FEDERAL COURT OF AUSTRALIA

Department of Employment and Workplace Relations v Howell, in the matter of Castel Electronics Pty Ltd (No 3) [2026] FCA 266

ORDERS

In this order:

(a)    1stCash means the first cross-respondent under the first cross-claim and the cross-claimant under the second cross-claim;

(b)    first cross-claim means the cross-claim filed on 16 November 2022 (as amended) in this proceeding;

(c)    receivers means the defendants and the cross-claimants under the first cross-claim;

(d)    second cross-claim means the cross-claim filed on 17 March 2023 (as amended) in this proceeding;

(e)    Settlement Sum means the amount of $900,000 paid to the plaintiff to resolve its claim in this proceeding against the receivers;

(f)    superannuation guarantee charge means the superannuation guarantee charge referred to in the proof of debt lodged on 22 January 2019 by the Deputy Commissioner of Taxation in the liquidation of Castel Electronics Pty Ltd;

(g)    Thorn Australia means the second cross-respondent under the first cross-claim and the second cross-respondent under the second cross-claim; and

(h)    Thorn Group means the first cross-respondent under the second cross-claim.

THE COURT DECLARES THAT:

1.    Thorn Australia, and not 1stCash, is the “Indemnifying Party” under the Deed of Indemnity dated 25 January 2018.

2.    Pursuant to the Deed of Indemnity, Thorn Australia is liable to indemnify the receivers for:

(a)    the costs and disbursements incurred by the receivers in defence of the plaintiff’s claim in this proceeding;

(b)    the amount of $900,000 paid to the plaintiff in settlement of its claim in this proceeding; and

(c)    the superannuation guarantee charge, if demand for payment of is made by the plaintiff.

THE COURT ORDERS THAT:

1.    There be judgment for the receivers against Thorn Australia in the sum of $900,000 plus interest calculated to 13 March 2026 of $120,982.19.

2.    Thorn Australia is to pay the receivers’ costs and disbursements incurred in defence of the plaintiff’s claim in this proceeding on an indemnity basis.

3.    Thorn Australia is to pay the receivers’ costs of first cross-claim on an indemnity basis.

4.    Thorn Australia is to pay 1stCash’s costs of the first cross-claim on an indemnity basis.

5.    Thorn Australia is to pay 1stCash’s costs of the second cross-claim on an indemnity basis;

6.    The costs as ordered are to be determined by a Registrar on a lump sum basis pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth) and in accordance with such directions and orders as the Registrar thinks fit who shall then make an order fixing the amount of the costs payable within 14 days.

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

REASONS FOR JUDGMENT

MCELWAINE J:

1    For reasons published on 18 December 2025, I resolved two cross-claims in this proceeding: Department of Employment and Workplace Relations v Howell, in the matter of Castel Electronics Pty Ltd (No 2) [2025] FCA 1629 (primary reasons). The cross-claims arose from my determination of a separate question between the Commonwealth as plaintiff and Malcolm Howell and Liam Bellamy (the receivers) as the first and second defendants: Department of Employment and Workplace Relations v Howell, in the matter of Castel Electronics Pty Ltd [2024] FCA 566.

2    The orders of 18 December 2025 required the parties to confer and provide an agreed minute of consequential orders, or if not, their respective drafts and submissions in support. There is no agreement. Without leave 1stCash Pty Ltd filed a solicitor’s affidavit deposing as to contentious facts. I ruled the affidavit inadmissible in part at a case management hearing on 20 February 2026.

3    I now resolve the orders that the parties have not been able to agree on. What follows assumes familiarity with the primary reasons and adopts the nomenclature of the parties therein.

4    The first issue concerns the primary relief the receivers are entitled to on success of their cross-claim against Thorn Australia Pty Ltd and the failure of their cross-claim against 1stCash (first cross-claim).

5    The declarations proposed by the receivers, save for one matter, accurately reflect the findings in the primary reasons and mirror the declarations proposed by 1stCash. Thorn Australia proposes a different form of wording for some paragraphs which do not reflect my findings save in one respect. For the potential superannuation guarantee charge claim, the declaration should be conditioned by the making of a demand for payment by the Commonwealth conformably with [64] of the primary reasons and the submissions of Thorn Australia.

6    The orders must next be resolved. It is not appropriate that judgment be generally entered for the receivers against Thorn Australia on the first cross-claim, because aspects of that claim failed. All that is necessary is that there be judgment in favour of the receivers against Thorn Australia in the amount of $900,000 plus pre-judgment interest. Interest calculated to today amounts to $120,982.19.

