Federal Court of Australia

Rambaldi (Trustee) v Meletsis, in the matter of the bankrupt estate of Karas (No 3) [2022] FCA 807

ORDERS

THE COURT ORDERS THAT:

1.    Westpac Banking Corporation, as a non-party to the proceeding, pay the plaintiffs’ and the first and second defendants’ costs of the first and second defendants’ applications to vary the freezing orders heard on 18 March 2022 and 14 April 2022, and of this application, on an indemnity basis.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

1    The plaintiffs and first and second defendants seek indemnity costs against Westpac Banking Corporation (Westpac) for two interlocutory hearings on 18 March and 14 April 2022, which relate to interim freezing orders that the plaintiffs obtained on 1 March 2022 against the first defendant, Nick Meletsis (Mr Meletsis), and the second defendant, Hallmark Group (Aust) Pty Ltd (Hallmark), of which Mr Meletsis is the sole director. The freezing orders were made substantially in the form set out in the Freezing Orders Practice Note (GPN-FRZG), and provided for the usual exceptions permitting the defendants to pay living expenses and legal fees.

2    Mr Meletsis operates personal bank accounts with Westpac, as well as business accounts in the name of entities controlled by him. Following the making of the freezing orders, Westpac placed a block on bank accounts in the name of Mr Meletsis and his entities. Although Mr Meletsis was permitted to access money for the purposes of paying his living expenses and legal fees, he experienced myriad difficulties with Westpac providing him the necessary access to make these payments in the six weeks following the 1 March orders. This was despite further orders made on 7 and 14 March to vary the 1 March orders with a view to permitting specific payments to be made from the Westpac accounts.

3    On 14 April, I further varied the 1 March orders, as I explain below. At the hearing on that day, at which Westpac appeared, I reserved the question of whether it, as a non-party to the proceeding, should pay the plaintiffs’ and the first and second defendants’ costs of the first and second defendants’ applications to vary the freezing orders heard on 18 March and 14 April on an indemnity basis. Having directed the parties and Westpac to provide written submissions on the question, and having considered them, I formed the view that it was appropriate to determine the question on the papers.

The freezing orders and the defendants’ access to funds

4    The plaintiffs are the trustees of the bankrupt estate of the fifth defendant, Tom Karas. The proceeding has a long history. The relevant background to it is set out in Rambaldi (Trustee) v Meletsis (2022) 157 ACSR 652; [2022] FCA 73 (Davies J). On 17 February 2022, Davies J made final orders in the proceeding including, relevantly, entering judgment for the plaintiffs against Mr Meletsis and Hallmark. As at 1 March 2022, the judgment debts owed by the defendants had yet to be finally determined and paid to the plaintiffs.

5    The defendants filed five affidavits of Mr Meletsis, sworn on 6, 7, 12 and 17 March, and 13 April 2022, in relation to the orders they sought before me at various stages. Westpac also filed an affidavit of Thi Thuy Vi Nguyen affirmed 21 April 2022, pursuant to a direction I made at the hearing on 14 April about the issue of costs. I have extracted the excerpts of correspondence between the parties and Westpac below from these affidavits.

6    On 1 March, the plaintiffs made an urgent ex parte application for interim freezing orders. After a hearing that afternoon, I ordered, among others, that freezing orders be made against the first and second defendants, relevantly in the following terms:

TO: NICK MELETSIS and HALLMARK GROUP (AUST) PTY LTD (ACN 053 243 995)

This is a ‘freezing order’ made against you on 1 March 2022 by the Honourable Justice O’Callaghan at a hearing after the Court was given the undertakings set out in Schedule A to this order.

The Court orders:

…

FREEZING OF ASSETS

6. (a)    You must not remove from Australia or in any way dispose of, deal with or diminish the value of any of your assets in Australia (‘Australian assets’) up to the unencumbered value of $4,200,000 (the Relevant Amount).

(b)    If the unencumbered value of your Australian assets exceeds the Relevant Amount, you may remove any of those assets from Australia or dispose of or     deal with them or diminish their value, so long as the total unencumbered value of your Australian assets still exceeds the Relevant Amount.

(c)    If the unencumbered value of your Australian assets is less than the Relevant Amount, and you have assets outside Australia (‘ex-Australian assets’):

(i)    You must not dispose of, deal with or diminish the value of any of your Australian assets and ex-Australian assets up to the unencumbered value of your Australian and ex-Australian assets of the Relevant Amount; and

(ii)    You may dispose of, deal with or diminish the value of any of your ex-Australian assets, so long as the unencumbered value of your Australian assets and ex-Australian assets still exceeds the Relevant Amount.

7.    For the purposes of this order:

(a)    Your assets include:

(i)    all your assets, whether or not they are in your name and whether they are solely or co-owned;

(ii)    any asset which you have the power, directly or indirectly, to dispose of or deal with as if it were your own (you are to be regarded as having such power if a third party holds or controls the asset in accordance with your direct or indirect instructions); and

(iii)    for the first defendant, the following property assets in particular (and if any of those assets have been sold, the net proceeds of the sale):

[The order described two property assets.]

(iv)    For the second defendant, the following property assets in particular (and if any of those assets have been sold, the net proceeds of the sale):

[The order described seven property assets.]

…

EXCEPTIONS TO THIS ORDER

10.    This order does not prohibit you from:

(a)    for the first defendant, paying $2,000 per week on your ordinary living expenses;

(b)    paying up to $25,000 on your reasonable legal expenses;

(c)    dealing with or disposing of any of your assets (which have not vested in your bankruptcy) in the ordinary and proper course of your business, including paying business expenses bona fide and properly incurred; and

(d)    in relation to matters not falling within (a), (b) or (c), dealing with or disposing of any of your assets in discharging obligations bona fide and properly incurred under a contract entered into before this order was made, provided that before doing so you give the applicants, if possible, at least two working days written notice of the particulars of the obligation.

11.    You and the applicants may agree in writing that the exceptions in the preceding paragraph are to be varied. In that case the applicants or you must as soon as practicable file with the Court and serve on the other a minute of a proposed consent order recording the variation signed by or on behalf of the applicants and you, and the Court may order that the exceptions are varied accordingly.

…

PERSONS OTHER THAN THE APPLICANT AND RESPONDENT

14.    Set off by banks: This order does not prevent any bank from exercising any right of set off it has in respect of any facility which it gave you before it was notified of this order.

15.    Bank withdrawals by the respondent: No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order.

…

7    The orders also contained a penal notice, in the usual terms, as follows:

TO: NICK MELETSIS and HALLMARK GROUP (AUST) PTY LTD (ACN 053 243 995)

IF YOU (BEING THE PERSONS BOUND BY THIS ORDER):

(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER REQUIRES YOU NOT TO DO,

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

8    The freezing orders were made substantially in the form set out in Annexure A to the Freezing Orders Practice Note (GPN-FRZG) including, as noted in the orders, the undertakings given to the court by counsel for the plaintiffs. The proceeding was otherwise adjourned to 7 March.

9    The next morning, Deniz Dostol Berk of Frenkel Partners, the legal representatives for the plaintiffs, emailed Westpac, attaching a copy of the 1 March orders by way of service, and identifying a Westpac bank account that the plaintiffs understood to be conducted by Hallmark. About two hours later, George Kanon, a Risk Analyst at Westpac, responded to Mr Berk, confirming receipt and that the request was “being looked at as a priority”.

