Federal Court of Australia

Skelin v Self Care Corporation Pty Ltd (No 2) [2022] FCA 50

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to rule 26.12(c) of the Federal Court Rules 2011 (Cth) (FCR), the applicant be granted leave to file notices of discontinuance in respect of the whole of proceedings NSD 485 of 2021 and NSD 745 of 2021.

2.    Subject to order 3, the applicant pay the costs of the proceedings, including the costs ordered on 29 July 2021.

3.    The first and second respondents pay the applicant’s costs of their application for non party costs orders.

4.    If the parties are unable to agree as to the quantum of the costs in orders 2 and/or 3 above within 28 days, the proceedings be referred to a Registrar of the Court for the assessment and payment of those costs in a lump sum amount.

5.    The Registrar be directed pursuant to FCR 1.37 to determine the quantum of the lump sum for costs payable pursuant to orders 2 and/or 3 in such manner as he or she deems fit including, if thought appropriate, on the papers.

6.    The Registrar be directed pursuant to FCR 1.37, at the conclusion of the quantification process, to order that whatever sum has been quantified pursuant to orders 2 and/or 3 above be paid within 28 days from the date of the Registrar’s order.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

BURLEY J:

1.    INTRODUCTION

1.1    The proceedings

1    The applicant, Pascal Skelin, has filed interlocutory applications for leave to file notices of discontinuance in two related proceedings, NSD 485 of 2021 and NSD 745 of 2021 (appeal proceedings). The respondents, Self Care Corporation Pty Ltd and Self Care IP Holdings Pty Ltd (together, Self Care), contend that leave to discontinue should only be granted on the condition that Anne Skelin and Ojdana Skelin, who are respectively the wife and mother of Mr Skelin, be ordered jointly with Pascal Skelin to pay the respondents’ costs of the appeal proceedings. Neither Anne Skelin nor Ojdana Skelin are parties.

2    The appeal proceedings are applications for leave to appeal from Judgments and Orders made by a Judge of the Federal Circuit Court of Australia (FCCA) in matter SYG 2771 of 2019 (FCCA proceedings), one permitting Self Care to amend its pleadings (Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 2) [2021] FCCA 1000 (Judge Baird)), and the other declining to recuse herself from the hearing of the proceedings before her on the basis of apprehended bias (Self Care Corporation Pty Ltd v Green Forest International Pty Ltd (No 8) [2021] FCCA 1668 (Judge Baird)).

3    In these reasons, for clarity only, and with no disrespect intended, Pascal Skelin, Anne Skelin and Ojdana Skelin are described by their first names. They were represented by the same solicitors and counsel. I refer to them collectively as the Skelins.

4    Pascal made an application for a stay of the FCCA proceedings pending the hearing of the applications for leave to appeal. At that point the FCCA proceedings were listed to be heard over several weeks commencing on 2 August 2021. I refused the stay for the reasons set out in Skelin v Self Care Corporation Pty Ltd [2021] FCA 888 (Skelin 1) and ordered that Pascal pay the costs of the stay application (July costs order). The evidence indicates that the trial in the FCCA proceedings has since proceeded for 12 days but has not been completed.

5    In the present applications Pascal seeks orders pursuant to r 26.12(2)(c) of the Federal Court Rules 2011 (Cth) (FCR) that he be given leave to file notices of discontinuance in respect of the whole of the appeal proceedings. Self Care opposes those orders and proposes that the grant of leave to discontinue be subject to the condition to which I have referred at [1], and that the payment of costs include the costs awarded in the July costs order. Self Care also seeks an order that in the event that the quantum of costs cannot be agreed then the matter be referred to a Registrar of the Court for assessment of the amount due to be paid in a lump sum pursuant to FCR 40.02(c).

1.2    The evidence

6    The Skelins rely on an affidavit given by Gregory Grunert, a solicitor in the employ of Taylor David lawyers who works under the supervision of Chad Gear. They also rely on two affidavits given by Mr Gear, who has conduct of the appeal proceedings and the FCCA proceedings. Mr Gear gives evidence that he is instructed to act for Pascal and was instructed also to act for Anne and Ojdana after Self Care identified the orders that it now seeks. In both of his affidavits Mr Gear exhibits documents and gives evidence on information and belief from each of Pascal, Anne and Ojdana.

7    Objection was taken to hearsay evidence being adduced from the Skelins. Self Care contended that s 75 of the Evidence Act 1995 (Cth) does not apply because a decision made consequent on an application for leave to appeal is a judgment under s 24(1)(a) of the Federal Court of Australia Act 1976 (Cth) (FCA Act), which has been found to be a final decision, citing a tentative view expressed in Probiotec Ltd v The University of Melbourne [2008] FCAFC 5; 166 FCR 30 at [79] (Rares J, Finn and Besanko JJ agreeing). I rejected that objection on the following basis.

