Federal Court of Australia

Deputy Commissioner of Taxation v Peever (No 3) [2025] FCA 1187

ORDERS

THE COURT ORDERS THAT:

1. At or before the adjourned hearing listed on 29 September 2025 at 2.15pm, the parties will submit short minutes of order, in accordance with these reasons for judgment.

2. Costs of each of the Applicant’s and First Respondent’s Interlocutory Applications be reserved.

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

REASONS FOR JUDGMENT

WHEATLEY J:

INTRODUCTION

1 These proceedings were commenced by the Applicant, the Deputy Commissioner of Taxation, in which he sought, by way of an urgent ex parte interlocutory application, freezing orders against the First to the Thirty-Fifth Respondents.  On 9 December 2024, his Honour Justice Rangiah made certain freezing orders on that urgent ex parte application.

2 Relevantly, the Commissioner alleges, in summary, that:

(a) the First Respondent, Mrs Peever, holds funds on either a resulting or constructive trust for the Commonwealth that she received from the Company Taxpayers (being the Sixth to Thirty-Fifth Respondents), being proceeds of allegedly false claims for goods and services tax (GST) refunds and income tax offsets for research and developments (R&D) offsets.  The Commissioner advances arguments based on breach of trust and/or fiduciary duties and on the first limb of Barnes v Addy (1874) LR 9 Ch App 244 at 251-252, by knowingly assisting in a breach of trust and/or fiduciary duty, and within the second limb of Barnes v Addy at 251-252, being in receipt of assets or funds for no consideration; and

(b) the Second Respondent, Mr Peever, is liable for the total amount owing under Director Penalty Notices (DPNs) less an amount currently held by the Commissioner under Security Bond Demand Notices.

3 This hearing concerned competing interlocutory applications seeking to vary the freezing orders made by the Court originally on 9 December 2024, which have been amended by consent from time to time (Freezing Orders).

4 Each of the Commissioner, the First Respondent, the Second Respondent, and the Associated Companies, being the Third to Thirty-Fifth Respondents, had competing applications to vary the Freezing Orders.  However, some issues were ultimately not pressed, some were amended, and some were the subject of consent orders.  In so far as certain matters were the subject of consent by the parties, I was satisfied to make those Orders and did so on 3 June 2025.

5 The contested hearing proceeded on the following two issues:

(a) the Commissioner sought to limit the reasonable legal expenses identified in the Annexures to the Freezing Orders, to those legal expenses incurred only in this Proceeding and the taxation objections (Reasonable Legal Expenses – Variation to the Subject Matter); and

(b) the First Respondent sought by way of an amended application to increase the amount permitted to be spent on reasonable legal expenses (the quantum further changed by way of the amendment), by way of an additional lump sum payment, with the reasonable legal expenses then to continue at the same amount of $10,000 per month (or such other order as the Court thinks fit) (Reasonable Legal Expenses – Variation Lump Sum sought).

6 For the reasons given below, I am satisfied that:

(a) on the Commissioner’s application, the terms of the relevant Annexures to the Freezing Orders should be varied to limit the “reasonable legal expenses” to only the legal expenses incurred in this Proceeding and taxation objections the Respondents have served on the Applicant (or any subsequent review or appeal); and

(b) on the First Respondent’s application to vary the Freezing Orders, an additional lump sum amount of $165,000 be ordered and payable forthwith and from 1 September 2025 up to a total of $15,000 per calendar month for the First Respondent’s reasonable legal expenses be permitted.

BACKGROUND

7 Given the ultimately confined issues in dispute, only relating to a variation of the reasonable legal expenses, the relevant background can be stated shortly.

8 At the ex parte hearing on 9 December 2024, Rangiah J made the Freezing Orders against all of the assets of Mrs Peever, Mr Peever and the Associated Companies.

9 Relevantly, Annexure A of the Freezing Orders as originally made contained an exception in relation to reasonable legal expenses regarding the First Respondent:

11.    This order does not prohibit you from:

(a)    …

(b)    subject to paragraph 12 below, paying up to $10,000 per calendar month on your and the second respondent's combined reasonable legal expenses;

10 The Freezing Orders originally also made provision for variation of the exceptions:

13.    You and the applicant may agree in writing that the exceptions in paragraph 11 are to be varied. In that case 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 applicant and you, and the Court may order that the exceptions are varied accordingly.

11 Annexure B of the Freezing Orders as originally made also provided similarly in relation to the Second Respondent:

10.    This order does not prohibit you from:

(a)    …

(b)    subject to paragraph 12 below, paying up to $10,000 per calendar month on your and the first respondent's combined reasonable legal expenses;

12 Annexure B also originally provided in Order 12 a provision for variation by consent, as Annexure A did in Order 13 (set out above).

13 The remaining Annexures relevant to the Associated Companies also provided for a similar exception (in Annexures C, E and F at [10] and Annexure D at [11]) that did not prohibit the Associated Companies from paying $10,000 per calendar month on the combined reasonable legal and accounting expenses incurred by the Third to Thirty-Fifth Respondents.  A similar ability to vary the exceptions by consent was also provided in [11] and [12], respectively.

14 On 20 December 2024, on the return date, the Respondents were represented and appeared.  The Freezing Orders were varied by consent.  Relevantly, paragraph 11(b) of Annexure A in relation to the First Respondent was varied as follows:

4(b)    paragraph 11(b) be replaced with the following:

subject to paragraph 12 below, paying:

(i) $100,000 to the trust account of Cooper Grace Ward Lawyers forthwith for the first respondent's reasonable legal expenses; and

(ii) from 1 January 2025, up to $10,000 per calendar month on the first respondent's reasonable legal expenses.

15 Annexure B was also varied in relation to the Second Respondent at paragraph 10(b) as follows:

5(a)    paragraph 10(b) be replaced with the following:

subject to paragraph 11 below, paying:

(i) $100,000 to the trust account of McCullough Robertson forthwith for the second respondent's reasonable legal expenses; and

(ii) from 1 January 2025, up to $10,000 per calendar month on the second respondent's reasonable legal expenses.

