Consolidated Byrnes Holdings Limited ACN 111 052 585 v Hardel Investments Pty Limited ACN 083 276 000 [2009] FCA 399 (29 April 2009)

Last Updated: 30 April 2009

FEDERAL COURT OF AUSTRALIA

Consolidated Byrnes Holdings Limited ACN 111 052 585 v Hardel Investments Pty Limited ACN 083 276 000 [2009] FCA 399

PRACTICE AND PROCEDURE – costs – application for indemnity costs brought by defendants against plaintiffs and non-parties – originating action an application for winding up under Corporations Act 2001 (Cth) – application previously dismissed – circumstances necessary to award costs in absence of hearing – whether plaintiffs and non-parties acted reasonably in bringing proceedings – whether plaintiffs and non-parties acted reasonably in prosecution of the proceedings – whether plaintiffs and non-parties acted reasonably in events leading up to proceedings being dismissed – application brought for improper and collateral purposes – application was an abuse of process – plaintiffs’ and non-parties’ conduct entirely unreasonable – application for indemnity costs granted

PRACTICE AND PROCEDURE – costs – application for costs against non-parties – where plaintiffs may not be capable of satisfying orders for costs – Court can make an order for costs against non-parties even though proceedings have been dismissed – whether operation of s 43 of Federal Court of Australia Act 1976 (Cth) was affected by s 1335(2) of Corporations Act 2001 (Cth) – s 1335(2) only operates to save earlier enactments which otherwise would be inconsistent with the provision introduced – intended to be an enabling provision – does not prevent Court from making an order for costs against non-parties in proceedings brought under the Corporations Act 2001 (Cth) – Court can utilise O 6 r 8(1)(b) to join a non-party even where s 1335(2) would prevent an order for costs against non-parties – application granted

PRACTICE AND PROCEDURE – costs – application for costs against non-parties – where non-parties were legal practitioners – where proceedings had been dismissed – whether O 69 r 9(1)(d) empowers the Court to make an order for costs against legal practitioners if s 1335(2) operates to prevent an order being made against a non-party – statute must prevail where power under Federal Court Rules to award costs against legal practitioner is inconsistent with statute – legal practitioners joined as parties to proceedings so costs orders could be made – application granted

Acts Interpretation Act 1958 (Vic) s 38
Companies Act 1936 (NSW) s 365(2)
Corporations Act 2001 (Cth) s 58AA, s 459E, s 459F, s 459G, s 459P, s 465C, s 1335(2)
Federal Court of Australia Act 1976 (Cth) s 43, s 59
Judicature Act 1890 (UK) s 5
Justices Act 1958 (Vic) s 74(1)
Licensing Act 1958 (Vic)
Supreme Court Act 1928 (Vic)
Supreme Court Act 1986 (Vic) s 24(1)
Federal Court (Corporations) Rules 2000 r 1.3, r 2.9, r 213
Federal Court Rules

Applicant NAGM of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 396; (2002) 125 FCR 488 referred to
Australian Forest Managers Ltd (in liq) v Bramley (1996) 136 ALR 431 not followed
Australian Securities Commission v Australian Home Investments Ltd (1993) 116 ALR 523 applied
Baillieu Knight Frank v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359 cited
Bent v Gough [1992] FCA 267; (1992) 36 FCR 204 cited
Bond Corporation Holdings Ltd (1990) 1 WAR 465 cited
Boscaini v Corporation of Kensington and Norwood [1999] SASC 327 not followed
Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471; (1993) 45 FCR 224 applied
Chief Commissioner of Stamp Duties v Paliflex Pty Ltd [1999] NSWSC 15; (1999) 149 FLR 179 cited
Construction Enterprises Pty Ltd v Lafarge Plasterboard Pty Ltd [2002] NTSC 21 cited
David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 referred to
Garnett v Bradley (1878) 3 App Cas 944 cited
Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429 cited
Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284 applied
Hardel Investments Pty Ltd (ACN 083 276 000) v Consolidated Byrnes Holdings Limited (ACN 111 052 585) [2009] FCA 400 referred to
Knight v F.P. Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178 referred to
L & D Audio Acoustics Pty Ltd v Pioneer Electronic Australia Pty Ltd (1982) 7 ACLR 180 referred to
Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Ltd (No 2) [1998] QSC 18; (1999) 1 Qd R 518 applied
Packer v Meagher (1984) 3 NSWLR 486 cited
Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962; (2007) 25 ACLC 1216 cited
Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175 cited
Re A Company (No 0012209 of 1991) [1992] 2 All ER 797 cited
Re British Electric Street Tramways [1903] 1 Ch 725 cited
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin [1997] HCA 6; (1997) 186 CLR 622 cited
Re Struthers (liq of Project Management, Architecture and Construction Interiors Pty Ltd) (No 3) [2005] NSWSC 1113; (2005) 56 ACSR 238 applied
Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; (1992) 39 FCR 193 not followed
Ritter v Godfrey [1920] 2 KB 47 cited
TS Recoveries Pty Ltd v Sea-slip Marinas (Aust) Pty Ltd (2007) 25 ACLC 1371 cited
U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd [1998] VSC 13; (1999) 1 VR 204 applied
Vestris v Cashman (1998) 72 SASR 449 applied
Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 cited

CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 and ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 v HARDEL INVESTMENTS PTY LIMITED ACN 083 276 000
NSD 424 of 2008
CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 and ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 v AVPRI PTY LIMITED ACN 109 814 057
NSD 425 of 2008

LANDER J
29 APRIL 2009
ADELAIDE

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 424 of 2008

IN THE MATTER OF HARDEL INVESTMENTS PTY LIMITED ACN 083 276 000

BETWEEN:

CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 First Plaintiff ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 Second Plaintiff

AND:	HARDEL INVESTMENTS PTY LIMITED ACN 083 276 000 Defendant

JUDGE:	LANDER J
DATE OF ORDER:	29 APRIL 2009
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. Mr James Warren Byrnes be joined as a defendant to the proceeding.
2. Mrs Catherine Gina Byrnes be joined as a defendant to the proceeding.
3. Dr Justin Peter Low be joined as a defendant to the proceeding.
4. Mrs Elizabeth Laura Low be joined as a defendant to the proceeding.
5. Messrs Simmons and McCartney be joined as a defendant to the proceeding.
6. The applications to join Mr Ian Lazar and Mrs Victoria Lazar as defendants to the proceeding and to pay the defendant’s, Hardel Investments Pty Limited ACN 083 276 000, costs be dismissed.
7. The plaintiffs and each of Mr James Warren Byrnes, Mrs Catherine Gina Byrnes, Dr Justin Peter Low, Mrs Elizabeth Laura Low and Messrs Simmons and McCartney pay the defendant’s, Hardel Investments Pty Limited ACN 083 276 000, costs on an indemnity basis.
8. The costs referred to in paragraph 7 hereof shall include the costs of the preparation, swearing and filing of the affidavit of Peter William Harris sworn on 28 April 2008 and filed in action number NSD 584 of 2008.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 425 of 2008

IN THE MATTER OF AVPRI PTY LIMITED ACN 109 814 057

BETWEEN:	CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 First Plaintiff ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 Second Plaintiff
AND:	AVPRI PTY LIMITED ACN 109 814 057 Defendant

JUDGE:	LANDER J
DATE OF ORDER:	29 APRIL 2009
WHERE MADE:	ADELAIDE

THE COURT ORDERS THAT:

1. Mr James Warren Byrnes be joined as a defendant to the proceeding.
2. Mrs Catherine Gina Byrnes be joined as a defendant to the proceeding.
3. Dr Justin Peter Low be joined as a defendant to the proceeding.
4. Mrs Elizabeth Laura Low be joined as a defendant to the proceeding.
5. Messrs Simmons and McCartney be joined as a defendant to the proceeding.
6. The applications to join Mr Ian Lazar and Mrs Victoria Lazar as defendants to the proceeding and to pay the defendant’s, Avpri Pty Limited ACN 109 814 057, costs be dismissed.
7. The plaintiffs and each of Mr James Warren Byrnes, Mrs Catherine Gina Byrnes, Dr Justin Peter Low, Mrs Elizabeth Laura Low and Messrs Simmons and McCartney pay the defendant’s, Avpri Pty Limited ACN 109 814 057, costs on an indemnity basis.
8. The costs referred to in paragraph 7 hereof shall include the costs of the preparation, swearing and filing of the affidavit of Peter William Harris sworn on 28 April 2008 and filed in action number NSD 584 of 2008.
   

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NSD 424 of 2008

IN THE MATTER OF HARDEL INVESTMENTS PTY LIMITED ACN 083 276 000

BETWEEN:

CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 First Plaintiff ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 Second Plaintiff

AND:	HARDEL INVESTMENTS PTY LIMITED ACN 083 276 000 Defendant

NSD 425 of 2008

IN THE MATTER OF AVPRI PTY LIMITED ACN 109 814 057

BETWEEN:

CONSOLIDATED BYRNES HOLDINGS LIMITED ACN 111 052 585 First Plaintiff ALPHA ASSET GROUP PTY LIMITED ACN 108 722 541 Second Plaintiff

AND:	AVPRI PTY LIMITED ACN 083 276 000 Defendant

JUDGE:	LANDER J
DATE:	29 APRIL 2009
PLACE:	ADELAIDE

REASONS FOR JUDGMENT

INTRODUCTION

1. It is convenient, because these two proceedings have common plaintiffs and, more particularly, the applications under consideration raise common issues, to give the one set of reasons.
2. These reasons should be read in conjunction with the reasons given today in action number NSD 584 of 2008 in which the defendants to these proceedings are the plaintiffs and the plaintiffs in these proceedings are the defendants: Hardel Investments Pty Ltd (ACN 083 276 000) v Consolidated Byrnes Holdings Limited (ACN 111 052 585) [2009] FCA 400.
3. This is an application by the defendants for the costs of these proceedings. It is necessary to trace the history of the proceedings before identifying against whom the defendants seek orders for costs and the particular orders sought.

THE PROCEEDINGS

4. Both these proceedings were commenced in the New South Wales Registry of this Court on 28 March 2008 by the plaintiffs seeking the winding up of the two defendants in the separate proceedings in insolvency pursuant to s 459P of the Corporations Act 2001 (Cth) (the Corporations Act). In both proceedings the plaintiffs claimed to be creditors of the defendants and relied upon the defendant’s failure to comply with two statutory demands. They claimed that debts had been assigned to them.
5. The relationship of the parties to each other will be explained later, but it should be noted in passing that Mrs Catherine Byrnes is the sole director of the first plaintiff, Consolidated Byrnes Holdings Limited (CBH) and Dr Low and Mrs Low are the directors of the second plaintiff, Alpha Asset Group Pty Ltd (Alpha). The plaintiffs asserted in these proceedings that they have been assigned two debts from companies controlled by Dr and Mrs Low, Contor Developmennts Pty Ltd (Contor) and Cobra Property Services Pty Ltd (Cobra). Mr James Byrnes is the husband of Mrs Catherine Byrnes and claims to be a consultant of the plaintiffs.
6. The originating processes which commenced these two proceedings attached a copy of an unsigned creditors’ statutory demand which was dated 18 December 2007 and which was a copy of the document which was said to have been served upon the defendants together with an affidavit of Mr James Byrnes who deposed that in his belief there was no genuine bona fide dispute to the amount claimed by the plaintiffs. The plaintiffs also filed an affidavit in support of the originating process, again sworn by Mr James Byrnes who deposed that the statutory demands were posted to the defendants at 5.45pm on 18 December 2007. He asserted that at that time and date, and at the date of his affidavit, the amounts claimed in the statutory demand, in the case of the defendant, Hardel Investments Pty Limited (Hardel) ($1,791,032.50) and in the case of Avpri Pty Limited (Avpri) ($2,100,000), were still unpaid and due and owing.
7. On 26 April 2008 the defendants filed their notices of appearance to which was annexed their Grounds of Opposition to Winding Up (grounds of opposition): rule 2.9 of the Federal Court (Corporations) Rules 2000 (Cth); s 465C of the Corporations Act.
8. The defendants raised a number of grounds of opposition to the applications for winding up, the principal ground being that the statutory demands had never been served upon the defendants and, in those circumstances, did not comply with s 459E of the Corporations Act.
9. Moreover, the defendants claimed that the statutory demands were defective for the purpose of s 459E in that Mr Byrnes was not authorised to make the demands and that the affidavits which purportedly accompanied the demands did not comply with the requirements of s 459E(3) in that they did not properly verify the debts or give proper notice to the defendants of the basis of the alleged indebtedness.
10. A further ground in opposition was that at the time that the statutory demands were purportedly served on the defendants there was no valid assignment of the alleged debts to the plaintiffs. It was claimed, in opposition to the winding up, that neither of the plaintiffs were creditors of the defendants.
11. Lastly, it was claimed that the defendants were solvent.
12. The defendants asserted in their grounds of opposition that if the plaintiffs claimed that the statutory demands had been served by reason of them having been attached to the originating process which was issued on 28 March 2008 and which had been served on the defendants on 7 April 2008, then the period within which the defendants had to comply with the statutory demands had not expired at the time the originating process was issued, and there was a genuine dispute as to the existence and amount of the alleged debts to which the statutory demands related.
13. On the same day that the defendants filed their notices of appearance and grounds of opposition to the applications for winding up they commenced a proceeding against the plaintiffs in NSD 584 of 2008 to set aside the statutory demands pursuant to s 459G of the Corporations Act.
14. The grounds upon which the orders for the setting aside of the statutory demands were based were stated to be:
    1. That the Statutory Demands purported to be served by the Respondents on each of the Applicants on 7 April 2008 be set aside pursuant to s 459H of the Corporations Act.
       
    2. In the alternative to paragraph 1 herein, that the statutory demand purported to be served on the Applicants by the Respondents on 7 April 2008 be set aside pursuant to s 459J of the Corporations Act.
       
    3. That the Respondents pay the Applicant’s costs of this application.
       
    4. That this application be made specifically returnable before the Court at 9.15am on 2 May 2008.
       
15. The significance of the last date was to have that proceeding returned before the same judge at the same time as these proceedings for winding up.
16. It can be seen that the defendants commenced their proceeding against the plaintiff in NSD 584 of 2008 in case it be found that the service of the originating processes in the winding up proceedings was held to be service of the statutory demands which were attached to those originating processes.
17. On 4 June 2008 Gyles J ordered that the proceedings be transferred to the South Australian Registry. All three proceedings came before me for directions on 27 June 2008. The plaintiffs who were represented by counsel appeared by video conference. The defendants were represented by senior and junior counsel. I made various directions as to the filing of evidence and written submissions, and listed the proceedings for hearing on 25 August 2008.
18. Mr Byrnes was in the habit of emailing his and the plaintiffs’ solicitors and copying in the defendants’ solicitor. His correspondence is particularly aggressive. A sample was an email sent on 20 August 2008:

Grant, [referring to his solicitor, Mr McCartney] based on a conversation between the first Mortgagees representative and myself today it would seem that our action is somewhat hopeless from a recovery point of view.

The first mortgage is 14.8m
The second mortgage is 1.45

Leaving aside the questions of a third there are 60 blocks in stage one.
Settlements start this week.
The first advises there are only 42 sold.
The first expects 9 million from the 42 sales
The first is taking 100% from sales over agent’s commission and rates and land tax.
By next week the borrower will have an unfunded GST liability approaching 1 million as well.

