Federal Court of Australia

Special Gold Pty Ltd (in liq) v Dyldam Developments Pty Ltd (subject to a Deed of Company Arrangement) (No 3) [2025] FCA 1031

ORDERS

THE COURT ORDERS:

1.    The fifth, sixth, seventh, eighth and ninth defendants pay the plaintiff’s costs on the ordinary party-party basis, which may be assessed as a lump sum at the plaintiff’s election.

2.    The plaintiff pay the costs of the second, third and fourth defendants on the ordinary party-party basis up to and including 22 June 2025, and on the indemnity basis on and from 23 June 2025, such costs to be assessed as a lump sum.

3.    The second, third and fourth defendants file any affidavits and written submissions in relation to the amount of the lump-sum costs order by 19 September 2025.

4.    The plaintiff file and serve any affidavits and written submissions in relation to the amount(s) of lump-sum costs orders by 10 October 2025.

5.    The second, third and fourth defendants file and serve any affidavits and written submissions in reply by 24 October 2025.

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

REASONS FOR JUDGMENT

JACKMAN J:

1    This judgment relates to the issue of costs arising from my judgment in Special Gold Pty Ltd (in liq) v Dyldam Developments Pty Ltd (subject to a Deed of Company Arrangement) (No 2) [2025] FCA 825 (the Primary Judgment or PJ). I use the same defined terms in these reasons as I did in the Primary Judgment.

2    In the Primary Judgment, I found that Special Gold succeeded against Sam (the fifth defendant), Fayad-Lee (the sixth defendant), Remon (the seventh defendant), Parklea Markets Corp (the eighth defendant) and Rainbow North Rocks (the ninth defendant). Special Gold is entitled to an order for costs against those persons and companies, the costs order following the successful outcome for Special Gold. Although Special Gold has not sought a lump-sum costs order at this stage against those persons and companies, an election in favour of such an order can readily be accommodated within the timetable which I have set for the assessment of the lump-sum costs order in favour of the Ayoub Companies, being ABS Agri, ACN 390 and I Properties (the second to fourth defendants).

3    The Ayoub Companies seek an order that Special Gold pay their costs on the ordinary party-party basis up to 22 June 2025, and on the indemnity basis on and from 23 June 2025. The basis for seeking indemnity costs is an offer of compromise dated 22 June 2025 marked “without prejudice save as to costs”, thus invoking the principle established by Calderbank v Calderbank [1976] Fam 93. The Ayoub Companies also seek costs on a lump-sum basis.

4    On 22 June 2025, the solicitors for the Ayoub Companies sent an offer to the solicitors for Special Gold, marked “without prejudice save as to costs”, to the effect that the Ayoub Companies were prepared to forgo their entitlement to a costs order on the basis that Special Gold consents to orders dismissing the proceedings against the Ayoub Companies with no order as to costs (the Offer). The Offer was expressed as a “walk away” offer to resolve the claims against the Ayoub Companies. The Offer expressed a number of reasons why Special Gold’s claims against the Ayoub Companies were “doomed to fail”. As to the claim under the first (knowing receipt) limb of Barnes v Addy, the Offer pointed out that the function performed by the Ayoub Companies was purely ministerial. As to the claim pursuant to the second (knowing assistance) limb of Barnes v Addy, among the reasons given for that claim being “hopeless” was that the Ayoub Companies could not possibly have known that the impugned payments were not in Special Gold’s interests (even if that were the case in fact) and no dishonest and fraudulent design had even been articulated. The Offer was expressed to be open for acceptance until 5pm on 30 June 2025. The Offer concluded by stating that, if it were not accepted, then the Offer would be relied upon in support of an application for indemnity costs from the date the Offer was made.

