Federal Court of Australia

Naidenov (as liquidator) v Anderson, in the matter of Peach & Co Pty Ltd (in liq) (No 2) [2024] FCA 1306

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiffs pay the defendant’s costs of the amended interlocutory process dated 22 October 2024 as agreed or taxed.

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

REASONS FOR JUDGMENT

GOODMAN J

A.    Introduction

1    On 24 October 2024, I made an order dismissing the plaintiffs’ interlocutory application for an order pursuant to s 1323(1) of the Corporations Act 2001 (Cth) for the appointment of a receiver of the property of the defendant and for alternative orders in the nature of freezing orders. My reasons for doing so are set out in Naidenov (as liquidator) v Anderson, in the matter of Peach & Co Pty Ltd (in liq) [2024] FCA 1232 (Naidenov (No 1) or J). Some familiarity with Naidenov (No 1) is assumed in these reasons for judgment.

2    I also made orders allowing the parties an opportunity to make submissions concerning the costs of the interlocutory application. Both parties took that opportunity. It is common ground that the plaintiffs should pay the defendant’s costs of the interlocutory application. The defendant seeks, and the plaintiffs resist, orders that: (1) the defendant’s costs be paid forthwith; and (2) those costs be paid in a fixed sum of $15,000.

B.    Should the defendant’s costs be paid forthwith?

3    The Court’s power to award costs is found in s 43 of the Federal Court of Australia Act 1976 (Cth) (FCA Act), which section confers a broad discretion. Rule 40.13 of the Federal Court Rules 2011 (Cth) provides that if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. The Court has a discretion to make an order dispensing with r 40.13: see rr 1.34 and 1.35. In Watson v Kriticos [2022] FCA 4, Perram J explained at [6]:

The principles governing the exercise of the discretion are similarly well-established. As a general proposition, the discretion should be exercised in favour of a party who establishes that the demands of justice require a departure from the ordinary rule embodied in r 40.13: FKP v Spirits at [7]; Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd (1992) 36 FCR 297 at 312 per Olney J. Always to be borne in mind, however, are the twin policy considerations underpinning r 40.13: first, that it is generally undesirable that the parties should be exposed to multiple taxation processes during the life of one proceeding; and second and relatedly, that during the balance of the litigation, costs orders may be made in the opposite direction which will normally be capable of being set-off against earlier costs orders.

4    At [7], his Honour provided a series of examples of circumstances in which an order that costs be paid forthwith have been made. Similar groupings of such examples may be found in, e.g., Fiduciary Ltd v Morningstar Research Pty Ltd [2002] NSWSC 432; (2002) 55 NSWLR 1 at 4 to 5 ([11] to [13]) (Barrett J, as his Honour then was); Stone v Melrose Cranes and Rigging Pty Ltd [2016] FCA 1113 at [55] (Markovic J); and Richmond v Ora Gold Ltd [2020] FCA 70 at [33] (Colvin J). In the present case the circumstances relied upon by the defendant are his contentions that:

(1)    the evidence before the Court demonstrates that the defendant is in a precarious financial position because his only real property asset has negative equity, he has been sued by the liquidator for close to $1 million, and he has limited cash resources;

(2)    the application should not have been brought in circumstances where there was no probative evidence justifying the relief which was sought against the defendant; and

(3)    the proceeding is at a “very early stage”.

5    I am not persuaded by these contentions.

6    As to the first, there is insufficient evidence before the Court concerning the defendant’s financial position to allow any finding to be made as to whether that position is precarious or otherwise. There was some evidence concerning the defendant’s equity position in the Property, namely that the Property had a value in the range of $4.0 to $4.7 million; and that the Property was security for loans from the NAB (with a balance owing in the order of $3.9 million) and from Mr Thomson (being a loan of $1 million, for which the balance owing is not apparent on the evidence): J[21]. However, this evidence falls well short of establishing that the defendant’s financial position is precarious. In any event, the financial position of a party is generally of little moment in the exercise of the costs discretion: see, e.g., Northern Territory v Sangare [2019] HCA 25; (2019) 265 CLR 164 at 174 [26] and 175 [32] (Keifel CJ, Bell, Gageler, Keane and Nettle JJ); Hamilton v Meta Platforms Inc [2023] FCA 1496 at [44] to [45] (Cheeseman J). As Davies J noted in Rigby v Rigby [2016] NSWSC 241 at [43]:

In deciding whether or not to make a costs order, the ability of a person to pay costs ordered is not a consideration. Nor is the financial position of the person who seeks and is entitled to costs. ...

7    As to the defendant’s second contention, I accept that unreasonable conduct in the form of the pursuit of unmeritorious proceedings may ground an order that costs be paid forthwith. However, I do not accept the defendant’s submission that there was no probative evidence adduced in support of the application. The evidence that was adduced was not sufficiently persuasive to justify the relief sought, but it does not follow that the plaintiffs acted unreasonably or that a forthwith costs order should be made.

8    As to the defendant’s third contention, I accept that the interlocutory application was determined early in the proceeding. However, I am not satisfied that this is a sufficient reason to make a forthwith costs order, particularly as there is no basis from which to conclude that the proceeding is complex or will take an unusually lengthy time to reach a final hearing.

C.    Should a lump-sum costs order be made?

9    The Court may award a party costs in a specified sum: s 43(3) of the FCA Act. The exercise of the Court’s discretion to award costs is informed by the Court’s Costs Practice Note (GPN-COSTS), which records at [4.1] the Court’s preference for the making of lump-sum costs orders wherever it is practicable and appropriate to do so: see Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at 406 to 407 ([16] to [20]) (Allsop CJ, Besanko and Middleton JJ); Coshott v Prentice (No 2) [2018] FCAFC 221 at [4] (Kerr, Farrell and Gleeson JJ).

10    However, I am not persuaded that a lump-sum order should be made in the present case, for the following reasons.

11    First, although the Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order, the lump-sum costs procedure is not intended to apply generally to interlocutory costs orders: see Costs Practice Note at [4.1] and footnote 13. I see no reason to depart from the usual position, particularly when I have declined to make a forthwith costs order with the consequence that the quantum of costs for the interlocutory application will be determined at the conclusion of the proceeding, together with any subsequent costs orders: see Axent Holdings Pty Ltd v Compusign Australia Pty Ltd (No 3) [2018] FCA 6 at [25] (Kenny J); PlayUp Limited v Mintas (No 2) [2023] FCA 52 at [46] (Markovic J). As Perram J noted in Kriticos at [6], it is generally undesirable that the parties should be exposed to multiple taxation processes during the life of one proceeding; and that during the balance of the litigation, costs orders may be made in the opposite direction which will normally be capable of being set-off against earlier costs orders.

12    Secondly, and in any event, the nature of the evidence that the defendant has put forward in support of this aspect of his application is insufficient. That evidence consists of tax invoices rendered by the defendant’s solicitors and his counsel, which have been redacted so as to obscure the dates on which services were rendered, the hourly rates of those who provided those services, the time spent in providing those services, and the identity and seniority of the solicitors who provided those services. The only relevant information which has not been obscured is the date and total amount of each tax invoice. The paucity of evidence provided means that I am not in a position to make any meaningful assessment of an appropriate amount to be awarded as a lump-sum.

D.    Conclusion

13    For the reasons set out above, the interests of justice do not require that the costs payable to the defendant be paid forthwith or on a lump-sum basis. The appropriate order is an order that the plaintiffs pay the defendant’s costs of the plaintiffs’ amended interlocutory process dated 22 October 2024, as agreed or taxed. I will make an order to that effect.

Associate:

Dated:    13 November 2024