Federal Court of Australia

Low (Liquidator) v Hughes (No 3) [2026] FCA 1048

ORDERS

THE COURT ORDERS THAT:

1.    The part of the proceedings in paras 5 to 10 of the plaintiffs' amended originating process filed on 4 December 2023 is dismissed.

2.    The plaintiffs pay the fifth and sixth defendants' costs of, and in connection with, the interlocutory application filed on 23 April 2025 and the separate hearing ordered to be heard on 28 July 2025, such costs to be taxed if not agreed.

3.    Otherwise, the costs of and incidental to the claims in paras 5 to 10 of the plaintiffs' amended originating process filed on 4 December 2023 are reserved.

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

REASONS FOR JUDGMENT

VANDONGEN J:

1    In Low (Liquidator) v Hughes (No 2) [2026] FCA 71 (Low (No 2)) I separately answered a question that arose in these proceedings and said that I would hear from the parties on the question of costs. Orders were then made on 20 March 2026 for the filing of written submissions and for the question of costs to be determined without an oral hearing pursuant to s 20A(2) of the Federal Court of Australia Act 1976 (Cth) (FCA Act).

2    The plaintiffs and the fifth and sixth defendants (together, the Parties) emailed a 'Minute of Proposed Consent Orders' to my chambers. By that minute, the Parties consent to an order being made that judgment be given in favour of the fifth and sixth defendants (defendants) in relation to part of the proceedings or, in the alternative, to an order dismissing the same part of the proceedings. The relevant part of the proceedings is those claims in paras 5 to 10 of the amended originating process filed on 4 December 2023 (Corporations Act Claims).

3    The Parties are ambivalent about which of those two orders should be made and have indicated that they are content for the Court to 'elect' which of those orders are 'appropriate'. In either case, the Parties contend that the Court has the power to make those orders under r 30.02 of the Federal Court Rules 2011 (Cth) (Rules).

4    The Parties also consent to certain costs orders being made. In that regard the Parties agree that an order be made that the plaintiffs pay the defendants' costs of and in connection with an interlocutory application lodged by the defendants with the Court on 22 April 2025 (Interlocutory Application), such costs to be taxed if not agreed. By the Interlocutory Application the defendants sought orders that the Court determine a separate question pursuant to r 30.01 of the Rules. The Parties also agree that the order should require that the plaintiffs pay the defendants' costs of and in connection with the hearing of the separate question before me on 28 July 2025 (separate question hearing), such costs also to be taxed if not agreed.

5    Originally, the defendants sought an order that the plaintiffs pay the costs of and in connection with the Corporations Act Claims. However, the Parties subsequently agreed that an order should be made that those costs be reserved.

6    In the circumstances I will make the costs orders consented to by the Parties.

7    This means that the issues for the Court to determine are:

(1)    Whether the Court should make any order under r 30.02 of the Rules, namely, judgment for the defendants in respect of the Corporations Act Claims, or an order dismissing that part of the proceedings.

(2)    Whether the Court should make further orders in terms of a substituted minute of proposed orders provided by the defendants on 14 July 2026. By that minute the defendants seek that the following orders be made:

1.    The costs referred to in paragraph 3 of the parties' minute of proposed consent orders [emailed to chambers] on 14 July 2026 (Consent Orders) be assessed on an indemnity basis.

2.    [Alternative to paragraph 1] The costs referred to in paragraph 3 of the Consent Orders be assessed on an indemnity basis from 1 May 2025 and otherwise on a party/party basis.

3.    The costs referred to in paragraph 3 of the Consent Orders be taxed and paid forthwith.

4.    [Alternative to paragraph 3] To the extent that the costs referred to in paragraph 3 of the Consent Orders are of or in connection with the separate hearing ordered to be heard on 28 July 2025, the costs be taxed and paid forthwith.

8    For the purposes of that minute, 'paragraph 3 of the Consent Orders' is the order that I have referred to at [4] of these reasons in relation to which I already said I will make. That order requires that the plaintiffs pay the defendants' costs of and in connection with the Interlocutory Application and the separate question hearing, such costs to be taxed if not agreed. In the balance of these reasons those costs are referred to as the Costs.

