Federal Court of Australia

Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) (No 3) [2025] FCA 1139

ORDERS

THE COURT ORDERS THAT:

Costs in Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) [2025] FCA 692

1.    The second to sixth defendants pay the plaintiff’s costs of the application by the second to sixth defendants to vary the order made on 14 May 2025 (freezing order).

2.    There be no order as to the costs of the application by the seventh defendant to vary the freezing order.

Costs in Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) (No 2) [2025] FCA 977

3.    The costs of the plaintiff’s application to continue the freezing order be as follows:

(a)    the plaintiff pay the costs of the second and third defendants; and

(b)    as between the plaintiff and the fourth to sixth defendants, costs be costs in the cause.

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

REASONS FOR JUDGMENT

GOODMAN J:

1    These reasons for judgment address the cost consequences of two earlier decisions concerning a freezing order made by the Court on 14 May 2025 and extended on 22 May 2025. In the first of those decisions – Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) [2025] FCA 692 (Morcom (No. 1)) – I dismissed an application by the second to sixth defendants for a variation of particular terms of the freezing order. In the second of those decisions – Morcom Holdings Pty Ltd v Mountain Asset Partners Pty Ltd (in liquidation) (No 2) [2025] FCA 977 (Morcom (No. 2)) – I made orders with respect to the plaintiff’s application for the continuation of the freezing order: discharging the freezing order to the extent that it operated upon the second and third defendants; discharging the freezing order to the extent it operated upon the fourth defendant upon the provision of a particular undertaking by the fourth defendant; continuing the freezing order as against the fifth defendant; and continuing the freezing order as against the sixth defendant but providing for the discharge of the freezing order as against the sixth defendant in the event that the sixth defendant and the other co-owner of particular real property provided a particular joint undertaking. In each of Morcom (No. 1) and Morcom (No. 2), I made an order reserving the question of costs.

2    Various parties now seek costs orders. Before addressing the orders sought, I note the following relevant matters of principle.

3    First, the Court’s discretion with respect to costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is broad, albeit it must be exercised judicially having regard to relevant principles and the justice of the particular case: see, e.g., Summers v Repatriation Commission (No 2) [2015] FCAFC 64 at [14] (Kenny, Murphy and Beach JJ).

4    Secondly, the general position is that costs follow the event.

5    Thirdly, where a plaintiff succeeds on an interlocutory application concerning the establishment of an interim regime to preserve the status quo pending a final hearing, and where there has been no determination of the underlying merits of the claims made other than a preliminary assessment of the viability or strength of those claims, then an appropriate order is often that the costs of that interlocutory application be costs in the cause. As Justice Gleeson noted in Australian Securities and Investments Commission, in the matter of Whitebox Trading Pty Ltd v Whitebox Trading Pty Ltd (No 2) [2017] FCA 385 at [6], where there is a successful application for an interlocutory injunction and the applicant’s entitlement to ultimate relief has not been adjudicated upon, the usual order is that costs of the application be costs in the cause. In that case, her Honour referred to the decision of the Court of Appeal of the Supreme Court of New South Wales (Beazley, Giles and Hodgson JJA) in His Eminence Metropolitan Petar, Diocesan Bishop of the Macedonian Orthodox Church of Australia and New Zealand & Anor v The Macedonian Orthodox Community Church St Petka Incorporated & Anor (No 2) [2007] NSWCA 142 at [21], where their Honours explained:

… The rationale for making an order that costs be costs in the cause is that, at the stage of granting an interlocutory injunction, the court is not in a position to adjudicate on the ultimate outcome of the proceedings. Rather, provided there is a reasonable case to be tried, the Court’s focus in deciding whether to grant the application for interlocutory relief is on other considerations and, in particular, on determining whether, on the balance of convenience, an injunction ought to be granted. Accordingly, if a plaintiff who applies for an interlocutory injunction is not ultimately successful in the proceedings, that plaintiff should not receive the costs of the application for an injunction which, when the matter is considered in overview cannot be sustained. However, as already explained, each case must depend upon its own facts.

6    Fourthly, where the Court has made a decision in favour of one party on a discrete issue which will not arise again for determination at the final hearing, the Court is more disposed to the making of an order in favour of the successful party on the basis that costs follow the event: see, e.g., Taylor (liquidator), in the matter of Heading Contractors Pty Ltd (in liq) v Heading (No 2) [2021] FCA 925 at [18] (Charlesworth J).

7    Finally, different considerations apply where the Court has not determined the merits of the interlocutory application. In Chapman v Luminis [2003] FCAFC 162 the Full Court of this Court (Beaumont, Sundberg and Hely JJ) explained at [7]:

The authorities establish the following propositions in relation to the making of costs orders in circumstances such as the present:

-    where a proceeding terminates before there has been a hearing, the Court should not resolve the issue of costs by engaging in something in the nature of a hypothetical trial: Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201;

-    this does not mean that a Court can never make an order for costs. Often it will be unable to do so, but in other cases an examination of the reasonableness of the conduct of the parties may provide the basis for an order, or a judge may be confident that one party was almost certain to have succeeded if a matter had been fully tried: Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622 at 625 (McHugh J);

-    a distinction is to be drawn between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the Court’s discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should be bear (sic) the costs: ONE.TEL Ltd v Deputy Commissioner of Taxation (2000) 171 ALR 227 at 231-232 (Burchett J).