16 Further, paragraph 11(a) of Annexure D and paragraph 10(a) of Annexures C, E and F were amended and substituted as follows:

(a) paying:

(i) $100,000 to the trust account of McCullough Robertson forthwith for the combined reasonable legal and accounting expenses incurred by the Third to Thirty-Fifth Respondents; and

(ii) from 1 January 2025, up to $10,000 per calendar month for the Third to Thirty-Fifth Respondent's combined reasonable legal and accounting expenses;

17 The effect of these orders allows funding for the First Respondent’s reasonable legal expenses, who is separately represented, and for the combined funding of the Second to Thirty-Fifth Respondents, who are together represented.

18 On 26 March 2025, the exceptions to the Freezing Orders were again relevantly amended by consent in relation to the First Respondent as follows:

10.    Annexure A to the Freezing Orders is varied as follows:

(a)    …

(b)    paragraph 11(b) is replaced as follows:

11(b) subject to paragraph 12 below, paying:

(i)    $100,000 to the trust account of Cooper Grace Ward Lawyers forthwith for the first respondent's reasonable legal expenses;

(ii)    $5,500 to the trust account of Gilshenan & Luton Lawyers from the total sum identified in subparagraph 11(b)(iii) below for the first respondent’s anticipated reasonable legal expenses;

(iii)    from 1 January 2025, up to a total of $10,000 per calendar month on the first respondent's reasonable legal expenses.

19 On 3 June 2025, after the hearing of the contentious issues the subject of these applications, further variations of the Freezing Orders were made by consent.  It is unnecessary to set out those variations in full.  However, relevantly, in relation to the Second to Thirty-Fifth Respondents, variations were made to Annexures B-F with respect to the exception regarding reasonable legal expenses and a further schedule was inserted requiring certification of those legal expenses.  That certification (by Schedule D) also required identification of whether the legal expenses were incurred in connection with (a) this proceeding, (b) Part IVC objections and proceedings, (c) any judicial review proceedings in relation to s 260-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) (TAA), and (d) other legal expenses that are allowed under the Freezing Orders as varied.

THE APPLICATIONS TO VARY

20 Effectively only two issues remained, being:

(1) Reasonable Legal Expenses – Variation to the Subject Matter; and

(2) Reasonable Legal Expenses – Variation Lump Sum sought by the First Respondent.

21 The Commissioner submitted that the Court’s discretion to vary the Freezing Orders required a threshold issue to be meet, being a material change of circumstances: Westpac Banking Corporation v Forum Finance Pty Limited (Freezing Orders Variation No 2) [2022] FCA 1206 (Forum Finance (No 2)) at [15] (Thawley J); National Australia Bank Ltd v Human Group Pty Ltd (No 2) [2020] NSWSC 1900 at [104]-[112] and [119] (Henry J); Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 at [46] (McLelland J); Short v Crawley (No 42) [2009] NSWSC 1110 at [75] (White J); also see CIP Group Pty Ltd v So (No 5) [2024] FCA 1373 at [13]-[14] (Derrington J).

22 The First Respondent initially submitted that as there had not been a contested hearing, there was no need to meet this threshold.  Ultimately, the parties accepted effectively that the threshold had been meet by the Australian Federal Police (AFP) executing a search warrant at the residence of the First and Second Respondents and/or by what was described as the criminal investigation.  In the circumstances of this case this would amount to a relevant material change in circumstances, particularly seeking the variation as to the reasonable legal expenses, in either of the two ways sought.

Reasonable Legal Expenses – Variation to the Subject Matter

23 The Commissioner sought to narrow or limit the scope of the reasonable legal expenses, such that the relevant exception of each Annexure to the Freezing Orders would expressly only relate to legal expenses incurred in this Proceeding and the taxation objections that the Respondents had served on the Commissioner and any review in the Administrative Appeals Tribunal or taxation appeal to this Court (Part IVC Proceedings).

24 The Commissioner described his application as “responsive” to applications foreshadowed by the Respondents in which the Commissioner anticipated the Respondents were seeking a significant increase in the allowance for reasonable legal expenses.

25 The variation sought by the Commissioner was described as seeking to prevent the “reasonable legal expenses” exception to the Freezing Orders extending to legal expenses incurred beyond these Proceedings or the Part IVC Proceedings.  Specifically, the Commissioner identified that the variations sought were to prevent funds being used in respect of criminal or family law proceedings.

26 The Commissioner submits that this variation is appropriate as his claim is, in part, a proprietary claim.  This is on the basis that the funds and assets the subject of the Freezing Orders have, for the most part, been traced from the GST refunds and the R&D offsets which the Commissioner claims were falsely claimed.  On this basis, the funds and assets are claimed to be held on trust for the Commissioner.

27 The purposes of making the Freezing Orders is to prevent the frustration or inhibition of the Court’s processes, by seeking to meet a danger that a judgment or prospective judgment will be wholly or partly unsatisfied; it is not to give security: r 7.32 FCR; Deputy Commissioner of Taxation v Huang (2021) 273 CLR 429; [2021] HCA 43 at [17] (Gageler (as the Chief Justice then was), Keane, Gordon and Gleeson JJ).  However, given the significant interference with the rights against whom the order is made, the order should be no greater than that which is necessary to protect the processes of the court: Deputy Commissioner of Taxation v Karas & Ors [2012] VSC 68 at [18] (Kaye J).  Ordinarily, and relevantly for this issue (accepting that ordinary living expenses usually fall within the exception as well), the person against whom the order is made should have reasonable access to the assets or funds in order to pay reasonable legal expenses: Karas at [19]; Deputy Commissioner of Taxation v Bollands (2012) 90 ATR 679; [2012] FCA 1050 at [20]-[25] (McKerracher J); Crosby Textor Research Strategies Results Pty Ltd v Syed [2020] NSWSC 1792 at [43] (Rees J); Human Group at [109].  It has been described that the order is to prevent “illegitimate” dissipation of assets, which would generally not include funds needed for ordinary living expenses or to fund the conduct of the litigation: Goumas v McIntosh [2002] NSWSC 713 at [27] (Barrett J); Bollands at [22].