Should the Court make an order under r 30.02 of the Rules?

9    Rule 30.02 of the Rules provides that:

If a decision on a question substantially disposes of the proceedings or renders any further trial of the proceeding unnecessary, a party may apply to the Court for:

(a)    judgment; or

(b)    an order dismissing the whole or part of the proceedings.

10    It may be seen that the power to make an order under either paras (a) or (b) of r 30.02 is relevantly conditioned on there being a 'decision on a question [that] substantially disposes of the proceedings'.

11    I was not provided with any assistance from the Parties about the proper construction of r 30.02. In particular, in circumstances in which there is clearly no basis to suggest that the decision in Low (No 2) rendered any further trial of these proceedings unnecessary, I was not provided with the benefit of any submissions on the question of whether the decision in Low (No 2) nevertheless 'substantially dispose[d] of the proceedings'.

12    I could not locate any authorities that have considered the meaning of 'substantially disposes of the proceedings' for the purposes of r 30.02 or its predecessor. However, the ordinary meaning of the phrase 'substantially disposes of' suggests that the rule is intended to operate in circumstances in which a decision on a separate question renders any further trial of the proceeding unnecessary or, where only a part of the proceedings are disposed of, the proceedings may be regarded as having been disposed of to a great or considerable extent, or to a large degree.

13    In the wake of Low (No 2) almost all of the claims the plaintiffs previously made against the defendants are now no longer viable. As the plaintiffs' second further amended statement of claim demonstrates, this has significantly altered the metes and bounds of the plaintiffs' pleaded case. I am of the view that when regard is had to what remains of the plaintiffs' claims against the defendants, Low (No 2) disposed of the proceedings against the defendants to a considerable extent. On that basis I find that the separate question determined in Low (No 2) substantially disposed of the proceedings for the purposes of r 30.02.

14    Rule 30.02 provides that a party can apply for either judgment or an order dismissing the whole or part of the proceedings. It is unnecessary to say anything about the differences between entering 'judgment' and an order dismissing the whole or part of the proceedings. As r 30.02(a) does not contemplate that judgment might be entered in respect of part of proceedings, but it is expressly contemplated in r 30.02(b) that part of a proceeding may be dismissed, I consider that it would be appropriate to make an order that the Corporations Act Claims be dismissed.

What other costs order should be made?

15    Broadly speaking, there are two issues that must be determined. Firstly, should the plaintiffs be required to pay some or all of the Costs on an indemnity basis? Secondly, should the plaintiffs be required to pay some or all of the Costs, whether on an indemnity basis or otherwise, forthwith?

16    I will deal with those two issues in turn.

Should the Costs be paid on an indemnity basis?

17    The defendants seek orders that the Costs be paid on an indemnity basis on two alternative grounds. The first ground is that the Costs should be paid on an indemnity basis because the Corporations Act Claims should never have been made and the defendants should therefore never have been required to deal with them. The second, and alternative ground, is that the Costs incurred since 1 May 2025 should be paid on an indemnity basis because the plaintiffs unreasonably refused an offer of compromise.

18    The Court has a broad power to award costs, including indemnity costs, under s 43 of the FCA Act. In exercising its discretion to award costs in a civil proceeding the Court is relevantly required to take into account any failure by a party to comply with the duty imposed by s 37N(1) of the FCA Act to conduct proceedings in a way that is consistent with the overarching purpose in s 37M.

19    In Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [4], the Full Court said that the principles relevant to an award of indemnity costs are well established but that there is no exhaustive list of the circumstances that may warrant the exercise of the discretion. However, at [5] the Full Court identified that, in broad terms, an order for indemnity costs requires that some special or unusual feature has arisen. Further, indemnity costs are not punitive but are designed to compensate a party fully for costs incurred when the Court takes the view that it was unreasonable for the party against whom the order is made to have subjected the innocent party to the expenditure of costs. Circumstances in which indemnity costs may be awarded include where allegations are made that should never have been made and where the party making the allegations should have known that they had no chance of success or persists in what should have been understood to have been a hopeless case: Melbourne City at [5]. However, whether indemnity costs can properly be awarded will depend on the particular circumstances of each case in which they are sought.

