingly am of the opinion that the failure to cross-examine Mr Zappia was of no consequence and does not provide a valid ground of appeal.

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(ii) Failure to cross-examine defendant's expert 78 In the course of his oral submissions, Mr Johnson properly conceded that her Honour had regard to Mr Zappia's evidence on the issue of "support" but, in effect, discounted what he had said. Mr Johnson stated that the complaint on this ground of appeal was that, in effect, the basis for not accepting Mr Zappia's evidence on the matter was not put to him (transcript 15 February 2010, p.15). 79 The plaintiff relied upon a report produced by Mr Cook. It was an unsigned report. Objection was taken to its admission. However, the learned Magistrate permitted the report to be admitted. Accordingly, it remained for the court below to assess the weight to be given to it. 80 It is clear that Mr Cook's report was subjected to consideration by the Magistrate, it being referred to in a number of paragraphs in the judgment (eg, paragraphs [25], [63], [73], [74], [76], [77] and [78]). 81 In the written submissions for the plaintiff (paragraph [37]), the issue in relation to Mr Cook's report is identified and it is a reasonably narrow one. It is there stated:- "Mr Cook's experts evidence (for Mr Zappia) was that it would not have been possible for the firm of chartered accountants, Grant Thornton, to have prepared their financial reports if the books and records were inadequate. A report as to affairs, and a report to creditors by the administrator was also prepared. Cook stated that if the financial record keeping by the company was deficient, or if the company did not keep proper books and records, this would not have been possible." 82 The submission then is that, as Mr Cook was not cross-examined, it followed that the principles stated in Ali (supra) meant that Mr Cook's evidence should have been accepted. 83 It was also submitted that Mr Tolcher, GBT's expert, having had the opportunity to examine certain boxes of company records, did not take advantage of that opportunity. Accordingly, the submission was that a Jones v Dunkel inference should have been drawn on the question of "inadequacy". 84 The contention advanced for Mr Zappia was that the Local Court could not reject the evidence of Mr Cook on these matters and accept Mr Tolcher's opinion where he had not been re-examined on the point. 85 I do not consider that the submissions on this point raises a question of law or any point of legal principle. 86 The material that was available to Mr Tolcher and his analysis of it was a matter examined by the Magistrate in relation to the issue of actual insolvency and, in particular, third party support. It could not be said that the Magistrate's ultimate findings and conclusions depended wholly upon acceptance of Mr Tolcher's analysis. The plaintiff's complaint essentially seeks to raise a question of fact concerning the evaluation of Mr Tolcher's evidence. The ground relied upon, in my opinion, falls outside the appeal provisions in s.39(1) of the Local Court Act to which reference has been made above. 87 Further, I do not consider that the point raised involves a question of law or a mixed question of fact and law under s.40(1) of the Act. Even the assumption that it could possibly be said to raise a mixed question of law and fact, it would not, in my opinion, justify the grant of leave to appeal under s.40(1) of the Local Court Act. For reasons stated above, no error has been established and no miscarriage of justice arises in relation to the matters raised.

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(9) Costs 88 On 19 June 2009, Magistrate Truscott delivered Reasons for Decision on the question of costs. 89 Her Honour noted that Mr Zappia conceded that a costs order against him could not be resisted but that he opposed two particular aspects. The first was the costs for the expert report of Raymond Tolcher obtained by the plaintiff in accordance with leave that had been granted by the Local Court. The second was the application for indemnity costs for the failed interlocutory application determined on 9 March 2009 in relation to the issue of consent of the liquidator to take proceedings against Mr Zappia, as director of Zaps Logistics. 90 In relation to the application for indemnity costs of the application on the issue of "consent", her Honour recorded the history surrounding that application. 91 The parties had attended before the Registrar on 11 September 2008 following the successful appeal to this Court. On the review hearing date of 2 December 2008, the proceedings came before her Honour and substantially all of the hearing time was taken up by the plaintiff on the issue of the consent of the liquidator to prosecute the action. It was noted that no notice of motion had been filed subsequent to the callover before the Registrar and prior to the hearing date. It was also noted that much of the issue concerning "consent" was that the liquidator was not of sound mind when the purported consent was given. That matter was determined in favour of GBT. 92 The proceedings were then adjourned to 12 March 2009 on which date submissions were to be made. 93 As discussed earlier in this judgment, a notice of motion in relation to the issue of the liquidator's consent was subsequently filed. Her Honour noted that the evidence being relied on was somewhat different to the initial application. GBT on that occasion raised an issue of Anshun Estoppel but the Magistrate determined that she would deal with the substantive issue and found adversely to Mr Zappia. 94 In her Reasons for Decision dated 19 June 2009, the learned Magistrate noted that the issue of Anshun Estoppel had probably been correctly raised and that Mr Zappia had had many opportunities to have made the application which her Honour described as "… a waste of time and covered an issue that had been well ventilated or an issue in terms of the commencement of the action (that) should have (been) well ventilated prior to the original proceedings …" (p.3). 95 Magistrate Truscott then made an order that the defendant pay indemnity costs in respect of the notice of motion heard on 26 February 2009. 96 In relation to the Tolcher report, her Honour observed that she had found the report of use and could understand why leave had been granted to GBT to obtain it and that the defendant had engaged an expert to assess it. She could see no reason why Mr Zappia should not bear the costs of the Tolcher report and made an order that he do so. 97 In the Written Submissions on Appeal dated 28 September 2009, it was submitted on behalf of Mr Zappia that the order for indemnity costs involved a serious error or errors (paragraph 58):- "… where Mr Zappia's contentions were correctly argued and properly put, or in any event were certainly matters subject of proper argument and proper submission. The costs orders of the first instance trial before Magistrate Morahan were not the subject of remittal to the Local Court at Newcastle before Magistrate Truscott and there was no warrant to disturb His Honour's finding as to costs on the Tolcher report."