28 However, the parties accepted as a matter of principle that the ordinary pre-disposition of allowing the use of funds the subject of such an order is different where the subject assets and funds are arguably trust property or subject to a proprietary claim: Crosby at [45]-[46]; Cong v Shen [2020] NSWSC 945 at [163]-[165] (Ward CJ); Birketu Pty Ltd v Westpac Banking Corporation (No 2) [2018] NSWSC 494 at [60]-[63] (Garling J); Beehive Corp Pty Ltd v XY [2021] WASC 352 at [26]-[32] (Kenneth Martin J); Human Group at [110]-[112]; see also the passages referred to by McKerracher J in Bollands at [25] wherein the express reference is made to a freezing order which is of a non-proprietary nature.

29 That approach to be adopted is that the Court must undertake a “careful and anxious judgment”: Birketu at [61]; Cong at [163]; In the matter of Courtenay House Capital Trading Group Pty Limited (in liquidation) (2018) 133 ACSR 451; [2018] NSWSC 1918 at [49] (Black J); Human Group at [111] and [164].  This is because of the “obvious risk of injustice”; Birketu at [60]; Human Group at [110].  That being if the assets or funds the subject of the proprietary claim are used to finance the defendants’/respondents’ litigation, those assets or funds are not the defendants’/respondents’ but rather are money held on trust for the plaintiff/applicant.  The matters to be considered in undertaking this evaluation are not closed. The observations of Lloyd J in PCW (Underwriting Agencies) v Dixon [1983] 2 All ER 158 at 164, in relation to exercising the discretion, are also relevant.

30 The First Respondent submitted and accepted that “whilst a proprietary claim may be asserted (and established to the good arguable case threshold as it has been in this case) that does not mean that the proprietary claim will succeed”. Further, it was also accepted that there was sufficient material before Rangiah J to make the Freezing Orders, so there had already been a determination that there is a serious question to be tried.  The First Respondent accepted that as there is a proprietary claim, the ordinary pre-disposition of allowing the use of funds the subject of such a freezing order to be used, was not the starting position.  However, the First Respondent also sought to diminish the proprietary claim on the basis of it being an accessorial claim and that the First Respondent has a credible basis for the receipt of at least some of the sums in issue.  These matters invite the Court to assess the competing underlying merits.  As observed below, it is inappropriate to do so at this time.

31 The Second Respondent did not concede that the Commissioner’s claim was proprietary, particularly in so far as it concerned the Second to Thirty-Fifth Respondents.  However, the Second Respondent accepted the juridical and practical distinctions between circumstances involving a freezing order where there is a proprietary claim and where there is not such a claim. The Second Respondent also did accept that Rangiah J made reference to the Commissioner’s allegation of accessorial liability under the principles in Barnes v Addy as against the First and Third to Sixth Respondents. The Commissioner submitted that he had a proprietary claim in relation to the assets and funds the subject of the Freezing Orders, except those in relation to the Second Respondent.  This was on the basis that the Commissioner accepted that the Second Respondent did not hold any assets of value in his name. The Commissioner advances a case in relation to false GST refunds and R&D offsets claimed and contends that the funds are held on trust by the Respondents (the Commissioner has traced funds into the assets the subject of the Freezing Orders), and that in breach of trust and/or fiduciary duties the Company Taxpayers transferred significant amounts for no consideration to related entities, being other Respondents, and those funds are also held on trust and subject to a proprietary claim.  This is based on the first and second limb of Barnes v Addy, and that all of the assets and funds the subject of the Freezing Orders are the subject of these claims.

32 On a review of the Originating Application, the Commissioner does make at least in part a proprietary claim against all of the Respondents, apart from the Second Respondent.  The Second Respondent’s Affidavit in relation to his assets is consistent with the Commissioner’s submission that the Second Respondent does not hold any assets of significant value in his name.  The Affidavit lists five watches (said to be worth $175,000) and the joint bank account.  In the context of this Proceeding, these are modest amounts.

33 The nature of the Commissioner’s claims results from GST refunds and R&D offsets which are said to have been falsely made.  The funds from those matters are said to be traceable into the assets which are the subject of the Freezing Orders. The Second Respondent (husband of the First Respondent) is a director of the Third to Thirty-Fifth Respondents and the position of the First Respondent is claimed that she is knowingly concerned and/or being in receipt of assets or funds for no consideration.  There is clearly overlap and competing interests in relation to each of the Respondents and potentially as between the Respondents.

34 Given the hearing of this matter is only in the context of seeking a variation of the Freezing Orders, whether or not the Commissioner’s claim is proprietary is not decisive.  In accordance with the principles outlined, it changes the starting point.  However, it is still necessary as an exercise of discretion to weigh the interests of justice in these particular circumstances.

35 While the First Respondent accepted those propositions, it was also submitted that there is no blanket prohibition or even a general prohibition on criminal defence costs being permitted, even in cases where a proprietary claim exists.  So much can be accepted.  It is a balance.  Not only between the Commissioner and the First and Second Respondent, but also including the public interest, in allowing people to defend themselves and fund that defence against serious criminal charges: Council of the Law Society v O’Brien [2019] NSWSC 1879 at [16]-[17] (Campbell J).  As it is likely that I will hear the final trial in this Proceeding, it is not appropriate that I delve into the merits now.  It is sufficient to observe, at least as is accepted by the First Respondent, that it would be open to find that the Commissioner has a good arguable case and it is based on a proprietary claim against at least against the First Respondent.  It can also be accepted that the matter is complex. At the time the original Freezing Orders were made, there were no criminal investigations underway.  The Freezing Orders are to be construed having regard to their ordinary meaning, as a whole and in the context in which they were made, that is objectively.  This means that the Court does not delve into the subjective intention of the parties or the Judge: Human Group at [72].