10    On 3 March, David Phillips, the legal representative for the defendants, emailed Westpac requesting urgent access by Mr Meletsis to $2,000 for living expenses and $25,000 for legal expenses, as provided for in the orders. Mr Phillips noted that Mr Meletsis needed the funds “to pay for his family’s basic needs given that the immediate effect of the Freezing Orders has been to deny him access to everything”, and the legal fees were “desperately needed” to confirm counsel’s engagement for the next hearing on 7 March. Mr Phillips’ email also requested that the $2,000 in living expenses be first drawn from Mr Meletsis’ personal account and, if there were insufficient funds in that account, that Westpac transfer the required funds into Mr Meletsis’ personal account from an account in the name of Genesis Holdings (Aust) Pty Ltd (Genesis), an entity of which Mr Meletsis was the sole director and shareholder.

11    On the same day, Westpac sent a letter to Mr Meletsis, relevantly in the following terms:

As Westpac Banking Corporation has been put on notice of the Freezing Order, Westpac Banking Corporation has placed withdrawal restrictions on the following account(s) to ensure it does not permit or facilitate a breach of the Freezing Order:

[The letter identified four accounts.]

(Together, the Relevant Accounts)

What this means for you – you will need to attend your local branch to conduct all permitted withdrawals

Westpac Banking Corporation has placed withdrawal restrictions on the Relevant Accounts so any withdrawals can only occur at the branch. This is because Westpac Banking Corporation has no ability to monitor the Relevant Accounts unless the withdrawal restrictions are in place.

…

Until the Freezing Order is no longer in effect you will need to go into your local branch to conduct any withdrawals on the Relevant Accounts permitted under Freezing Order. You can email legalnotices@westpac.com.au to advise of the transactions you wish to conduct and we will confirm whether the withdrawals are permitted under the Freezing Order before you attend the branch. Please note that withdrawal requests may not be completed on the same day so we recommend that you email the withdrawal request through to us at least 1 – 2 business days beforehand, together with any supporting documents required, so we can confirm the withdrawal is permitted under the Freezing Order.

Westpac Banking Corporation has taken the above steps to ensure that the Bank is compliant with the Freezing Order that have been served on Westpac Banking Corporation and to ensure that Westpac Banking Corporation is not helping, permitting or assisting with a breach of the Freezing Order.

Westpac Banking Corporation is unable to remove the withdrawal restrictions on the Relevant Accounts until we receive:

(i)    A further order from the Court stating that the Freezing Order are no longer in place; or

(ii)    If you provide us with written consent from all the parties named in the Court proceedings which states that Westpac Banking Corporation is not required to monitor … one or all of Relevant Accounts.

12    Westpac also sent letters in similar terms to the entities controlled by Mr Meletsis that day.

13    On 4 March, Mr Berk emailed Mr Kanon requesting urgent confirmation that Westpac had taken “all necessary action in accordance with the freezing order”. Mr Kanon responded about ten minutes later, confirming that Westpac had “actioned the orders accordingly”.

14    Several hours later, Mr Kanon responded to Mr Phillips’ 3 March email, relevantly as follows:

We have sent correspondence to your clients … regarding the process for requesting payments for expenses and how the branch staff can assist.

In relation to the $2000 withdrawal for living expenses as per Order 10(a), Mr Meletsis is only able to withdraw those funds from personal accounts held in his name. You can seek amended orders that allow Mr Meletsis to withdraw funds in relation to 10(a) from business accounts that he has authority to or provide written consent from all parties in this matter to allow this. If you obtain amended orders to allow for this, then please provide us with a copy and we will make arrangements for your client.

In relation to the $25,000 withdrawal/transfer for Legal expenses as per 10(b), we require a tax invoice/s to be sent and reviewed before permitting payments of this nature.

15    Mr Meletsis deposed that, as at 6 March, he had “yet to be able to obtain access to the $2,000 living allowance for ordinary expenses”.

16    The parties returned before the court on 7 March. After that hearing, I made orders varying the freezing order. This included amending paragraph 7(a)(ii) to include in the definition of “assets” the Genesis bank account identified in Mr Phillips’ 3 March email, and varying the exceptions to the freezing order, specified in paragraph 10, including to:

(1)    remove existing paragraph 10(a) (the general exception for Mr Meletsis to pay $2,000 per week on his ordinary living expenses);

(2)    add new paragraphs to order 10 to allow withdrawals from specific business accounts (including the Genesis account) for various payments, the nature and amounts of which were specified in the order;

(3)    remove existing paragraph 10(b) (the general exception for the defendants to pay up to $25,000 on their reasonable legal expenses) and replace it with a paragraph permitting the drawing of $165,000 from the Genesis account to be paid to Mr Phillips’ trust account, on the condition that it could only be used for payment of the first and second defendants’ legal fees and disbursements in the proceeding and in any appeal for work performed on or after 1 March 2022; and

(4)    add a new paragraph providing for the permitted withdrawals from the Genesis account to be deposited into Mr Meletsis’ personal account, then to be drawn to meet the permitted payments.

17    The proceeding was then adjourned to 18 March.

18    Mr Berk sent a copy of the 7 March orders to Mr Kanon that evening via email. In that email, Mr Berk noted that the orders allowed “restricted and specific withdrawals” to be made from the Genesis account.

19    On 8 March, Mr Phillips emailed Mr Kanon, referring to the 7 March orders and noting that:

(1)    the permitted payments set out in the 7 March orders were entitled to be made;

(2)    a tax invoice setting out the defendants’ legal fees was not necessary to permit payment of the defendants’ legal expenses, as the permitted payment of $165,000 provided in the orders as varied was to be paid into Mr Phillips’ trust account “to be dealt with in accordance with the Order – nothing to do with the bank”; and

(3)    the business account for State Securities Pty Ltd was to be left open and available for Mr Meletsis to operate, as permitted by the order.

20    On 9 March, Mr Phillips again emailed Mr Kanon, setting out at length nine permitted payments, requesting that the permitted payments be made, and attaching a copy of Exhibit NM-5 to an affidavit of Mr Meletsis sworn 6 March which set out the list of current liabilities of himself personally and his entities, as well as overdue payments. The email also said “if the Bank does not act in accordance with the above, my clients have little alternative other than to make an ex parte application to the Court to compel the bank to make the Court ordered payments. Should that be necessary, this email will be produced in support of an Order for indemnity costs”.

21    Westpac did not respond to either of Mr Phillips’ 8 or 9 March emails, and on the evening of 12 March, Mr Phillips emailed Westpac, copying Mr Berk, attaching by way of service an interlocutory application and supporting affidavit of Mr Meletsis of the same date. The first and second defendants, by that interlocutory application, sought the following orders:

1.    The discharge of the Freezing Order made 1 March 2022 and varied on 7 March 2022 (Freezing Orders).

2.    Further or in the alternative, an interim mandatory injunction requiring Westpac Banking Corporation Ltd to allow withdrawals in accordance with the Freezing Orders.

3.    Orders permitting the 1st and 2nd Defendants to give security in lieu of a Freezing Order pursuant to Order 12(a)(iii) of the Freezing Orders.

4.    Pursuant to Rule 36.05 of the Federal Court Rules 2011, an order extending the time within which the 1st and 2nd Defendants may file a notice of appeal to the judgment and orders of Justice Davies made 17 February 2022 in VID1279/2017.