20    Insofar as their first ground is concerned, the defendants submit that they should be fully compensated for the Costs, having regard to the following matters:

(1)    The originating process did not seek relief under s 1324 of the Corporations Act 2001 (Cth) until after the plaintiffs realised that they could not rely upon s 79 of that Act.

(2)    When the plaintiffs sought leave to amend the originating process and the statement of claim to include the Corporations Act Claims, the associate to Jackson J said, in an email dated 29 November 2023, that 'it is not presently clear to his Honour the basis on which the plaintiffs seek injunctive relief'.

(3)    In a letter sent by the defendants to the plaintiffs dated 28 October 2024, concerns were raised about the viability of the Corporations Act Claims, including that the claim for injunctive relief against the fifth defendant was untenable because, on the plaintiffs' own case, the fifth defendant had not provided services to clients since in or around 2017.

(4)    Although the plaintiffs sought injunctive relief, the real objective was to obtain damages from the defendants.

(5)    The damages sought by the plaintiffs had no connection to the injunctive relief they sought.

(6)    Damages were sought notwithstanding clearly established law, particularly McCracken v Phoenix Constructions (Qld) Pty Ltd [2012] QCA 129; (2013) 2 Qd R 27.

21    The fact that the plaintiffs were required to pivot away from relying on s 79 of the Corporations Act when it became apparent that certain claims were not sustainable does not warrant a conclusion that the plaintiffs should pay the Costs on an indemnity basis. It is also not clear why the fact the plaintiffs sought injunctive relief when, as the plaintiffs accept in their written submissions, the objective was to obtain damages from the defendants, is a factor that weighs in favour of an award of indemnity costs. As I observed in Low (No 2) at [90]:

The express terms of s 1324(10) make it clear that the power to make an order that a person pay damages is enlivened only if the Court has power under s 1324 to grant an injunction. As Bryson J said in GE Capital Australia v Davis [2002] NSWSC 1146 at [61], where there is no prospect of the grant of an injunction under s 1324(1), there is no room under s 1324(10) for an order requiring the payment of damages.

(emphasis added)

22    The balance of the matters relied on by the defendants collapse into a contention that the Corporations Act Claims had no chance of success or that the plaintiffs persisted in what they should have understood to have been a hopeless case. I do not accept that contention.

23    Mindful of the need not to make an assessment in hindsight (as to which see Kingsheath Club of the Clubs Limited (In liq) [2003] FCA 1589 at [5] to [6] and Westpac Banking Corporation v Forum Finance Pty Limited (in liq) (Relief) [2025] FCA 882 at [52]), I am of the view that the detailed reasons in Low (No 2) demonstrate that the pursuit by the plaintiffs of the claim under s 1324(10) of the Corporations Act could not properly be described as unreasonable conduct. While I ultimately concluded that this aspect of the plaintiffs' claim could not survive in the face of the construction of s 1324 propounded in McCracken, that conclusion required a close analysis of the reasoning in that case. Further, and as the plaintiffs correctly point out, the proper construction of s 1324(10) has been the subject of considerable controversy even after McCracken was decided: In the matter of Colorado Products Pty Limited (in prov liq) [2013] NSWSC 1613 at [40] to [41]. See also Barnett K, 'A Reconsideration of s 1324(10) of the Corporations Act 2001 (Cth): Damages in Lieu of an Injunction' (2018) 36 (No 4) C&SLJ 376 and Baumfield V, 'Injunctions and Damages under s 1324 of the Corporations Act: Will McCracken v Phoenix Constructions Revive the Narrow Approach?' (2014) 32 (No 7) C&SLJ 453.

24    I also note that the plaintiffs were not wholly unsuccessful in Low (No 2). This is because I found that, while the plaintiffs could not be granted any of the relief sought, they could be granted relief under s 1324. However, it must be said that this conclusion would have rung hollow insofar as the plaintiffs were concerned.

25    Having regard to all of the circumstances I am of the view that it was not unreasonable for the plaintiffs to have subjected the defendants to the expenditure of the Costs.