36 In the context of the reasonable legal expenses, Barrett J in Goumas at [27] referred to them as being “to fund the conduct of the very litigation the integrity of which the order is designed to protect”, that is being relevant to those proceedings. McKerracker J similarly referred to them in Bolland at [22] as “any person the subject of a Freezing Orders should not be deprived of reasonable legal advice to contest the merits of the substantive claim against which the order is based”.  To this can also be added the observation of Neuberger J in The Anglo-Eastern Trust Ltd v Kermanshahchi [2002] EWHC 3152 (Ch) at [7], [9] and [10], which are also directed towards the reasonable legal expenses, being those in relation to the litigation which has given rise to the freezing orders.  These can be contrasted to the position of Campbell J in O’Brien at [24], wherein his Honour was of the view that while the “legal expenses” extended to embrace the costs of defending the criminal proceedings, his Honour also made a declaration to provide clarity.  Implicit in that position is that the term “reasonable legal expenses” may be ambiguous.

37 The Commissioner relies on Crosby, Beehive and Birketu to submit that the assets and funds frozen in this Proceeding should not be permitted to be used in respect of legal fees for criminal proceedings, even if such matters arise out of the same conduct (factual matrix) or that the First or Second Respondent does not have another source of funds for such criminal legal fees. Those matters did turn on their own facts, applying the principles outlined above.  In this sense, the First and Second Respondents relied on matters such as:

(a) the difference in the size of the frozen funds;

(b) an absence of delay;

(c) that the criminal trial was listed for hearing, whereas no charges have been laid;

(d) at least in relation to the Second Respondent, a list of assets does not disclose any superannuation; and

(e) that the First and Second Respondents are not seeking for criminal defence costs.

38 In exercising the discretion, particularly in these circumstances of undertaking, at least on one view, a “careful and anxious judgment” means that particular attention must be given to the circumstances of this case. Exercising this discretionary power, whether it is based on the Commissioner having a proprietary claim or not, will invariably be fact dependant and requires a careful review and consideration of the particular evidence before this Court, rather than a mere comparison between factual similarities or differences.

39 The Second Respondent relied on the material change in circumstances, being the AFP search, as supporting a variation to permit the reasonable legal expenses as including criminal proceedings, given that there was now at least some prospect of such proceedings and they arose out of the same factual matrix: O’Brien at [24].  In O’Brien, the defendants had been charged with very serious criminal offences, which were anticipated to proceed on indictment and trial or sentence in the District Court.  Although those proceedings were in their infancy, the matter before Campbell J was an application seeking that the “legal expenses” be extended to the costs of the criminal defence: O’Brien at [4]-[5].  Further, the Second Respondent submitted that the determination of this issue at this time was not necessary as no criminal charges had been laid.  In this context, it was also submitted that if charges are laid that would amount to a material change in circumstances.

40 Neither the First nor Second Respondent rely on evidence of having made an application for legal aid in relation to any criminal proceedings or the results of such an application.  The evidence in this regard was that the First Respondent’s solicitor has reviewed the legal aid website to try and ascertain whether the First Respondent would be eligible.  The solicitor states from that review that it is her understanding that the First Respondent would likely not qualify for legal aid funding.  The Second Respondent made a similar submission.  This is not the same as having made an application and it being rejected.  This may be informed, somewhat, by the fact that there have not been charges laid at this time.  At this stage, any criminal charges or proceedings is hypothetical.  It means that the Court is not in a position to be able to consider the complexity or costs which may be involved in any such criminal proceedings.  The Court must assess whether any injustice to the Commissioner will be outweighed by any potential injustice to the First and Second Respondents if they are precluded from accessing funds to advance a defence in relation to potential criminal proceedings.  To state this proposition, being the current circumstances, is to recognise the difficulty in assessing the speculative and hypothetical position.

41 The First Respondent has not relied on an Affidavit disclosing all of her assets on this contested application.  It is submitted on her behalf that such an Affidavit has been prepared and is held under seal as a consequence of the First Respondent’s right to claim privilege against self-incrimination.  The First Respondent relies on a statement of her solicitor on information and belief that she has no other source of income or ability to otherwise fund a defence in these proceedings.  There are no details of what enquiries have been made or what avenues have been pursued to try and seek alternate funding.

42 The First Respondent also submitted, in seeking to distinguish matters such as Crosby and Beehive, that effectively that the limitation sought by the Commissioner is hypothetical because no charges have been laid, so there are no criminal defence costs.  However, historically, given the terms of the Freezing Orders, a payment was permitted to Gilshenan & Luton which was in relation to the AFP search and not in relation to legal expenses in these Proceeding or the Part IVC Proceedings.  Rather than regarding the Commissioner’s application as hypothetical, premature or unnecessary, given the history of this matter, it is one which seeks clarity as to the particular subject matter for funds which may be dispersed on account of reasonable legal expenses.