5.    Costs[.]

6.    Such further or other orders as the Court considers appropriate.

22    On 14 March, Mr Kanon emailed Mr Phillips in response to the “breakdown of the 9 payment requests as per the updated order” of 7 March, relevantly in the following terms:

Our usual process for allowing payments to be made in accordance with court orders is for the customer to come into branch to facilitate these in accordance with branch process and account authorities.

Could you please advise which Westpac branch and which day this week your client is able to attend to process the 9 payments. Upon your response we will reach out to the selected branch and confirm with you your client’s attendance to complete the payments.

23    On 15 March, Mr Kanon emailed staff at Westpac’s Fitzroy branch to advise that Mr Meletsis would be attending shortly to conduct the nine transfers identified in Mr Phillips’ 9 March email, and requesting that the transfers be completed “as per your branch procedure”. The email continued:

If any further withdrawals or transfers are requested by the customer, please notify our team and we will have to review them to see if they can be approved. Do not allow any withdrawals/transfers from any account/s Mr Meletsis has authority to without first seeking our approval.

24    Mr Phillips spoke with Allison Strickland, a lawyer at Westpac, during the course of the day. That same day, Ms Strickland emailed Mr Phillips, and relevantly set out the following process for making additional payments:

Please … let us know if there are any other expenses Mr Meletsis would like to conduct that fall within the scope of the Court Orders by providing details of the proposed payment, the relevant category these expenses fall into and any invoices to support payment.

Once we have the relevant invoices and details of the transfers, we can then review and work with the branch. We will then let you know a suitable time for Mr Meletsis to attend the Fitzroy branch to facilitate payments.

25    Mr Phillips responded the evening of 16 March, setting out a number of payments which Mr Meletsis sought to be made from his accounts and enclosing copies of tax invoices in support of those payments. These payments included various utility bills, interest payments, and the like.

26    On 17 March, Mr Meletsis attended the Fitzroy branch, but was informed by the Branch Manager, Anil Dhingra, that the contents of Mr Phillips’ 16 March email had not been processed. Mr Meletsis had previously spoken to Ms Strickland, and Mr Meletsis deposed that both Ms Strickland and Mr Dhingra advised him that, while the permitted payments could be transferred into his personal account and the various Westpac accounts of his entities pursuant to the freezing orders (as varied), Westpac considered that the orders did not allow him to use those accounts to make the permitted payments.

27    Mr Meletsis also deposed that, as at 17 March, Mr Phillips had not received the permitted payment of $165,000 into his trust account.

28    Ms Strickland and Mr Phillips exchanged further emails on 17 March, and arranged for Mr Meletsis to attend the Fitzroy branch at 9:30am on 18 March to conduct the payments set out in Mr Phillips’ 16 March email. Ms Strickland also noted that the branch advised that it was unable to pay invoices via the “BPay” system, but could instead issue cheques.

29    Mr Phillips also confirmed that Westpac’s attendance at the resumption of the hearing the next day was not required, as follows:

As discussed I have spoken with the Associate requesting that the matter be stood down tomorrow morning until 2.15pm to enable the payment process to be completed and that your attendance is not required at this time.

30    As was arranged between Mr Phillips and Ms Strickland, Mr Meletsis attended the Fitzroy branch on the morning of 18 March. Mr Meletsis’ evidence was that it took over two hours to process 34 payments, and that, in the following weeks, he spent about 25 hours ensuring that the payments had been received by the intended recipients. Mr Meletsis deposed as to numerous difficulties with these payments, including that:

(1)    some electronic funds transfers made on 18 March did not contain any details or information from which the recipient could determine who made the payment;

(2)    he believed that the provider of his life insurance only accepted payments by direct debit or credit card, and not via cheque as was provided by the bank; and

(3)    a local telegraphic transfer had not been received by the Australian Securities and Investments Commission.

31    The parties attended a further hearing on 18 March. At that hearing, I made orders further varying the 1 March orders, relevantly:

(1)    providing that the Commonwealth Bank of Australia account in the name of Mr Meletsis’ mother (which, Mr Meletsis deposed, had also been frozen) was not subject to the freezing orders;

(2)    adding a new order 10A which stated that the freezing orders did not prohibit the transfer of money between specified accounts operated by Mr Meletsis and his companies;

(3)    adding a new order 10B which stated that the freezing orders “did not prohibit direct debits and similar automatic debits that were in place on each of the accounts listed in paragraph 10A prior to 1 March 2022 from being given effect for the purpose of enabling payments permitted by these orders”; and

(4)    amending the list of permitted payments, including to provide for monthly withdrawals of the permitted payments.

32    For reasons which are not entirely clear, and I mean no criticism of any party by this, my chambers were not provided with a draft form of order reflecting the precise form of the variations until six days later, on 24 March. A sealed copy of those orders was made available to the parties on 25 March.

33    On 25 March, Mr Phillips sent a copy of those orders to Ms Strickland via email, and relevantly stated:

Would you please adhere to the variations made noting that the new paragraph 10B does not prohibit direct debits and similar automatic payments that were in place on each of the accounts listed in paragraph 10A prior to 1 March 2022 from being given effect for the purposes of enabling payments permitted by these Orders. You will further note that that there is no prohibition on the transfer of money between any of the accounts listed in 10A for the purpose of payments permitted by these Orders. There are a number of direct debits that await processing as well as the bank addressing payment (the bank may need to reprocess) previous direct debits that have been dishonoured since 1 March 2022.

Given the variations to these Orders, my client now has access to all of the accounts listed in 10A of the varied Orders for the purpose of making the permitted payments. My client now has the obligation to adhere to the Freezing Orders to make the permitted payments which are all fully disclosed and transparent. If this requires transfer of funds between accounts, he is able to do so as per Order 10A with no bank involvement.

34    Ms Strickland responded to Mr Phillips on 28 March, relevantly in the following terms:

I understand from your email that you would like [Westpac] to remove restrictions that have been placed on your client’s accounts.

It is Westpac’s position that it is unable to remove the restrictions on your client’s accounts based on the recent Court Orders as the accounts listed in paragraph 10A of the Court Orders are still subject to the freezing order. In particular, the Court Orders amended paragraph 7(a)(ii) of the freezing order to exclude a listed Commonwealth Bank account but did not exclude the bank accounts held with Westpac. As a result, it is Westpac’s position that the operation of the freezing order still applies to the Westpac accounts.

…

… Westpac is still required to maintain restrictions on your client’s accounts as it has been served with copies of these Court Orders. It cannot otherwise monitor transactions (including direct debits previously set up) that are not between the accounts listed in paragraph 10A without the current restriction on the accounts. As previously advised, Westpac requires clear orders from the Court confirming that they are not required to monitor the accounts. Alternatively, if the parties to the proceeding agree clearly in writing that these accounts do not need to be restricted and monitored by Westpac, we would be prepared to consider this.

Westpac would be happy to assist your client with conducting any transactions permitted by the abovementioned paragraphs in accordance with its usual practice of informing legalnotices@westpac.com.au via email of the transactions to be conducted in advance. The Legal Notices team will advise when your client can attend a branch. Please note that if there are many transactions that it may take some time for this to be organised.

35    Mr Meletsis again attended the Fitzroy branch on 7 April to withdraw $2,000 in cash for living expenses. However, he was told by Mr Dhingra that he could not make the withdrawal and that such payment would require the written authority of Ms Strickland. Mr Meletsis also deposed that monthly direct debits on his bank accounts for April 2022 for permitted payments had been dishonoured by Westpac.