26    Turning to the second ground on which the defendants rely in seeking an award of indemnity costs. In support of that ground, the defendants rely on an affidavit of Ebenezer Assibey-Bonsu, a solicitor employed by the defendants' lawyers, which was sworn on 17 April 2026. Attached to Mr Assibey-Bonsu's affidavit is a letter addressed to the solicitors for the plaintiffs dated 29 April 2025. In that letter the defendants made an offer that if the plaintiffs discontinued the Corporations Act Claims, with no order as to costs, then the defendants would consent to the discontinuance. That offer was expressed to expire at 4.00 pm on 9 May 2025 and stated that it was made in accordance with the principles in Calderbank v Calderbank [1976] Fam 93. In that context, the letter spelled out various reasons why the defendants considered that it would be unreasonable for the plaintiffs not to accept the offer.

27    The plaintiffs formally rejected that offer on 1 May 2025.

28    It should be noted that the defendants do not rely on r 25.14(2) of the Rules.

29    Recently, in Deakin University v Macreadie (Final Orders) [2026] FCA 583 at [15], Wheelahan J summarised the principles to be applied where a 'Calderbank offer' is made:

[T]he Court may entertain making an order for indemnity costs against the respondents in the exercise of its general discretion as to costs where it is shown that the respondents' failure to accept the offer was unreasonable or imprudent. The burden of showing unreasonableness is on [the applicant] and the reasonableness of the failure by the respondents to accept the offer is determined by reference to the circumstances existing at the time the offer was not accepted and not in hindsight. The circumstances to be taken into account in determining whether the failure to accept a Calderbank offer was unreasonable cannot be stated exhaustively but may include -

(a)    the stage of the proceeding at which the offer was received;

(b)    the time allowed to the offeree to consider the offer;

(c)    the extent of the compromise offered;

(d)    the offeree's prospects of success, assessed as at the date of the offer;

(e)    the clarity with which the terms of the offer were expressed; and

(f)    whether the offer foreshadowed an application for an order for indemnity costs in the event of the offeree rejecting it.

(citations omitted)

30    For essentially the same reasons I have given for refusing to make an order that the plaintiffs pay the Costs on an indemnity basis, I would also refuse to make an order that the plaintiffs pay the Costs on an indemnity basis from 1 May 2025. In all of the circumstances, I am not persuaded that the defendants have shown that the plaintiffs' failure to accept the defendants' Calderbank offer was unreasonable or imprudent.

31    Having dealt with the defendants' application for orders that the Costs be paid on an indemnity basis, it is then necessary to consider their application for some or all of the Costs to be taxed and paid forthwith.

Should the plaintiffs be ordered to pay the Costs or part of the Costs forthwith?

32    Rule 40.13 of the Rules provides that if an order for costs is made on an interlocutory application, the party in whose favour the order is made must not tax those costs until the proceeding in which the order is made is finished. Accordingly, to the extent the Costs are of and in connection with the Interlocutory Application, r 40.13 applies. In that case, the plaintiffs must therefore be taken to apply for an order dispensing with r 40.13 pursuant to r 1.34 of the Rules: Federal Treasury Enterprise (FKP) Sojuzplodoimport v Spirits International B.V. (No 5) [2018] FCA 19 at [5].

33    The relevant principles to be applied in this context were identified by Perram J in Federal Treasury Enterprise (FKP) at [7] to [9]:

The principles guiding the exercise of the discretion involved are well established. First, at a high level of generality, Rule 40.13 confers a discretion which 'should be exercised in favour of a party who establishes that the demands of justice require that there be a departure from what appears to be the general practice…' (Thunderdome Racetiming and Scoring Pty Ltd v Dorian Industries Pty Ltd [1992] FCA 291; (1992) 36 FCR 297 at 312).