43 For all of these reasons, I am satisfied that it is appropriate to vary the Freezing Orders to expressly limit the reasonable legal expenses to those that are incurred in this Proceeding and in the Part IVC Proceedings.  Although there is some basis for considering that the Commissioner’s claim is a proprietary claim, as outlined, in the particular circumstances of this case, I prefer to commence with the ordinary starting point, being the usual predisposition to allowing ordinary living expenses and reasonable legal expenses. In the context of this case, the reasonable legal expenses (similar to Goumas and Bolland) were likely to fund the very litigation to which the Freezing Orders related.   Further, the original ex parte orders made on 9 December 2024, relevantly, made provision for reasonable legal expenses.  By consent, the quantum of those reasonable legal expenses was enlarged on 20 December 2024 to provide for the lump sum of $100,000.  That is, the Freezing Orders already made provision for reasonable legal expenses.  What is in issue is the breadth or scope of those reasonable legal expenses.  Given the history and potential uncertainty of this Proceeding and potentially other proceedings, it is preferrable to provide certainty as to the scope of the reasonable legal expenses.  It is also relevant to the exercise of the discretion generally that there is a proprietary claim against all of the Respondents except for the Second Respondent.  This is not to meld together different considerations, but it is to consider the particular circumstances of this case. At least in relation to the First Respondent, it is accepted that there is a proprietary claim.  At this stage any criminal proceedings as against the First or Second Respondent are speculative and unknown.  Hence the legal expenses in relation to any hypothetical criminal proceedings are also speculative and unknown.  Both the First and Second Respondents expressly submit that they are not currently seeking any legal expenses on account of criminal defence costs.  This is based on there not being any charges laid.  The First and Second Respondents, however, oppose the Commissioner’s application.  This may be on the basis that if any criminal charges are laid, currently, a further application to vary may not be required.  Of course, if such an application is not agreed to by the Commissioner, it is likely to increase legal expenses in the Proceeding and therefore reduce the assets and funds currently the subject of the Freezing Orders. Whether or not any legal aid may be able to be obtained is also unknown.  The reasons for this may include that there are no current criminal proceedings.  Funding legal expenses in relation to any potential criminal proceedings is not of itself an “illegitimate” use of the funds.  There is public interest, as well an interest of the First and Second Respondents, in being able to properly defend such matters, should they choose to do so.

44 However, on balance, at this stage of the proceedings, on the basis of the evidence currently available, it is appropriate to clarify the orders and limit the reasonable legal expenses to this Proceeding and any Part IVC Proceedings.

Reasonable Legal Expenses – Variation Lump Sum sought

45 The First Respondent applies to vary the amount that can be expended on reasonable legal expenses, in short contending that despite the Orders which were amended and which permitted a lump sum of $100,000, plus $10,000 per month, such allowances are insufficient.

46 By an amended application, the First Respondent sought the variation as follows:

Variation to Freezing Orders

4.    Annexure A to the Freezing Orders is varied by replacing paragraph 11(b) with the following:

Subject to paragraph 12 below, paying:

(i) The total sum of $430,425.93 $394,735.18 to the trust account of Cooper Grace Ward Lawyers for the first respondent’s reasonable legal expenses being:

a. The sum of $100,000 paid to date; and

b. The sum of $80,000 referred to in order 2 above; and

c. The sum of $250,425.93 $294,735.18 to be paid forthwith.

(ii) From 1 August January 2025, up to a total of $10,000 per calendar month on the first respondent’s reasonable legal expenses.

47 The First Respondent’s solicitor has provided five affidavits in relation to this application.  It is necessary to consider the material in some detail.  However, not only would it be inappropriate to conduct a taxation of the costs incurred, but it would also not be possible on the basis of the evidence currently before the Court. The difficulty which arises is whether, at this stage of the proceedings, the Court should be involved in the minutiae over the quantum of what are contented to be reasonable legal expenses.

48 Applications of this type involve an evaluative process to try and ascertain what will facilitate the interests of justice overall in the Proceeding: Westpac Banking Corporation v Forum Finance Pty Ltd (Freezing Orderss Variation) [2022] FCA 910 (Lee J) at [35] and see the approach [2]-[4] and [36]-[39].  The payment of legal expenses is out of the assets and funds the subject of the Freezing Orders, in which the Commissioner claims, in part, a proprietary interest.  Given the Commissioner’s claim and the position of the First Respondent, there are competing public interests.  In undertaking the broad evaluative exercise, the task is to strike an appropriate balance between these competing interests.

49 The Freezing Orders already make provision for allowing the payment of reasonable legal expenses, as the First Respondent ought not be deprived of reasonable legal advice to contest the merits of the Proceeding: Goumas at [27]; Bollands at [22].

50 In a different context, Kirby P in New South Wales Crime Commission v Fleming (1991) 24 NSWLR 116 at 142-144 set out general criteria for determining “reasonable legal expenses”.  Appropriately adapted, those principles which are applicable to this evaluative exercise are as follows:

(a) What are “reasonable” legal expenses, are to be determined objectively.

(b) If the parties agree on the provision to be made for reasonable legal expenses, the court will ordinarily be entitled to accept that provision and make orders accordingly.

(c) In the absence of agreement, evidence which relates to the purposes for which the expenses are specified will be necessary and such evidence should address costs incurred and likely to be incurred.

(d) Matters of context and complexity will be relevant in determining what is appropriate as “reasonable legal expenses”.  These matters include whether the court in which the dispute is taking place is a superior court or a lower court, whether that court has a scale which may provide a guide, and whether special circumstances, including complexity, the amount of property involved or other considerations, all may impact on what are “reasonable legal expenses”.

(e) Ordinarily, detailed evidence should be placed before the court, including matters of anticipated duration, issues raised, retention of counsel and the opinion of the solicitor as to whether such charges are “reasonable”.  In some cases, the court may be assisted by the opinion of an experienced, independent solicitor who has reviewed these matters and offered an opinion as to “reasonable legal expenses”.

(f) A court may be hesitant to determine, in advance, precisely all of the expenses to be incurred which will constitute “reasonable legal expenses”.  However, some items may be properly determined to provide some certainty that particular expenses will be met.

51 Therefore, what are reasonable legal expenses will require a consideration of all of the above listed factors to determine objectively whether such matters are necessary, proportional in the circumstances of the case and reflect a fair rate and time for the work to be performed, such that the expense incurred will constitute “reasonable legal expenses”.

52 The First solicitor Affidavit relevantly provided the various charge-out rates of the firm for a partner through to a paralegal (and word processing operator) and counsel.  The First solicitor Affidavit outlined that the firm had invoiced the First Respondent $220,415.93 (including GST) and including counsel fees.  This was said to be in relation to the following work:

(a) $132,877.50 for addressing and reviewing the Freezing Orders made on 9 December 2024, including the initial 6,500 pages of material, case management hearings, various compliance aspects with Banks and the like and negotiating and arranging amendments to the Freezing Orders;

(b) $12,221.55 for addressing and responding to the originating application, including initial advice work;

(c) $41,287.28 for preparing submissions and associated work related to the taxation objections for the 2021 and 2022 income years; and

(d) $34,029.60 for assisting, advising and briefing Gilshenan & Luton with the investigations of potential criminal contraventions.