36    On 12 April, Mr Phillips sent a letter to Ms Strickland, via email, detailing the various difficulties that Mr Meletsis had had with accessing his accounts for permitted payments, requesting that Westpac enable Mr Meletsis to access and operate his accounts for the permitted purposes under the freezing orders, and that, absent such action, he would commence an urgent application and seek indemnity costs.

37    On 13 April, Mr Phillips forwarded his 12 April email and letter to Esther Nelson, a Senior Lawyer at Westpac, having received an out of office response from Ms Strickland. Ms Nelson responded that afternoon, relevantly as follows:

As discussed, in accordance with our usual processes for dealing with Court freezing orders relating to our customers that Westpac is served with:

•    Westpac places restrictions on the customers’ accounts which prevents any withdrawals being made unless they are conducted at the branch. This is because Westpac has no ability to monitor the customer’s accounts unless the withdrawal restrictions are in place. Westpac takes this approach to ensure it is compliant with the court freezing orders it is served with to ensure that Westpac is not helping, permitting, or assisting with a breach of the court freezing orders.

•    When a withdrawal restriction is placed on an account this means that:

(i)    No withdrawals including electronic withdrawal transactions are permitted. This includes any direct debits that have been set up.

(ii)    Deposits (including any electronic credits) will still be accepted into the account but cannot be withdrawn.

(iii)    Any redraw facilities on loans will be restricted

•    Until the Court Freezing Orders are no longer in effect the customer will need to conduct any withdrawals through their preferred branch. The process is that the customer can email legalnotices@westpac.com.au to advise of the transactions they wish to conduct, and Legal Notices will confirm whether the withdrawals are permitted under the freezing orders before the customer attends the branch. We generally recommend the customer provide at least 1- 2 business days’ notice of the withdrawal, together with any supporting documents required, so the branch withdrawal is relatively smooth.

From our conversation I understand that your client has raised concerns about his ability to access funds in his restrained accounts for his living expenses and also to enable him to run his business. As discussed, if you are able to provide Westpac with written agreement from the parties in the proceedings that states that Westpac is not required to monitor your client’s accounts in accordance with the Court Freezing Orders then Westpac will remove the restraints over those accounts. As set out above, Westpac has no ability to monitor or place limitations on accounts, so this agreement needs to be absolute. Alternatively if further orders are made by the Court to that affect, Westpac will comply with them.

38    Following receipt of that email, Mr Phillips contacted my chambers via email, copying (among others) Mr Berk and Ms Nelson and seeking a hearing for the following day. My chambers responded shortly thereafter, telling the parties that a hearing would take place the following day. I also directed that Mr Phillips notify the legal department at Westpac, including the general counsel, that a legal representative of Westpac was required to attend the hearing.

39    At the hearing the next morning, Ms S Farrugia of HWL Ebsworth, the solicitors for Westpac, appeared on its behalf. Ms Farrugia put Westpac’s position this way:

The bank’s position is, quite simply, the bank can only either block the account in accordance with the freezing order or not block the account. The position of the bank is set out in an email from Ms Nelson to Mr Phillips.

…

So the bank’s systems do not permit a partial block on the accounts to enable those transactions to occur. That also applies to the direct debits which are mentioned in order 10(b) but not identified. So it’s unable to permit those transactions to occur without removing all the restrictions which are on those relevant accounts. Now, if Westpac were to remove those restrictions on the relevant accounts to enable those transactions contemplated by the freezing orders to occur, then it may unwittingly assist or otherwise facilitate a breach of the freezing orders. Now, in those circumstances, Westpac has maintained the restrictions on the relevant accounts.

40    In response to a question I asked about what part of the order Westpac said would make it liable for facilitating a breach of the freezing orders by Mr Meletsis, Ms Farrugia accepted that there was “no specific order”. After Mr AA Segal, junior counsel for the plaintiffs, in the course of his submissions identified that the only orders applicable to the bank were orders 14 and 15, Ms Farrugia put the bank’s position in the following terms:

I think the concern is because of order 15, which does provide if the withdrawal appears to be permitted by the order the bank, without the blocks in place, if there are direct debits which are not listed in the order – with those direct debits having been previously stopped because of the block – this is not about the bank wanting to play some sort of monitoring role, as my learned friend Mr Galvin made a submission. This is about the bank wanting to comply with the orders.

41    That is, Westpac was “concerned” that order 15, which provided that “[n]o bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order”, imposed some obligation upon Westpac to be satisfied that any such withdrawal did, in fact, appear to be permitted by the freezing orders.

42    After a brief adjournment to enable Ms Farrugia to obtain instructions, Westpac agreed that if order 15 were amended to remove the words “if the withdrawal appears to be permitted by this order”, then it would lift the restrictions on Mr Meletsis’ accounts. With some reluctance, I made that order so that Mr Meletsis could have access to necessary funds as soon as possible. I say “with some reluctance” because I did not understand then, and for reasons I set out below, I do not understand now, why the alteration to the standard form freezing orders was necessary. I also directed that Westpac file and serve an affidavit in response to Mr Meletsis’ affidavit sworn 13 April, including an explanation of the circumstances in which the first and second defendants’ applications to vary the freezing orders heard on 18 March and 14 April became necessary to be made, and reserved the question of whether Westpac should pay the plaintiffs’ and first and second defendants’ costs of those applications on an indemnity basis.

43    Westpac prepared and filed an affidavit of Thi Thuy Vi Nguyen accordingly on 21 April. I then invited the parties and Westpac to file and serve submissions on the question of costs, which they duly did.

The submissions

44    Both the first and second defendants, as well as the plaintiffs, now apply for an order requiring Westpac to pay their costs arising from the defendants’ interlocutory application dated 12 March 2022, which resulted in the two interlocutory hearings on 18 March and 14 April, on an indemnity basis. Both the defendants and the plaintiffs submitted that, for the reasons below, such orders would be an appropriate exercise of the court’s discretion, because there was a real and direct causal connection between Westpac’s unreasonable conduct and the costs incurred by the respective parties.

45    The defendants submitted that Westpac’s conduct unreasonably hindered the payment of permitted living and legal expenses, notwithstanding the clear wording of the orders (which were in the standard form annexed to the Practice Note) and the manifest intention of the court and the parties. Such disregard for the true purport of the orders caused unwarranted financial stress and hardship for Mr Meletsis and his family.

46    As to Westpac’s responses to Mr Phillips’ correspondence, the defendants submitted that:

(1)    Westpac’s response to Mr Phillips’ 3 March request, stating that the living expenses could only be withdrawn from a personal account and requiring the production of a tax invoice before payment of legal expenses, was unnecessary and unreasonable;

(2)    it was not appropriate for a solicitor to issue a tax invoice for funds which the solicitor intended to hold on trust pending the completion of work and invoicing; and

(3)    Westpac did not respond to Mr Phillips’ 8 and 9 March requests to process permitted payments.

47    The defendants also submitted that, when Mr Meletsis did attend the Fitzroy branch as directed by Westpac, it placed “unreasonable conditions and restrictions on the processing of permitted payments, including refusing to allow permitted payments the subject of pre-existing direct debit facilities to be paid by this method” after his attendance on 18 March, and continued to refuse Mr Meletsis’ attempts to access funds even after his attendance at the branch on 7 April. The defendants submitted that Westpac’s contention that its own systems and processes did not allow it to give effect to the regime embodied in the court’s orders was “no answer” to the criticisms levelled at Westpac’s conduct, and that, in any event, such limitations were not known to the defendants until Ms Farrugia made that submission at the 14 April hearing.