8    Whether or not an order is final or interlocutory turns upon its legal, rather than its practical, effect; that is, whether the legal effect of the order is a final determination of the rights of the parties in the principal cause pending between them; Hall v Nominal Defendant [1966] HCA 36; 117 CLR 423 at 433 (Windeyer J); Licul v Corney [1976] HCA 6; 180 CLR 213 at 225 (Gibbs J); Bienstein v Bienstein [2003] HCA 7; 77 ALJR 908 at [25] (McHugh, Kirby and Callinan JJ). Discontinuance of proceedings means that the Court cannot determine an applicant’s claims on its merits; Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421 at [23] (Stewart J). Where proceedings are discontinued, an applicant is not estopped from asserting the claims again in new or other proceedings: FCR 26.14; Addenbrooke Pty Ltd v Duncan (No 2) [2017] FCAFC 76; 348 ALR 1 at [549] (Gilmour and White JJ). The practical effect of an order granting leave to the applicant to file a notice of discontinuance is not to make a final determination of the rights of the parties. As such, leave to appeal against costs orders may be required where the substantive proceeding was discontinued; Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; 247 FCR 61 at [290] (Bennett, Besanko and Beach JJ). The Court has recognised that an order of the Federal Circuit Court dismissing an application to set aside a notice of discontinuance is interlocutory and therefore leave to appeal was required; Mbuzi v AGL Sales Pty Limited [2016] FCA 1313 at [28]-[33] (Rangiah J).

9    Accordingly, an order allowing a discontinuance is interlocutory, as are the costs orders associated with any such order; see also Cribb (Liquidator) v Jackson [2019] FCA 1632 at [28] (Colvin J). Furthermore, the vast bulk of the costs concerned in the present application (which I was informed during the course of argument amount to some $76,000 excluding GST) relate to the July costs order, being the costs that Pascal was ordered to pay as a result of Skelin 1. In substance, the application now advanced by Self Care is for third party costs orders to be made against each of Ojdana and Anne arising from the refusal of the stay application. The stay application was undoubtedly interlocutory in character. The fact that Self Care has deferred seeking third party costs orders until the conclusion of the appeal proceedings cannot change the substantive characterisation of those costs orders as interlocutory.

10    Self Care relies on an affidavit given by its solicitor, Michael Williams, a partner of Gilbert + Tobin who exhibits various documents produced by Pascal, Anne and Ojdana. Self Care also relies on a bundle of documents tendered at the hearing.

1.3    The main issue

11    FCR 26.12(1) provides that a party claiming relief may discontinue a proceeding in whole or in part by filing a notice of discontinuance in accordance with Form 48. FCR 26.12(2)(b) provides that a party may file the notice of discontinuance with the opposing party’s consent before judgment has been entered in the proceeding. FCR 26.12(2)(c) provides that the party may file a notice of discontinuance with the leave of the Court at any time.

12    In the present case Pascal did not obtain the consent of Self Care to file notices of discontinuance and so he has sought the leave of the Court. FCR 26.12(7) relevantly provides that unless the Court orders otherwise, a party who files a notice of discontinuance under FCR 26.12(2) is liable to pay the costs of each other party to the proceeding in relation to the claim, or part of the claim, that is discontinued. Pascal accepts that he is to pay the costs of the appeal proceedings. The contest concerns whether or not, as a condition of leave to discontinue, Anne and Ojdana should also be jointly and severally liable to pay those costs.

2.    RELEVANT LAW

13    Section 43 of the FCA Act provides:

(1)    The Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which this or any other Act provides that costs shall not be awarded. This is subject to:

(a)    subsection (1A); and

(b)    section 570 of the Fair Work Act 2009; and

(c)    section 18 of the Public Interest Disclosure Act 2013.

…

(2)    Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.

(3)    Without limiting the discretion of the Court or a Judge in relation to costs, the Court or Judge may do any of the following:

(a)    make an award of costs at any stage in a proceeding, whether before, during or after any hearing or trial;

(b)    make different awards of costs in relation to different parts of the proceeding;

(c)    order the parties to bear costs in specified proportions;

(d)    award a party costs in a specified sum;

(e)    award costs in favour of or against a party whether or not the party is successful in the proceeding;

(f)    order a party’s lawyer to bear costs personally;

(g)    order that costs awarded against a party are to be assessed on an indemnity basis or otherwise.

…

14    The jurisdiction of the Court to award costs has been broadly defined by Parliament and the Court is able to make such orders for the payment of costs as may be required for the just disposal of all proceedings brought before it; Caboolture Park v White Industries [1993] FCA 667; 45 FCR 224 at [23] (Lee, Hill and Cooper JJ).