This new information once presented to the court would mean that the court should wind up the companies on a just and equitable basis.

They are so far from Solvent it’s not funny.

As I have been saying this for over 6 months the director would be wise to have his personal affairs in order as he will be bankrupted sooner or latter.

I have agreed to disciss purchasing the first mortgage at full value next week or the week after.
I can buy the second if I want it at a discount.

The Hardel agreement requires him to provide us a second ranking mortgage.

If this guy had any brains he would get on a plane this week with lawyer in hand and try and cut a deal ... I can get money the easy way or the hard way ... the hard way means I ensure he gets a liquidator to pursue him for insolvent trading, bankrupt him and start examining everyone he has given money to in his family in the past 5 years. Wife, Kids, Who ever ... look at any donations to the church in the past year as they are on notice of the insolvency ... this guy is a candidate for a fully tax paid vacation in a government facility for 2 to 3 years.

I am a disgruntled person who knows how to ensure disingenuous errant debtors do not get away with there ill gotten gains without great shame and discomfort.

In stead of going to church on Sunday morning, he will wake up next to some guy named bubber who will teach him some new sexual acts.

(Grammatical and spelling errors as per original document.)

19. On 22 August 2008 the plaintiffs’ solicitors (Simmons and McCartney) wrote to the defendants’ solicitors advising that they thought the matter ought to be adjourned because they were aware that the defendants were settling approximately $9 million in property sales over the next two weeks. They wrote to my Chambers on the same day attaching a copy of the letter to the plaintiffs’ solicitors advising they would be seeking an adjournment of the hearing on Monday, 25 August 2008. In that letter they wrote:

We refer to the above matter that is scheduled to be heard in the Federal Court on Monday 25 August 2008.

Our client is of the understanding that your clients’ (sic) are in the process of settling approximately $9.0million in property sales over the next 2 weeks.

This may assist in the resolution of this matter and we are therefore of the view that Monday’s hearing should be adjourned to enable this to take place.

We have been instructed by our client to request an adjournment on Monday for a period of 8 weeks to enable your clients’ settlements to be completed without the involvement of any external parties.

In that regard any costs associated with the adjournment are to be reserved at this stage.

Please contact my office to discuss this matter further.

20. They also sought to appear on 25 August 2008 by video conference.
21. On the same day the defendants’ solicitors wrote to the plaintiffs’ solicitors advising that the defendants would not consent to any adjournment of the matter. However, they offered to settle the matter on the basis that the plaintiffs discontinue the winding up proceedings; the plaintiffs acknowledge that there had been no effective service of the statutory demands; the plaintiffs pay the defendants’ costs fixed at $50,000; and the plaintiffs undertake not to issue or attempt to issue any other winding up proceedings in respect of the alleged debts. The defendants wrote that if the plaintiffs did not accept the offer they should be prepared to proceed and Mr Byrnes and Mrs Low should be present and available for cross-examination. The defendants also filed an outline of argument addressing the grounds of opposition in the notice of appearance. The grounds identified were: (a) non-service of demands; (b) no fair notice of the demands; (c) defective demands; and (d) no valid assignment of the debts.
22. Dr Low said in an affidavit subsequently relied upon by his counsel that neither he nor his wife were made aware of that offer.
23. The plaintiffs’ solicitors’ request gave rise to an exchange of correspondence between the plaintiffs’ solicitors and the defendants’ solicitors in relation to whether there had been compliance with the directions which I had made on 27 June 2008.
24. On the same day as they made their request (22 August 2008), the plaintiffs’ solicitors were advised that I would not allow the plaintiffs’ counsel to appear by video conference on 25 August 2008.
25. On 25 August 2008 the plaintiffs’ solicitors wrote to my chambers claiming that the defendants were in default in relation to various directions I had given on 27 June 2008. They wrote:

I am the solicitor for the Applicant’s (sic) in this matter. Unfortunately I was interstate on business last Friday and therefore did not have a direct hand in the various communications that took place.

I am taking the liberty of writing to you to foreshadow the Applicant’s intention to seek a reasonable adjournment for the scheduled preliminary hearing.

You have already heard from my office regarding the property sales that the Respondents’ (sic) are in the process of completing in Queensland. It is our clients’ view that an appointment of a liquidator to the Respondent companies will have a seriously deleterious effect on the standing of the unsecured creditors.

That in itself is a valid reason to seek an adjournment today, however there are other matters that have had a serious impact on our position.

What is of serious concern to myself and my clients is that the Respondents’ (sic) were extremely late in filing their further evidence and Outline of Argument.

The Outline of Argument (unsigned and unstamped) was received in my office by email at 5:57pm on Friday the 22nd of August 2008.

This outline was to have been served on us by the 20th August 2008.

By a further email received by my office at 5:21pm, also on Friday 22nd August 2008 was an affidavit containing the evidence of Ken Pridmore, a person who we had not previously intended to call.

In that email I was advised that this affidavit was to be filed in Court today.

This affidavit should have been in our hands on the 8th August 2008.

Toni Vozzo, the solicitor having charge of this matter at Johnson Winter & Slattery served an affidavit on us by email at 3:42pm on 21st August 2008. That affidavit was required by 8th August as well.

Apart from the lateness of receipt of that material, it is my view that neither of those affidavits addressed the further evidence put on by Mr Byrnes in his affidavit sworn and filed on 12th August 2008 but rather addressed the more substantial issues raised in his previous affidavit of 30th May 2008.

In addition to the above we received four Notices to Produce under cover of the email of 22nd August 2008, received at 5:57pm.

It is my view that we were not given proper time to respond to those notices, the affidavits, or to give proper and reasonable consideration to the Respondents’ Outline of Argument.

My office had already put a request to the Respondents’ lawyers seeking to adjourn proceedings to allow the property settlements to take place. Last night, on returning to my office and seeing the emails, I put a further request to Johnson Winter and Slattery advising them that we were unable to respond to their material in the limited time left to us and that as a consequence we were embarrassed.

My office did request a Video teleconference this morning to make the foreshadowed adjournment application.

As our clients’ (sic) took the decision on Friday night not to incur considerable expenditure in travelling to Adelaide I would like the opportunity to be heard in relation to matters raised herein.

I make that request accordingly and look forward to hearing from you.

For my part I apologise to the Court for the confusion that this is causing.

26. As the letter shows, they repeated their request to be heard by video but I again refused, because to accede to that request would have meant that the proceedings had to be adjourned in circumstances where the defendants were opposing an adjournment.

THE PROCEEDINGS ARE DISMISSED

27. On 25 August 2008 when the matter was called on the plaintiffs were represented by Adelaide counsel, Mr Michael Burnett, who applied for an adjournment of the proceedings on the ground that the defendants had failed to comply with the directions which I had made on 27 June 2008. I was advised that counsel was only retained to make the application for the adjournment and not in the proceedings. The plaintiffs’ solicitors’ letter of 22 August 2008 spoke of an adjournment of eight weeks. Their letter of 25 August 2008 spoke of a reasonable adjournment. Counsel asked for a short adjournment. The defendants opposed the application. I was not satisfied that the reasons put for the adjournment were bona fide. First, because the defendants’ obligations were to file affidavits and their written submissions in response to any affidavits and written submissions filed by the plaintiffs. The plaintiffs failed to comply with the directions which bound them in relation to the time within which they were to file their affidavits and submissions. In those circumstances, the plaintiffs were not entitled to rely upon the defendants’ failure to comply with the time limits which applied to them. Secondly, I had been advised, as already indicated, that on 22 August 2008 the plaintiffs indicated that the reason why they sought an adjournment was not because of the fault on the part of the defendants but because they were aware that the defendants were settling approximately $9 million in property sales over the next two weeks.
28. In considering the application, I asked counsel to inquire as to whether his instructors and counsel who were retained in the proceedings were available to attend the next day. He obtained instructions in relation to that request, and advised me that whilst the solicitors and counsel would be available, Mr Byrnes, who was required for cross-examination, could not attend until Wednesday. Further inquiries were made and counsel then sought an adjournment of the matter until Wednesday so that Mr Byrnes could attend for cross-examination and the matters could proceed.
29. I refused the application for an adjournment for other than a very short period and adjourned the matter to Wednesday, 27 August 2008 to allow the plaintiffs to consider the defendants’ evidence and submissions, and to arrange for Mr Byrnes to be present in Adelaide for cross-examination as requested by the defendants. As already indicated, the defendants also wished to cross-examine Mrs Low.
30. I indicated at that stage that I would allow the defendants to have their costs thrown away by reason of the adjournment on an indemnity basis but left open the party who would be responsible for those costs.
31. On Tuesday, 26 August 2008 the plaintiffs purported to discontinue both proceedings by filing a notice of discontinuance. However, the notice was incompetent because O 22 r 2(3) of the Federal Court Rules provides that an application for winding up order under s 459P may not be discontinued without leave of the Court and no leave had been sought or given. The plaintiffs’ solicitors were advised that the proceedings would be heard on Wednesday, 27 August 2008.
32. Dr Low said he was not told of the implication of this action.
33. On the morning of 27 August 2008 the plaintiffs’ solicitors wrote to the defendants’ solicitors advising that they were “agreeable to dismissal of the proceedings and costs as agreed or assessed”. In correspondence to my Chambers, the plaintiffs’ solicitors advised that the costs of Monday and Tuesday ought to be on an indemnity basis and the remainder of the costs on a party and party basis. They said in their letter that the costs should be paid by the applicants (the plaintiffs). They wrote:

As lawyers and Counsel we unfortunately do not control our client’s (sic) decisions and act on instructions.

I renew and repeat my apologies to the Court for the inconvenience. I have just been informed by Mr Burnett that he is not available today.

34. My chambers responded advising the plaintiffs’ solicitors that if Mr Burnett was not to appear, and no alternative counsel were available, then the plaintiffs would be unrepresented. It was pointed out to the plaintiffs’ solicitors that it was not acceptable for them to make submissions to the Court via email. They were advised that if the plaintiffs were to be unrepresented the plaintiffs may need to reach an agreement with their opponents as to costs.
35. Five minutes before the hearing was due to commence my Associate was advised by email by the plaintiffs’ solicitors:

That is exactly what I want to do.

I need Eve Thomson to agree or we need to have an alternative date to appear in front of his honour and make submissions as per my email.

Ms Thomson is a solicitor employed by the defendants’ solicitors.

36. The plaintiffs did not appear at the hearing on 27 August 2008 and, as a consequence, I dismissed the proceedings: Consolidated Byrnes Holdings Ltd v Hardel Investments Pty Ltd [2008] FCA 1337. Mr Whitington QC, senior counsel for the defendants, sought an order for the costs of the proceedings and for the costs awarded on Monday to be reserved so that the defendants could give notice to non-parties to the proceedings that an order for costs would be sought against them.
37. He contended that orders for costs ought to be made against non-parties because the plaintiffs in the proceedings were bare trustees and any order for costs against them might not be able to be enforced.
38. I reserved the question of costs and adjourned further consideration of that question until 26 September 2008.
39. I directed each defendant in the two proceedings to give notice to any non-parties against whom they sought an order for costs advising (1) the orders sought; and (2) the basis upon which the orders were sought by identifying the material facts upon which the defendants would rely for those orders.
40. The proceeding NSD 584 of 2008 in which the defendants are plaintiffs was not listed for hearing on either 25 August 2008 or 27 August 2008. In those circumstances, I indicated that I would list that proceeding for hearing on the return of any application for costs in these proceedings.

THE DEFENDANTS’ APPLICATION FOR COSTS

41. On 15 September 2008 and in compliance with my directions, the defendants wrote to the following parties:

• James and Catherine Byrnes;

• Justin and Elizabeth Low;

• Ian and Victoria Lazar; and

• Simmons and McCartney

advising them that orders for costs would be sought against them in these proceedings on a full indemnity basis.

42. I will not set out the whole of their letter which is in similar terms to each of the non-parties. The letter indicated the nature of the proceedings commenced by the plaintiffs and the proceeding commenced by the defendant. A history of the proceedings was included. The parties were advised that on 27 August I had reserved the question of costs and made directions that the defendants give notice to any non-parties against whom they sought any order for costs. The letter set out the costs orders and the reason for the orders. The letter claimed that the plaintiffs would be unlikely to be able to satisfy any costs orders made against them; that the non-parties had played a significant role in the conduct and control of the winding up proceedings; and that the non-parties had an interest in the subject matter of the proceedings. Copies of the exhibits and the statement of facts which had been taken from the affidavits and in the letter were given with the letter. The defendants’ solicitors offered to provide the whole of the affidavit material for inspection at their Sydney offices.
43. Ms Thomson, a solicitor in the employ of the defendants’ solicitors, has exhibited to her affidavit Mr Byrnes’ reply to the notice given on 15 September 2008. On 16 September 2008 at 7.25 pm, he emailed her (copy to his solicitor, Mr McCartney):

Let be clear

You are aware who the lawyers are.

You will not be able to recover any money, because we have a genuine offsetting claim

Your clients owe us over 4 million.

Don’t expect to actually get money.

What ever you may be able to get a cost order for just reduces our claim

If you try and recover other than by agreeing to an offset, we will apply for the matter to be transferred and run the matter of our claim

(Grammatical and spelling errors as per original document.)

44. On 26 September 2008 the proceedings were called on when the plaintiffs and the non-parties were represented by the same solicitor.
45. On that date I made the following orders:
    1. The defendants in NSD424 of 2008 and NSD425 of 2008 and the plaintiffs in NSD584 of 2008 issue any notice of motion seeking joinder of any parties to these proceedings by 29 September 2008.
       
    2. The defendants in NSD424 of 2008 and NSD425 of 2008 and the plaintiffs in NSD584 of 2008 file and serve any affidavits upon which they intend to rely in support of the notice of motion by 29 September 2008.
       
    3. Any party who is sought to be joined in the notice of motion file and serve any affidavits in opposition to the notice of motion upon which they intend to rely by 7 October 2008.
       
    4. The notice of motion if issued be listed at 9.30am on Thursday, 9 October 2008 for hearing.
       
46. On 29 September 2008 the defendants, by notice of motion, sought the following orders:
    1. Pursuant to Order 6, rule 8 of the Federal Court Rules and/or rule 2.13 of the Federal Court (Corporations) Rules 2000, that James Warren Byrnes, Catherine Gina Byrnes, Justin Peter Low, Elizabeth Laura Low, Ian David Lazar and Victoria Lazar be joined as defendants to this action.
       
    2. To the extent necessary to make the order sought in paragraph 1 above:
       

2.1 pursuant to Order 35, rule 7(2) of the Federal Court Rules, or pursuant to the inherent jurisdiction of the Court, that the order of this Court dated 27 August 2008 that this action be dismissed be set aside; and

2.2 following joinder of the persons referred to in paragraph 1 herein, this action be dismissed, but reserving the question of costs.

3. That the plaintiffs, James Warren Byrnes, Catherine Gina Byrnes, Justin Peter Low, Elizabeth Laura Low, Ian David Lazar and Victoria Lazar, pay the defendant’s costs of this action, including the costs of this Notice of Motion, jointly and severally on an indemnity basis.
   