5    One of the well-established cases justifying the award of indemnity costs is an imprudent refusal of an offer of compromise: Anchorage Capital Partners Pty Ltd v ACPA Pty Ltd (No 2) [2018] FCAFC 112 (Anchorage) at [6] (Nicholas, Yates and Beach JJ), citing Black v Lipovac (1998) 217 ALR 386 at 432 (Miles, Heerey and Madgwick JJ). The question whether rejection of an offer was unreasonable must be assessed in light of the circumstances existing at the time the offer was rejected: Anchorage at [6]–[7]. A non-exhaustive list of factors which may be relevant to the assessment of whether or not the rejection was unreasonable was set out in Anchorage at [7], namely:

(a)    the stage of the proceeding at which the offer was received;

(b)    the time allowed to the offeree to consider the offer;

(c)    the extent of the compromise offered;

(d)    the offeree’s prospects of success, assessed as at the date of the offer;

(e)    the clarity with which the terms of the offer were expressed; and

(f)    whether the offer foreshadowed an application for an indemnity costs order in the event of the offeree rejecting it.

6    Addressing each of those factors, the Ayoub Companies submit, and I accept, that it was unreasonable for Special Gold to have rejected the offer.

7    As to the stage of the proceeding at which the offer was received, the Offer was provided at a relatively late stage of proceedings, in a confined window between the filing and service of affidavits and the commencement of the trial. Special Gold was in a position then to make an informed and considered assessment of the strengths and weaknesses of its case. I accept the submission of the Ayoub Companies that the Offer was not provided at such a late stage that it was impractical for Special Gold to give it serious consideration, having regard to the preparation of the matter for hearing. In any event, even if the Offer had been provided at a later stage than it actually was, Special Gold clearly was capable of negotiating and settling claims even during the proceedings, as evidenced by the settlement of the claims which it made against Dyldam mid-way through the hearing on 9 July 2025.

8    The Offer allowed seven days for its acceptance. That period is less than the fourteen days provided for in r 25.05(3) of the Federal Court Rules 2011 (Cth). However, the final hearing was due to commence on 7 July 2025, being fifteen days from the date of the Offer. In those circumstances, the period of seven days was appropriate, having regard to the need for the parties to make final preparations for the hearing. As events transpired, no response (including any request for additional time to consider the Offer) was received, and the Offer lapsed.

9    As to the extent of the compromise offered, there are conflicting authorities as to whether a “walk away” offer, or an offer that there be no order as to costs, is a genuine compromise. Some of the authorities in support of the proposition that such an offer is not a genuine compromise for the purpose of justifying an order for indemnity costs were cited in Wills v Chief Executive Officer of Australian Skills Quality Authority (Costs) [2022] FCAFC 43 at [30]–[31] (Logan, Griffiths and Perry JJ), although it was not necessary for the Full Court in that case to decide the point (see [32]). However, there is no fixed rule, and it is a question of fact in each case whether an apparently low offer should be viewed as amounting to a genuine offer of compromise: Rakman International Pty Ltd v Boss Fire & Safety Pty Ltd [2023] FCAFC 202 at [159] (Nicholas, Burley and Rofe JJ). In the latter case (at [160]), the Full Court cited with approval Finkelstein J’s reasons in Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (No 4) [2009] FCA 803 at [13], in which his Honour gave as an example of a “walk away” offer which must be regarded as a genuine offer of compromise, a case that has progressed for some time where the parties’ costs are quite high, in which case an offer to walk away may be a significant offer in a business sense.

10    Mr Zaki, the solicitor for the Ayoub Companies, gives evidence that the costs and disbursements incurred up to 22 June 2025 by the Ayoub Companies exceeded $250,000 (plus GST): Mr Zaki’s Affidavit of 1 August 2025 at [13]. In my view, the offer to forgo a costs order in those circumstances was a genuine compromise. Special Gold submits that the Offer did not disclose the amount of the costs incurred to date, but I regard that as a matter of minor significance. It must have been obvious to Special Gold that the Ayoub Companies had incurred substantial costs over the period of over three months since the proceedings began, in preparing for a trial on an expedited basis. If it was important to Special Gold to know the amount of costs incurred by the Ayoub Companies up to that point in time, they should have asked for that information, rather than simply letting the Offer lapse with no reply. Special Gold also relies on the fact that its claim against the Ayoub Companies was for an amount in excess of $6 million, but I do not regard that as establishing that the Ayoub Companies’ Offer was not a genuine compromise.