15    In Knight v FP Special Assets Ltd [1992] HCA 28; 174 CLR 178 the Court considered whether the Supreme Court of Queensland had jurisdiction to make an order for costs against the receivers of companies which were unsuccessful parties in proceedings even though the receivers themselves were not parties to those proceedings. The Court considered that it did. In Caboolture Park the Full Court at [23] confirmed that the same applied by reference to s 43 of the FCA Act. In the course of their reasons in Knight, Mason CJ and Deane J (Gaudron J agreeing at p 205) noted that the prima facie general principle is that an order for costs is only made against a party to the litigation. There is, however, a variety of circumstances in which considerations of justice may, in accordance with general principles relating to awards of costs, support an order for costs against a non-party. One general category is where (1) the party to the litigation is an insolvent person or a person of straw; (2) where the non-party has played an active part in the conduct of the litigation, and; (3) where the non-party (or its agent) has an interest in the subject of the litigation; Knight at 192-193.

16    In FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [205] Basten JA (Beazley and Giles JA agreeing at [1] and [83] respectively) observed that the authorities upon which the joint judgment in Knight drew were replete with references to the awards of costs against third parties being made against the “real party” to the proceedings.

17    After reviewing a number of cases, Basten JA said at [210]:

…the principle established in Knight v FP Special Assets cannot be limited to the specific circumstances of the case, the joint judgment having expressed a conclusion in more general terms. A further example, not encompassed by those identified to date, is illustrated by Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429, a decision of the Full Court of the Federal Court in relation to an order sought against a litigation funder. The judgment contains an extensive analysis of the case law, including consideration of the judgment of Callinan J in Arundel Chiropractic Centre Pty Ltd v Deputy Commissioner of Taxation (2001) 179 ALR 406. It is clear that the categories of case which may attract the exercise of the power are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:

(a)     the unsuccessful party to the proceedings was the moving party and not the defendant;

(b)     the source of funds for the litigation was the non-party or its principal;

(c)     the conduct of the litigation was unreasonable or improper;

(d)     the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e)     the unsuccessful party was insolvent or could otherwise be described as a person of straw.

18    That passage has been cited with approval in numerous decisions, including in this court, see, for instance, Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50; 200 FCR 154 at [83] (Keane CJ, Lander and Foster JJ). In Dunghutti the Full Court observed at [86] that, unsurprisingly, the cases where orders for costs have been sought against non-parties mainly concern an unsuccessful party who is impecunious. It said:

88     The Court has power to make an order for costs against a non-party where the non-party is connected with the unsuccessful party to the proceeding, and has caused that party to start, continue or prosecute the proceeding in circumstances where the non-party’s conduct makes it just and equitable that the non-party be visited with an order for costs in favour of the successful party either in addition to such an order against the unsuccessful party or in substitution for such an order. As Gobbo J said in Bischof v Adams, a statement which the Full Court has approved, the categories of cases are not closed.

89     We think that the only precondition to the exercise of power would have to be that the non-party has a sufficient connection with the unsuccessful party and the litigation to warrant the Court exercising its jurisdiction. The connection between the non-party and the unsuccessful party and the litigation must be material to the question of costs: Vestris v Cashman (1998) 72 SASR 449 at 467 per Lander J.

19    The exercise of the discretion to make a third party costs order is approached with caution and has been described as rare and exceptional; Dunghutti at [90]. ‘Exceptional’ in this context means no more than outside of the ordinary run of cases where parties pursue or defend claims for their own benefit and at their own expense; Dymocks Franchise Systems (NSW) Pty Ltd v Todd (No 2) [2004] UKPC 39; [2005] 4 All ER 195 at [25] (Privy Council); KSMC Holdings Pty Ltd t/as Hubba Bubba Childcare on Haig v Bowden (No 3) [2020] NSWCA 158 at [44] (Paine JA).

20    Family members may provide financial support for an applicant in litigation without for that reason alone becoming exposed to an adverse costs order in the event that the applicant fails: Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498 (Collier J), KSMC Holdings at [45].

21    The parties made submissions as to the weight and relevance of particular factors to be taken from the authorities. However, it must steadily be borne in mind that the only precondition to the exercise of power is that the non-party has a sufficient connection with the unsuccessful party and the litigation to warrant the Court exercising its jurisdiction; Dunghutti at [89]. The exercise of the discretion under s 43 of the FCA Act will in each case turn on its particular facts.