4. Pursuant to order 62, rule 9(2)(d) of the Federal Court Rules, that the plaintiffs’ solicitors, Simmons & McCartney, pay the defendant’s costs thrown away of 25, 26 and 27 August 2008 on an indemnity basis.
   
47. The matter came on before me on 9 October for the purpose of making directions and on that occasion I made the following directions:
    1. The plaintiffs and any non-party the subject of the notice of motion filed by the defendant on 29 September 2008 file and serve any affidavits in opposition to the notice of motion to join the non-parties as parties to the proceeding and for the order for costs sought by the defendant by Friday, 17 October 2008.
       
    2. The defendant file and serve any further written submissions in support of the application for joinder in the notice of motion filed on 29 September 2008 and any further written submissions as to the application for costs by 21 October 2008.
       
    3. The plaintiffs and any non-parties the subject of the notice of motion filed by the defendant on 29 September 2008 file and serve any written submissions in opposition to the application for joinder in the notice of motion and the application for costs by 24 October 2008.
       
    4. The proceeding be adjourned until Friday, 31 October 2008 at 10.30am for hearing.
       
48. The defendants’ application that the plaintiffs and non-parties pay its costs was heard on 31 October 2008.
49. At the hearing the first plaintiff, Mr and Mrs Byrnes and the plaintiff’s solicitors, Messrs Simmons and McCartney, were represented by Mr Dart. The second plaintiff and Dr and Mrs Low were represented by Mr Lazarevich. Mr and Mrs Lazar were represented by Mr Quinn. The defendants continued to be represented by Mr Whitington QC and Mr Doyle.
50. The parties relied upon a number of affidavits. The defendants relied upon an affidavit of Peter William Harris, the sole director of each of the defendants sworn on 28 April 2008; an affidavit of Mr Kenneth Pridmore, who provides business consulting and litigation management services to the defendants sworn on 22 August 2008; an affidavit of Mr Matthew Holden, an accountant employed by the defendants’ accountants, Brentnalls SA Chartered Accountants sworn on 24 April 2008; and two affidavits of the defendants’ solicitor, Ms Eve Thomson sworn on 23 and 29 September 2008.
51. The first plaintiff, Mr and Mrs Byrnes and Messrs Simmons and McCartney relied upon affidavits of Mr Byrnes sworn on 29 May 2008 and Mrs Byrnes sworn on 17 October 2008. The second plaintiff and Dr and Mrs Low relied upon the affidavits of Dr Justin Low sworn on 8 and 23 October 2008; the affidavits of Mrs Low sworn on 13 August 2008 and 8 October 2008; and the affidavit of Dr and Mrs Low’s solicitor, Mr Christian Dennis Moore sworn on 30 October 2008. They also relied upon exhibit KJP1 to the affidavit of Kenneth Pridmore.
52. Finally, Mr and Mrs Lazar relied upon the affidavit of Mr Lazar sworn on 17 October 2008. They also relied upon the affidavit of Mrs Byrnes sworn on 17 October 2008.
53. There can be no doubt, because these winding up proceedings were dismissed, that the defendants are entitled to the costs of the proceedings as against the plaintiffs at least on a party and party basis: Ritter v Godfrey [1920] 2 KB 47; Re British Electric Street Tramways [1903] 1 Ch 725. No submission was made by any party to the contrary.
54. However, the defendants claim that they are entitled to costs on an indemnity or a solicitor and client basis against the plaintiffs and the non-parties for separate reasons; first, because proceedings had been initiated and maintained for an ulterior and abusive purpose being to pressure the defendants into paying the claimed debts with a threat of the proceedings; secondly, the proceedings were in any event hopeless and lacking in merit and known to the plaintiffs as such at the time of issuing proceedings; thirdly, the defendants had not received fair notice of the purported statutory demands; and fourthly, at all times there was a genuine dispute as to the existence of the underlying debts.

THE WINDING UP PROCEDURE

55. The purpose of the winding up procedure in insolvency in Pt 5.4 of the Corporations Act is to permit a creditor to apply to the Court for an order that an external administrator (a liquidator) be appointed to get in the company’s assets; and to identify the company’s liabilities so that the company’s assets can be distributed amongst the company’s creditors. Section 459E provides a statutory regime which allows a creditor to serve a statutory demand on a company which if not satisfied within the time prescribed in the Act raises a presumption that the company is insolvent.
56. Gummow J described the purpose of Pt 5.4 of the Act in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 at 270:

The provisions of the new Pt 5.4 constitute a legislative scheme for quick resolution of the issue of solvency and the determination of whether the company should be wound up without the interposition of disputes about debts, unless they are raised promptly.

57. The purpose of a winding up order and the appointment of a liquidator is to impose a regime for the benefit of all of the company’s creditors not to secure the repayment of the plaintiff creditor’s debt: TS Recoveries Pty Ltd v Sea-slip Marinas (Aust) Pty Ltd (2007) 25 ACLC 1371 at [19].
58. The winding up procedure is not to be used for the purpose of compelling a solvent company to pay a disputed debt: Radiancy (Sales) Pty Ltd v Bimat Pty Ltd [2007] NSWSC 962; (2007) 25 ACLC 1216. Nor is it to be used for the purpose of coercing a company into paying a debt without allowing the company a reasonable opportunity to ascertain that the debt is payable: L & D Audio Acoustics Pty Ltd v Pioneer Electronics Australia Pty Ltd (1982) 7 ACLR 180 at 183.
59. A winding up proceeding which is brought for a purpose other than the purpose identified may amount to an abuse of process: Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 518-522. A winding up proceeding brought for a collateral purpose will be an abuse of process and will attract the Court’s implied power to prevent abuse of its own processes: David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; (1995) 184 CLR 265 at 279.
60. It will be an abuse of process if a creditor brings a winding up proceeding under Pt 5.4 against a solvent company as a means of putting pressure on the company to pay its debt: Baillieu Knight Frank v Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359; Re A Company (No 0012209 of 1991) [1992] 2 All ER 797.
61. It may be an abuse of process if the creditor who has served a statutory demand has knowledge that the company is unaware of the statutory demand but persists with the winding up proceedings: Chief Commissioner of Stamp Duties v Paliflex Pty Ltd [1999] NSWSC 15; (1999) 149 FLR 179.
    62. In L & D Audio Acoustics Pty Ltd v Pioneer Electronic Australia Pty Ltd (1982) 7 ACLR 180, McLelland J said at 183:

Proceedings by a person as creditor for the winding up of a company on the ground that it is unable to pay its debts will ordinarily be held to be an abuse of process:

(1) if the winding up proceedings are bound to fail eg if it is clear that the applicant will not be able to prove that he is a creditor within the meaning of s 363(1)(b) of the Code, or will not be able to prove that the company is unable to pay its debts within the meaning of s 364(1)(e);

(2) if the application is made for some improper purpose eg if the applicant is seeking to use the winding up proceedings to coerce a company into paying an alleged debt without affording the company a reasonable opportunity to ascertain or have it established that the debt is properly payable; or

(3) if issues will arise in the winding up proceedings of a kind inappropriate for determination in such proceedings eg a substantial contest as to the existence or enforceability of a debt relied on by the applicant, which should properly be resolved in separate proceedings brought for that purpose.

63. The question to be determined when it is asserted that the proceedings constitute an abuse of process is the purpose for which the proceedings have been brought. If the proceedings have been brought for an ulterior or collateral purpose, then the proceedings are an abuse of the Court’s processes. The party who has initiated the proceedings may then be liable to pay the costs of the party against whom the proceedings were brought on an indemnity basis.

HISTORY

64. The defendants’ claims for indemnity costs against the plaintiffs and the non-parties necessitate an examination of the facts and circumstances giving rise to the bringing of the winding up applications and the circumstances which transpired after their commencement.
65. In a sense, that is undesirable because the proceedings have already been dismissed in circumstances where the plaintiffs have abandoned their claims. However, because of the defendants’ claims against the plaintiffs and non-parties, an examination of the facts cannot be avoided.
66. This is not to try a hypothetical action between the parties. The Court should not be called upon to decide whether the plaintiffs’ proceedings if pursued would or would not have succeeded. The parties should not be burdened with the conduct of proceedings already dismissed. Moreover, the only evidence before the Court is in affidavit form. The Court has not had the advantage of seeing and hearing the witnesses on matters where the facts are in dispute. In those circumstances, the inquiry must be limited to whether commencing the proceedings was reasonable and whether the conduct in the proceedings, including the conduct leading up to my dismissing the proceedings, was reasonable: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Quin [1997] HCA 6; (1997) 186 CLR 622 per McHugh J at 624.
67. The following matters are taken from the affidavits to which I have referred.
68. The defendant, Hardel is the trustee for the Hardel Investments Unit Trust. It entered into a loan agreement with Contor as trustee for the Contor Developments Unit Trust on or about 16 December 2005 (the loan agreement).
69. The defendant, Avpri entered into a services agreement with Mr Harris, a company director of the defendants and Cobra on or about 14 July 2005 (the services agreement).
70. At the relevant time, Dr Justin Low was the sole director of Contor and Cobra, and the two agreements to which I have referred were entered into in the context of a property development at Coomera in Queensland.
71. The plaintiff, CBH, has as its sole director, Catherine Byrnes, the wife of Mr James Byrnes. At the relevant time, Mr Byrnes was disqualified from managing a corporation. The plaintiff, Alpha, has as its directors, Dr Low and his wife, Mrs Low. It would appear from the evidence that CBH is a company associated with Mr James Byrnes and Alpha is a company associated with Dr Low and Mrs Low.
72. Mrs Low has sworn an affidavit in which she says that she had no involvement in the events except in a formal sense. She was not involved in the negotiations leading up to the loan agreement and services agreement. She was not a director of Contor or Cobra. She had little or no involvement or knowledge of the events that followed.
73. Sometime prior to 2004 Mr Harris and Dr Low met each other as members of the Paradise Community Church and became friends.
74. In early 2004 Avpri obtained an option to purchase land in Coomera, Queensland for the purpose of development. Contor owned adjoining land and, after Avpri obtained its option, approached Avpri offering to sell its land for $8.5 million. On 9 July 2004 Contor and Avpri entered into agreement for the sale and purchase of the Contor land.
75. It is Mr Harris’ case that, prior to entering into that agreement, various representations had been made by Dr Low relating to development approval which representations were relied upon by Mr Harris in causing Avpri to enter into the contract for sale and purchase.
76. Settlement was to take place on 9 November 2004 but did not occur because Avpri could not obtain a valuation of the property at the $8.5 million purchase price, nor had development approval been obtained at that date.
77. In July 2005 the purchase price was adjusted to $6.5 million (the second contract of sale). At the same time, Dr Low proposed that a services agreement should be entered into so that Cobra could provide services and skills in relation to property development through Dr Low. The services agreement provided that Avpri would pay Cobra in the order of $2.5 million in instalments. Mr Harris says that agreement was also entered into in reliance on representations made by Dr Low.
78. The second contract of sale was to settle on 15 August 2005. For reasons which are unimportant, Hardel was incorporated to become the vehicle to purchase the land on the same terms and conditions as Avpri had agreed, and the contract for sale between Contor and Avpri was rescinded on 16 December 2005. A deed of rescission was entered into under which Hardel agreed to pay the fees which Avpri had previously agreed to pay. Contor acknowledged in that Deed that it had received $815,000 from Avpri on account of deposit monies and extension fees.
79. A third contract for sale and purchase of the land was entered into by Hardel and Contor. That contract provided for settlement on 16 December 2005 which was the same date upon which the contract was executed.
80. There was a shortfall of funds as a result of which Hardel entered into the loan agreement with Contor. The contract of sale between Contor and Hardel settled on 16 December 2005.
81. Some monies were paid by Hardel in satisfaction of the loan agreement but no monies were paid by Avpri in relation to the services agreement.
82. Mr Harris deposes in his affidavit as to the reasons why no monies were payable:

56. In particular, I disputed (and continue to dispute) that:

56.1. The interest, extension fees and other charges said to be payable by Hardel at settlement of the Third Contract of Sale, and which necessitated entry into the Loan Agreement, were in fact payable by Hardel;

56.2. Dr Low provided the services to Avpri contemplated by the Services Agreement, and certainly not the services which he represented that he was capable of providing and would provide under the Services Agreement;

56.3. The final instalment of $1 million under the Services Agreement is due and payable; and

57. I also believe that a counterclaim exists against Contor and Cobra as a result of the falsity of the July 2004 representations and the July 2005 representations, which were relied upon in entering into the Contracts of Sale and Services Agreement, and in incurring the expenses my companies have incurred based on the representations. I believe that there are further claims available against Contor and Cobra for costs incurred by my companies as a consequence of those representations not being fulfilled or capable of being fulfilled.
    
58. Throughout mid to late 2007 I had various without prejudice meetings and discussions with Dr Low about settlement of our disputes regarding the Loan Agreement, the Services Agreement, and the sale of the Reserve Road land, including a without prejudice meeting with Church elders held on or about 23 October 2007.
    
83. Mr Harris says that on 10 October 2007 Mr Ian Lazar advised a financier of Hardel that he had bought “the vendor finance debt” from Dr Low. Mr Lazar is the sole director and secretary of Business Acquisitions Australia Pty Ltd (BAA). Dr Low had first met Mr Lazar in February 2007. Dr Low said in his affidavit that he bumped into Mr Lazar again in April 2007. In August 2007 he told Mr Lazar there was a large amount of money owed to his companies. Mr Lazar said he would help. Mr Lazar suggested Dr Low assign the debt to him and he would recover the debt. In September 2007 Mr Lazar introduced Dr Low’s accountant (Michael Armstrong) to Mr James Byrnes, who was then a director of Australian Litigation Funders Pty Ltd (ALF). Dr Low has deposed that he did not wish to engage Mr Byrnes “but he started acting any way and claimed Armstrong agreed to engage him on my behalf. In any case Mr Byrnes assisted Lazar in sending emails to the Harris (sic) and his consultant Ken Pridmore demanding the payment of the debt”.
84. On 12 October 2007 Mr Harris received an email from Mr Lazar of BAA in the following terms:

I have tried to contact you on all your numbers.

I have taken an assignment of debt from Justin Low and unlike Justin I don’t wait to be paid.

I will be writing to your mortgagee’s (sic), any creditors that I will have my mercantile agent track down, the ATO and any other government entity that I think you owe money to or have breached any form of legal obligation by yourself or any current or previous director.

I will seek to make an application in court immediately to have you and any family members publicly examined and I will be pushing for an urgent application next week to injunct any of your assets both company family trust or personal under the corporation act that allows me to do so in order to protect my position.

I require you to respond as an urgency to confirm how and when I am getting my money back.

If I don’t get a response by close of business today, I will take this as you wish me to proceed the other way.

The email contains a number of threats calculated to obtain a response from the addressee.

85. Mr Harris responded seeking a stamped copy of the assignment of debt from Dr Low referred to in Mr Lazar’s email. Mr Lazar responded:

I will not be providing you with anything.

I suggest you find your own mechanisms to prove the purchase of debt.

In the interim I await you solicitors (sic) correspondence.

This second email was copied to Dr Low. His email address is given as [e-mail].