8    See also Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 at 689 to 690 [37] (Payne JA, Meagher JJA agreeing); and Bridging Capital Holdings Pty Ltd v Self Directed Super Funds Pty Ltd (Costs) [2022] FCA 361 at [16] (Stewart J).

Morcom (No. 1)

9    Against that background, I turn to the applications in Morcom (No. 1), being applications brought by the second to sixth defendants, and separately by the seventh defendant, for variations to the freezing order. Some variations were agreed between the plaintiff and those defendants, and reflected in orders made on 16 June 2025.

10    The second to sixth (but not the seventh) defendants pressed for further variations. That part of the application failed because the second to sixth defendants did not establish a sufficient basis for the variations sought.

11    The plaintiff contends that the second to sixth defendants should pay its costs of their application in Morcom (No. 1).

12    The second defendant accepts that he should pay the plaintiff’s costs but contends that as he was one of five defendants and is now separately represented, his liability for the plaintiff’s costs should be for one-fifth of those costs. That concession is properly made. The issues determined in Morcom (No. 1) do not appear to be relevant to the issues that will require determination at the final hearing. Thus, it is appropriate that the second defendant, who was unsuccessful on that application, pay the costs of the plaintiff of that application. However, I am not minded to make an order equating those costs to one-fifth of the plaintiff’s costs. This is a matter best left for assessment during the taxation process.

13    The third defendant contends that the plaintiff should pay his costs on the basis that he was ultimately successful in Morcom (No. 2) in setting aside the freezing order as it applied to him and that but for the bringing of the application for the freezing order, the third defendant’s application to vary that order would not have been necessary. I do not accept this submission – as noted above, the issues for determination in Morcom (No. 1) were discrete and the third defendant was unsuccessful with respect to those issues. Further, the third defendant (and the second and fourth to sixth defendants) opted to bring an application for variation of the freezing order rather than (as was originally envisaged in orders made on 22 May 2025) simply contesting the plaintiff’s application to continue the freezing order. Thus, the appropriate order is that the third defendant pay the plaintiff’s costs of that application.

14    The fourth to sixth defendants contend that the costs of Morcom (No. 1) should be costs in the cause on the basis that Morcom (No. 1) and Morcom (No. 2) are part of a larger dispute which is yet to be finally determined. Although, as will be seen below, I accept that the costs of the application in Morcom (No. 2) as between the plaintiff and the fourth to sixth defendants should be costs in the cause, for the reasons already explained, Morcom (No. 1) involved discrete issues with respect to which the fourth to sixth defendants were unsuccessful. Thus, the fourth to sixth defendants should pay the plaintiff’s costs of that application.

15    The seventh defendant is in a different position. He also made an application for a variation of the freezing order. He reached an agreement with the plaintiff for some variations to that order, which agreement was reflected in the orders made on 16 June 2025. However, he then decided not to pursue the remainder of his application and on 23 July 2025 orders were made by consent for the dismissal of the remainder of that application and for the reservation of costs.

16    The plaintiff seeks its costs. The seventh defendant contends that there should be no order as to costs.

17    There has been no determination of the merits of the remainder of the seventh defendant’s application. I am not satisfied on the evidence before the Court that there was capitulation on the part of the seventh defendant, particularly in circumstances where part of the application was the subject of compromise. Nor is it obvious that the application would have failed. In those circumstances, the appropriate order is that there be no order as to costs of the seventh defendant’s application.

Morcom (No. 2)

18    I turn now to the question of costs of the application determined in Morcom (No. 2). That application was, as noted above, an application by the plaintiff for the continuation of the freezing order. As also noted above, the plaintiff enjoyed mixed results.

19    The plaintiff was unsuccessful against the second defendant.

20    The plaintiff contends that the plaintiff and second defendant should each bear their own costs up to and including 16 July 2025 (on which date the second defendant filed an affidavit providing further disclosure of his asset position) and thereafter the plaintiff should pay the second defendant’s costs of the application that was determined in Morcom (No. 2). The second defendant seeks his costs.

21    The plaintiff should pay the second defendant’s costs. The evidence established that the plaintiff did not have a basis at any time for the proposition that there was a real risk that the second defendant would take action to frustrate the processes of the Court.

22    It is common ground between the plaintiff and the third defendant that the plaintiff should pay the costs of the third defendant.

23    With respect to the fourth to sixth defendants:

(1)    the plaintiff contends that those defendants should pay the plaintiff’s costs of the application on the basis that the plaintiff was successful;

(2)    the fourth and sixth defendants contend that the plaintiff should pay their costs from 20 June 2025, on which date those defendants offered undertakings which were reflective of the ultimate outcome, and that otherwise the costs should be costs in the cause; and

(3)    the fifth defendant contends that costs should be costs in the cause.

24    I am satisfied that the plaintiff was successful as against the fourth to sixth defendants, particularly in circumstances where those defendants fervently resisted the continuance of the freezing order and the undertakings were offered only as an alternative position. However, there has been no determination yet of the plaintiff’s substantive case and, for the reasons set out at [5] above, the appropriate order is that the costs of the application determined in Morcom (No. 2), as between the plaintiff and the fourth to sixth defendants, be costs in the cause.

25    I note, for completeness, that the seventh defendant did not contest the continuation of the freezing order and thus there is no costs dispute between the plaintiff and the seventh defendant with respect to the application in Morcom (No. 2).

26    I will make orders accordingly.

Associate:

Dated:    18 September 2025

SCHEDULE OF PARTIES