Federal Court of Australia

Bad Wolf Purchasing Pty Ltd v Du Bray and Associates Pty Ltd (No 3) [2026] FCA 854

ORDERS

THE COURT ORDERS THAT:

1.    Lee Du Bray, jointly and severally with the plaintiff, pay the costs of the first and second defendants of the proceeding, including the interlocutory process filed on 1 February 2024 to be determined by a Registrar on a lump sum basis pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth).

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 July 2025, I dismissed the plaintiff’s proceeding and adjourned any consequential application for costs: Bad Wolf Purchasing Pty Ltd (as trustee for the Du Bray property Trust) v Du Bray and Associates Pty Ltd [2025] FCA 814 (primary reasons). Subsequently, I made an order that the plaintiff pay the costs of the liquidators of Du Bray and Associates Pty Ltd (in liq) (DBA) and I adjourned an interlocutory application by the liquidators for a personal costs order against a non-party, Lee Du Bray.

2    These reasons resolve the interlocutory application. The claim is that Lee Du Bray be made liable for the costs of the originating process of Bad Wolf and the interlocutory application of the liquidators dated 14 February 2024 made pursuant to s 90-15 of the Insolvency Practice Schedule under the Corporations Act 2001 (Cth). Costs are sought on a lump-sum basis. These reasons assume familiarity with my primary reasons.

3    The liquidators rely on two solicitors’ affidavits that were read without objection or the need for cross-examination: Jingyi Wang made on 1 August 2025 and Vincent Zhu made on 19 May 2026. Lee Du Bray appears on his own account. He filed and served but did not read his affidavit made on 21 April 2026. Dr Grenkie appears for the liquidators.

4    The interlocutory application engages the well-understood discretion to make a costs order against a non-party: Knight v Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178. Broadly, it is made on the grounds that Bad Wolf is unable to satisfy the costs order, and that Lee Du Bray was an active participant who funded the proceeding and held a financial interest in its outcome. Lee Du Bray resists on the basis that the evidence does not establish his contended involvement (and hence the liquidators have failed to discharge their onus). Lee Du Bray submits that: he did not manage or control the proceeding; he was not the real party; there is no sufficient evidence of Bad Wolf’s inability to satisfy the costs order; he should not in any event bear the costs of the s 90-15 application by the liquidators; and, finally, that the costs agreement between the liquidators and their solicitors is unenforceable having been made contrary to s 477(2B) of the Corporations Act.

5    I recite some of the background from my primary reasons. Bad Wolf claimed against the liquidators of DBA that, as the successor trustee to the discretionary Du Bray Property Trust, it was entitled to funds of approximately $462,000 held on deposit with the Westpac Banking Corporation as an asset of the Trust and therefore not available to the liquidators of DBA as the former trustee. As matters developed another contention was advanced to the effect that DBA held the funds as an express, albeit secret, trustee for Du Bray & Associated Ltd, a company incorporated in New Zealand (DBNZ).

6    Bad Wolf’s claim rested on documents and oral evidence from its then-sole director Andrew Chen who for many years has acted for Lee Du Bray and associated entities. Andrew Chen was not a satisfactory witness in his affidavit evidence in chief: Bad Wolf at [50]-[57]. He made false statements in his affidavits about the involvement of Lee Du Bray in the proceeding. Lee Du Bray was made bankrupt on petition of his former de facto partner on 16 July 2020 and discharged on 17 November 2024. This followed a bitter series of contests in the High Court of New Zealand concerning division of the assets of the relationship: Bad Wolf at [3]-[4].