86. There is no explanation in the evidence why such aggressive emails were written. Mr Lazar has sworn an affidavit but has not explained the circumstances in which he (or BAA) received an assignment of the debt (if in fact he did) and why it was that he wrote what he did.
87. Mr Harris said that on 17 October 2007 he made a without prejudice offer to Dr Low to resolve the dispute and he requested a copy of the assignment of debt to Mr Lazar. He said that he received no response from Dr Low but, instead, on 22 October 2007, received an email from Mr Byrnes (a copy of which was sent to Dr Low’s email address) in the following terms:

I have instructions from Mr Ian Lazar of BAA who has taken assignment of debts, which has been confirmed by Dr Low. Than any offer or settlement will need to be approved by BAA and on terms acceptable to BAA.
I prepared a detailed document pertaining to the history and causes of action which are available to the parties.
I confirm that from the documents and actions by the parties that Harris and His companies are substantially in breach of the agreements.
Clearly even by there offers it is clear they are hopelessly insolvent.
I have prepared a document setting out the agreement, the default and the defaulting parties action ... or lack of it.
This document will be sent to ASIC to the head of investigations. this area issues section 30 notices and investigates insolvent companies.
I know the area and have had dealing with them before on behalf of clients ... it is very simple ... my documents are complete and ASIC will act as I provide information which shows insolvent trading.
The term insolvent means cant pay your debts as and when they fall due.
To simply turn these insolvent companies to solvent companies you need to schedule debt that is presently due and pay able to be paid in part now and the balance secured in a manner which is acceptable to BAA.
I understand Dr Low is in discussion. I am instructed BAA do not authorize any settlement discussions and or any settlement.
We will however actively and commercially agree to take part in any fruitful discussions within the next 2 days.
After Wednesday if we are not completely satisfied then we shall file such notices and reports as we deem fit.
This ranges from filing defaults on the director and the companies with Veda/Baycorp.
Filing the appropriate complaint with ASIC fraud and insolvent investigations with a view of seeing ALL companies placed into the hands of a liquidator.
Finally if for one second I though there was any truth that, a respectable church and its elders would use un fair and unreasonable tactics to pressure Low. i would be horrified.
The man and his company were correctly owed money (the subject of the assignment.) the debt is 3.7 mil and growing.
If you are having difficulty ... we are willing to be commercial, don’t be thinking 2,350 as we are not interested ...
Neither I or Mr Lazar are easy intimated and would suggest you stop all the un godly threats and get real!
Email me and fast as my patience is running out fast.
Friday I was polite and willing to be as accommodating and reasonable as ever ... Mr Pridmore’s rudeness and stupid and unprofessional statements have only inflamed matters and have made me more determined than before and far less accommodating when it comes to commercial give and take ... i am happy however to put things back on track and will deal with any person who is authorized by the two companies to bind the companies to a deal.
So its back to you Mr Harris!

(Grammatical and spelling errors as per original document.)

88. This was, on the evidence, the first involvement of Mr Byrnes. In this email Mr Byrnes purports to be acting for BAA and claims, as Mr Lazar had, that Mr Lazar had taken an assignment of the debts. Mr Byrnes swore affidavits in the proceedings before the proceedings were listed for trial on 27 June 2008. He has not sought to rely on any further affidavits and has proffered no evidence to explain his actions in the period leading up to the commencement of the proceedings and since.
89. As a result, his conduct remains unexplained. The threats which can be seen in the email, and which will be shown in further communications, remain unexplained.
90. On 23 October 2007 a meeting took place between Dr Low, Mr Harris and elders of the church of which they were both members. Mr Harris said an in-principle agreement was reached to resolve the dispute but the matter did not resolve.
91. On 24 October 2007 at 4.20 pm Mr Harris received a further email, copies of which were sent to Dr Low and Mr Lazar from Mr Byrnes:

Further to our Email below [referring to email previously sent on 22 October 2007: see [70]].
We had the opportunity to meet with Mr Low from 11-45 am to 12-15 today.
At his request we agreed to withhold lodging caveats, Mr Low also undertook certain positive covenants to meet certain obligations to BAA and ALF.
Clearly if those obligations are not meet we reserve our rights
It would appear that Mr Low is trying very hard to accommodate the Harris group.
We wish to be informed of a time and place for the first tranche of funds to be paid.
We wish to be informed of the solicitor who is handling this from the Harris group
We seek an undertaking from the Harris group and or its lawyers that they will inform us of 2 things, the time and place of the first settlement and that directions have been given by Mr Low to pay ALF and BAA.
As you can imagine if the undertakings are not given we will look to our rights.
Further based on agreements reached both BAA and ALF stood to benefit substantially out of recovery of funds from the Harris companies and him personally, so we are to say the least very unhappy with being asked to stand down.
Further to accommodate the offer made (which we consider to be at the very low end of the scale at which we believed recoverable) and accepted subject to satisfactory security Mr Low both BAA and ALF agreed to give up certain bonus percentage payments. we trust that the Harris group appreciate that Low has been very accommodating and they should move quickly to settle this matter
Whilst we have agreed to allow Justin to enter into settlement discussions and agreements, BAA and ALF have and continue to affirm an equitable interest in the settlement.
Justin has arranged for a payment to be made to our respective groups from the proceeds paid down on debts owed by the Harris group
BAA are within there rights to seek specific performance of the assignment but have agreed subject to payment to BAA and ALF to agree upon payment to rescind and verbal or written agreement.
Likewise ALF have an equitable interest in the proceeds which are presently secured by agreements and guarantees and mortgages
There are a number of things the Harris group should be mindful of
They have got a good deal from Low and should Honor it.
It does not take 2 weeks to draft terms of settlement and provide positive covenants re loan documents. this is in reality should be effected next week.
The schedule of payments to be secured and subsequently paid at a latter date are as important to ME JIM BYRNES as is our payment out next week and that if the Harris group default in any way now or in the future we have agreed to immediately assist Mr Low in taking the Harris group to task.

(Grammatical and spelling errors as per original document.)

92. As already noted, ALF which was referred to in Mr Byrnes email of 24 October 2007 is a company associated with Mr Byrnes.
93. Mr Byrnes again claims in that email to be representing BAA which is surprising in view of the fact that on the same day Mr Lazar of BAA wrote to Dr Low acknowledging that the assignments of debts from Contor and Cobra to BAA “are now rescinded” and BAA has now relinquished its rights under the assignment. A deed was entered into on the same day to that effect. A redacted form of the Deed of Release is exhibited to Mr Harris’ affidavit. The parties to the Deed are BAA, ALF, Mr James Byrnes and Cobra, Contor and Dr Low.
94. Paragraph C of the Deed of Release records that a “verbal agreement” had been entered into between Cobra and Contor and BAA “to assign the debt to BAA with the option for Justin to withdraw the assignment should he negotiate a satisfactory settlement directly with the Harris parties”. It is further recorded that BAA subsequently introduced ALF to act on BAA’s behalf.
95. Paragraph D of the recital to the Deed of Release records that “Justin’s Group” had negotiated a settlement with “the Harris parties”. It is a term of the Deed of Release that “ALF and Jim further agreeing not to contact “Justin’s Group” or the Harris parties or take any action whatsoever which will adversely affect the Harris parties or jeopardise the payment to be made by the Harris parties at any time unless requested to do so by Justin Low”.
96. It would appear that no assignment had occurred as at the date of the release but merely an agreement to assign.
97. On 25 October 2007 the defendants’ Sydney solicitors (J. Biady & Associates) wrote to Mr Lazar at BAA saying:

Our client instructs as follows :-

1. It is the registered proprietor of development properties at Coomera (“the Properties”) which were acquired from Contor Developments Pty Ltd (“Contor”);
   
2. Demands for payment have been received from you in relation to the Properties;
   

100. You have written to our client and asserted that certain monies payable by Hardel to Contor have been assigned to you. As such you requested that our client must pay those monies to you in lieu of paying them to Contor;
     

4. Our client requested you to provide some evidence of the assignment in order to establish your legal entitlement, if any, to be paid any amounts and to quantify the amounts to which you lay claim;
   
5. Your response was to steadfastly refuse to provide any of the information requested. You also refused to provide a copy of the assignment document and repeatedly stated to Mr Harris, the CEO of our client, that he should “get it himself”.
   
6. Our client has not been able to obtain any confirmation from Contor that there has been any assignment of any debt by it to you.
   
7. Our client is and remains ready, willing and able to meet all proper claims on it. Our client will pay any debts properly and legitimately due and owing.
   
8. At this stage there is nothing whatsoever that might suggest that any moneys are due to you.
   
9. Our client has had no dealings whatsoever with you, no contract with you and no notification of any assignment of any debt to you.
   

If you wish to assert that you have a binding and valid entitlement to claim moneys from Hardel, you will need to particularise the claim and substantiate it to our client’s reasonable satisfaction.

If we do not receive the requested substantiation within 14 days of the date hereof, our client will proceed to deal with Contor without further regard to you. Please be very clear that unless you take the necessary steps to allow our client to verify and quantify the claims you are making, our client intends to disregard the claims by you and you may lose any entitlement you may have to require our client to deal with you.

The letter set out the substantiation which was required.

98. On 30 October 2007 Dr Low’s accountant, Mr Armstrong, was provided with a facsimile of the letter written by Mr Lazar on 24 October 2007 of BAA to Dr Low acknowledging that the assignment had been relinquished and enclosing a copy of the redacted Deed of Release.
99. Apparently in November, Mr Harris and Dr Low exchanged further correspondence in an attempt to resolve the ongoing disputes. No settlement was achieved.
100. Dr Low said in his affidavit that in late November 2007 he had a number of discussions with Mr Byrnes regarding the debts owed to Cobra and Contor. Mr Byrnes offered to purchase the debts for $200,000. Dr Low said in his affidavit that it was agreed that any funds recovered would cover costs and the balance would be distributed according to the Heads of Agreement dated 29 November 2007. He said, “We agreed to establish an entity named the Coomera Trust for the purpose of conducting the matter.”
101. The Heads of Agreement of 29 November 2007 is a handwritten agreement, the parties to which are Cobra, Contor, Dr Low and BAA and ALF. The agreement claims:

This agreement is an agreement, not an agreement to agree as defined in Masters and Cameron.

102. Contor and Cobra were to assign for the consideration of $1 each to BAA all “claims, interest and securities it either holds or may be entitled from Avpri Pty Ltd (owed to Cobra) Hardel Investments Pty Ltd (owed to Contor)”. BAA was to hold the assignments “non-beneficially” – “to the benefit of BAA/ALF unit trust which will issue units equally to ALF and BAA”. The total consideration was expressed to be $1 each to Cobra and Contor on signing; a further two instalments of $25,000 on two separate but unidentified Fridays in November; and two further instalments of $75,000 each to Cobra and Contor on 31 January 2008. The Heads of Agreement then provided for the disbursement of funds owed. $200,000 was payable to the unit holders. BAA was to be entitled to be reimbursed all costs and expenses involved in the recovery of the debts:

Upon repayment of the 200,000 and costs BAA will then Direct the Next $650,000 to Be Paid to Either Cobra, Contor or at Justin Lows Direction.

(Grammatical and spelling errors as per original document)

103. The Heads of Agreement provided that “all funds and assets” were to be distributed as to 50% to the BAA unit trust and 50% at the direction of Justin Low. The document exhibited to Dr Low’s affidavit is unsigned.
104. On 10 December 2007 Mr Byrnes emailed Mr Pridmore and copied in Mr Michael Armstrong, Dr Low and Mr Lazar:

Ken

I extended you an olive Branch, you failed to take advantage of the offer.

Big mistake!

As you would have appreciated my firm and Lazars firm have a vested interest in making sure YOUR client pays Justin a portion of what is legally owed.

There was an agreement to assign the debts rights and entitlements, this did not proceed because of your promises.

My firm was engaged as an advisor and part of a team of professionals to assist Low.

As an agent for the lender and or contractor to Harris companies Low is perfectly entitled to discuss what is going on much the same as Harris uses your services and know doubt pays (or should do) for same.

If nothing eventuates we will complete the assignment process, then the fun will really begin, but not for Harris nor you if you ever expected to get fees that may be owed .!!.

Low and I have discussed again assigning all rights title an interest to a trust associated with the writer.

And we have now completed a new assignment which we have agreed to hold for a few days to see if you were going to provide a proof of funds and execute an acceptable agreement ... that acceptable to us ... you have no bargaining power here ...

Instead I here you again carry on with rubbish about confidentiality, there is No binding Confidentiality agreement ... there was an offer and an acceptance of the offer that required an agreement that we needed to approve ... Time UP ..., there was a draft agreement sent, not accepted By Low ... the terms of which would need to be changed before being executed and your time process to effect same would need to be in hours not days. If you or Harris want to play games re the agreement, expect that we will need to discuss this with Bankwest as it is a default under your loan to have proceedings on foot for such an amount as is owed to Low entities. They are entitled to be fully informed of the position and as a fellow member of the same reporting agency we are entitled to discuss with them defaulting commercial accounts

Low and I have discussed causes of action that he legally able to pursue.

As this may surprise you, I have a very senior contact at Bank west who I am yet to talk to regarding this offer to settle the moment I talk to him forget getting 1c.

I will call him and tell him what a rogue and cheat Harris is ... maybe tomorrow. see how you respond by 12 noon

I will advise him that I plan to have Harris listed as a payment defaulter with credit reporting agencies.

I will advise him that I will be seeking a section 30 examination through ASIC.

I will advise him that after chatting to my old friend David Geer, who I was borrowing off 16 years ago, that there is action afoot which will no doubt Domino in to a cascading series of liquidations of the Harris group.

Seeking enforcement under the personal Guarantees

Seeking to lodge personal default notices under the guarantees.

Seeking to set aside the variation based on breaches of the trade practices act and enforcing the original securities on comera.

Taking assignment of existing securities.

Causing yet more good Christians to be thrown to the lions (Harris being the predator)

That’s just for starters.

So pull your head in with the silly statements and threats as they only make a fool of you ken.

Your man owes the money.

Low wants his money.

He agreed to an offer subject to an acceptable agreement and payment.

So far all you have done is talk. time to put up or shut up as they say.

Provide the proof of funds from Bankwest by 12 noon tomorrow.

Set aside Wednesday to fly to Sydney with your lawyers to meet and finalise the agreement ... including allowing Low security over comera for the 800 k p>

Now I hope you understand this is not a negotiation, do it or watch how I Huff and Puff and Blow your house down

Merry Christmas

Jim Byrnes

(Grammatical and spelling errors as per original document.)

105. It would appear from Mr Harris’ affidavit that that email was received without any warning. In any event, Mr Byrnes claimed that his firm and Mr Lazar’s firm had a vested interest in ensuring that Mr Harris pays Dr Low a portion of what is legally owed. Mr Byrnes threatened that a number of actions would be taken to embarrass Mr Harris with his bankers and bring Mr Harris to the attention of reporting agencies. The writer also threatened to have Mr Harris examined by ASIC. The email is written in similar terms to previous correspondence. The email suggests that the agreement to assign the debts did not proceed. It may be inferred that the Heads of Agreement of 29 November 2007 did not proceed.
106. As I have said, Dr Low was sent a copy of the email, as was Mr Lazar. Both would have been aware of the threats that Mr Byrnes made in that email.
107. On 11 December 2007 Mr Byrnes emailed Mr Pridmore (consultant to Mr Harris) and Mr Armstrong (accountant to Dr Low) at 10.16 am:

I start writing to you at 10-10, so we can be clear that leaves you 1 hour 50 minutes to respond to yesterdays email.