Secondly, in the exercise of the discretion, the Court should bear in mind the twin policy considerations underpinning Rule 40.13. These are that the Court should avoid exposing the parties to the perils of multiple taxation proceedings (Vasyli v AOL International Pty Ltd [1996] FCA 804) and should keep in mind that subsequent events in the litigation may generate costs orders going in the opposite direction and in respect of which set-offs may ultimately be available (Bailey v Beagle Management Pty Ltd [2001] FCA 60; (2001) 105 FCR 136 at 145 [37]). A corollary of that latter consideration - particularly relevant to this case - is that prior costs orders may be available to set off the interlocutory costs order sought to be taxed. On the other hand, where no credit risks attend the parties to the litigation, this set-off consideration may be somewhat less significant (Courtney v Medtel Pty Limited (No 3) [2004] FCA 347 at [24]).

Thirdly, a range of factors may justify departure from the ordinary rule: where the final determination of the proceedings is far away: Allstate Life Insurance Co v Australia and New Zealand Banking Group Ltd (No 13) [1995] FCA 1459 at [5] ('It would be wrong if the successful parties do not enjoy the fruits of their order for costs for such a long time.'); where a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in handling the proceeding with competence and diligence (Life Airbag Company of Australia Pty Ltd v Life Airbag Company (New Zealand) Ltd [1998] FCA 545 ('Life Airbag')); where, following a successful amendment application, a case is essentially a new proceeding (McKellar v Container Terminal Management Services Ltd [1999] FCA 1639 at [19] and [40]); where a discrete issue has been resolved (Australian Flight Test Services v Minister for Industry, Science and Technology [1996] FCA 1425 at [7]); or where there is some reason to think that interlocutory disputation is having the effect of draining the ability of one side to conduct the litigation (Clipsal [Australia Pty Ltd v Clipso Electrical Pty Ltd [2016] FCA 37] at [12]).

34    As Abraham J said in Wilson v Britten-Jones (No 3) [2021] FCA 63 at [8] to [9], to those principles may be added:

The party who seeks an order that costs of an interlocutory application be payable forthwith bears the onus of demonstrating a good reason why the general rule should be departed from: The Owners - Strata Plan No 87231 v 3A Composites GmbH (No 2) [2020] FCA 333 at [33] (The Owners - Strata Plan No 87231).

What has been said in previous cases does not lay down immutable or rigid rules in relation to the exercise of the discretion, as each case must be assessed on its own merits. Much will depend on the nature of the proceeding, the nature of the interlocutory application, the status or stage of the proceeding when the interlocutory application is considered and determined, and the circumstances of the parties: The Owners - Strata Plan No 87231 at [35].

35    The separate question hearing in Low (No 2) was not an interlocutory application. That hearing finally determined a question arising in the proceedings, namely that the plaintiffs could not be granted any of the relief sought against the defendants in the Corporations Act Claims. Accordingly, r 40.13 does not apply. The question of whether the costs of that hearing should be taxed and paid forthwith falls to be determined at the Court's discretion under s 43(2) of the FCA Act. As s 43(3)(a) contemplates, the Court has the power to make an award of costs at any stage in a proceeding.

36    In their written submissions the defendants argue that the Costs should be taxed and paid forthwith. In support of that argument the defendants point out that the Interlocutory Application and the separate question hearing involved a discrete issue. The defendants also submit that they should not be out of pocket until the determination of the proceedings, especially where the plaintiffs 'unreasonably persisted with the Corporations Act Claims'. The defendants also point out that the costs of the Interlocutory Application 'will be relatively easy to identify, and it will not be difficult to separate those costs from other costs'.

37    I decline to make any order that the plaintiffs are to pay the Costs or any part thereof to be taxed and paid forthwith. I have already said that I do not consider that the plaintiffs acted unreasonably in persisting with the Corporations Act Claims, even after receiving a Calderbank offer. The other reasons given by the defendants in support of their application that the Costs be taxed and paid forthwith are in my view far from compelling.

38    In circumstances in which the defendants bear the onus of demonstrating a good reason why the general rule should be departed from, I am not persuaded that r 40.13 should be dispensed with in relation to the costs of the Interlocutory Application. I am also not persuaded that the Court's discretion conferred by s 43 of the FCA Act should be exercised by ordering that the costs of the separate question hearing be taxed and paid forthwith.

Associate:

Dated:    31 July 2026