53 In relation to the amount above at (c) for $41,287.28 for preparing submissions and associated work in relation to the taxation objections, the taxation objections were lodged with the Commissioner in January 2023.  The First solicitor Affidavit does describe this work as being “since being briefed”, the firm “has invoiced for work undertaken”, which included those matters.  Although legal expenses in relation to the taxation objection would fall within the terms of the Freezing Orders, it would have been expected that such work would have been invoiced and paid before the Freezing Orders were imposed.  Another solicitor Affidavit relied on by the First Respondent stated that as at 25 March 2025, the firm had invoiced since 9 December 2025 for $135,976.93 (including GST), including an amount for the preparation of submissions in support of the taxation objections, for approximately $3,693.80.  The First Respondent submitted (without evidence) that costs were incurred in January 2025 in relation to a request by the Commissioner to provide further information in respect of the taxations objections.  It was submitted that this was the explanation for the amount at (c) above.  However, the costs of providing further information in response to a request in January 2025 is more consistent with the other evidence of an amount being incurred since 9 December 2025 (as opposed to “since being briefed”) and for an amount of $3,693.80.  Having made these observations, in undertaking the broad evaluative exercise, I do not make an express finding about it, however observe that there may be potential inconsistencies in this evidence.

54 The First solicitor Affidavit then states that $95,915.93 of the legal costs incurred is outstanding.  No invoices are provided in relation to this outstanding amount.  The First solicitor Affidavit also provided further estimates of costs to be incurred, which can be summarised as follows:

(a) progressing an urgent interim application, which did not proceed (for approximately $40,000) (Interim Application);

(b) progressing an application to vary the Freezing Orders (for approximately $40,000 if contested) (Variation Application);

(c) progressing an application to discharge the Freezing Orders, which did not proceed (for approximately $67,430) (Discharge Application);

(d) $30,000 to $40,000 in advice and recommendations in this Proceedings (Advice Work);

(e) $29,920 in assisting the First Respondent in complying and reporting with respect to the Freezing Orders, this being $7,480 per month (Reporting Costs); and

(f) fees to be incurred in relation to the AFP investigations, for approximately $17,160 (AFP Work).

55 In terms of the quantum of the costs estimated in the First solicitor Affidavit that will be incurred, from the above list (a)-(f), items (a) and (c), which add to $107,430, did not proceed (however, these are considered further below).  Furthermore, the fees to be incurred in relation to the AFP investigations, those being related to the criminal investigation, will not be permitted (for the reasons given above on the Commissioner’s application).

56 The First Respondent’s solicitor, on information and belief in the Second solicitor Affidavit, attests that the First Respondent:

(a) is unable to work due to various medical conditions and because she cares for her young child;

(b) currently spends approximately four hours a week attending to banking requirements due to the Freezing Orders;

(c) has no other source of income or funds.

57 Furthermore, it does not appear to the First Respondent’s solicitor that she would qualify for any form of Centrelink payment.

58 By way of the Third solicitor Affidavit, an update on costs is provided, which although reliance is placed on and stated that it should be read with the two earlier affidavits, there are unnecessary aspects of repetition.

59 In relation to the Interim Application, it is said in effect that much of the work relevant to the Interim Application was already done and that the work in progress for the month of April 2025, including counsel’s fees, was $39,659.25.  That work is said to include the preparation of two affidavits dated 10 April 2025, which were also relied on in the Variation Application.   The solicitor attests that approximately $37,582.46 related to that work, said to be for the Interim Application, with approximately $2,076.80 relating to liaising with the Bank to seek approval for certain payments and with the Applicant responding to queries and providing bank statements.  The estimate for the Variation Application, being the same as the Interim Application, is said to have taken into account that most of the preparation work would have been done in the Interim Application.  The estimate for the Variation Application remained at $40,000 in this Third solicitor Affidavit.

60 The total fees incurred and said to be outstanding at the date of the Third solicitor Affidavit is an amount of $125,575.18.  The other estimates for the Discharge Application, Advice Work, Reporting Costs and AFP Work remained the same (but were repeated) in the Third solicitor Affidavit.

61 The Fourth solicitor Affidavit responded to matters in an affidavit relied on by the Commissioner in relation to certain expenses and payments.  Such matters were not the subject of an application by the Commissioner.  Further costs were incurred in relation to the preparation of that affidavit.

62 The Fifth solicitor Affidavit expressly states that the Discharge Application was no longer being pursued by the Second to Thirty-Fifth Respondents and as such those costs were no longer sought.  Those are the costs of the Discharge Application.  The solicitor provides another costs estimate relevantly stating that an additional $22,000 in costs for the Variation Application were to be incurred because of the adjournment and additional hearing time on 26 May 2025.  Further, it was anticipated that $40,000 to $50,000 in costs would be incurred in relation to the taxation objection decision, once made (Part IVC Work).  The estimate for the Advice Work and the AFP Work remained the same.

63 Therefore, the further updated estimate can be summarised as:

(a) $40,000 plus $22,000 for the Variation Application;

(b) $30,000 to $40,000 for the Advice Work;

(c) $17,160 for the AFP Work; and

(d) $40,000 to $50,000 for the Part IVC Work.

64 The summary no longer includes an amount for the Reporting Costs.  However, the Fifth solicitor Affidavit attests that the updated estimate is based on the continual provision of $10,000 per month for legal fees and that this would “cover her expenses of complying with the Freezing Orders reporting requirements” which were not covered by the updated estimate. Even if (considered further below) the estimate of $7,480 was reasonable for Reporting Costs, there is no account for the balance.

