Federal Court of Australia

Frisken (Trustee) v E K Recruitment Pty Limited (in liq), in the matter of E K Recruitment Pty Ltd (in liq) (Costs) [2026] FCA 852

ORDERS

THE COURT ORDERS THAT:

1.    The plaintiff pay the defendant’s costs in the lump sum of $53,000.

2.    The plaintiff pay the Deputy Commissioner of Taxation’s costs in the lump sum of $43,721.82.

3.    The plaintiff pay the costs of Mr John Paul El-Bayeh and Mr Rafayel El-Khoury in the lump sum of $69,314.03.

4.    The plaintiff is not entitled to be indemnified or reimbursed out of the Trust Fund of the EK Recruitment Creditors’ Trust in relation to orders 1 to 3 above, or in relation to his own costs.

5.    The plaintiff pay his own costs of the proceedings.

6.    Madison Marcus Law Firm and Mr Gerard Breen pay their own costs of the proceedings.

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

REASONS FOR JUDGMENT

JACKMAN J:

1    On 9 March 2026, I gave judgment in these proceedings in relation to the substantive issues: Frisken (Trustee) v E K Recruitment Pty Ltd (in liq), in the matter of E K Recruitment Pty Ltd (in liq) [2026] FCA 223 (the Principal Judgment). Defined terms used in the Principal Judgment bear the same meaning in these reasons. I set a timetable for written submissions and affidavits in relation to costs, which has been extended by agreement.

2    The Originating Application as initially filed on 16 January 2025 sought a wide range of relief, including:

(a)    very substantial variations to the DOCA and the Trust Deed;

(b)    directions as to termination of the Trust;

(c)    directions as to convening a meeting of creditors of the Trust;

(d)    directions regarding the procedure for approving Mr Frisken’s remuneration as trustee;

(e)    judicial advice as to the proof of debt by the Deputy Commissioner of Taxation (DCT);

(f)    judicial advice as to whether to commence proceedings against the Guarantors; and

(g)    a direction that Mr Frisken would be justified in being indemnified from the Trust Fund for the costs of these proceedings.

3    As I noted in the Principal Judgment at [1], the Originating Application was very substantially amended during the course of argument on 25 February 2020. Although the Company was the only defendant joined in the proceedings, the relief originally sought had the capacity to affect directly the rights or liabilities of the DCT and the Guarantors, who should thus have been joined as parties, bearing in mind the principle stated in John Alexander’s Clubs Pty Ltd v White City Tennis Club Ltd [2010] HCA 19; (2010) 241 CLR 1 at [131] (French CJ, Gummow, Hayne, Heydon and Kiefel JJ). I deal with the position of the Solicitors separately below. As a matter of general principle, the starting-point is that a person given leave to be heard under r 2.13 of the Federal Court (Corporations) Rules 2000 (Cth) neither receives nor pays costs: Morelli (Liquidator), in the matter of FW Projects Pty Ltd (in liq) v White Hills Pty Ltd (No 2) [2024] FCA 955 at [19]–[21] (Halley J). However, in the present case, in my view, the DCT and the Guarantors were either necessary or desirable parties, who should have been joined as parties given the wide-ranging relief sought in the Originating Application as originally filed. Further, having been notified of the application and hearing, they are bound by the judicial advice given to Mr Frisken as Trustee pursuant to s 63(11) of the Trustee Act.

4    Mr Frisken has abandoned his application for advice as to his own costs being payable from the Trust Fund, but seeks indemnity from the Trust Fund for any costs made against him, or alternatively that the Solicitors pay the costs of the Company, the DCT and the Guarantors directly (if orders are to be made in their favour). Mr Frisken seeks an order that the Solicitors pay Mr Frisken’s costs of the proceedings in the lump sum of $115,267.02, on the ground that the cause of the drafting issues which gave rise to the proceedings lies with the Solicitors. The fundamental flaw in Mr Frisken’s submission that the Solicitors should bear the liability for any adverse costs orders and for his own costs is that the question of fault on the part of the Solicitors was never in issue in the proceedings. Nevertheless, it remains open to Mr Frisken to make a claim for professional negligence against the Solicitors for loss caused by way of costs incurred by him and any adverse costs orders made against him, and it is equally open to the Solicitors to contend in relation to any such claim that Mr Frisken should bear some proportion of that loss himself. That would be a matter for another court in different proceedings.

5    The Company seeks an order that Mr Frisken pay its costs in the lump sum of $53,000 (including the costs incurred in relation to the costs question). The figure is well supported by the affidavit of its solicitor, Mr Catchpoole. It is the Court’s preference to award costs by way of lump sum whenever it is practicable and appropriate to do so. In my view, the order sought by the Company is justified. Mr Frisken was unsuccessful in the primary relief sought for variation of the DOCA and the Trust Deed, and pursued many of his claims in a way that increased costs (especially in the preparation of written submissions) until they were abandoned at the outset of the hearing. Contrary to Mr Frisken’s submissions, I do not regard the Company’s decision not simply to file a submitting appearance as open to criticism.