48    The plaintiffs adopted the defendants’ submissions. They further submitted that there was a real and direct causal connection between Westpac’s unreasonable conduct, and the costs incurred by the plaintiffs to form the basis for the court to exercise its discretion and order indemnity costs against Westpac, for the following additional reasons:

(1)    Frenkel Partners provided the orders of 1 and 7 March 2022 to Westpac, each on the day that they were made;

(2)    between 8 and 10 March, Frenkel Partners, Mr Phillips, and a representative of Westpac communicated via email to facilitate a solution for Mr Meletsis to be provided access to his bank accounts (and those of his entities) in a manner permitted by the freezing orders;

(3)    in particular, on 9 March, Frenkel Partners sent an email to Mr Phillips, copied to Westpac, which stated, inter alia: “For the avoidance of any doubt, the purpose of the Orders is not to ‘unfreeze’ the accounts of Mr Meletsis and Genesis Holdings, but rather, it directs Westpac to allow Mr Meletsis to make specific withdrawals from those accounts as outlined in the Orders”;

(4)    Westpac did not respond to the emails sent by Frenkel Partners between 8 and 10 March;

(5)    the 18 March orders varied the freezing orders with the intention, or objective, to assist Westpac in allowing the defendants access to their bank accounts, but solely because of the position adopted by Westpac, the costs incurred by the plaintiffs were in effect wasted; and

(6)    until production of Ms Nelson’s email, the plaintiffs were not made aware of the fact that the defendants’ difficulties were caused by first, Westpac’s incorrect interpretation of the freezing orders and secondly, Westpac’s internal processes.

49    Westpac submitted that to make a costs order against a non-party, let alone a costs order on an indemnity basis, is “exceptional” and “rare” and there is no warrant for the court to do so in the circumstances described below.

50    Broadly speaking, there were two reasons why Westpac submitted that its conduct was reasonable, and it was therefore not appropriate to order costs against it at all, let alone on an indemnity basis.

51    First, it submitted, any failure to abide by the terms of the freezing orders exposed it to the risk of punishment for contempt of court. As I say, at the hearing on 14 April, Westpac’s submission was that it understood this exposure to arise by reason of order 15, a contention which was expanded in its written submissions filed a few weeks later. Order 15, prior to the amendment on 14 April, was in the following terms: “No bank need inquire as to the application or proposed application of any money withdrawn by you if the withdrawal appears to be permitted by this order”.

52    In its written submissions, Westpac provided the following “context” for its conduct:

Once Westpac was served with the freezing orders made on 1 March 2022, it was incumbent on Westpac to ensure that restraints were placed on accounts held or controlled by Mr Meletsis and/or Hallmark Group (Aust) Pty Ltd so as to prevent them from removing or in any way disposing of, dealing with or diminishing the value of their assets up to the unencumbered value of $4.2 million.

Failure to do so exposed Westpac to the risk of being adjudged guilty of contempt. This exposure is expressly recorded in the penal notice set out in the freezing orders: any person who knows of the order and does anything which helps or permits those bound by the order to breach its terms is liable to punishment.

A person, not directly bound by an order, may be guilty of contempt of court if that person, with knowledge of the order, does an act which infringes, or frustrates, the efficacy of the order, and thus interferes with the due administration of justice. [Citing Ferguson v Eakin [1997] NSWCA 106 (Powell JA); R v Hinch [2013] VSC 520, [55] (Kaye J); Fitzsimons v Commonwealth Bank of Australia [2012] NSWSC 660 (Stevenson J).]

In Fitzsimons v Commonwealth Bank of Australia, Stevenson J cited with approval the following passage from Biscoe, Freezing and Search Orders, 2nd ed (2008) at [4.12]:

A bank is guilty of contempt if, knowing of a [freezing] order against the defendant, it allows the defendant to move money in breach of the injunction, even where the defendant had not been served with the order and had therefore not committed any contempt to which the bank could be an accessary.

These circumstances compelled Westpac to place restrictions on the relevant accounts, upon it being put on notice of the making of the freezing orders. Westpac’s conduct thereafter accorded with paragraph 15 of the freezing orders (which formed part of the standard freezing orders made by the Court), which required Westpac to form a view as to whether a proposed application of moneys to be withdrawn appeared to be permitted by the freezing orders.

Further, the plaintiffs served Westpac with the freezing orders and subsequently sought Westpac’s confirmation that it had “taken all necessary action in accordance with the freezing order”. These circumstances placed Westpac in an invidious position if it did not act promptly to place restraints on the relevant accounts.

53    Westpac’s second reason for its conduct was that, because of the operation of Westpac’s systems, the regimes agreed to by the plaintiffs and defendants to facilitate the permitted payments, embodied in the court orders as varied, “could not be implemented by Westpac as seamlessly as the parties had envisaged”. This was because Westpac’s systems, as Ms Farrugia explained, did not permit it to place partial restrictions on accounts. Instead, its “established process” was that which was communicated to Mr Meletsis on 3 March: for him, upon giving one to two days’ notice, to attend a branch so that branch staff could process permitted transactions manually. While Westpac recognised that this would have caused Mr Meletsis “unavoidable convenience”, it submitted that this process nevertheless enabled Mr Meletsis to have access to permitted funds.

54    It also submitted that, to accommodate these technical impediments, it offered “practical solutions” to the parties, including inviting the parties to provide it with a written agreement that it was no longer required to monitor the accounts, which the parties did not provide.

55    As to the defendants’ various requests for the permitted payments to be made, and Westpac’s responses to those requests, it submitted that its conduct was reasonable for the following reasons:

(1)    Contrary to the defendants’ submission, Westpac did not “refuse” Mr Phillips’ 3 March request for payment of Mr Meletsis’ living expenses and legal expenses. Rather, it took a “cautious”, and not unreasonable, approach, in particular:

(a)    Its response that Mr Meletsis could only withdraw funds for living expenses from a personal account was “informed by a reasonable construction of the freezing orders” because living expenses can only apply to natural persons.

(b)    Westpac also proposed a solution that the freezing orders be varied to allow Mr Meletsis to withdraw funds for living expenses from business accounts, or to provide written consent from all parties.

(c)    Westpac’s requirement for a tax invoice to be issued and reviewed before permitting payments for legal expenses was reasonable in light of order 15, which required some (albeit low) level of satisfaction that the withdrawal appeared to be permitted by the orders.

(2)    The defendants’ criticism that Westpac did not respond to Mr Phillips’ 8 and 9 March emails was unfair and unjustified, in circumstances where the freezing orders, as varied by the 7 March orders, identified permitted payments by reference to an annexure to an affidavit which was not provided to Westpac until Mr Phillips’ 9 March email.

(3)    Westpac did not, contrary to the defendants’ submission, “refus[e] to allow permitted payments the subject of pre-existing direct debit facilities to be paid by his method” when Mr Meletsis attended the Fitzroy branch following the 7 March variation. Rather, its systems did not allow partial restrictions to be placed on accounts such that direct debit transactions could be permitted while at the same time prohibiting other internet banking. And in any event, Mr Meletsis’ 16 March request was not expressly directed to pre-existing direct debit facilities, and the relevant orders at the time (being the orders as varied on 7 March) “did not embody a regime which expressly dealt with pre-existing direct debit facilities”.

56    Westpac also submitted that there was no real and direct causal connection between its conduct and either of the hearings on 18 March or 14 April.