Low entities have agreed to assign all rights and interest to a new entity which will be jointly controlled by ALF.

The offer to settle will be terminated, repudiated, finished ... gone ... as will Harris’s chances of borrowing money until after he comes out of bankruptcy in 2011.

There will be a new Sherif in town and he wants the 3.7 million owed ... but will be reasonable. i will give him a few alternatives.

Oopppsss sorry

Only 1 hour 47 minutes to go

(Grammatical and spelling errors as per original document.)

108. Later the same day, at 12.44 pm, he wrote again to the same gentlemen but this time copied in Dr Low:

Mark Altschwager you Bankwest relationship manager is away today ... lucky you ...

My contact is far senior and has given me all his contacts.

So ken ... are you feeling Lucky?

(Grammatical and spelling errors as per original document.)

109. He wrote twice more on 11 December, at 2.31 pm and 2.43 pm, in much the same vein. In the second of those emails, a copy of which was sent to Dr Low, Mr Byrnes wrote:

Post 12 noon update.
Assignments now being finalized.
I have spoken with Bankwest and am talking to the Hardel relationship manager tomorrow and have already got the ear to someone much more senior. Have not decided what I want to tell them yet ... but the truth is that companies and Harris are in default of contractual obligations and the security holder is within there rights to list the companies and directors as defaulters today. The security Holder can seek the appointment of a controller over the sites ... note I am saying sites. the Group is insolvent and unable to pay its debts as and when they fall due.
http://www.asic.gov.au/asic/asic.nsf/byheadline/Complaining+about+companies+or+people?open Document
great page, have completed the complaint and have spoken to ASIC and said I have information about a that represents they have a ASIC commission license, yet there phone does not work.
they have no C.R.M, they have no corporate governance, they are associated with a group that has an un approved funds or funds.
the funds are insolvent and they are still trying to raise money.
remember insolvent means unable to pay it debts as and when they fall due.
it is a great Pity that ken Pridmore and or the companies management did not have either the manners or good sense to properly deal with these issues before it became to late.

(Grammatical and spelling errors as per original document.)

110. He continued his email assault on 12 December by sending two emails. The first was sent at 12.29 am:

Good evening gentleman.

Got a message saying you don’t want to pay your bills and don’t want to resolve this.

Fine, I expect to forward you a notice of assignment mid morning.

I will speak to Bankwest tomorrow and advise them of the default and our intention to move to wind up various entities.

Our action to move to Bankrupt Mr Harris under is Guarantee that he has defaulted on.

Our listing with the credit reference tomorrow both personally as a defaulter under is guarantee and as a director.

We will list the defaulting companies as well

I have had a preliminary discussion with ASIC but to date have not advised who the party is, that changes tomorrow.

Caveats will be lodged on other entities property tomorrow.

I have arranged already to acquire from lenders securities held over a property.

Any securities taken out or lodged to secure investor funds will be set aside.

Securities taken or given by other companies are an uncomercial transaction and will be void.

All payments made to unsophisticated investors and related parties will be subject to claims as preferential payments and or uncomercial transactions.

Transfers by the director to related parties and family within the past 5 years will be subject to claw back.

I will suggest ASIC review the various funds raised from unsophisticated investors and the numerous breaches that ASIC can and will pursue, of course Ken is no stranger one only needs to see what happened to his last major client.

We will support ASICs move to appoint a provisional liquidator as the companies are clearly insolvent and unable to pay there debts as and when they fall due it may be a contest to see who gets a controller appointed first.

I will encourage ASIC to undertake an immediate section 30 examination.

Within days of me really bring to the attention of your lenders the position and our causes of action, they will need to appoint a receiver under there respective charges.

We will advise Paradise Church that we feel for the investors who have been cheated but we are bring an end to Harris Pridmore ponzi scheme

Perhaps you Mr Harris should consider getting advise from someone besides Pridmore.

I don’t like bullies ... there is only one way to deal with them and that’s to let them no were they stand and deal them numerous decisive blows up front.

Unfortunately this makes me act like a bully, which is not how I wanted to resolve this ... but as your MR PRIDMORE IS ABOUT TO LEARN ... THERE IS ALWAYS A BIGGER BULLY OUT THERE ... AND YOU HAVE FOUND HIM

I was offended by Pridmores rude behaviour, his disingenuous comments, and his complete lack of morality but it will be Mr Harris who pays for Pridmores behavior.

All offers are withdrawn.

All settlement discussions and offers have been repudiated by the Harris group.

There purported settlement offer was an agreement to agree and falls within the masters and Cameron definition of agreement to agree and is therefore non binding on the parties, even if it was a binding agreement the Harris failure to adequately provide a document on acceptable terms and the Harris failure to pay as per the original offer means that the offer was repudiated by the constant failures of the Harris companies

Mr Harris you have the most to lose here

Our advise suggests that the variation agreement should be either set aside as it was based on deceptive conduct.

This allows us to maintain our position on comera.

We are happy to Be paid the $3.8m owed plus further cost and interest.

You had the chance ... you choose to listen to someone whose advise will ultimately see you bankrupt and struck of as a director and possibly facing criminal charges.

You have my contact details, you can stick your head in the sand ... in which case its going to be quick and devasting ... or you can smarten up get your “A” team together and get to Sydney and try and resolve this.

I will be talking to my contact at the bank tomorrow, David Geer with whom I have known for 16 years, ASIC fraud and insolvency investigation area, let me make it clear ... what I propose wont all happen in the next couple of days, some parts of my intended actions will happen within days, others may take months ...

Recently I received lots of negative press arising out of comments by a road contractor from Victoria.

He misappropriated 3 million of my clients money.

He wanted to settle but try as he may he could not do what was required.

All his companies went into receivership (I WARNED HIM OF THIS DAY ONE), his companies were then liquidated (I HATE TO SAY BUT I TOLD HIM SO), I arranged for funding for the liquidator to examine the director. the transcript has been sent to the DPP with a senior counsels advise. (ALL MY PLANS ALL CARRIED OUT)

I pushed him into bankruptcy.

His wife is being pursued now for funds she received 2 years prior to the liquidation ... she will be forced to hand back not only several million ... but interest and cost ... she is soon to be bankrupt.

Finally I am fair and I can be negotiable and commercial ... let me make it perfectly clear ... never mistake Kindness for weakness ... i am Not Justin and I have no qualms about doing what is required to recover money. (within the law that is)

So consider Mr Harris your options ... consider them quickly, as I am out of the office until 12 noon but am on my mobile.

If you Mr Harris don’t call me to plead your case and ask politely to meet for a without prejudice discussion ... then by 5pm, I will have the defaults listed and called in my contact at Bank west.

Up to you ,,, BY THE WAY NO NEED CALLING JUSTIN ... THAT’S TO LATE !

(Grammatical and spelling errors as per original document.)

111. In the second email, sent at 9.43 am, he said that he was “passing the SA area of Bankwest and discussing the situation at a national senior management level”. Mr Byrnes threatened to inform the defendants’ bankers of their default; Mr Harris will be bankrupted and listed as defaulter with credit reference queries; ASIC has been informed; ASIC will be asked to review the defendants and appoint a provisional liquidator; ASIC will be encouraged to undertake a s 30 examination; and the Church will be informed.
112. Mr Byrnes boasts that he is a bigger bully and boasts about how he ruined a road contractor.
113. The email sent at 12.29 am contains naked threats. They go further than a creditor pressing for repayment of a debt. The email contains threats that no reasonable person would make. They are outrageous and constitute harassment. There can be no doubt that the series of emails to which I have referred constituted serious threats which I find were made for the purpose of frightening Mr Harris into paying to Dr Low the amount which Dr Low was seeking from Mr Harris at or about this time.
114. The emails were written after Dr Low had withdrawn the offer to assign the debt to BAA which was recorded in the Deed of Release of 24 October 2007. During that interval Dr Low and Mr Harris were attempting to resolve their dispute.
115. It must be inferred that at some time shortly before 10 December 2007 Dr Low or someone associated with Dr Low spoke to Mr Byrnes and instructed or retained him for the purpose of attempting to persuade Mr Harris to pay the debts.
116. Mr Byrnes sent another email on 12 December 2008, this time to Mr Harris’ Adelaide solicitors advising that he had a notice of assignment to forward on the Low/Harris matter and enquiring whether it should be sent to them or some other party. He continued:

I will not suffer fools or Bullies, I have reviewed all files records and documents, I have sought counsels advise (sic) to determine causes of action, I have obtained consents to act by a liquidator, I have conducted a detailed investigation in to the Harris Co method of capital raising and have a strong view on the matter. I will at all times be sensible and act in a polite and dignified manner ... until treated inappropriately, at which time I will take a much more hard line approach.

117. It is difficult to reconcile Mr Byrnes’ statement that he “will at all times be sensible and act in a polite and dignified manner” with the emails to which I have referred.
118. On 12 December 2007 ALF wrote a long letter to the defendants’ Sydney solicitors in response to complaints made by those lawyers concerning Mrs Byrnes’ conduct in more measured tones than previously employed. In that letter, Mr Byrnes said that no action would be taken for recovery or for notifying credit reference departments until such time as Mr Harris’ solicitors had been provided with a notice of assignment.
119. Both the email and the letter of 12 December suggested an assignment was in place of the debts from Cobra and Contor to some other party which is represented by Mr Byrnes. However, as the facts will show, no such assignment had been executed at that time. It is clear enough that insofar as it was claimed at that time there was an assignment, the claim was false.
120. On 14 December 2007 Alpha was appointed joint trustee with CBH of the Coomera Trust. An undated Deed of Settlement constituting the Coomera Trust was exhibited to an affidavit of Mrs Low. The settlor of the trust was Michael Armstrong. The trustees are CBH and Alpha. The Coomera Trust is a discretionary trust. The beneficiaries of the Coomera Trust include ALF, CBH as trustee for the Byrnes Motor Trust, CBH as trustee for Byrnes Family Trust, BAA, Elizabeth Low for the Coomera Discretionary Trust, Ian Lazar and Mrs Victoria Lazar.
121. It is tolerably clear when regard is had to the deeds of assignment which were said to be executed on 17 December 2007 that the parties intended the Coomera Trust to be the vehicle by which any debts which were recovered would be distributed. The joint trustees of the Coomera Trust were controlled by Dr Low and Mr Byrnes respectively. Dr Low’s accountant was the appointor.
122. Dr Low has exhibited to his second affidavit, sworn on 23 October 2008, two separate deeds of assignment made by Cobra and Contor in which it is said each of those companies assigned to Alpha and CBH as joint trustees the two debts said to be owing by the defendants to the assignors.
123. The two deeds are similar in form. Contor is the assignor in one deed and Cobra in the other. The assignees in both deeds are Alpha and CBH. Jim Byrnes and ALF and Ian Lazar and BAA are also parties to the deeds.
124. In the respective deeds the “Seller” is defined to mean Contor and Cobra. In both deeds the “Buyer” is said to be Alpha. In both deeds the “Buyer’s Guarantor and Indemnifier” is defined to mean “Ian David Lazar and Business Acquisitions Australia Pty Ltd (ACN 114 268 361) of Suite 2, 11 Rangers Road, Neutral Bay in the State of New South Wales and Jim Byrnes and Australian Litigation Funders Pty Ltd (ACN 117 508 586) and Consolidated Byrnes Holdings Ltd (ACN 111 052 585)”.
125. The debt in the Contor deed is the debt said to be owned by Hardel Investments Pty Ltd and in the Cobra deed the debt is said to be owned by Avpri Pty Ltd.
126. In both deeds the recitals state that the Seller has agreed to assign the respective debts to the Buyer. The Buyer it is said is the assignee in the recitals but Buyer is defined in the deed to be Alpha, not Alpha and CBH. In both cases, the Buyer, as I have said, is Alpha which is said in the recitals to both deeds to be the trustee of the Coomera Trust and is buying the debt for the benefit of the beneficiaries of that trust.
127. The deeds seem to assume that Contor and Cobra will assign the debts to the Buyer but the Buyer will buy the debts rather than take them by way of assignment.
128. In both deeds the operative clause is clause 2.1 which provides:

In consideration of the payment of $100,000 by the Buyer to the Seller, payable as set out in Schedule 1 hereof, the Seller as the legal owner immediately assigns to the Buyer absolutely all of the Seller’s right title and interest in the Debt together with all interest which has accrued or which may accrue in the future on the Debt and all securities relating thereto which are held by or which the Seller is entitled to enforce pursuant to the Debt.

129. Schedule 1 provides that the date of payment is 31 January 2008. Clause 3 provides for the Seller’s covenants which include a covenant that “the Seller has full power to assign the Debt to the Buyer”.
130. In both deeds the Seller appoints the Buyer as the attorney of the Seller to demand the debt; conduct any legal proceeding in relation to the debt; and appoint any substitute delegate or sub-attorney.
131. Clause 10 provides that the deed is the whole agreement between the parties and supersedes all oral and written communications by or on behalf of any of the parties.
132. Clause 16 provides for a guarantee and indemnity. Clause 16 provides:

16.1 In consideration of the Seller, at the request of the Buyer’s Guarantor and Indemnifier, to enter into this agreement and agree to allow the Buyer to pay the payment under clause 2.1 by instalments as set out in Schedule 2, the Buyer’s Guarantor and Indemnifier agrees as follows:

(a) The Buyer’s Guarantor and Indemnifier guarantees to the Seller that the Buyer will comply with all its obligations under this Deed at the time they should be complied with;

(b) the Buyer’s Guarantor and Indemnifier agrees to indemnify the Seller for any loss the Seller suffers as a result of the Buyer not complying with its obligations under this Deed;

(c) The guarantee and indemnity in this clause is a continuing guarantee and indemnity and they do not come to an end until released in writing by the Seller;

(d) The Seller shall be at liberty without discharging The Buyer’s Guarantor and Indemnifier from liability hereunder to grant time or other indulgence to the Buyer in respect of the Buyer’s obligations under this Deed and to accept payment from the Buyer in cash or by means of negotiable instruments and to treat The Buyer’s Guarantor in all respects as though he were jointly liable with the Buyer as a debtors under this Deed to the Seller instead of being merely surety for the Buyer and in order to give full effect to the provisions of this guarantee the Buyer’s Guarantor and Indemnifier hereby waives all rights inconsistent with such provisions and which he might otherwise as surety be entitled to claim and enforce;

(e) This guarantee and indemnity shall not be determined by the death or bankruptcy of the Buyer’s Guarantor and Indemnifier but shall be binding upon his executors, administrators and assigns.