6    I do not regard it as appropriate that Mr Frisken’s liability for the Company’s costs be indemnified out of the Trust Fund. I do not think that Mr Frisken has conducted these proceedings efficiently, and indeed has increased costs by pursuing claims which were abandoned at the hearing. Further, any indemnity out of the Trust Fund would be at the expense of beneficiaries, including the DCT, and thus would reduce the prospect of beneficiaries being paid a distribution from the Trust. In my view, it is within the broad discretion conferred by s 43 of the Federal Court of Australia Act 1976 to decide that a trustee should bear a liability for costs personally rather than being indemnified out of the trust fund, irrespective of the terms of the trustee’s indemnity under the trust deed or the implied indemnity under s 59(4) of the Trustee Act. If it were necessary to do so, I would find that a substantial proportion of Mr Frisken’s liability for the Company’s costs was not properly incurred, in light of the extent to which Mr Frisken failed in (or abandoned) his claims for relief and the inefficient way in which the proceedings were conducted; see Adsett v Berlouis (1992) 37 FCR 201 at 208–212 (Northrop, Wilcox and Cooper JJ). The same reasoning applies to the costs orders which I deal with below concerning the DCT and the Guarantors.

7    The DCT seeks an order that Mr Frisken pay the DCT’s costs on a lump sum basis in the amount of $43,721.82. That figure is well supported by the affidavit of Mr Logan, the solicitor for the DCT. As the DCT submits, the DCT had no real option but to file evidence and written submissions, because Mr Frisken sought orders which included that the Trust be terminated and a determination of the amount for which the DCT’s proof of debt should be admitted. Those claims were abandoned only after the DCT had filed its evidence and written submissions. Further, the DCT was amply justified in paying for legal representation at the hearing to monitor the way in which Mr Frisken amended his case on the day. Accordingly, it is appropriate that Mr Frisken pay the DCT’s costs in the lump sum of $43,721.82.

8    The DCT opposes Mr Frisken being indemnified from the Trust Fund for that adverse costs order. In my view, as between Mr Frisken and the DCT, it is Mr Frisken who should bear the liability for costs. The practical effect of that position would be undermined if Mr Frisken were entitled to indemnity from the Trust Fund, in that the depletion of the Trust Fund would result in beneficiaries, including the DCT, receiving a lower (or perhaps no) distribution (without additional contributions beyond those already required to satisfy claims under the Trust Deed). The DCT also submits, and I accept, that Mr Frisken should not be permitted to recover his own costs from the Trust Fund, because the practical effect would be that the DCT would bear the cost of Mr Frisken’s largely unsuccessful application as well as the DCT’s own costs of resisting it.

9    The Guarantors seek an order that Mr Frisken pay their costs in the lump sum of $69,314.03, and that Mr Frisken not be entitled to be indemnified from the Trust Fund for that amount. As the Guarantors submit, Mr Frisken failed to obtain the primary relief which he sought of variations to the DOCA and the Trust Deed (which the Guarantors had opposed), and the Guarantors did not oppose the relief sought by way of judicial advice under s 63 of the Trustee Act. I accept that the Guarantors incurred costs in protecting their legitimate interests, given that the Guarantee defines “Guaranteed Money” broadly to include debts and monetary liabilities under or in connection with the Trust Deed (see Principal Judgment at [23] and [46]–[47]), and Mr Frisken was seeking variations to the Trust Deed as well as indemnity from the Trust Fund. The amount of the lump sum sought is appropriate in light of the affidavit of Mr Frangi, the solicitor for the Guarantors.

10    On the issue whether Mr Frisken should bear those costs personally or be indemnified out of the Trust Fund, as between Mr Frisken and the Guarantors, it is Mr Frisken personally who should bear the costs liability, having failed to obtain his primary relief and having unnecessarily and unreasonably increased the costs incurred by the Guarantors in the conduct of the proceedings, as discussed above. Any reduction in the balance of the Trust Fund by reason of Mr Frisken’s costs liability to the Guarantors may have the potential to increase the Guarantors’ exposure under the Guarantee, which would reverse the intended and appropriate effect of the costs order. I note, however, that I express no views as to the construction or application of the Guarantee (see Principal Judgment at [7]).

11    The Solicitors seek an order for their costs to be paid by Mr Frisken in the lump sum of $30,000. As indicated above, I regard the Solicitors as being in the usual position of persons seeking leave to be heard under r 2.13; that is, as persons who neither receive nor pay costs orders. I acknowledge that the Solicitors played an important role in the proceedings in drawing Mr Frisken’s attention to s 444A of the Corporations Act as importing the prescribed release of creditors’ claims into the DOCA (see the Principal Judgment at [16] and [65]), as well as making some insightful submissions on the construction of the DOCA and the Trust Deed. However, I do not regard those matters as sufficient to justify a costs order in favour of the Solicitors.

12    As I have indicated above, I express no view as to whether, or to what extent, the Solicitors have any liability to Mr Frisken arising from any allegations of professional negligence.

Associate:

Dated:    30 June 2026