57    For the 18 March hearing, Westpac submitted that it did not attend that hearing because the defendants’ solicitor had informed it that its attendance was not required. It also submitted that of the four orders sought by the defendants at that hearing, only one was directed at Westpac. The balance of the orders sought the discharge of the freezing orders, permission for the defendants to give security in lieu of the freezing orders, and an extension of the time to file a notice of appeal. Westpac submitted that “it is not contended that the orders could have been made without the need for attendances by the parties”. I understand that submission to be that, even absent the defendants’ ongoing difficulties with accessing the funds permitted by the freezing orders, the parties would have needed to attend court on 18 March in any event and accordingly, the costs incurred in doing so were not caused by Westpac’s conduct.

58    Westpac further submitted that “the parties appreciated, by 18 March 2022, that paragraph 15 operated to impose a monitoring burden on Westpac, and that a suitable amendment to that order could ameliorate the issues being encountered by the defendants”. This was so because, at the hearing on 18 March, senior counsel for the defendants said:

It’s really [order] 15 that’s the relevant one. From our point of view. The difficulty with that is that the bank says, ‘Well, we want to be satisfied as to what the purpose of the payment is. You have to satisfy us.’. And so the reason I’m not suggesting any change to that order, your Honour, is because it seems like the penny may have dropped at the bank and we’re hoping that if these orders are provided to the bank, we won’t have any more of these sorts of issues.

59    Westpac submitted that, against all this background, and particularly in circumstances where the defendants told Westpac that it did not need to attend the hearing, “there is nothing in the circumstances that establishes that Westpac’s conduct was unreasonable, or sufficiently unreasonable, so as to warrant the exercise of the rare and exceptional discretion to order that Westpac, a non-party, pay the parties’ costs”.

60    As for the 14 April hearing, Westpac submitted that had it been consulted about the 18 March orders, it would have been able to raise practical difficulties with the parties and inform them that “by reason of the functionality of Westpac’s systems, the monitoring burden imposed on Westpac could not be discharged as efficiently as the parties might have hoped or expected”. Further, it submitted that it had less than 24 hours to respond to the request received on 12 April, because the defendants contacted my chambers to seek a hearing in the afternoon of 13 April. Accordingly, Westpac submitted that “the calling on of the matter on such short notice meant that the plaintiffs’ solicitors were given about 90 minutes to consider Westpac’s proposal which, if it had been agreed by the parties, would have obviated the need for the hearing on 14 April 2022”.

61    Westpac again contended that it proposed solutions to the difficulties faced by the defendants, including in writing to the parties on 28 March to say that “if the parties agreed in writing that the relevant accounts did not need to be restricted and monitored by Westpac, Westpac would be prepared to consider this” and that it was happy to assist Mr Meletsis to conduct the permitted payments in accordance with its usual processes, to which no response was received. As for Mr Meletsis’ attendance at a branch on 7 April, Westpac submitted that he “did not follow the process which [it] had advised needed to be followed” and that the attendance was without notice.

62    Westpac submitted that it informed the defendants’ solicitor of its inability to place partial restrictions on accounts by telephone on 13 April 2022, contrary to the defendants’ contention that they did not become aware of this restriction until oral submissions during the 14 April hearing.

Consideration

63    The court has a broad discretion under s 43(2) of the Federal Court of Australia Act 1976 (Cth) to make costs orders, including on an indemnity basis under s 43(3)(g) and against non-parties. Westpac’s submission is that such orders are not appropriate in the circumstances of this case.

64    Two questions arise:

(1)    Is it appropriate to make a costs order against Westpac as a non-party in respect of the 18 March and 14 April hearings, and this application?

(2)    If yes, should the costs order be the ordinary order (that those costs are payable on a party/party basis) or an order that they be paid on an indemnity basis?

65    In this case, those questions are to an extent inter-related. The first question requires consideration of whether there is sufficient connection between the conduct of the non-party and the costs claimed. The second question requires consideration of whether there are some special or unusual circumstances to warrant departure from the ordinary costs order. Here, for reasons that I will explain, Westpac’s conduct is relevant to both questions, although it is more conveniently dealt with mostly under the rubric of the second question.

66    For the following reasons, I answer the two questions as follows:

(1)    Yes.

(2)    The costs are to be paid on an indemnity basis.

The first question: Is it appropriate to make a costs order against Westpac as a non-party in respect of the 18 March and 14 April hearings, and this application?

67    While the power under s 43(2) of the Federal Court Act does not explicitly provide for making costs orders against non-parties, it is well established that the power extends to such orders. See Knight v FP Special Assets Limited (1992) 174 CLR 178 at 192 (Mason CJ and Deane J). However, there must be some connection between the non-party and the proceeding and/or the costs. The nature of this connection was described by Gobbo J in Bischof v Adams [1992] 2 VR 198 at 204–205:

It is not practicable to lay down a set of parameters in advance for there may be cases where the interests of justice support an order for costs even though the connection is slender. Thus if a witness deliberately refuses to answer to a subpoena and thereby causes the case to be adjourned and so increases costs to the parties, I would have thought that it was very much arguable that he should bear these extra costs. There would seem to be no connection in the ordinary sense of that word between that witness and the proceedings, beyond the fact that he was a potential witness. It may be said, however, that there is a causal connection between the non party and the incurring of the costs, a matter that bears directly on the justice of whether he should be made to pay costs that he has caused to be incurred.

Again, there may be cases where the connection is significant but not material to the issue of costs. Thus a person may benefit greatly from a particular proceeding but may not have any real part in supporting the proceeding.

The most convenient course is, in my view, to look at both factors in considering the connection between the proceedings and the non party, namely, the connection between the non party and the proceedings and secondly, the causal connection between the non party and the costs.

I have concluded that, without limiting myself to these two matters, I should take both factors into account in any exercise of discretion. The connection must be real and direct and it must be material to the issue of costs. The mere fact that a person may benefit from the litigation will not, without more, suffice.

See also Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar of Aboriginal and Torres Strait Islander Corporations (No 4) (2012) 200 FCR 154 at 169 [81], 170 [88] (Keane CJ and Lander and Foster JJ).

68    In my view, there is a clear causal connection between Westpac’s conduct and the parties incurring the costs of the defendants’ applications to vary the freezing orders in relation to both the 18 March and 14 April hearings.

69    For the 18 March hearing, Westpac submitted that there was no causal connection between its conduct and the parties’ costs because only one of the four orders sought by the defendants ahead of that hearing was directed at Westpac. But almost all of that hearing, and no doubt the preparation for it, was occupied with further amending the 1 March orders to facilitate easier access to the permitted payments. The defendants did not seek the discharge of the freezing orders or the substitution for security in lieu of the freezing orders at that point, and I made the order for extension of time for the defendants to file their notice of appeal after a very brief exchange with counsel for the defendants and with no objection from the plaintiffs.

70    Westpac also submitted that there was no causal connection in circumstances where the defendants had agreed that Westpac’s attendance at the 18 March hearing was not required. However, it is clear that the defendants did not press for Westpac’s attendance because they hoped that the further amendments which were sought (and made) would facilitate resolution of the issues that the defendants were facing. This is evident from the email from Mr Phillips to Ms Strickland set out at [29] above, in which Mr Phillips advised that he had requested the matter, which was originally to be heard in the morning of 18 March, be stood down until 2:15pm to “enable the payment process to be completed” after Mr Meletsis attended the Westpac branch.