65 In relation to the Interim Application, it did not proceed.  The matter was mentioned in Court on 17 April 2025, to understand the utility of both the Interim Application and the Variation Application, as it appeared there would be duplication if both applications proceeded.  At that mention, counsel for the First Respondent (quite properly) recognised the duplication and in the circumstances was content to simply press the Variation Application.  This hearing only lasted nine minutes in Court (from the transcript).  The Interim Application sought a variation and payment of $80,000 forthwith for reasonable legal expenses.  The estimate to progress that application was half of the amount sought.  In all of the circumstances, as was recognised at the mention of the Interim Application, that application was unnecessary, involved redundant duplication and ultimately was not pressed.  The First Respondent relied on an amended interlocutory application which sought the variations as are set out above.  Those amendments struck through the entirety of the interim relief.  Objectively, taking into account the timetabling orders that had been made for the hearing of the Variation Application and the Discharge Application, it was not necessary (nor did it provide the parties with an opportunity to respond to each other’s submissions) to also pursue this Interim Application.  By the Fifth solicitor Affidavit an amount for these costs was no longer sought.

66 In relation to the Discharge Application, this was not pressed and the hearing of this was vacated.  There is an absence of evidence that any preparatory work was done in relation to the Discharge Application.  The First Respondent no longer seeks any amount for these legal expenses.

67 In relation to the Advice Work, the evidence of what this work will involve is not detailed.  The evidence does not address what the issue or issues are that may require this advice work.  The evidence does not address the time which it is anticipated will be required to provide such advice and/or whether counsel would be required.  The evidence does not address what level of personnel within the firm will be required to undertake and perform such advice work.  That is, there is an absence of sufficient material to determine how this estimate of future legal costs was calculated: Forum Finance (No 2) at [34] and [36].

68 Although I accept that the First Respondent will require advice during this Proceeding, in the absence of such evidence, it is difficult to objectively determine whether or not this estimate of expenses anticipated to be incurred would constitute “reasonable legal expenses”.  As a category of legal expenses, I accept that such a category would be reasonable.

69 In relation to the Reporting Costs, the First solicitor Affidavit attests that the general oversight and reporting requirements of the Freezing Orders will incur approximately $7,480 (including GST) per month.  This estimate broadly outlines the steps that are being taken to comply with, take instructions about and report on matters in relation to paragraphs 11, 11(d), 12 of the Freezing Orders.  Although a dollar value for such matters is provided, again there is no time estimate provided.  Further, despite the various charge-out rates being provided for people at various levels within the firm, it is not stated at which level within the firm such work is to be performed (or has been performed).  Such work, on the broad description provided, appears to be more mechanical in nature, rather than requiring a senior legal practitioner.  By way of example only, it would not be necessary or reasonable to have a partner of the firm conduct this work.  However, there is simply no evidence one way or the other.  It is not possible to ascertain such matters from previous invoices issued by the firm engaged by the First Respondent, because those are not in evidence either.  In the absence of detailed evidence, it is not possible to ascertain whether the work being done and charged for would constitute “reasonable legal expenses”.  It is the First Respondent who bears the onus on her application to vary the Freezing Orders: see, by analogy, Legal Services Board v David Brian Forster [2015] VSC 136 at [64] (Robson J); see also Clout (Trustee) v Anscor Pty Ltd [2001] FCA 174 at [20] (Drummond J), cited with approval by Davies J in Allomak Ltd v Allan (according to the schedule attached) [2010] VSC 187 at [24].  Obviously, however, it is not unreasonable for the First Respondent to seek the involvement of her solicitors in relation to the reporting and compliance of the Freezing Orders.  Non-compliance with the Freezing Orders is a serious matter.  The Freezing Orders are accompanied by a penal notice.  The evidence regarding the costs incurred on the Interim Application is also relevant in this context.  It was stated that of the total costs incurred for April 2025, approximately $2,076.80 related to liaising with the Banks, the Applicant and the provision of some documents.  Based on the previous evidence that Reporting Costs were incurred each month, the usual monthly reporting and liaising requirements must have been undertaken in April 2025.  It is not then explained how or why the monthly ongoing or Reporting Costs for April 2025 were only $2,076.80 and not the $7,480 as estimated.  In the absence of sufficient material and without further explanation, the monthly Reporting Costs seem excessive: Forum Finance (No 2) at [34] and [36]-[37].  Further, the evidence may be potentially, at least in some respects, inconsistent.

70 Further, the First Respondent relies on the evidence of the Reporting Costs being approximately $7,480 per month, in part, for the variation of the quantum of reasonable legal expenses.  However, the amended application does not seek an increase to the monthly amount able to be paid going forward.  It remains at $10,000 per month.  The First Respondent’s solicitor attests (in the Second and Third solicitor Affidavit) that should she not be permitted to spend more than $10,000 per month on her reasonable legal expenses, she may not continue to receive assistance by way of her current legal team.  Finally, in the Fifth solicitor Affidavit, it is stated that the current provision of $10,000 per month for legal expenses would cover her costs of complying and reporting (that is, the Reporting Costs). Effectively, the approach of the First Respondent seems to be that the anticipated legal costs that will be incurred have been estimated and sought on a lump sum basis forthwith, while the Reporting Costs can be paid from the current provision of $10,000 per month.

71 The Commissioner submits that by the First and Second Respondents having separate legal representation there is significant duplication.  However, the interest of each of the First Respondent and the Second Respondent is different.  Those have been somewhat outlined above.  In all of the circumstances, it is reasonable that the First and Second (to Thirty-Fifth) Respondents are separately represented, should they consider that appropriate.  It is a matter for each of the Respondents.

72 The Commissioner also submits that the First Respondent was aware of the quantum limit on the reasonable legal expenses, in the Freezing Orders, but incurred additional expenses.  This, it is submitted, should weigh against making the variation sought.

73 The First Respondent contended that a key consideration is whether she is able to obtain a fair trial: Forum Finance at [34].  I accept that this must be part of the evaluative exercise.