3.    CONSIDERATION

3.1    The submissions

22    Self Care submits that, as an undischarged bankrupt with no assets, it cannot be in dispute that Pascal is a “man of straw”. Although the evidence of Mr Gear refers to Pascal having a new income stream, there is no documentary evidence to support that contention. Self Care submits that both Anne and Ojdana have played an active part in the conduct of the appeal proceedings by funding Pascal’s costs. In the case of Anne, it is submitted that she is also a client of Taylor David and as such is jointly and severally liable for her husband’s costs. In addition, she proffered an undertaking to pay Self Care’s costs in the course of making the stay application. In Ojdana’s case, Self Care submits that she appears to have paid the vast majority of Taylor David’s invoices.

23    Self Care submits that caution must be exercised in considering the information and belief evidence of Ojdana and Anne given in the affidavit evidence of Mr Gear, which should be regarded as insufficient to explain their involvement in the litigation and self-serving. In the absence of direct evidence, it is submitted that an inference should be drawn that nothing that they or Pascal might have said regarding the terms upon which funding was provided would have assisted them. It contends that the loan documentation exhibited to Mr Gear’s affidavit reinforces the conclusion that Anne and Ojdana have funded the litigation and that it is not necessary that they give day to day instructions.

24    Self Care further submits that Anne and Ojdana have an interest in the outcome of the appeal proceedings and the FCCA proceedings in circumstances where the personal claims made against Pascal, if successful, will “detrimentally affect their assets”. It contends that they would, “presumably, be the real beneficiaries of a favourable costs order, had one been made in favour of Mr Skelin”. In this regard, it says that a central argument made by Pascal in support of the stay was that the main deficiency in the amended pleading concerned allegations regarding his personal liability. Self Care submits:

22     In Anne Skelin’s case, her house is frozen and may be sold to meet any liability of her husband in the FCCA Proceedings. She is also the largest creditor in Mr Skelin’s bankruptcy (through her company Berkeley BC Pty Ltd). Ojdana Skelin is also a major creditor in Mr Skelin’s bankruptcy. Their financial interests were aligned with Mr Skelin’s pursuit of the Appeal Proceedings.

25    The Skelins rely on evidence to submit that Pascal is not a man of straw, contending that he derived income of $556,660 in the span of five months in 2021 and expects to receive in excess of $500,000 in the next calendar year. During the same period, Pascal has remitted in excess of $300,000 to Taylor David in respect of legal fees.

26    The Skelins submit that there is no evidence that either Anne or Ojdana participated in the conduct of the litigation aside from the assistance that they have provided in respect of financial matters. Ojdana has given two loans to Anne, one for $1 million and another for $3 million. They submit that the financial support was motivated by the natural affection that she held for Pascal and Anne.

27    The Skelins submit that Anne was unaware of the appeal proceedings and has never had any active or even passive involvement in the proceedings in this court or in the FCCA. They dispute that she is a client of Taylor David and rely on evidence to the effect that no staff at Taylor David had, prior to the present application, any interaction with her. Furthermore, they submit that, because Pascal is the defendant in the FCCA proceedings, the only benefit that Pascal could hope to achieve from the appeal proceedings was avoiding a substantial damages award and receiving an award of costs from Self Care. They submit that such award, reduced to the level of party/party costs, could hardly be something in which a non-party such as Anne has an interest.

28    In relation to Ojdana, the Skelins submit that her interest is more remote. Her financial interest, it is submitted, could only be that if Pascal received a favourable costs order (either in the appeal proceedings or the FCCA proceedings) such funds would be paid into his bankrupt estate and flow back to her by payment of dividends, or be paid to Anne and repaid to Ojdana as a creditor of the estate. Ojdana’s interest in the bankruptcy is 4% of the total and, according to Pascal’s trustee in bankruptcy, she is unlikely to receive any dividend. They submit, in respect of Anne and Ojdana, that money advanced to pay the costs of the appeal proceedings was as a result of their emotional commitment to Pascal.

3.2    The evidence

29    There is no dispute that Pascal is an undischarged bankrupt. He filed a statement of affairs on 12 February 2020. His trustee in bankruptcy is Aaron Lucan of Worrells Solvency and Forensic Accountants. Two reports to creditors have been issued by Worrells, one on 10 March 2020 and the other on 10 September 2021. The March 2020 report discloses that in his statement of affairs Pascal indicated that he was a director or shareholder of some 16 companies. Anne supplied $40,000 to Worrells to provide remuneration to that firm in respect of its conduct of the bankruptcy. The total of the known debts are identified as being $675,080. The major creditor is a company identified as Berkeley BC Pty Ltd. Ojdana is listed as being owed $38,625.

30    The September 2021 report indicates that during the second year of his bankruptcy Pascal obtained employment and provided Mr Lucan with an estimate of his income. The total income is not disclosed, but Mr Lucan reports that as a result of that disclosure, Pascal is liable to make income contributions of $38,375 for the first and second years of his bankruptcy. The list of proofs of debt received records that the total is $868,131, that Berkeley remains the largest creditor, being owed $554,798, and that Ojdana is owed $38,750.