7    I found Andrew Chen’s evidence unsatisfactory in many respects. Contrary to his evidence in chief, he did not have direct knowledge of material facts in issue, was provided with evidence of the facts by Lee Du Bray and invented accounting entries to simply “balance the books”. Further, and also contrary to his affidavit evidence, it emerged that he was appointed to the position of the director of Bad Wolf by Lee Du Bray, who was the person behind the giving of instructions to various solicitors despite his status as an undischarged bankrupt, and that where he had provided instructions to the solicitors, he did so at the request or direction of Lee Du Bray. Further, that his role in the proceeding was to assist Lee Du Bray, who had directed its commencement and was funding it through a related entity. All of these findings are set out in Bad Wolf at [53]-[58]. Of course, Lee Du Bray is not a party to this proceeding and none of those findings bind him. But this does not gainsay reliance by the liquidators on the evidence of Andrew Chen in part support of the interlocutory application. As correctly submitted by Dr Greinke, Lee Du Bray had a fair opportunity pursuant to case management orders to put on evidence in rebuttal to that of Andrew Chen. He has not done so.

8    I also reject a submission of Lee Du Bray to the effect that I cannot make findings conformably with the evidence of Andrew Chen because I concluded in my primary reasons that he was not a credible witness: PJ [57]. The submission misunderstands my primary reasons. I found aspects of his evidence in chief to be untruthful, which was exposed by the ultimately truthful account that he gave when cross-examined. It is that evidence that the liquidators now rely on.

9    I find according to the evidence as follows. The Trust was established on 1 March 2007 when DBA was appointed as the Trustee. Lee Du Bray was named as the Appointor and the Guardian. He is within the class of discretionary beneficiaries. The accounts of the Trust for the period 2013 to 2016 record Lee Du Bray as the sole beneficiary having received, in each year, a distribution of the entire profit of the Trust. Bad Wolf was incorporated on 11 November 2009 and Lee Du Bray was appointed as the sole director and was the only shareholder. Following the sequestration of Lee Du Bray’s estate, his then girlfriend, Lucinda Morgan, was appointed as the sole director of DBA and Bad Wolf. Between February and July 2022, creditor payments which were due to DBNZ were diverted and paid into the Westpac account of DBA.

10    An “explanation” subsequently given by the solicitors Vincent Young Lawyers is that the funds were diverted at the direction of Lee Du Bray to avoid the effect of certain freezing orders made in respect of his assets, and those of DBNZ, by the High Court in New Zealand and in the proceedings involving his former de facto partner. In August 2022, following the making of a winding up order in respect of DBA, Danielle Woodhouse as the Appointor of the Trust, removed DBA as the Trustee and appointed Bad Wolf. As stated above, Lucinda Morgan was the sole director of Bad Wolf at this time. Despite his status as a bankrupt, on 9 September 2022, Lee Du Bray purporting to act as the sole shareholder of Bad Wolf removed Lucinda Morgan as the director and appointed Andrew Chen.

11    On 15 September 2022, that is shortly after his appointment as the director, Andrew Chen made demand of the liquidators for release of the Westpac funds. In that correspondence he asserted that the funds belonged to DBNZ in consequence of the scheme to divert creditor payments from that company to DBA. He made that assertion based on documents provided by Lee Du Bray and Vincent Young Lawyers.

12    Although Andrew Chen gave instructions on behalf of Bad Wolf to commence this proceeding by its solicitors Strongman & Crouch on 14 December 2023, he did so at the request of Lee Du Bray; in his words he did it “on behalf of the shareholder”. Following Lee Du Bray’s discharge from bankruptcy, Andrew Chen made a second affidavit on 13 December 2024 in which he attributed inquiries as to the facts and the provision of source documents to a Michael Schwartz, a citizen of the United States who, with Lucinda Morgan, are the appointed directors of DBNZ. That evidence was false. In fact, it was Lee Du Bray who provided information and documents to Andrew Chen. There was a discussion between Andrew Chen and Lee Du Bray over the course of the weekend immediately prior to when Andrew Chen gave evidence. Despite that, Andrew Chen was not aware of any reason that Lee Du Bray could not himself have given evidence in the proceeding.

13    Andrew Chen’s further evidence under cross-examination was:

Dr Grenkie: Now, is it the case you are conducting this proceeding, in effect, at the request or direction of Mr Du Bray? --- Yes, potentially.

Yes.

His Honour: what do you mean by “potentially”? --- because I am an accountant because, as you can see, I am not the shareholder of the company. I do not own any asset I am but an officer that he has engaged two – as a director.