74 I accept that the First Respondent is unable to work and hence would not be able to assist in payment of her reasonable legal expenses.  I also accept that the legal costs that have been incurred are more than was anticipated on 20 December 2024, when the additional lump sum amount of $100,000 was ordered, together with the $10,000 per month.  However, it appears this would have been known early on, given the estimates and descriptions of costs incurred.

75 The issues involved in this Proceeding are complex and the sums of money and amount of property involved is significant.  I accept that it is in the interests of justice for the First Respondent to be legally represented in this Proceeding.  However, given the competing considerations, that representation must be necessary, proper, proportional and reasonable in all of the circumstances of this case.

76 Although the basis upon which the costs estimate has changed in the Fifth solicitor Affidavit, the amount calculated which the First Respondent seeks as an additional lump sum payable forthwith remains the same, being $294,735.18.  Overall, this is only approximately $35,000 less than that originally sought.   However, this is in circumstances when the Interim Application (estimated costs of $40,000) did not proceed and was not necessary.  The Discharge Application (estimated costs of $67,430) did not proceed.  The AFP Work will not be permitted (estimated costs of $17,160) and the details surrounding the provision of the Advice Work is absent.  Even without any allowance or discount for the Advice Work (accepting that some such work will be required), this may result in a reduction of approximately $120,000.

77 There is also some inconsistency as to the Reporting Costs being incurred each month.  It is difficult to reach an objective decision as to what is reasonable in the absence of detailed evidence regarding these costs.  The amount of approximately $7,500 per month seems excessive.  However, this category of costs is reasonable.

78 Further costs were incurred on the Variation Application due to the adjournment and further costs are anticipated on the Part IVC Proceedings.  These further costs approximate to the difference in the amount now sought for the provision of reasonable legal expenses.  The solicitor for the First Respondent also attests that a mediation may be required (for which a costs estimate has not been provided) and it is anticipated that these proceedings will not be involved in any further substantive steps until the determination of the Part IVC Proceedings.  Therefore, and as might be expected in this type of litigation, future costs are somewhat uncertain.  The solicitor who has carriage of the Proceeding for the First Respondent is a partner of the firm and does attest that the litigation is being conducted reasonably and as efficiently as possible.

79 The solicitor for the First Respondent gives evidence that costs already incurred and outstanding invoices together amount to $125,575.18.  However, correspondence in evidence suggests that the solicitors have current invoices outstanding totalling $121,192.60.  It is noted there is “work-in-progress” which is unbilled.  It is not stated with any precision the basis for the incurred, invoiced and outstanding costs.  Approximately $62,000 was said to be incurred on the Variation Application.  However, some time has also passed since hearing this application.  That is, additional monthly amounts of $10,000 have also become available to the First Respondent.  However, the Reporting Costs in at least some amount have continued.  It is implicitly submitted that the Advice Work and the Part IVC Work cannot be met by the monthly $10,000 provision.  As already observed, the precision in the evidence is lacking.

80 In undertaking this evaluative exercise, a taxation of costs is not to be undertaken nor is an assessment with any mathematical precision required.  It could not be done, on the basis of the evidence.  The First Respondent also submitted that the evidence was uncontested.  That is accepted, however, there are the difficulties with the evidence, as described above.  Further, it was submitted that the quantum sought to access for legal expenses was relatively modest in the context of the frozen assets and funds.

81 A “careful and anxious judgment” is required in these circumstances where there is a proprietary claim as against the First Respondent.  There is an “obvious risk of injustice” if the First Respondent was able to dissipate the assets and funds.  However, I also accept that the First Respondent has no other source of income to pay for legal representation in circumstances where the Proceeding is complicated.

82 In all the circumstances and seeking to achieve the appropriate balance, there is a need to meet some of the additional costs incurred to date.  I am not satisfied on the basis of the evidence that all of those costs said to have been incurred and anticipated to be incurred should be ordered at this stage.  There has been unnecessary duplication.  Five affidavits have been filed, when two should have been sufficient, allowing for the adjournment. Further, in relation to anticipated and future costs, it is necessary to bear in mind that the Court might be hesitant to determine in advance precisely all future legal costs, particularly in the absence of detailed evidence.  That is the circumstances of this case, as there is an uncertainty in the future steps (it is unclear whether any Part IVC Proceedings would be in the Administrative Review Tribunal or this Court, whether this Proceeding will advance prior or after the Part IVC Proceedings, or whether there will be a mediation).  On this basis, all of the amounts sought should not now be extracted from the frozen assets and funds.  However, in reaching the appropriate balance, some will be ordered as an additional lump sum payable forthwith.  That amount will be $165,000.  This is allowing some discounting and non-allowance for some past legal costs where amounts are uncertain, unnecessary, potentially inconsistent, insufficiently detailed and appear excessive.  This has also broadly been the approach in relation to the future anticipated legal costs, which are uncertain, insufficiently detailed or relate to matters which, on the basis of the amendment to the Freezing Orders, will not fall within its scope (being the AFP Work).

83 However, on balance, and in an attempt to ameliorate the position moving forward, I am satisfied that the monthly provision for legal expenses should be increased, albeit modestly.  It will be increased to $15,000 per month.  Although it is not for the Court to dictate to a party how to run their case, on further reflection, the First Respondent’s legal team may be able to find further efficiencies in the way the litigation is conducted.

84 The First Respondent can make a future application, in the absence of agreement, should that be appropriate.  Although I am conscious that will also increase the costs and thereby potentially decrease the fund upon which a proprietary claim is made as against the First Respondent, the current uncertainty means that this is the appropriate approach.  The alternative is to order a larger amount now to be extracted from the frozen fund.  That does not strike the right balance in the context of the Proceeding.

CONCLUSION

85 There will be further amendments to the Freezing Orders.  It may be that another amendment is required, in terms of identifying where such funds are to be extracted.  As such, I will hear further from the parties in relation to any amendment which may be required in this regard.

86 The costs of these application should be reserved.

Associate:

Dated:    26 September 2025

SCHEDULE OF PARTIES