71    Further, at that hearing, counsel for the defendants submitted that, while the payments sought up until that point had been made when Mr Meletsis attended the branch, the proposed amendments to the orders were to “make the future easier”. Counsel also submitted that the defendants did not propose any change to order 15 of the freezing orders because “it seems like the penny may have dropped at the bank and we’re hoping that if these orders are provided to the bank, we won’t have any more of these sorts of issues”. The defendants reasonably expected that the amendments would facilitate easier payment of the expenses which were already permitted under the 1 March orders, and it is clear that the defendants agreed that Westpac did not need to attend the hearing on that basis. For reasons I shall explain in considering the question of indemnity costs, Westpac’s conduct in processing the permitted payments was unreasonable and it acted with disregard for clear court orders providing for those permitted payments. Its conduct made it necessary for the defendants to seek amendments to facilitate those payments, and in these circumstances – and where the conduct continued even after the orders had been amended on 18 March – Westpac cannot rely on the defendants’ agreement that it did not need to attend the hearing to escape liability for costs.

72    Westpac also submitted that by 18 March, the parties appreciated that order 15 imposed a monitoring obligation because, at the hearing that day, senior counsel for the defendants submitted “[i]t’s really [order] 15 that’s the relevant one. … The difficulty with that is that the bank says, ‘Well, we want to be satisfied as to what the purpose of the payment is. You have to satisfy us’”. But that was, at most, counsel’s restatement of Westpac’s position, not his agreement with it.

73    Similarly, I am also satisfied that there is sufficient causal connection between Westpac’s conduct and the 14 April hearing.

74    Westpac submitted that had it been consulted about the 18 March orders, it would have been able to tell the parties about the difficulties of implementing those orders due to the limitations of its systems and processes, and thus the April hearing to further amend the orders would not have been necessary. But, as I say, Westpac continued to act unreasonably and in apparent disregard of the freezing orders. This resulted in the need for the April hearing which was again occupied, for the most part, with submissions regarding further amendments to the orders so that Westpac could process the permitted payments.

75    Westpac also submitted that it had less than 24 hours to respond to a request received on 12 April, and “the calling on of the matter on such short notice meant that the plaintiffs’ solicitors were given about 90 minutes to consider Westpac’s proposal which, if it had been agreed by the parties, would have obviated the need for the hearing on 14 April 2022”. But Westpac responded to Mr Phillips’ 12 April email nonetheless. In that response, despite the 18 March amendments to the court orders, it simply reiterated the existing process it had earlier outlined and its proposed solution that the parties agree that Westpac no longer needed to monitor the defendants’ accounts. In my view, the defendants cannot be criticised for acting with urgency where the payments sought were for daily living expenses (the critical nature of which is self-evident), and Westpac remained unmoved.

76    As for the “proposal” which Westpac refers to that, had it been agreed to by the parties, would have obviated the need for the hearing, I understand this to be the amendment to order 15. But this amendment was never raised in any correspondence with the parties, and Ms Farrugia only referred to order 15 after counsel for the plaintiffs identified orders 14 and 15 as being the “only orders that relate to the bank”. I am therefore not satisfied, had the 14 April hearing not occurred, that Westpac would have proposed that course and “obviated the need for the hearing”.

77    As for Westpac’s submission that it informed the defendants’ solicitor on 13 April of the inability to place partial restrictions on accounts, contrary to the defendants’ submission that they became aware of this at the hearing of 14 April, that is irrelevant. There is no reason, and Westpac did not advance any, why the defendants becoming aware of those limitations on 13 April would have avoided the cost of the 14 April hearing.

78    Accordingly, weighing all these factors in the balance, I am satisfied that this is a case in which it is appropriate to order costs against Westpac as a non-party to the proceeding.

The second question: Should the costs order be the ordinary order (that those costs are payable on a party/party basis) or an order that they be paid on an indemnity basis?

79    Costs are ordinarily ordered on a party/party basis, and there must be some special or unusual circumstance to warrant departure from that usual course. The relevant principles are well established and usefully set out in Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [4]–[5] (Jagot, Yates and Murphy JJ):

Usually the Court will award costs to the successful party on a party/party basis, but where the circumstances of the case warrant a departure from the usual course the Court may order indemnity costs. The principles relevant to an award of indemnity costs are well-established. There can be no exhaustive list of the circumstances that may warrant the exercise of the discretion.

In broad terms an order for indemnity costs requires that some special or unusual feature arises: Cirillo v Consolidated Press Property Ltd (formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at [3] (Finn J). Indemnity costs are not punitive but are designed for “compensating a party fully for costs incurred, as a normal costs order could not be expected to do, when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs”: Hamod v New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr and Goldberg JJ agreed). Such circumstances may include where allegations are made “which ought never to have been made”, where the case is “unduly prolonged by groundless contentions” (Ragata Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115 at [15], [17] (Davies J)), and where “the applicant, properly advised, should have known that he had no chance of success” (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what should on proper consideration be seen to be a hopeless case” (J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 at 303 (French J)).

80    As these passages make clear, the circumstances in which a court may order costs on an indemnity basis are a matter of discretion and the categories of such cases are not closed.

81    In my view, this is a case in which it is appropriate to compensate the plaintiffs and the defendants fully for costs incurred because it was unreasonable for Westpac to have subjected them to the expenditure of costs of the defendants’ applications to vary the freezing orders heard on 18 March and 14 April.

82    In acting as it did after it was put on notice of the freezing orders, Westpac acted with disregard for the clear intention of the regime set out in those orders. Westpac submitted that “[a] person, not directly bound by an order, may be guilty of contempt of court if that person, with knowledge of the order, does an act which infringes, or frustrates, the efficacy of the order, and thus interferes with the due administration of justice”. It also submitted that it was “put in an invidious position” and that “any failure to abide by the terms of the freezing orders exposed Westpac to the risk of punishment for contempt of court”. That is not so. Contempt by a non-party requires some intent on the part of the non-party to frustrate the court’s orders. As Eveleigh LJ observed in Z Ltd v A-Z and AA-LL [1982] QB 558 at 578:

I think that the following propositions may be stated as to the consequences which ensue when there are acts or omissions which are contrary to the terms of an injunction. (1) The person against whom the order is made will be liable for contempt of court if he acts in breach of the order after having notice of it. (2) A third party will also be liable if he knowingly assists in the breach, that is to say if knowing the terms of the injunction he wilfully assists the person to whom it was directed to disobey it. This will be so whether or not the person enjoined has had notice of the injunction.

83    This was emphasised by Lord Rodger of Earlsferry in Customs and Excise Commissioners v Barclays Bank plc [2007] 1 AC 181 at 207 [62]–[64]:

Punishment for contempt of court is the remedy which the law provides for the addressee’s failure to comply with an injunction such as a freezing order. Liability is strict and so he may be guilty of contempt even where he did not deliberately flout the order, the degree of his fault being relevant in determining the appropriate punishment: Attorney General v Times Newspapers Ltd [1992] 1 AC 191, 217G-H per Lord Oliver of Aylmerton.