133. It would seem from that clause that Mr Lazar and Mr Byrnes and the companies associated with them are guaranteeing to Contor and Cobra respectively that Alpha will comply with its obligations under this deed. That follows because Alpha is the Buyer and clause 2 talks of the Buyer paying the sum of $100,000 for the Seller to assign to the Buyer all of the rights in the debt.
134. It is not clear why Mr Lazar and Mr Byrnes and their companies would guarantee Alpha’s performance in purchasing a debt from Cobra and Contor. All three parties, Cobra, Contor and Alpha, are controlled by Dr Low and Mrs Low. The Buyer and the Seller are controlled by the same parties.
135. There does not seem to be any need for any form of guarantee at all.
136. Moreover, if these were the deeds which operated between the respective parties to the deed, then CBH was not the assignee or buyer of the debts. Even though CBH is said to be an assignee to the deed, the assignment is not to the assignee but is a sale by the Seller to the Buyer and CBH is not one of the Buyers.
137. In the end there may be no assignment to Alpha and CBH. CBH’s entitlement to any part of the debt might arise because the debt purchased by Alpha became an asset of the Coomera Trust of which it was a joint trustee with Alpha.
138. The deeds perhaps raise more questions than provide answers.
139. In the end result, the deeds do, however, disclose that Dr Low purported to sell the debts to a company associated with himself for the benefit of the beneficiaries of the Coomera Trust and, for reasons which are unexplained, Mr Lazar, Mr Byrnes and the companies associated with them guaranteed the performance of that transaction.
140. The deeds do not disclose the advantages which might flow to CBH or Mr Lazar and the companies associated with him.
141. It is Mrs Low’s evidence in her affidavit that the deeds were executed on 17 December 2007 at the offices of Guardian Lawyers. She said at the same time she executed notices of assignment which are in the form of the notices of assignment annexed to the affidavit of James Warren Byrnes sworn on 29 May 2008.
142. Dr Low said that it was agreed at that time that CBH and Alpha would appoint Mr Byrnes as the agent of the Coomera Trust and that Mr Byrnes would provide a consultancy service in relation to the recovery of the debt. Dr Low says:

In this capacity he was authorized and responsible for engaging and liaising with lawyers and generally conducting the matter.

At all times, I was of the understanding that the assignment of the debts was lawful and proper. I relied upon representations made by Mr Byrnes and Mr Lazar that they were experts in debt recovery and knew what they were doing. Furthermore, Mr Byrnes worked for an entity named Australian Litigation Funders Pty Ltd who I assumed was its business to engage in this type of activity.

143. Mrs Low said that on 17 December 2008 she and Mrs Byrnes met as trustees of the Coomera Trust. Of course, they were not that. The trustees of the Coomera Trust were CBH and Alpha. However, she said they met as trustees and minutes of that meeting were signed by herself and Mrs Byrnes. Annexed to Mrs Low’s affidavit are those minutes which record that Alpha and CBH, as trustees of the Coomera Trust, resolved to appoint an agent:

The trustees resolved to appoint James Warren Byrnes of James W Byrnes & Associates and/or Australian Litigation Funders Pty Ltd and/or in his individual capacity as the representative of the trustees and do all things necessary on the trustees (sic) behalf.

Mr James Warren Byrnes is instructed to make demands on behalf of the directors of the trustee company.

Mr James Warren Byrnes is also instructed to liaise with lawyers on behalf of the trustees.

The minutes are signed by both Mrs Low and Mrs Byrnes.

144. On 18 December 2007 CBH sent to the defendants’ Adelaide solicitors, Magarey Farlam Lawyers, with copies to their Sydney solicitors, a letter and notices of assignment assigning the interest of Cobra and Contor to the joint trustees, Alpha and CBH. CBH and Alpha are the trustees of the Coomera Trust.
145. The notices of assignment were in the following form:

Notice of Assignment

TO Avpri Pty Ltd (A.C.N. 109-814-057)

WE GIVE YOU NOTICE THAT:

1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the ‘Assignor’) has assigned to Alpha Asset group Pty Ltd & Consolidation Byrnes Holdings Limited as joint trustees for the Coomera Trust absolutely the debt of $2,1000,000-00 due and owing by you to Cobra Property Services Pty Ltd.
   
2. You are irrevocably directed to pay $2,100,000-00 to The Coomera Trust
   

Dated this 18day of December 2007

For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited.

By its duly authorised representitive James W Byrnes

Notice of Assignment

TO: Hardel Investment Pty Ltd A.C.N. 083 276 000 46 Riversiside Grove, Denmancourt, SA 5075 (fax [phone])

WE GIVE YOU NOTICE THAT:

1. Contor Developments Pty Ltd A.C.N. 104 784 367 of Suite 404, 33 Lexington Drive, Bella Vista in the State of NSW (the ‘Assignor’) has assigned to Alpha Asset group Pty Ltd & Consolidated Byrnes Holdings limited as joint trustees for the Coomera Trust absolutely the debt of $1,791,032.50 plus interest accruing from the date of the assignment and cost now due and owing by you to the assignor
   
2. You are irrevocably directed to pay $1,791,032.50 plus interest and cost to the Coomera Trust.
   

Dated this 18day of December 2007

For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited.

By its duly authorised representitive James W Byrnes

(Grammatical and spelling errors as per original documents.)

They were each dated 18 December 2007 and they were each signed by Mr Byrnes as “By its duly authorised representitive (sic) James W Byrnes”. The notices might purport to reflect the authority that Mrs Low said was given on the previous day.

146. In the letter of 18 December 2007 Mr Byrnes writes:

Therefore the assignee now demands payment by Harris, the guarantor to the debtor in the amounts of $2,100,000.00 (two million one hundred thousand dollars) in relation to Avpri Pty Ltd, further the assignee now demands from Mr. Harris the guarantor in relation to Hardell (sic) Investments Pty Ltd the amount of $1,791,030.50 (one million, seven hundred and ninety one thousand, thirty dollars and fifty cents).

The demands having now been made, we give notice that we reserve our rights to immediately seek to notify any and/or all credit reporting agencies of the default of both the companies and we give notice that within seven days unless the amounts have been paid and/ or compounded to the satisfaction of the assignee, we reserve our rights to list the guarantor and the debtors as payment defaulters.

147. The demand mentioned in the second of the paragraphs referred to above would seem to be the demand made in the first paragraph. There is, however, no suggestion in that letter of 18 December 2007 that any statutory demands have been made or served or attempted to be served on any of the defendants. The demand in the letter cannot be thought to be a statutory demand for the purpose of Part 5.4 of the Act.
148. On the same day at about 4.10 pm Mr Pridmore received an email from Mr Byrnes which had attached to it copies of the notices of assignment which were in the same form as the notices of assignment sent to the defendants’ Adelaide solicitors on that day. I shall refer to the notices of assignment sent to the Adelaide and Sydney solicitors, and Mr Pridmore on 18 December 2007 as the “first notices of assignment”.
149. On 20 December 2007 CBH wrote to the defendants’ Sydney solicitors and said:

Please note that I write to you in our capacity as Joint Trustee and I have been empowered by the Trustees to deal with matter; I have full and complete carriage of the debts owing formerly to Contor Developments Pty Ltd and Cobra Property Services Pty Ltd.

150. The letter also encloses two notices of assignment again addressed to Hardel and Avpri which were in the following form:

Notice of Assignment

TO: Hardel Investment Pty Ltd A.C.N. 083 276 000 46 Riversiside Grove, Denmancourt, SA 5075 (fax [phone])

WE GIVE YOU NOTICE THAT:

1. Contor Developments Pty Ltd A.C.N. 104 784 367 of Suite 404, 33 Lexington Drive, Bella Vista in the State of NSW (the ‘Assignor’) has assigned to Alpha Asset group Pty Ltd & Consolidated Byrnes Holdings limited as joint trustees for the Coomera Trust absolutely the debt of $1,791,032.50 plus interest accruing from the date of the assignment and cost now due and owing by you to the assignor
   
2. You are irrevocably directed to pay $1,791,032.50 plus interest and cost to the Coomera Trust.
   

Dated this 18day of December 2007

For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited.

By its duly authorised representitive James W Byrnes

(signed)

By duly authorised representitive Elizabeth Laura Low

(signed)

Notice of Assignment

TO Avpri Pty Ltd (A.C.N. 109-814-057)

WE GIVE YOU NOTICE THAT:

1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the ‘Assignor’) has assigned to Alpha Asset group Pty Ltd & Consolidation Byrnes Holdings Limited as joint trustees for the Coomera Trust absolutely the debt of $2,1000,000-00 due and owing by you to Cobra Property Services Pty Ltd.
   
2. You are irrevocably directed to pay $2,100,000-00 to The Coomera Trust
   

Dated this 18day of December 2007

For and on behalf of Alpha Asset group & Consolidated Byrnes Holdings Limited.

By its duly authorised representitive James W Byrnes

(signed)

By duly authorised representitive Elizabeth Laura Low

(signed)

(Grammatical and spelling errors as per original documents.)

151. I shall call these notices of assignment the “second notices of assignment”.
152. Those notices of assignment are in different form to the first notices of assignment. The second notices of assignment are signed by both Mr Byrnes and Mrs Low as the “duly authorised representitive[s] (sic)” of the assignees. The notices of assignment have not been signed by the assignors.
153. Mr Byrnes said that on 18 December 2007 he sent notices of assignment by email to Mr Harris and Mr Ken Pridmore. He exhibited to his affidavit the notices of assignment which he said he sent to the respondents care of their registered offices. They are not the notices of assignment which the defendants’ Adelaide solicitors received on that date. They are in the same form as the form of notices of assignment which were exhibited to an affidavit of Mr Byrnes sworn on 19 March 2008 which was filed in the respective proceedings on 28 March 2008. The notices of assignment which are said to be dated 17 December 2007 and which he said were sent to “Peter Harris and Ken Pridmore of the Respondents and to their then solicitor Jim Biady” is in each case:

Notice of assignment

TO: Avpri Pty Ltd A.C.N. 109-814-057
255 Port Rd Hindmarsh SA 5007

WE GIVE YOU NOTICE THAT:

1. Cobra Property Services Pty Ltd A.C.N. 079-999-992 (the ‘assignor’) has assigned to Alpha Asset Group Pty Ltd & Consolidated Byrnes Holdings Limited absolutely [the debt of $2,100,000-00 due and owing by you to the assignor.
2. You are irrevocably directed to pay $2,100,000 to. Alpha Asset Group and Consolidated Byrnes Holdings Limited
3. You may contact the assignee through there appointed consultant James W Byrnes of level 3 suit 1 , 50 Margaret St Sydney or PO Box H172 Australia Square Sydney 1217 or by [e-mail]
   

Dated this 17 day of December 2007

For and on behalf of
(signed)
Justin Low, as director of Assignor

(signed)
Elizabeth Low as director of co
Assignee, Alpha Asset Group

(signed)
Catherine Byrnes as Director of co
Assignee, Consolidated Byrnes
Holdings Limited

Notice of assignment

TO: Hardel Investments Pty Ltd A.C.N. 083 276 000
255 Port Rd Hindmarsh SA 5007

WE GIVE YOU NOTICE THAT:

1. Contor Developments Pty Ltd A.C.N. 104 784 367 (the ‘assignor’) has assigned to Alpha Asset Group Pty Ltd & Consolidated Byrnes Holdings Limited absolutely [the debt of $1,791,032-50 due and owing by you to the assignor.
2. You are irrevocably directed to pay $1,791,032-50 to. Alpha Asset Group and Consolidated Byrnes Holdings Limited
3. You may contact the assignee through there appointed consultant James W Byrnes of level 3 suit 1 , 50 Margaret St Sydney or PO Box H172 Australia Square Sydney 1217 or by [e-mail]
   

Dated this 17 day of December 2007

For and on behalf of
(signed)
Justin Low, as director of Assignor

(signed)
Elizabeth Low as director of co
Assignee, Alpha Asset Group

(signed)
Catherine Byrnes as Director of co
Assignee, Consolidated Byrnes
Holdings Limited

(Grammatical and spelling errors as per original documents.)

154. I shall call this latest version of the notices of assignment the “third notices of assignment”. The third notices of assignment are the only versions which have been signed by the assignors.
155. It is clear that there are three different versions of the notices of assignment and the defendants made much of the facts of those differing versions.
156. The defendants contended that the notices of assignment were not signed on 17 December 2007 as each of them purport.
157. Mr Byrnes has not given evidence in relation to that matter. Mrs Low said that she executed a deed of assignment and a notice of assignment “on or about 17 December 2007”. She said that the deed and notices which she signed are annexed to the affidavit of James Warren Byrnes sworn on 29 May 2008. She says that she also executed further notices of assignment, copies of which are annexed to the affidavit of James Warren Byrnes. She does not indicate which affidavit but her evidence cannot be correct. The only notices of assignment annexed to Mr Byrnes’ affidavit are the third notices of assignment. The second notices of assignment, which she executed, were not exhibited to any affidavit of Mr Byrnes. She does not explain when they were executed. Neither Dr Low nor Mrs Low explain how Dr Low came to execute the third notices of assignment.
158. The applicants and the non-parties have not attempted to explain the discrepancies in the notices and Mrs Low was not cross-examined in relation to her evidence. In my opinion, it is likely that the only notices of assignment which were executed on 17 December 2008 were the first notices of assignment sent to the Sydney and Adelaide solicitors, and Mr Pridmore on 18 December 2008.
159. The second notices of assignment must have been executed prior to 20 December 2008 because CBH sent a copy of those documents to the Sydney solicitors on that date. It is unclear when the third notices of assignment were executed but it is unlikely that they would have been executed prior to 20 December 2008 because otherwise, if they were, they would have been supplied either on 18 December 2008 when the first notices of assignment were sent or on 20 December 2008 when the second notices of assignment were sent.
160. The applicants had the opportunity of explaining the differences and the evolution of the notices of assignment but neglected to do so. I accept the defendants’ criticism of Mrs Low’s evidence when she speaks of the document having been executed on or about 17 December.
161. The third notices of assignment were relied upon by the plaintiffs and Mr Byrnes, and Mrs Low as the notices given to the defendants. Mr Byrnes sent those notices of assignment to Mr Pridmore on 1 February 2008 but there is no evidence that the notices of assignment were ever served on the defendants or their solicitors.
162. I find that the third notices of assignment which she said were executed on 17 December 2008 were not executed on that date, were not executed before 20 December 2008, but were executed some time after 20 December 2008.
163. Mr Byrnes has sworn an affidavit on 29 May 2008 which was relied upon by the first plaintiff and Mr and Mrs Byrnes on this application. He said that he received advice from Dr Low’s accountants of the registered office of both Avpri and Hardel which was at Brentnalls SA, 225 Port Road, Hindmarsh.
164. He said that he completed the creditors’ statutory demands which he placed into the one envelope, affixed a stamp, addressed the envelope to the defendants’ registered offices and posted the statutory demands in the mail box at the post office at New South Head Road, Double Bay. The envelope, he said, bore a return address care of Thomas and Co Solicitors, Level 3, 50 Margaret Street, Sydney, New South Wales which was an office which he shared with those solicitors. He does not in that affidavit exhibit the statutory demands which he said he sent. At no time has an executed copy of the statutory demands been adduced by the plaintiffs or any of the non-parties.
165. Mr Matthew Holden is an accountant employed by Brentnalls SA Chartered Accountants for Hardel and Avpri. He has the responsibility for the day to day management of those companies’ files under the supervision of a partner.
166. The registered office of Avpri was at the offices of Brentnalls at 255 Port Road, Hindmarsh from 28 July 2004 to 26 December 2007. The registered office of Hardel was at the same office from 18 February 2005 to 26 December 2007.
167. Mr Holden has deposed that no statutory demand was received by Brentnalls for Hardel or Avpri in December 2007 or January 2008 from CBH or Alpha or at all. He has deposed to the procedures which exist in Brentnalls which is a small accounting firm of four partners and four associates. Mail addressed to the firm at 255 Port Road, Hindmarsh is delivered each week day. Mail addressed to a post office box is collected by a member of the administrative staff each week day morning from the post office which is across the road from Brentnalls’ offices. The receptionist sorts all of the mail and allocates the mail to the accountant responsible for the particular client.
168. Some time in December 2007 Mr Holden was told by either Mr Harris or Mr Pridmore to “look out for any demands or court proceedings directed to Hardel or Avpri and to notify them immediately if anything was received”. Mr Holden’s evidence is that the original of the statutory demands, which are attached to Mr Byrnes’ affidavit which is exhibited to the originating process, were never received at the registered office of the defendants.
169. On 22 December 2007 Mr Pridmore wrote to Dr Low and Mr Byrnes in the following terms:

As you are aware from previous correspondence we are engaged as consultants by Mr Peter Harris to assist with his business matters and those relating to various entities associated with Mr Harris (“the Harris Entities”). Mr Harris has requested that we communicate with you in relation to claimed rights of action by Justin Low, Contor Developments Pty Limited and Cobra Property Services Pty Limited against various of the Harris Entities and alleged assignments to Alpha Asset Group Pty Limited and Consolidated Byrnes Holdings Pty Limited as proposed in correspondence dated 18 December 2007 from Consolidated Byrnes Holdings.