7    The parties agree that there should be an order that Thorn Australia must pay the amount of the receivers’ costs of defending the plaintiff’s claim, but Thorn Australia contends that this should not be an indemnity costs order. I reject that contention as it does not reflect my finding at [117] of the primary reasons.

8    The parties are at loggerheads about who should bear the costs of the cross-claims. The first cross-claim named 1stCash and by later amendment Thorn Australia in the alternative. The justification was that as between 1stCash and Thorn Australia there was dispute as to which had the obligation to indemnify. The receivers failed on the cross-claim against 1stCash but succeeded against Thorn Australia; the reason being that pursuant to the Deed of Novation the indemnity obligation was novated to Thorn Australia. In addition, 1stCash cross-claimed against Thorn Australia under a separate Deed of Indemnity, if it was liable to indemnify the receivers (second cross-claim). It was not necessary to resolve that claim, once I determined that 1stCash was not the indemnifying party of the receivers.

9    The competing costs positions may be shortly stated. The receivers submit that Thorn Australia should pay their costs of the first cross-claim against Thorn Australia (on an indemnity basis) as well as the costs of 1stCash by making a Sanderson order (Sanderson v Blythe Theatre Co [1903] 2 KB 533). The first part of that order is supported by 1stCash but disputed by Thorn Australia which submits that it should only bear liability for the costs of the receivers, limited to the novation and estoppel by convention issues (primary reasons [43]-[58] [100] – [115]) and then, only from 25 August 2023 being the date it was joined by the receivers as the second cross-respondent. Thorn Australia submits that this, adopting a broad-brush approach, amounts to one third of the costs of the cross-claim against it from 25 August 2023.

10    The Sanderson order (which is the second part) is opposed by 1stCash which seeks the usual order following dismissal of the first cross-claim against it; i.e. that the receivers pay their costs. Thorn Australia also submits that the receivers should pay the costs of the second cross-claim brought against 1stCash.

11    The logical way to determine the competing submissions is to start with the Thorn Australia submission that costs should be ordered on an issue basis. The general rule is that a successful party should receive a costs order, though it may be appropriate to limit the quantum of the award to reflect the extent of success on particular issues: Kruger v Thompson (No 2) [2025] FCAFC 193 at [8]: “However, the mere fact that the Court does not accept all of the arguments advanced by a successful appellant does not mean that such a course is warranted”. It is not in my view in this case. Thorn Australia raised and maintained unmeritorious defences on the Deed of Novation and estoppel issues. The fact that Thorn Australia succeeded in its arguments to the effect that it was not contractually obliged to indemnify the receivers, by application of the contractual exclusions, does not justify a separate issue costs order. What should have been obvious to Thorn Australia from the outset is that, despite the exclusions, it was at very significant risk of failing on the alternative estoppel claim, which was an exclusively documentary case. Its arguments in defence of the claim were without merit and they consumed a considerable portion of the proceedings and the arguments at trial.

12    Thus, the receivers are entitled to their costs of the first cross-claim against Thorn Australia. An indemnity award does not follow from the provisions of the Deed of as explained at [112] of the primary reasons. Nonetheless, the receivers seek an indemnity costs order in the exercise of the Court’s discretion because Thorn Australia unreasonably refused to accept the obligation to indemnify and/ or rejected Calderbank settlement proposals of 29 January 2024 and 14 October 2025. In the first, the receivers proposed that Thorn Australia should admit the obligation to indemnify in which case the claim against 1stCash would be discontinued with each party bearing their own costs. In the second, the receivers proposed that Thorn Australia pay to 1st Cash $150,000 to settle the costs of the cross-claim and $650,000 to the receivers in full settlement of the cross-claim against Thorn Australia (inclusive of costs) with the settlement to be finalised by consent orders.

13    In my view an indemnity costs order is justified for the whole of the first cross-claim. The estoppel claim was wholly documentary. Thorn Australia’s defence was devoid of merit as explained at [100]-[115] of the primary reasons. Acting reasonably Thorn Australia ought to have appreciated from the outset that even if the exception to the indemnity applied (negligence of the receivers) Thorn Australia would be found liable on the estoppel claim. The reasons why were articulated in the Calderbank offers. Thorn Australia by its unreasonable conduct caused the costs of the first cross-claim to be incurred and it should pay the entire costs of it and not simply from the date it was joined.