11    Turning to Special Gold’s prospects of success, assessed as at the date of the offer, I regard those prospects as manifestly weak. The propositions made by the Ayoub Companies as to prospects set out in the Offer which I have set out above were established at the hearing. The proposition that the claim of knowing receipt must fail because the Ayoub Companies had received funds ministerially was made good by my findings at PJ [71] and [115]–[117]. It is true, as Special Gold submits, that the Ayoub Companies admitted the fact of receipt in their pleadings and affidavit evidence, but Special Gold needed also to grapple with the ministerial character of that receipt. The Offer’s proposition that the claim of knowing assistance in the alleged breaches of directors’ duties must fail because the Ayoub Companies did not know whether payments were or were not in Special Gold’s interests was made good by the findings at PJ [119] and [135]. Special Gold submits that the relevant analysis in this regard depended heavily upon whether Mr Ayoub would give evidence, which was not clear until the hearing itself. However, Special Gold has not sought to demonstrate that it could realistically have established requisite knowledge on the part of the Ayoub Companies in the event that Mr Ayoub did not give evidence. As events transpired, Mr Ayoub did give evidence, and (somewhat surprisingly) the cross-examination sought to demonstrate that Mr Ayoub was even more ignorant of the relevant transactions, and of whether there was any self-interest on the part of Special Gold in them, than his affidavit had suggested. As to the Offer’s proposition that the claim of knowing assistance must fail because no dishonest and fraudulent design had relevantly been articulated, that proposition was made good at PJ [118]. Special Gold’s submission that the Offer did not state in clear terms that Special Gold was precluded from raising a knowing assistance case because of a deficient pleading is based on a misreading of the Offer.

12    As to the clarity with which the terms of the offer were expressed, the Offer was crystal clear.

13    As to whether the Offer foreshadowed an application for indemnity costs in the event it was rejected, that too was clearly stated in the Offer.

14    In those circumstances, having regard to the fact that the Ayoub Companies have achieved a better result than the Offer, it is appropriate to order that Special Gold pay the Ayoub Companies’ costs on and from 23 July 2025 on the indemnity basis.

15    There is also a dispute as to whether the costs of the Ayoub Companies should be assessed on a lump-sum basis. The Court’s preference, wherever it is practicable and appropriate to do so, is for the making of a lump-sum costs order: para 4.1 of the Costs Practice Note (GPN-COSTS), pursuant to its power to do so under r 40.02(b). In my view, it is appropriate to assess costs on a lump-sum basis in the present case. The present case is consistent with the “regular” costs scenario described at para 4.4 of the Costs Practice Note, in that the case has been somewhat lengthy and may involve a degree of complexity in the assessment of costs. There is no particular characteristic that a case must possess for it to be suitable for the making of a lump-sum costs order, but such an order is appropriate where it would save the time, trouble, expense and aggravation of a taxation: Paciocco v Australia and New Zealand Banking Group Ltd (No 2) [2017] FCAFC 146; (2017) 253 FCR 403 at [20] (Allsop CJ, Besanko and Middleton JJ).

16    I regard it as appropriate to bring the matter to as quick a conclusion as reasonably possible, including the assessment of the amount of costs orders. There is no apparent prejudice to Special Gold in a lump-sum assessment, and indeed Special Gold may now wish to avail itself of that facility in relation to the costs orders in its favour against other parties.

17    Mr Zaki gives evidence in his affidavit that he expects to be able to serve an expert report on the amount of costs claimed within 3 weeks following the making of the costs orders. In those circumstances, I will set a timetable which accommodates that estimate, giving ample time to Special Gold to respond, and for the Ayoub Companies to reply. I anticipate dealing with the amount of the lump-sum costs order or orders on the papers.

Associate:

Dated:    27 August 2025

SCHEDULE OF PARTIES