31    In his first affidavit Mr Gear gives evidence on information and belief from Pascal to the effect that Pascal:

(a)    Has been consulting to companies including TrueGreen Group and Halifax as a self-employed consultant;

(b)    Has earned in excess of $500,000 since 1 January 2021 and expects to earn a similar amount in 2022;

(c)    Expects to be in a position to pay Self Care’s costs of the appeal proceedings; and

(d)    Knows that Ojdana has paid some of his solicitor’s fees pursuant to loan agreements she has with Anne.

32    In his second affidavit Mr Gear gives further information and belief evidence from Pascal to the effect that Pascal:

(a)    Has provided ANZ bank statements recording payments into his personal account from TrueGreen in the period from May 2021 to August 2021 of some $350,000;

(b)    Received those payments for “strategic business consultancy services” to TrueGreen Group and TrueGreen Impact; and

(c)    Had provided statements recording deposits into his ANZ personal account in August 2021 for $183,333 from Minh Tam Nguyen for business consulting that he did for a company called Orion Global.

33    Exhibited to Mr Gear’s affidavits are various redacted bank statements to support the receipt of these funds. Also exhibited are transaction details of a Westpac Business Account that record payments to Taylor David in the order of $375,000 from Pascal dated from 1 August 2021 until 25 November 2021.

34    Two trust account statements produced by Taylor David both dated 30 November 2021 indicate that from August 2021 Pascal started to make payments in relation to the costs of the FCCA proceedings, and that from October 2021 he made payments of about $35,000 towards the Taylor David costs in the appeal proceedings. Prior to that Anne and Ojdana made frequent payments of Taylor David’s costs toward the FCCA proceedings. Mr Gear’s evidence on information and belief from both Anne and Ojdana is that Ojdana made payments to Taylor David at Anne’s request pursuant to the loan agreements referred to below.

35    In relation to Anne, Self Care relies on evidence that indicates that she is a party to a costs agreement with Taylor David dated 27 May 2021 in respect of proceedings No 485 of 2021. That agreement is in the form of a letter addressed to both Pascal and Anne that refers in its title to both the FCCA proceedings and No 485 of 2021 in this Court. It provides that the scope of work is to apply for an extension of time to file an appeal and act to the conclusion of the appeal. The standard terms appended to the letter include a provision that each of Anne and Pascal are jointly and severally liable to payment of Taylor David’s invoices. Paragraph 4.2 of the letter provides that to accept the Costs Agreement “you can sign and return this document, send us an email, call us or continue to provide us with instructions. By continuing to instruct us, you show that you agree to the Costs Agreement”.

36    Taylor David sent an email addressed to Anne and Pascal dated 13 August 2021 requesting permission to apply funds in trust against some invoices, to which Anne responded on the same day “OK”.

37    The Skelins submit that it could not be concluded that Anne was a party to the costs agreement. They submit that the costs agreement is not signed and that it could only be accepted by conduct, which Anne did not do. They further submit that because a costs agreement must state the type of conduct that will constitute acceptance of an offer, pursuant to s 322(4)(c) of the Legal Profession Act 2007 (Qld), Anne had to provide instructions above and beyond the authorisation of payments in order to become a party to the agreement. In my view those submissions are not well founded. Paragraph 4.2 of the costs agreement provides that by “continuing to instruct us, you show that you agree to the Costs Agreement”. The payments made by Anne to Taylor David, and Anne’s express written instruction that money should be paid out of trust on 13 August 2021, should be understood to represent an indication by Anne that she continued to instruct Taylor David. The continuation is not confined to the provision of instructions in the conduct of the appeal proceedings or the FCCA proceedings, but rather indicates Anne’s intention that Taylor David should continue to act. However, I reject the submission advanced by Self Care to the effect that by stating “OK” in her email Anne actually participated in the conduct of the proceedings. As I note below, no evidence supports such a conclusion.

38    Although the costs agreement refers to proceedings No 485 of 2021, Self Care submits, and I accept, that it may be inferred that the costs agreement applies to both proceedings in this court. Anne is also the addressee of a costs agreement in similar terms in respect of the FCCA proceedings.

39    A trust account statement produced by Taylor David dated 28 July 2021 indicates that Anne and Ojdana made frequent payments, on about 27 occasions, of Taylor David’s costs. Mr Gear gives evidence on information and belief from both Anne and Ojdana that Ojdana made payments to Taylor David at Anne’s request pursuant to the loan agreements.