Well, why did you accept the appointment as a director of Bad Wolf? --- In order to basically assist Mr Du Bray, the shareholder. I am but offering my service as a director.

Doctor Greinke: So I understand your evidence to be that you see your role as assisting Mr Du Bray? --- Yes.

And did he ask you to commence these proceedings to obtain the monies in the Trust bank account? --- Yes, I am doing it on behalf of the shareholder.

Yes. And is Mr Du Bray funding the litigation? --- There is a company that is funding the – this litigation.

And what’s the name of that company? --- Du Bray and Associate Australia Private Limited.

…

Doctor Greinke: And that’s a company controlled by Mr Du Bray, to your understanding? --- Yes, you can see that.

14    Clearly, Lee Du Bray owned and controlled Bad Wolf and directed the commencement of this proceeding by it. Whilst a bankrupt, he took steps to install first Lucinda Morgan and later Andrew Chen as the directors. Andrew Chen compliantly acted in accordance with Lee Du Bray’s direction and control of this litigation.

15    Despite Lee Du Brays status as a bankrupt, between February and July 2022, he implemented the scheme whereby creditor payments due to DBNZ (and which would have been subject to freezing orders) were diverted into the Westpac bank account of DBA. That fact is evidenced by the matters set out in the letters from Vincent Young Lawyers to the liquidators of 19 August and 1 September 2022. I am satisfied that Lee Du Bray is the person who gave Andrew Chen instructions for the content of that correspondence in that he is the person with knowledge of the facts referred to therein. Further, he is the person who signed correspondence addressed to Wise Australia Pty Ltd on 19 July 2022, and therein stated that he was the Chief Executive Officer of DBA arguing that access to the accounts had been improperly suspended, as the freezing orders had not been registered in Australia and were therefore unenforceable in relation to those accounts. Further, he stated that pursuant to the customer agreement, DBA elected to close each of the accounts and demanded payment to it, which he described as an urgent request because DBA then faced a winding up application which if successful would result in the loss of “my considerable investments” in DBA.

16    In an email of 15 August 2022 sent to Vincent Young Lawyers, Lee Du Bray provided details of another bank account for the Trust and signed the email purportedly in his capacity as the chief executive officer of DBA.

17    The only asset of Bad Wolf (as trustee of the Trust) is the right of exoneration from the assets of the Trust for the costs liability incurred in this proceeding. The most recent accounts in evidence for the Trust are to 30 June 2023. The total amount available for distribution was nil, in that total income precisely matched total expenses. The balance sheet, although it discloses a technical equity of $840,010 is misleading in two respects. One of the current assets recorded is the balance of the Westpac account at $462,658. Bad Wolf failed in its contention that this money is an asset of the Trust. The other, is that there is real property being land at 42 Dampier Terrace, Broome WA 6725 recorded as having a value of $838,542. Correspondingly, the Police and Nurses Credit Union is recorded as the secured mortgagee with an outstanding debt of $1,088,673. What is also known is that the mortgagee issued notices of default on 21 February 2023 for $1,067,634.13 and $783,729.89. The demands were not met, and the property was sold by the mortgagee in April 2024. Once those assets are removed from the balance sheet, the only assets remaining are intangibles being loans from Lee Du Bray of approximately $2.65 million with corresponding liabilities being amounts owed to Lee Du Bray of approximately $1.542 million. Lee Du Bray’s bankruptcy would have resolved those respective assets and liabilities, if they were of any real worth.

18    Dr Grenkie accepts in submissions that this is a serious allegation to make against Lee Du Bray and that the Briginshaw standard of actual persuasion applies. I proceed on that basis. The discretion expressed in the form stated by Mason CJ and Deane J in Knight at 192-193 is engaged, despite the liquidator’s failure to make an application for security for costs, which in this case is not of sufficient weight to displace the following. Overall, having balanced all relevant matters, I am satisfied that it is in the interests of justice to make a non-party costs order against Lee Du Bray, particularly given his active involvement in the proceeding and his financial interest in a successful outcome.