[60]

98 In relation to the challenge made to the indemnity costs order, the general principle was noted by Hislop J in his judgment given on 18 June 2008 (paragraph [16]). His Honour noted that the awarding of costs is a matter in the discretion of the Court. The exercise of the discretion, his Honour observed, will not normally be overturned in the absence of some manifest error or consideration of irrelevant matter. Leave will not generally be granted when the decision involves application of well-settled principles applicable to the exercise of the costs discretion. 99 In the Respondent's Written Submissions, paragraph 105, it is noted that Mr Zappia had sought to agitate the consent issue on a number of previous occasions without success. In that respect, it is there noted:- "(a) The issue of consent by the liquidator was dealt with at first instance by Magistrate Morahan in favour of the plaintiff. This decision was initially included with the appeal grounds before Justice Hislop, however, was abandoned at the appeal hearing. (b) The issue was again sought to be re-agitated at re-hearing on 2 December 2008 which resulted in a wasted hearing time:- … (c) This point was decided by Magistrate Truscott as follows:- 'The issue of Mr Sleiman's ability to consent to these proceedings cannot be an issue that would fall within the category of such other matters as remain in issue … It is my view that the defendant, in abandoning the issue of consent in the grounds of appeal, has limited itself and that limitation is … to be determined today, that is the issue of the date of the insolvency. If am wrong in that in terms of the remittance of this matter to the Court, then the defendant is invited to agitate that in another jurisdiction' - Transcript 2 December 2008, pg 33. (d) The defendant subsequently sought to agitate the issue of consent further by filing a Motion on 23 December 2008 seeking that the plaintiff's claim be struck out on the basis that the requisite consent under s.588R of the Corporations Act had not been provided. The defendant claims that the further Motion was necessitated by 'fresh' evidence constituted by an Affidavit obtained from Mr Sleiman. However, there was no explanation as to why this evidence was not obtained at an earlier stage or as to what attempts were made to obtain such evidence:- 'He had many opportunity to have made the application' - para 5, Judgment dated 19 June 2009." 100 In further response, it was submitted for GBT that a relevant factor had been Mr Zappia's general dilatory conduct in the proceedings, the learned Magistrate having noted that he had failed to comply with timetable directions and had failed to be ready for the initial hearing as well as the hearing on 2 December 2008 (judgment, 19 June 2008, paragraph [5]). Reliance in this respect was placed upon the dicta of the High Court on Oshlack v Richmond River Council (1998) 193 CLR 72 at [44] on the question of "… relevant delinquency on the part of the unsuccessful party …". 101 Finally, it was submitted for GBT that regard should be had to the comparatively small size of the GBT's claim relative to the extensive history of the proceedings and the numerous previous interlocutory applications that had been made by or on behalf of Mr Zappia, details of which are set out in paragraph [108] of the respondent's written submissions. 102 I have considered the matters relied upon by the parties in the context of the proceedings. It was, in my opinion, well within the discretion of the learned Magistrate to make an indemnity costs order in the terms that were made in this case. The issue of "consent" had been raised (unsuccessfully) before Magistrate Morahan the issue of consent was withdrawn from the appeal determined by Hislop J and the "fresh" evidence took the matter no further. I do not consider that any error has been established in the exercise of the discretion. This is not a case, in my opinion, in which leave to appeal in relation to that order should be granted. 103 In relation to the order as to costs of the Tolcher report, the report was clearly relevant to the issue of insolvency. It is also clear that in the way in which her Honour approached the issues of actual insolvency, including the issue of third party support, the Tolcher report provided worthwhile evidence when considered in light of the other evidence analysed in the judgment. 104 The use of the Tolcher report in the second hearing re-opened the question of costs concerning it. It was open to her Honour in making ancillary or consequential orders on the re-hearing, to make such orders as to costs as was appropriate to the circumstances. In my opinion, the exercise of the discretion to order costs in respect of the Tolcher report was well within the discretion available to her Honour. 105 No error, in my opinion, has been established in the exercise of that discretion.

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