By contrast, a third party who is notified of an injunction is guilty of contempt of court only if he knowingly takes a step which will frustrate the court’s purpose in granting the order. So a bank will be in contempt only if it knowingly fails to freeze a customer’s account and pays away sums in the account after being notified of an order. …

The policy of the law is that a third party, such as a bank, which is notified of a freezing order, must not knowingly undermine the court’s purpose in granting the order. …

84    In Australian Securities and Investments Commission v One Tech Media Limited (No 3) [2018] FCA 1071, ASIC brought a contempt application against the solicitors for the defendants where the solicitors had applied certain of the defendants’ funds to legal expenses over the maximum amount allowed by freezing orders. Justice Moshinsky found that the solicitors were not guilty of contempt because, as a non-party, the liability for the contravention was not strict and ASIC could not otherwise establish that the solicitors effected the relevant payments knowing that to do so would be in contravention of court orders. His Honour relevantly found at [116]:

In my view, [CCOM Pty Ltd v Jiejing Pty Ltd (1992) 36 FCR 524] and the authorities to which it refers establish the following propositions: a person who is not a party to the proceeding and not bound by a court order is not subject to the strict liability for contempt that applies to a person bound by a court order that is breached; a person who is not in terms bound by a court order but who knows of it and who then does something that disrupts the situation created by it may, but not necessarily must, be guilty of contempt of court; and such a person will be guilty of contempt where his or her conduct, coupled with knowledge of the court order, shows that he is flouting the authority of the court by doing something that he or she knows will prevent the court order achieving its intended object. The effect of these propositions is that an additional element of intention needs to be established.

85    As these authorities make clear, mere notice of a freezing order is not enough to render a third party of contempt should the defendant breach it. There must be some element of intent to assist the breach.

86    The freezing orders of 1 March provided for the payment of Mr Meletsis’ living expenses and the defendants’ legal fees. Just as a bank should not knowingly assist a defendant to breach orders prohibiting the disposal of the defendant’s assets, it should also not knowingly act to frustrate clear court orders providing for certain payments to be made. As Lord Denning MR said Z Ltd v A-Z and AA-LL [1982] QB 558 at 572, “[e]very person who has knowledge of [the freezing order] must do what he reasonably can to preserve the asset”. It follows that such a person should also do what they reasonably can to facilitate the entire regime contemplated by freezing orders, including any permitted exceptions.

87    Broadly speaking, Westpac submitted two justifications for its conduct. The first was because it had some “monitoring” obligation. Whatever that may mean, Westpac’s conduct went far beyond simply “monitoring” the accounts and satisfying itself that payments were permitted. Rather, the main justification for Westpac’s conduct identified in its submissions, both at the 14 April hearing and in written submissions as to costs, was the limitations of its systems and its “established process” for managing freezing orders.

88    Most of the defendants’ ongoing issues with accessing funds were attributable to Westpac’s inability to process payments, or unwillingness to do so outside of its usual protocol of requiring customers to attend a branch, even where it could easily be satisfied that payments were permitted. The clearest illustration is Westpac’s response to this request from Mr Phillips in his email of 25 March:

Would you please adhere to the variations made noting that the new paragraph 10B does not prohibit direct debits and similar automatic payments that were in place on each of the accounts listed in paragraph 10A prior to 1 March 2022 from being given effect for the purposes of enabling payments permitted by these Orders.

89    Ms Strickland’s response to that email was to reiterate Westpac’s position that it was “unable to remove the restrictions” on the accounts, it could not “otherwise monitor transactions (including direct debits previously set up)”, and would require “clear orders from the Court confirming that [Westpac was not] required to monitor the accounts”. The court orders, as amended, provided that they “did not prohibit direct debits and similar automatic debits that were in place on each of the accounts listed in paragraph 10A prior to 1 March 2022 from being given effect for the purpose of enabling payments permitted by these orders”. The orders could not have been clearer. Westpac could easily be satisfied that such payments were permitted, but it still refused to process those payments unless Mr Meletsis attended a branch to make the request. Westpac insisted that it needed a clear order of the court regarding its perceived monitoring obligations, but then proceeded to ignore other court orders which unambiguously permitted certain payments.

90    Similarly, the amendments made on 7 March permitted particular payments identified in an affidavit of Mr Meletsis. Even after having been supplied with that affidavit, Westpac’s response to Mr Phillips was that “[o]ur usual process for allowing payments to be made in accordance with court orders is for the customer to come into branch to facilitate these in accordance with branch process and account authorities”. Again, Westpac could easily be satisfied that the payments were in fact permitted under the orders. But again, it insisted on a strict adherence to a protocol which had nothing to do with that satisfaction.

91    Westpac’s own submission was that, had it been consulted about the 18 March orders, it “would have been able to inform the parties that, by reason of the functionality of Westpac’s systems, the monitoring burden imposed on Westpac could not be discharged as efficiently as the parties might have hoped or expected”. This seems to me to be a clear recognition that the main reason why Westpac could not facilitate the operation of the court orders was because of its systems and processes, and not because it could not be satisfied that the payments were in fact permitted.

92    Further, even where the defendants followed Westpac’s process of attending a branch to request payments, and Westpac made the payments (presumably having been satisfied that they were permitted), Mr Meletsis’ evidence, which Westpac did not challenge, was that there were numerous issues with these payments such that he could not be certain that they had been received or applied against relevant liabilities (see [30] above).

93    The system that Westpac proposed for processing permitted payments was also completely unworkable for day-to-day living expenses and emergencies. For example, Mr Meletsis deposed to the difficulty of being permitted to withdraw cash but not use credit cards and other electronic forms of payment for living expenses, including ordering food online when members of his family were in isolation after contracting COVID-19, paying for nearby parking at an emergency department when his child fell ill, and booking school holiday activities for his children online. Westpac was also unable to pay certain bills in the manner required by the biller due to the limitations of its systems.

94    As the parties submitted, it is no answer for Westpac to say that its systems or established protocols rendered it incapable of abiding by court orders. This is particularly so where Westpac is a major bank and, on its own evidence, on average “receives approximately 24 freezing orders each month”. This was not a situation in which Westpac’s systems were poorly adapted to accommodate a form of order which was unfamiliar or unknown to it; these were freezing orders made in the standard form which Westpac receives, on average, almost daily.

95    Westpac submitted that it offered “practical solutions” to the above difficulties, being its proposal that it would remove the block on the defendants’ accounts if the parties agreed that Westpac had no monitoring obligations. However, Westpac’s obligations were not a matter for agreement between the parties to the proceeding. It was for Westpac, not the parties, to identify and comply with its legal obligations. Contrary to its submission, this was not a practical solution, and Westpac did not identify any other solutions that it put to the parties to overcome the limitations in its own systems prior to it proposing the amendment to order 15 at the April hearing.

96    I accept that Westpac responded to correspondence from the solicitors for the parties, and did facilitate some payments for the defendants when they followed Westpac’s process for making them. However, as I say, even when that process was followed, not all payments were made. Westpac’s conduct frustrated the clear intention of the court orders, despite those orders being twice amended prior to the 14 April hearing to make clear what was permitted under them.

97    In my view, this is an appropriate case in which there should be an order for costs on an indemnity basis to compensate the plaintiffs and the defendants fully for costs incurred because it was unreasonable for Westpac to have subjected them to the expenditure of those costs.

Disposition

98    For the reasons I have given above, in the circumstances of this case, it is appropriate to order costs against a non-party to the proceeding and on an indemnity basis. Accordingly, I will order that Westpac Banking Corporation, as a non-party to the proceeding, pay the plaintiffs’ and the first and second defendants’ costs of the first and second defendants’ applications to vary the freezing orders heard on 18 March 2022 and 14 April 2022, and of this application, on an indemnity basis.

Associate:

Dated:    12 July 2022

SCHEDULE OF PARTIES