We further write to each of you in your personal capacity as well as your capacity as director, trustee or representative.

We understand that you are already well aware of this, however, for abundance of clarity, the amounts that you claim to be owed by the Harris Entities are in dispute, both because our clients do not recognise the alleged assignment as being valid and because they deny the amounts that you assert are owed.

The Harris Entities do not consider that your alleged assignment, be it in favour of the Coomera Trust or some other entity or person, is enforceable and regard that you or those who you purport to represent, do not have any rights in any way as against any of the Harris Entities.

In addition:

1. Avpri Pty Limited disputes that there is anything at all owing under the Consulting Agreement or on any other basis to Cobra Property Services Pty Limited;
   
2. Hardel Investments Pty Limited disputes, in the very least, the amount claimed as owing by it to Contor Developments Pty Limited; and
   
3. Hardel Investments Pty Limited further claims that, to the extent that there is any amount owing to Contor Developments Pty Limited it is, at the very least reduced if not fully eliminated by reason of causes of action that Hardel Investments Pty Limited has against Mr Justin Low and Contor Developments Pty Limited.
   

Please also be advised that Mr Peter Harris disputes that any amount is owed or can be owed under any guarantee arrangements and relies upon the above.

170. Mr Pridmore has deposed as to the events of 19 December 2007 and a telephone conversation with Dr Low. He said:
     7. At or about 12 noon on Wednesday 19 December 2007 I received a telephone call from Dr Justin Low in which he indicated that he wished to discuss the ongoing settlement discussions. Amongst other things, in the course of that discussion Dr Low said words to the effect that he had until 3:00 pm that afternoon to decide whether to proceed with the assignment or not. At the conclusion of the conversation, Dr Low indicated that he would need to go and talk to his wife Elizabeth about the matter, and would call me back shortly.
        
171. Dr Low has not denied that telephone conversation. Indeed, he has not addressed the topic. He has deposed that the Deeds of Assignment were executed on 17 December 2007.
172. There is, in the absence of any evidence to the contrary, no reason to reject Mr Pridmore’s evidence as to the events on 19 December 2007 and accept that he had a telephone conversation with Dr Low and Dr Low said words to the effect that he had until 3.30 that afternoon to decide whether to proceed with the assignment or not. Moreover, having accepted that Dr Low said that, there is no reason to think that Dr Low was intending to mislead Mr Pridmore at that time. It is in my opinion likely that Dr Low was truthful when he said that he had until that afternoon to decide whether to proceed with the assignment or not.
173. That is not inconsistent with Mr Byrnes sending the first notices of assignment to the defendants’ Adelaide and Sydney lawyers because those notices were not executed by Dr Low and Mrs Low. As I have already said, the second notices of assignment must have been executed before 20 December for them to have been sent to the defendants’ Sydney solicitors on 20 December. For reasons already given, it is likely that the third notices of assignment were executed after 20 December.
174. On 22 December 2007 Mr Pridmore wrote to Dr Low and Mr Byrnes enclosing a copy of the email to the defendants’ Adelaide solicitors advising that he had been requested by Mr Harris to communicate in relation to claimed rights of action by Dr Low, Contor and Cobra against various of the Harris entities “and alleged assignments to Alpha Asset Group Pty Ltd and Consolidated Byrnes Holdings Pty Ltd”. He wrote:

We understand that you are already well aware of this, however, for abundance of clarity, the amounts that are claimed to be owed by the Harris entities are in dispute, both because our clients did not recognise that the alleged assignment as being valid and because they deny the amounts that you assert are owed.

The Harris entities do not consider that your alleged assignment, be it in favour of the Coomera Trust or some other entity or person, is enforceable and regard that you or those who you purport to represent, do not have any rights in any way as against any of the Harris entities.

In addition:

(1) Avpri Pty Limited disputes that there is anything at all owing under the Consulting Agreement or on any other basis to Cobra Property Services Pty Limited;

(2) Hardel Investments Pty Limited disputes, in the very least, the amount claimed as owing by it to Contor Developments Pty Limited; and

(3) Hardel Investments Pty Limited further claims that, to the extent that there is any amount owing to Contor Development Pty Limited it is, at the very least reduced if not fully eliminated by reason of causes of action that Hardel Investments Pty Limited has against Mr Justin Low and Contor Developments Pty Limited.

175. On 25 December 2007, Mr Byrnes sent an email to Mr Pridmore, Dr Low and Mr Lazar which was copied to the defendants’ Adelaide lawyers. Mr Byrnes wrote:

Formal demands had been issued and sent to the companies. I would expect the appropriate action would be for the companies to provide detailed points of claim to determine what they said is in dispute.

176. On 27 December 2007 Mr Pridmore responded to Mr Byrnes’ email, a copy of which he sent to Dr Low reminding Mr Byrnes that Mr Byrnes had been sent a letter from the Sydney solicitors on 21 December 2007. Mr Pridmore was no doubt referring there to a letter which had been written by the defendants’ Sydney solicitors, J Biady & Associates which had given rise to the more measured reply from CBH to which I have already referred.
177. Mr Byrnes responded again and Mr Pridmore wrote again on 2 January 2008:

We think that you have a gross misunderstanding of the situation. In relation to this matter, our clients do not recognise you, the people or entities you purport to represent or your so-called claims.

Notwithstanding many requests to both yourself and Mr Lazar there has been a (sic) absence of any genuine evidence in support of your claimed assignment of debts.

Further, our clients have made it abundantly clear that they dispute the debts that you claim to have had assigned. If there is any misunderstanding as to the nature of those disputes we suggest that you refer to Dr Justin Low.

178. Mr Byrnes responded to that email on 2 January 2008 (a copy of which was sent to the defendants’ Adelaide solicitors and Mr Lazar) advising that he would not provide Mr Pridmore with a copy of “executed assignments of both debts” but would allow Mr Pridmore to inspect them at any meeting which was convened.
179. On 4 January 2008 Mr Byrnes emailed Mr Pridmore with a copy to the defendants’ Adelaide solicitors and Mr Lazar arguing that neither Cobra nor Contor or the assignees were obliged to provide any further evidence apart from the notice of assignment. He continued:

You are well are I have made you aware of the demands both orally and in writing.
I have without prejudice to the creditors rights extended an olive branch.
I have been polite in every approach to you.
I have acted in a courteous and pleasant manner.
I again remind you of an old saying “never mistake kindness for weakness” the position is if not resolved by the time I go overseas on Thursday instruction which will result in the debtors being wound up.
I plan to instruct a large firm who can deal with the formalities and filing of applications.
The appointment of a liquidator will be the end I fear of the groups ability to operate.
I have said and so we can be very clear, my phone is on 24/7 ... the number 0425 266600. I am despite what you believe a reasonable person to deal with ... until I reach a certain point.
Then I will take all such legal actions as may be required to not only recover the funds but to ensure those who may have broken the law a prosecuted to the fullest extent of the law.
I again confirm.
Demands require the debtors attention.

(Grammatical and spelling errors as per original document.)

180. I am not sure how Mr Byrnes assesses what might be described as a “courteous and pleasant manner”.
181. On 7 January 2008 Mr Byrnes emailed Mr Pridmore (with copies to the defendants’ Adelaide solicitors and Mr Lazar):

As the sun slowly sets over the horizon I can but only imagine what is going on in the Harris camp. perhaps it is normal to leave things to the last moment.
Now again and for the record.
Debts owed to Dr lows 2 companies have been assigned.
You have had and your lawyer acknowledges receipt of the assignment.
You constantly imply without any particularization that the assignment is not recognized.

The assignment notices were sent to the registered office prior to the Harris group changing the registered office to PKF.
The demands were sent to the registered office prior to the companies changing there registered office.

I have on behalf of the assignor obtained a verbal consent for Mr A Wily to act as liquidator of the 2 Harris companies.
On Friday lawyers will be instructed to make an application to the court which we believe will ultimately lead to the appointment of Mr Wily as liquidator.

I just want you all to be clear, when you go before the judge and try to stop the application it will be to little to late.
I offered to review any genuine and dispute or any genuine cross claim. I simply requested that the details of your claim be particularized.

There are a great many firms who are in full swing, yet not even a letter.
I have offered to sit a discuss in a rational and sensible manner any reasonable proposal that would see the debt owed compounded to the creditors satisfaction.
But we get silly threats from the Harris camp.

Now a time will come when the only hope you have is to prove solvency.
Any attempt to do will need to factor in our total debts.
Next to prove solvency you need to demonstrate you can pay the bills as and when they fall due.
Well gentlemen then both due, well and truly.

Time is running out.

(Grammatical and spelling errors as per original document.)

182. Because of the mention of formal demands, Mr Harris made enquiries at the registered office of the defendants (Brentnalls SA Chartered Accountants) as to whether the defendants had been served with any statutory demand or any other court proceeding.
183. Mr Byrnes deposed that on 7 January 2008 he had a telephone conversation with a partner in Johnson Winter & Slattery who some time in early January became the defendants’ solicitors who told him that they had not received the statutory demands. He deposed to the conversation which he said was in the following form:

She said words to the effect, referring to the Statutory Demands: “We don’t have them. Can you send me copies?” I replied with words to the effect: “Look, I don’t have access to my office. I share some space in a law firm and they closed on 22nd December re opening on the 14th of January. I have some IT issues and I can’t log onto my server. I can receive and send emails but I can’t access saved documents. I advised Biady of this in my letter to him of 20 December.” (See annexure B page 2 para 2). “Miss Vozzi you are the third lawyer in the space of a month involved in this. This is not my first trip to the rodeo. Your clients owe the money. They might have some rubbish excuse over a small part of the debt. They might claim the interest calculation is incorrect but look, they are hopelessly insolvent. They offered to settle before the assignments to make a payment of $1,200,000 plus secure another $800,000 so I guess Miss Vozzi you can say the debt is $2,000,000 but they defaulted on that agreement and that settlement is out the window. I hope you get some funds on account. Look, send me an email particularising your dispute. I will even agree not to proceed even if it is out of time if you can particularise a genuine and bona fide dispute. Please do not waste my time by sending me self serving statements that you believe there is a dispute, that will just infuriate me and lead to an eventual winding up of your clients. Also Miss Vozzi if you can put to me a sensible resolution, if you can compound to my satisfaction on behalf of my clients funds which would constitute part payment of an offer to settle this I will consider that to be satisfaction of the demand by compounding payment. Get some instructions, I’m not going to immediately move after theca expiry date as I am about to leave with my family to travel to Los Angeles. I am happy to give you some time to try and settle it but you have to do one of three things. Appoint a controller, provide me details of a genuine and bona fide dispute for the full amount claimed or compound to my satisfaction an amount to be agreed upon.” She then said: “I will get some instructions”.

184. On his own evidence, Mr Byrnes was well aware, as at 7 January 2008, that it was the defendants’ case that they had not received the statutory demands.
185. On 8 January 2008 Mr Pridmore wrote to Mr Byrnes by email, a copy of which was sent to Mr Lazar and Dr Low claiming to be entitled to the assignment documents together with copies of all collateral documents and evidence of the debt which was the debts which were asserted to exist.
186. He concluded:

Please do not misunderstand what is being put to you. If, indeed, you can provide supporting evidence for your claims, then please provide it. Don’t offer to meet and “show” us. Provide us with full and unadulterated copies of all documents upon which you rely, including those listed above, and allow our client’s legal advisors to review them and provide appropriate advice.

We are instructed that:

(a) Our clients are and remain ready, willing and able to meet all proper claims on them; and

(b) Our clients will pay any debts properly and legitimately due and owing.

Please be aware that this is an open letter and will be produced to the Court.

187. Mr Pridmore’s request is reasonable. Moreover, he has made it clear that the defendants will and are able to meet the proper claims of its creditors.
188. Mr Byrnes responded to Mr Pridmore’s email, with a copy to Mr Lazar and Dr Low writing, inter alia:

Thank you for your response.
I shall deal with your request one by one.

1. There is no legal entitlement or obligation for either and assignee and or assignor of a debt to provide assignment documents, there only obligation at law is to provide a notice of assignment setting out who the assignor and assignee is and the amount that is purported to have been assigned.
2. The documents which give rise to the claim you and or your client already have. These are the loan agreement between Contour developments pty ltd and Hardel investments pty ltd, dated 16 dec 2005. the amount as per item 7 of the schedule at the time of the advance was $1,237,542.47. interest is at 15% and the default rate is at 20%. the next debt the subject of an agreement is Agreement between Avpri pty ltd and cobra property Services Pty Ltd., the agreement sets out in the recitals the parties obligations. the fee was largely the result of the introduction to the land, in addition point three deals with the engagement and again notes that the appointment is non cancelable. point 6 is a release to Cobra which should deal with any claims that the landowner may have. the initial Debt was 2.5 million. interest is not specified but interest can be levied by a court judgment on amounts not paid on the due dates. the final payment was to be paid by 31 December 2007
3. The debts are arrived at as per the agreements executed as mentioned above, there is no obligation to provide a tax invoice for repayment of a mortgage as it is a financial transaction and thus not liable for GST as defined under the GST tax act. The repayment of funds as per the consulting agreement are however the subject of a need to produce a Tax invoice. the act states that a creditor must provide a tax invoice upon payment being tendered and or the debtor can write to the creditor and demand a tax invoice to be issued within 28 days. non compliance is an offense and can be reported and dealt with by the ATO, however both the agreement and the deed of variation do not make payment conditional upon the production of a tax invoice, the document sets out dates for payment and the debtor should have tendered payment on the due dates. I can confirm that the assignor will produce a tax invoice at the time payment is tendered.
4. Again with respect none of anyone’s business and I suggest somebody gets advice on a creditor ’s obligation when a debt has been assigned the only obligation is for the production of a notice of assignment.