40    Mr Gear gives evidence on information and belief from Anne in relation to the appeal proceedings to the effect that:

(a)    She is aware that Pascal used to work for Self Care and that Self Care commenced proceedings against him in about October 2019;

(b)    She has never read any of the documents in the case in any detail and only knows what Pascal chooses to tell her about the case;

(c)    She was generally aware that there were appeal proceedings in relation to the FCCA proceedings but has never read any documents relating to the appeals;

(d)    She has never given Pascal instructions in relation to either the appeal proceedings nor the FCCA proceedings;

(e)    She does not consider that she stands to gain anything from the success of Pascal in any of the proceedings; and

(f)    She tries to support Pascal emotionally in relation to the litigation.

41    Mr Gear also gives evidence that each of Mr Grunert, Emily Hyland (a lawyer) and Olivia Loveday (an administrative assistant and accounts person) work under his supervision. He is informed by each, and believes, that none has ever received instructions from Anne in relation to the conduct of the appeal proceedings. Mr Gear gives direct evidence that he has never received instructions from Anne in these proceedings, other than to offer the undertaking provided to the Court on 28 July 2021. Reference to the offer of an undertaking is made in Skelin 1 at [40(6)].

42    Two loan agreements between Anne as borrower and Ojdana and her husband Luka Skelin as lenders are in evidence. The first is dated 5 May 2020 and is for an “advance” of $1,000,000. The interest rate is 3% per annum. The agreement provides in cl 2 that the lender must make the advance to the borrower on the date of the document and the borrower must enter into “the security or such other security document as the lender requests”. The “security” is defined as a “first ranking General Security Deed” dated on or about the same date as the loan agreement. Clause 3 provides that the borrower must pay interest for each interest period (defined as the last business day of each month) in respect of the advance. Clause 4 provides that the borrower must repay the money owning (being principal and interest and any other monies owing) on the expiry date, which is 10 years from the date of the loan, or in the event of an act of default. An act of default includes non-payment of any amount owing or failure to comply with any other obligation.

43    The second loan agreement for $3,000,000 is dated 4 April 2021 and is relevantly on substantially the same terms.

44    In relation to the loan agreements Mr Gear gives evidence on information and belief from Anne to the following effect:

(a)    She is self-employed and has degrees in arts, business and psychology;

(b)    She and Pascal were married in 2001;

(c)    The loans from Ojdana are for living expenses because Anne needed money for lifestyle, everyday living expenses and school fees;

(d)    The loans were also for legal fees, which Anne asked Ojdana to pay;

(e)    Anne has never entered into a document referred to as a “general security deed” with Ojdana and Luka Skelin or otherwise been asked to provide or provided any form of security for the loan agreements; and

(f)    Anne has never paid or been asked to pay any money to Ojdana or Luka in relation to the loan agreements.

45    In relation to other matters, Mr Gear gives evidence on information and belief from Anne that:

(a)    She bought the property located at 30 Russell St, Vaucluse in around 2002 for $2.25 million. She is the only person on the title and paid for it with her own funds;

(b)    Berkeley Group Assets Pty Ltd (BGA) was set up about 20 years ago, and she has no idea whether it holds shares in Berkeley as a trustee of a trust; and

(c)    Upon further review she became aware that BGA is the trustee of the Berkeley Group Assets Trust of which she, amongst many others, is a beneficiary.

46    Mr Gear gives evidence on information and belief from Ojdana that she is has a PhD in artificial intelligence, that she has been aware that Self Care is engaged in proceedings against Pascal since early 2020, that she does not know much about those proceedings and does not monitor their progress or want to know about them. She informs Mr Gear that she has never read any of the documents relating to the FCCA proceedings or the appeal proceedings, was not aware of the proceedings in this court, has never given instructions in relation to any of the proceedings and does not consider that she has anything to gain from the conduct of them.

47    In relation to the loan agreement, Mr Gear gives evidence on information and belief from Ojdana that she made the loans out of love for Anne and Pascal and for the purposes of their general and legal expenses, but with no conditions attached to what the money could be used for. He gives further evidence that Ojdana has never been provided or requested any security in respect of the loan agreements or been provided or requested any payment of money in respect of the loan agreements.

48    There is no evidence that the $4 million provided for under the two loan agreements has been provided in full to Anne. Instead the arrangement appears to be more akin to a facility where up to $4 million will be advanced by Ojdana and Luka Skelin to Anne on request.

49    Mr Gear gives direct evidence that he has never received instructions from Ojdana in the conduct of the proceedings and information and belief evidence from Mr Grunert, Ms Hyland and Ms Loveday to the same effect.

3.3    Consideration

50    The authorities to which I have referred demonstrate that the question of whether a third party costs order ought to be made ultimately depends on the particular facts of the case. The factors identified in FPM Holdings provide a useful tool for analysis, bearing in mind however that the earlier cases can provide only limited guidance to the determination of this particular case.