19    First, the facts that I have found demonstrate that Lee Du Bray would have been the ultimate beneficiary of Bad Wolf’s success. The money would have been transferred to it to be held on the terms of the Trust. Lee Du Bray controlled the Trust either personally or by directing Andrew Chen as the director of Bad Wolf. The inference that I draw is that if Bad Wolf had recovered the money in the Westpac account, it would have resolved to pay and apply the funds to the benefit of Lee Du Bray (or otherwise at his direction) after his discharge from bankruptcy.

20    It was therefore in the financial interests of Lee Du Bray to cause this proceeding to be commenced and prosecuted. He is the person who directed and/or instructed Andrew Chen to commence it. He is the person who controlled the decision-making of Andrew Chen as to how the proceeding would be conducted. He is the person who provided evidence and documents to Andrew Chen in support of the claim. Despite all of this, including his direct and tangible financial interest in the outcome, he did not himself give evidence.

21    Second, despite his status as a bankrupt, it was Lee Du Bray who devised the scheme to divert the creditor payments due to DBNZ to DBA. This was the foundational claim that Bad Wolf brought for the ultimate benefit of Lee Du Bray in this proceeding.

22    Third, Lee Du Bray owned and controlled the decision-making of Bad Wolf at all material times, particularly for the purposes of the commencement and prosecution of this proceeding. I am satisfied that Andrew Chen acted as the proxy for Lee Du Bray at all relevant times.

23    Fourth, Lee Du Bray, through an associated corporation, funded the solicitors’ and counsel’s fees of this proceeding.

24    Fifth, the fact that Lee Du Bray was a bankrupt but also the decision-maker of Bad Wolf for part of this proceeding is no answer to the costs claim. I reject Lee Du Bray’s submission to the effect that he could not have lawfully managed the affairs of Bad Wolf because of the prohibition at s 206B(3) of the Corporations Act. I am satisfied that, despite the prohibition, that is precisely how Lee Du Bray acted.

25    Sixth, though not determinative, I am satisfied that Bad Wolf is unable to satisfy the costs order made against it.

26    Seventh, none of the other arguments advanced by Lee Du Bray are persuasive. Although QRS played a role in this proceeding and her participation arguably increased its cost and complexity, her involvement focused the parties’ attention on what became the critical issue: that is did Bad Wolf prove that the funds in the Westpac account were an asset of the Trust? A costs apportionment order is unwarranted for that reason. The liquidators were not obliged to join Lee Du Bray as a party to the proceeding: there is no principle that requires a non-party to be joined as a party prior to the conclusion of the proceeding in anticipation that subsequently a costs order may be sought against a non-party.

27    Lee Du Bray placed considerable emphasis in his submissions on s 477(2B) of the Corporations Act to the effect that the solicitor’s retainer to act for the liquidators was not approved by the Court, the committee of inspection or a resolution of the creditors. The submission appeared to be that in consequence the costs agreement is void or unenforceable and therefore it is not open to the liquidators to seek a non-party costs order against him. There are three short answers to that submission. The provision, if infringed, does not make a solicitor’s retainer void. It is an irregularity that may be cured by Court approval nunc pro tunc. On the face of the retainer, the agreement is not one to which the provision applies. The contract is between AHD Lawyers and Richard Stone and Greg Dudley in their capacity as the liquidators of DBA. It is a personal engagement where the liquidators are described as the “client” or “you”. The liquidators did not enter into the agreement as agents for and on behalf of DBA. For s 477(2B) to apply, the liquidator must enter into an agreement on behalf of the company in liquidation. There is also persuasive authority to the effect that the provision does not apply to a solicitor’s retainer agreement for the purpose of assisting a liquidator to commence legal proceedings in the course of a liquidation: see, for example, the incisive analysis of Charlesworth J in Frigger v Kitay (No 2) [2020] FCA 497; (2020) 143 ACSR 655 at [47]-[51]. Ultimately, however, I need not resolve this last point because I am otherwise satisfied that the submission is of no merit.

28    For these reasons, I make the order as sought by the liquidators.

Associate:

Dated:    1 July 2026

SCHEDULE OF PARTIES