14    Ordinarily, the success enjoyed by 1stCash on the first cross-claim against it would entitle it to the usual costs order against the receivers. The receivers resist that order and submit that Thorn Australia should pay those costs. A Sanderson order, if made, will impose the liability for the costs of 1stCash onto Thorn Australia. A Sanderson order may be made where it was reasonable for the receivers to proceed by cross-claim against 1stCash and: where “the conduct of the unsuccessful defendant makes it fair that it should bear the costs of the successful defendant”: Australian Securities and Investments Commission v One Tech Media Ltd (No 6) [2020] FCA 842 at [50], Davies J. The fairness inquiry at least requires identification of some conduct on the part of Thorn Australia which makes it objectively fair to impose the costs liability of the first cross-claim on it.

15    The receivers submit that Thorn Australia consistently denied liability to indemnify, contended in the second cross-claim that the liability was not transferred to it pursuant to the Deed of Novation and rejected the Calderbank proposal of 29 January 2024 (that if accepted, would have resulted in 1stCash being removed as a party on the basis that each would bear their own costs). In the event of non-acceptance, a Sanderson order was foreshadowed. The offer required Thorn Australia to admit that the Deed of Indemnity had been novated to it pursuant to the Deed of Novation. Thorn Australia steadfastly maintained throughout the preceding that the indemnity obligation had not been assumed by it.

16    A Sanderson order is opposed by 1stCash, though in part on controversial evidence that I ruled inadmissible on 20 February 2026. What is of importance is that 1stCash sent Calderbank correspondence to the receivers on 7 September 2023, asserted that pursuant to the Deed of Novation it did not have any liability to indemnify the receivers (and explained why in detail) and offered that if the receivers discontinued the cross-claim against it, each party would bear their own costs. The offer was open for acceptance for a period of 14 days. It contained the usual warning that if the offer was not accepted it would be relied on in support of an application for indemnity costs.

17    It should also be recorded that 1stCash seeks an order that the receivers pay its costs of the second cross-claim against Thorn Australia on the basis that it was reasonable to bring the claim as a reasonable and necessary response to the first cross-claim: Drive My Car Rentals Pty Ltd v Gabriel [2021] NSWCA 73; (2021) 104 NSWLR 697 at [93] – [96]. The difficulty with that submission is that the authority relied on refers to cases where the plaintiff’s claim makes it reasonable for a defendant to bring a third-party claim and where the third-party claim fails “solely by reason of the failure of the plaintiff to sustain its claim”: Drive My at [94]. I did not need to formally determine the second cross-claim as my finding at [57] – [58] of the primary reasons that Thorn Australia was the contractual indemnifying party made it unnecessary to separately determine that issue. Nonetheless, it is obvious that 1stCash was correct on that issue against Thorn Australia, the second cross-claim did not fail and that is a sound reason not to burden the receivers with the costs of the second cross-claim.

18    However, is the 1stCash Calderbank offer a reason to make each of the orders sought by 1stCash against the receivers? The question is whether, as the circumstances were then known, was it unreasonable for the receivers not to accept that offer? I am not satisfied that it was. To let 1stCash out of the proceeding at that stage when Thorn Australia vigorously contended in its case that it was not liable to indemnify, in my opinion would have been imprudent unless Thorn Australia admitted that it carried the contractual indemnity burden (subject of course to the provisos and exceptions on which it succeeded). Thorn Australia did not ever make that admission. Hence, I will not make an order that the receivers pay the costs of the second cross-claim. Thorn Australia must pay the costs of 1stCash.

19    That leaves the question whether a Sanderson order should be made in respect of the costs of the failed first cross-claim brought by the receivers against 1stCash. In my view, that is the appropriate order when Thorn Australia consistently maintained that, upon a proper construction of the Deed of Indemnity, it did not carry the contractual obligation to indemnify the receivers. The burden of meeting that contention was primarily assumed by 1stCash as it was most at risk. The receivers were in the more comfortable position of asserting the benefit of a contractual indemnity from one of the cross-respondents once the dispute as between 1stCash and Thorn Australia was resolved. The arguments of Thorn Australia on that were also devoid of merit and acting reasonably that should have been appreciated from the outset. The defence of this claim was manifestly unreasonable.

20    Finally, the question is whether the costs liability of Thorn Australia must be on an indemnity basis for 1stCash indemnity costs must be paid to 1stCash as a separate contractual obligation owed by Thorn Australia to 1stCash pursuant to cl 6.4 of the Share Sale Agreement (primary reasons at [45]).

21    In this multi-party commercial proceeding the costs are appropriately determined on a lump sum basis to reduce the scope of further disputes and facilitate a cost effective outcome.

22    For these reasons I make the declarations and orders recorded at the outset of this judgment.

Associate:

Dated:    13 March 2026

SCHEDULE OF PARTIES