51    I take the following matters into consideration.

52    Pascal is an undischarged bankrupt. The Skelins submit that the evidence of income given by Pascal, coupled with the bank statements, supports the contention that he is not a “man of straw”. However, Pascal’s trustee in bankruptcy considered that his income did not warrant annual payments of more than $38,000 in 2020 and 2021. Pascal provides no complete picture of his affairs, but rather refers to some payments he received. No contracts with, or invoices issued to, TrueGreen, Halifax or Orion Global are put into evidence.

53    Having regard to the fact that the trustee’s second report to creditors, dated 10 September 2021, made no mention of funds being available to discharge the debts owed by Pascal, I am not satisfied on the evidence before the Court that he might properly be regarded as other than an undischarged bankrupt. The evidence available does not provide a clear picture of Pascal’s affairs. In particular, it is opaque as to whether such funds that he does receive or has received to date are promised elsewhere.

54    Anne is a party to the Taylor David costs agreement in respect of the appeal proceedings and assisted in the payment of some of the fees and disbursements. Mr Gear’s evidence on information and belief from both Anne and Ojdana is that Ojdana made payments to Taylor David at Anne’s request pursuant to the loan agreements. Furthermore, in the course of the stay application, Anne offered an undertaking to pay Self Care’s costs in the event that the stay was granted and the application for leave to appeal and any appeal was ultimately unsuccessful (see Skelin 1 at [40(6)]). These factors tend to support the conclusion that Anne had some involvement in the proceedings.

55    However, balanced against these matters is the evidence given by Mr Gear that neither he nor those under his supervision received any instructions from Anne in the course of the proceedings. I accept that evidence. It is supported by the evidence given on information and belief from Anne to the effect that she had little knowledge of the detail of the appeal proceedings. I accept that Anne gave no instructions to Taylor David in relation to, and has played no active role in, the conduct of the appeal proceedings.

56    Next, the explanation given for the financial support provided to Pascal by Anne is that she does so because she is his wife, not because she has any particular interest in the litigation itself. Self Care challenges that explanation in several ways.

57    It first submits that if this were Anne’s position, she ought to have provided direct evidence of it and been cross examined. However, the total costs in issue in this application are $76,000. Upon taxation they are likely to be reduced. Anne was entitled to adduce evidence in the form that I have admitted. I do not consider that it was necessary for Anne to adduce evidence in person. Whilst I am conscious that in the absence of cross examination Anne’s evidence has not been tested, having regard to the whole of the evidence I am prepared to accept as credible the explanation that she has offered.

58    Self Care next submits that “in truth” Anne has a more significant interest in the outcome of the litigation because she is a major creditor in Pascal’s bankrupt estate. Self Care relies on the indebtedness of the estate to Berkeley. ASIC records exhibited to Mr Williams’ affidavit indicate that Anne is the sole director, secretary, and the holder of one of 2,000 issued shares in Berkeley. The balance of the shares are held by BGA. BGA is the trustee of the Berkeley Group Assets Trust. It is a discretionary trust. Anne is a beneficiary under the trust, but has no proprietary interest in any asset of the trust; Citrus at [33]. The two shareholders in BGA are Latin Holdings Pty Ltd and Berkeley, which hold 1,000 and 1,999 shares respectively. The sole director and secretary of Latin Holdings is Anne. The sole shareholder in Latin Holdings is BGA.

59    At the hearing Self Care submitted that the financial interests of Pascal and Anne are intimately intertwined and that I should reject the evidence that Anne is independently wealthy. Self Care relied on the report of a liquidator into the company activities of Freezeframe China Co Pty Ltd, a company that Pascal was a director and shareholder of prior to his bankruptcy and that is a respondent in both the appeal proceedings and the FCCA proceedings. That report indicates that from September 2017 to November 2019, Freezeframe paid about $869,000 to Berkeley in respect of services rendered by Pascal and Anne to Freezeframe. The September 2021 report by Worrells indicates that Mr Skelin owes Freezeframe $69,300.

60    However, Anne holds one share in Berkeley. The balance are owned by BGA. As I have noted, Anne has no proprietary interest in BGA. In that respect the interest that Anne has in Pascal’s estate is not as significant as Self Care contends. Furthermore, whilst the matters to which Self Care refers indicate that there is complexity in the arrangements, they do not go so far as to demonstrate that Anne is a major creditor in Pascal’s bankruptcy.

61    Self Care next submits that the personal claims against Pascal in the FCCA proceedings, if successful, will detrimentally affect Anne’s assets. However, as a general proposition, it cannot be the case that a spouse providing financial assistance to the conduct of a case becomes personally liable for costs merely because, as a spouse, the success or failure of litigation may be of derivative benefit. More is required.

62    Self Care also contends that in the case of Anne, her house is the subject of a freezing order and may be sold to meet any liability of her husband in the FCCA proceedings. The foundation for this submission is tenuous. There is no dispute that Anne is the sole owner of her Vaucluse property, which she has owned since 2002. Self Care points to no basis upon which it may be found in the FCCA proceedings that any dealing by her in the property would be curtailed by orders made against Pascal. Self Care seeks no relief against the property in the FCCA proceedings and has not established any basis upon which it may be said that Pascal has an interest in that property.

63    Taking these matters together, and having regard to the factors identified by Basten JA in FPM Constructions, I am not satisfied that it is just and equitable that a third party order should be made against Anne as a condition of granting Pascal leave to discontinue the appeal proceedings. Although she has provided some financial support to Pascal for the conduct of the FCCA proceedings, the only matter that is presently relevant is the conduct of the appeal proceedings in this court. Pascal was the moving party in this court. It cannot be said that in truth Anne was the moving party or a real party to the proceedings. Although she provided some of the funds for the appeal proceedings, she did not provide them all. Indeed, the evidence supports a finding that Pascal contributed some $35,000 of the costs. Nor, in my view has it been established that Anne had an interest which was equal to or greater than that of Pascal. An emotional interest in his well-being is not sufficient. It has not been demonstrated that she had a substantial financial interest in the outcome of the proceedings. Indeed, the evidence suggests that she derived no financial benefit in return for making payments towards Pascal’s legal costs. To these matters may be added the fact that Self Care does not submit, and I would not in any event find, that the conduct of the appeal proceedings was unreasonable or improper.

64    Taken as a whole I do not consider that it can be said that Anne is so connected with Pascal and has caused Pascal to start, continue or prosecute the appeal proceedings in circumstances where Anne’s conduct makes it just and equitable to be visited with a costs order in favour of Self Care; Dunghutti at [88].

65    In relation to Ojdana, she too has provided payments for the appeal proceedings and the FCCA proceedings. She has entered into loan agreements with Anne. Self Care contends that the terms of the loan agreement are commercial in nature and that it cannot be said that they were entered into out of emotional commitment on the part of Ojdana and her husband to Anne and Pascal. It submits that Ojdana has an interest in the outcome of the appeal proceedings because if Self Care is successful against Pascal in the FCCA proceedings, the result will detrimentally affect her asset, in the form of the unrepaid loan.

66    Conversely, Self Care submits that Ojdana would be a beneficiary of his success in the event of a costs order being made in his favour. The converse makes little sense, because at best a party party costs order would provide for partial return of the costs paid in the appeal proceedings (and, if ultimately successful, the FCCA proceedings). More generally, the obvious point in answer is that the loan agreements were not made with Pascal but with Anne. To the extent that they are to be regarded as commercial agreements, it is Anne who is liable. As I have concluded that Anne does not have an interest in the litigation, it is difficult to see how Ojdana can.

67    Ojdana’s evidence, adduced through Mr Gear on information and belief, is that she was motivated to enter the loan agreement with Anne and provide funds for Pascal’s legal costs out of her love for Anne and Pascal. I accept that evidence.

68    Self Care also submits that Ojdana is a major creditor of Pascal’s bankrupt estate. That submission does not withstand scrutiny. Ojdana is at best a minor creditor.

69    Self Care ultimately contends that by protecting Pascal from personal liability in the FCCA proceedings, Ojdana increases the likelihood that his debts to her and Anne will be repaid, and that Anne will repay her debt to Ojdana. However, the trustee does not predict that Ojdana will receive any dividend in the bankruptcy. Furthermore, neither of the loan agreements predicate repayment upon success in the appeal proceedings or the FCCA proceedings and, as I have noted, in any event Pascal is not a party to those agreements.

70    I am not satisfied that either Anne or Ojdana has a sufficient connection with Pascal, as the unsuccessful party, and with the appeal proceedings in general to warrant the Court exercising its jurisdiction to order that they be jointly and severally liable with Pascal for Self Care’s costs.

4.    DISPOSITION

71    For the reasons set out above I consider that Pascal should be granted leave to file notices to discontinue the appeal proceedings. I refuse Self Care’s application to make third party costs orders that Anne and Ojdana pay the costs of the appeal proceedings. Pascal should pay the costs of the application for leave to file notices of discontinuance. However, Self Care should pay Pascal’s costs of their application for a non-party costs order. For the avoidance of doubt, this outcome does not disturb the July costs order.

72    It is appropriate that an order be made that in the absence of agreement between the parties as to the quantum of costs, the quantification be referred to a Registrar of the Court for determination.

Associate:

Dated:    4 February 2022

SCHEDULE OF PARTIES