I am not interested in your clients reasonable satisfaction. They are parties who are seriously in default of there obligations and they are moving perilously close to having there companies would up.

I leave for overseas on Thursday morning.
So essentially they have till late Wednesday to meet and negotiate a settlement.
When I come back I expect to be informed of a return date for an application which will be filed on Friday.

As for your clients suggestion that they stand ready and able to pay the debts as and when they fall due this is nonsense.
The first debt had a repayment date of not later that 30 June 2006 your clients are 18 months late and have confirmed they did not have the funds and were attempting to refinance.
As far as open letter to the court, try getting an affidavit of solvency together as that is what you need or tender the amounts claimed in the demands.

(Grammatical and spelling errors as per original document.)

189. Mr Byrnes did not provide the information sought. Nor in fact has he ever provided the information. Any request of Mr Byrnes induced a quarrelsome response.
190. On 8 January 2008 Mr Harris instructed his present solicitors, Johnson Winter and Slattery to write to Mr Byrnes advising him that their enquiries revealed that no formal demand or notice had been served on the registered office of the defendants. He instructed his solicitors to ask what formal demands it was asserted had been sent. They wrote:

We act for Mr Peter Harris, Hardel Investments Pty Ltd (Hardel Investments) and Avpri Pty Ltd (Avpri).

Your email to Ken Pridmore and others sent on 7 January 2008 at 8.30pm has been referred to us. Your email suggests that “formal demands” have been sent to the registered office of Hardel Investments and Avpri, and you foreshadow making application to the Court to wind up the companies on Friday (11 January 2008).

We are instructed that our clients have made enquiries of both Bretnalls SA (former registered office of Hardel Investments & Avpri) and PKF Australia, Adelaide (current registered office of Hardel Investments & Avpri) as to whether any formal demands or notices have been received. Our clients have been informed that no formal demand or notice has been served on the registered offices.

Please clarify, as a matter of urgency, what “formal demands” you assert have been served, (and provide us a copy of any such written demand), and give details of the address, date and method of service.

We are further instructed that you are well aware (through previous correspondence sent on behalf of our clients) that there are genuine disputes:

● between our clients and Dr Justin Low & his related companies concerning the debts allegedly owed by our clients arising from the purchase of the Coomera property in Queensland; and

● between our clients and entities that you apparently represent concerning claims of assignments of the alleged debts.

In the circumstances it is entirely inappropriate for statutory demands to be made, and in the event that any such demand has been made, then we will be instructed to apply to set the demand aside.

Any application to wind up our client companies will also be vigorously opposed. We also request that we be given reasonable notice of any application or Court proceedings commenced against our clients.

Our clients reserve all rights.

This is an open letter and our clients may seek to bring this letter to the attention of the Court, if so advised.

Please direct all future correspondence in relation to this matter to this office.

191. Whatever might have been Mr Byrnes’ impressions as at 7 January 2008, he must have known when he received the letter from Johnson Winter & Slattery on 8 January 2008 by email (copies of which were sent to Mr Lazar and Dr Low) that the defendants asserted that they had not received any statutory demands. Dr Low and Mr Lazar must have been aware of the defendants’ position.
192. On 11 January 2008, after Johnson Winter and Slattery had obtained confirmation from the defendants’ accountants and former solicitors that they had not received any statutory demand, they wrote to Mr Byrnes advising that in those circumstances he could not apply to wind up the defendants. The letter was sent by email, a copy of which was sent to Mr Lazar. They wrote:

We refer to our letter dated 8 January 2008 and to your subsequent telephone conversation with Toni Vozzo.

We are instructed to write to you further as follows.

Our client companies have not been served with any statutory demand. We enclose a copy of letters from the current and former registered offices of our client companies confirming this.

Accordingly, on the basis of our instructions, we can see no basis upon which you could apply to wind up our client companies.

Our clients continue to reserve all rights including, but not limited to, the right to claim indemnity costs and damages against you and those you represent arising from any winding up application.

193. On 15 January 2008 Mr Byrnes wrote to the defendants’ solicitors and said:

The demand’s (sic), now expired was sent by mail to the registered address of the companies.

I personally saw to the postage and have agreed to swear affidavit Relating (sic) to same.

He further wrote:

The demand has now expired.

An act of insolvency has occurred.

I will hold of filling the winding up notice in the supreme court of NSW for a short period to allow you to seek instructions from your clients about there ability to make a genuine offer capable of almost simultaneous settlement.

(Grammatical and spelling errors as per original document.)

194. On 21 January 2008 the defendants’ solicitors wrote to Mr Byrnes in a letter sent by email and marked “URGENT”, a copy of which was sent to Mr Lazar and Mrs Low and a solicitor, Mr Noney at Guardian Lawyers. First, they sought advice from Mr Byrnes as to what capacity he purported to act in relation to the matter. Secondly, they confirmed that the defendants had not been served with any statutory demands or other formal proceedings in relation to the matter. Thirdly, they advised that the defendants disputed the validity and effectiveness of the assignments of the “Alleged Debts”. They advised that the defendants asserted that the Alleged Debts were incapable of assignment; because the services agreement was a contract for personal services and not capable of assignment; and because Cobra and Contor had fixed and floating charges over their assets and undertakings to National Australia Bank Ltd and Equititrust Ltd. Fourthly, they disputed that any money was owing under the Alleged Debts. In respect of the services agreement they disputed that any amount was owing. In respect of the loan agreement they asserted that there were significant defences and counterclaims arising from the underlying property transactions concerning the sale of the Coomera land to Hardel. Lastly, they complained about Mr Byrnes and Mr Lazar having approached various of the defendants’ financiers, including BankWest and making defamatory or misleading remarks about the defendants.
195. In respect of the last matter they wrote:

We are instructed that you and Mr Lazar have approached various financiers of our clients, including BankWest. Our clients believe such approaches may have included the making of defamatory or misleading remarks regarding our clients.

These approaches are entirely without our clients’ authority or consent. Our clients maintain that neither you, Mr Lazar, Mrs Low nor those you purport to represent have any proper basis to approach our clients’ financiers or anyone associated with our clients’ business interests (other than, of course, ourselves).

Please immediately desist from all communications with our clients’ financiers, including BankWest. All communications relating to this matter must be in writing directed to this office. Our clients reserve all of their rights in relation to all such unauthorised communications, including the right to seek damages for any loss suffered.

Our clients continue to reserve all of their rights.

196. The solicitors reserved the right to rely on the letter in the event that proceedings were commenced.
197. Mr Byrnes responded to the letter on 21 January 2008. He continued to maintain that there was no obligation on either the assignor or assignee to provide copies of the assignments to either the defendants’ solicitors or the defendants, but only to provide a notice of assignment which had been done.
198. He said he had authority to deal with the matter. He said that demands were sent unanswered and an act of insolvency had occurred.
199. He addressed the other matters referred to in the defendants’ solicitors’ letters and said that, under the circumstances, “we will now file an application for winding up of the 2 debtor companies and seek the appointment of a liquidator”.
200. On 22 January 2008 Mr Byrnes sent an email to Mr Harris, with copies to Dr Low, Mr Pridmore and Mr Lazar, Johnson Winter & Slattery, and Mr Grant McCartney who, by this stage, had apparently become the plaintiffs’ solicitor. He wrote that no genuine bona fide dispute had ever been articulated. The debts had been properly assigned and “[n]otices of assignment had been forwarded to the companies and there (sic) lawyers” at the time. He again said that the debtor had no right to see the assignment agreements. He said demands had been issued and “the correspondence above supports the argument that the Harris Group and its respective companies have been on notice since dec 07 (sic)”. He said:

To simply say we did not receive them is not going to hold up. the (sic) correspondence suggests that you new (sic) as you were advised about the demands but never rejected the fact that demands had issued (Jones and Dunkel).

He continued:

The winding up of these two companies will be the start of the complete collapse. the (sic) appointment of any controller to a Harris group company will be an act of default on all loans as well.

It is for this reason when filing the winding up application today I asked that an early return date could be found, we would not propose to advertise initially with the view that you may finally take things seriously and try and finalise a settlement.

201. It seems to me that that statement which was published to Dr Low and Mr Lazar and Mr McCartney evinces an intention on the part of Mr Byrnes to use the winding up procedure as a debt collection process. That seems to be clear from his statement that he would proceed in the way that he mentioned so that a settlement could be finalised.
202. The thrust of that particular statement is clear evidence, it seems to me, that at least as at 22 January 2008 Mr Byrnes saw the winding up procedure as an opportunity to collect the debts which he claimed had been assigned to the plaintiffs.
203. On 23 January 2008 Johnson Winter & Slattery emailed Mr Byrnes with a copy to Mr Lazar and Guardian Lawyers requesting that Mr Byrnes desist from approaching the defendants’ financiers as Mr Byrnes had threatened to do earlier that day.
204. This drew a further response from Mr Byrnes, a copy of which was sent to Dr Low, Mr Lazar, Guardian Lawyers and a number of other persons. In that email he wrote:

As for actions in damages, your clients are defaulting, insolvent, delinquent, unprofessional, un commercial, dishonest.

Do as you like ... I will not stop. in fact I just got back from a lovely 10 days in the USA and am just starting. this is the beginning.

I have complaints ready for ASIC

I have a complaint ready to go to the Major fraud Squad, re 178 ba and 178 bb of the crimes act (NSW)

I have a press release ready to go to the media about how the Harris group raised its funds, or fleeced the flock.

I have now detailed a list of every Harris company every lender to every company and have a letter just waiting to go to every lender.

I have 2 Sydney liquidators who have consented to act in winding up applications.

I have reports ready to go to every credit reporting agency in Australia listing Harris personally and his companies as payment defaulters.

As I get out of Holiday mood and go from cheerful to full scale collection mode, your clients will see that I will either achieve a result by liquidating and funding a liquidator to recover from related parties, reject un commercial claims from parties who really have no commercial interest in the project.

I have given up on your clients being sensible and wanting to try and resolve this with dignity and common sense, now its about getting every penny and then bankrupting the directors and getting ASIC to step in and protect the investors who have contributed to a scheme that is anon conforming scheme

Thank you, you will be forwarded the notices from the supreme court and you can arrange to either attend or appoint an Sydney agent.

Perhaps your clients, might get some advice and not act like amateurs.

They have as I see it got more problems then me coming.

Have a nice day
☺

(Grammatical and spelling errors as per original document.)

205. The opening sentence in the email says it all. The email contains a plethora of threats. Mr Byrnes indicates in that email he will leave no stone unturned in bringing the defendants to their corporate knees. The tone of that email again indicates the plaintiffs’ and Mr Byrnes’ purpose at that time, which was known to the persons to whom I have mentioned the email was sent, was to exact a settlement out of the defendants by the commercial threats contained in that email.
206. On 25 January 2008 Mr Byrnes emailed Mr Pridmore advising that “Winding up applications were finalized and attempted to be filed today, however one signature was missed”. He also advised that the lawyer handling the winding up application was Grant McCartney of Simmons and McCartney, Lawyers and Attorneys.
207. Dr Low has deposed that he was told by Mr Byrnes that Mr Byrnes had appointed Mr McCartney to assist him with the matter. He said that he and his wife felt comfortable with Mr McCartney’s involvement “and our expectation was that as such, the debt would be pursued in a professional and legitimate manner. We relied upon Mr Byrnes to keep us updated on progress in relation to the matters and to ensure that proper legal advice in relation to the process was obtained at all times.”
208. He also says that he and his wife have been kept abreast of developments but that most of the time they had not been fully aware of what Mr Byrnes and Mr McCartney have been doing.
209. Dr Low said that he was aware that Mr Byrnes and Mr McCartney were intending to pursue the matter by commencing winding up applications based upon the statutory demands but did not understand the significance of that action. He said that at no time did he have any understanding that anything done by Mr Byrnes or Mr McCartney was irregular.
210. Dr Low was, in fact, copied into a number of the emails sent by Mr Byrnes. He was not only aware of what Mr Byrnes was doing but he must have been aware of the manner in which Mr Byrnes was carrying out the exercise. Dr Low does not suggest in his evidence that he did not receive copies of the communications which were said to have been sent to him.
211. On 1 February 2008 the defendants’ solicitors wrote to Mr McCartney of Simmons and McCartney in the following terms:

We act for the Harris Companies in relation to a dispute with Dr Justin Low, Contor Developments Pty Ltd (Contor) and Cobra Property Services Pty Ltd (Cobra) regarding the sale of a property at Coomera, Queensland, in 2005.

We have been informed by Mr James Byrnes that he has instructed you to act in relation to applications to wind up the Harris Companies.

We understand that Mr Byrnes purports to represent alleged assignees of rights claimed by Contor and Cobra to arise under a Loan Agreement and a Consultancy Agreement entered into with various of our clients.

We request that you confirm whether you are instructed in this matter and who you are instructed by.

We have previously sought information from Mr Byrnes as to whom he purports to represent, and evidence of his authority to represent any entities other than himself. Mr Byrnes has not to date provided us with satisfactory, or indeed any, evidence of his authority to act on behalf of an entity other than himself.

If you are instructed by Mr Byrnes, we therefore foreshadow that we will need to be satisfied regarding Mr Byrne’s (sic) capacity and authority to instruct you in relation to this matter.

Finally, as we have advised Mr Byrnes a number of times, our clients have not to date been served with any statutory demands or other court proceedings. You should also be aware of our recent correspondence with Mr Byrnes concerning the underlying dispute. We especially refer to our letter to Mr Byrnes of 21 January 2008 (copy attached).

We have instructions to accept service of any such demands or proceedings.

Our clients reserve all of their rights.

Their letter of 21 January 2008 addressed to Mr Byrnes was enclosed.

212. Mr McCartney was put on notice, if he had not been earlier, as was his firm, that the defendants asserted that they had never been served with any statutory demands at any time. He was also aware because he received Johnson Winter & Slattery’s letter of 21 January 2008 of the various matters which they had raised in that letter with Mr Byrnes. Mr McCartney later suggests that he did not receive that letter when it was sent. That may be so but, as will be shown, there is no question that he later received the letter.
213. On the same day, 1 February 2008, Mr Byrnes emailed the defendants’ solicitors with copies to Mr Pridmore, Mr Harris, Mr McCartney and Dr Low enclosing copies of the third notices of assignment. The third notices of assignment were those subsequently exhibited to Mr Byrnes’ affidavit. He also advised that he had instructed Mr McCartney to file a winding up application on Monday morning. He wrote:

I again enclose for your reference a copy of the notice of assignment.
An earlier notice that complied with legal requirements was sent on the day of the assignment.

I took the trouble of sending you yet another copy for your records.
I have instructed Grant McCartney to file the winding up application on Monday morning.
I have spent much time recently with Justin Low preparing the basis of an affidavit for him to swear outlining the history, chronology, earlier default when Avpri failed to settle on the first contract for sale. details of the other buyer, the valuation at the time of exchange and at settlement.

I have prepared details of my emails that clearly put the group on notice of the demands and the offers to listen to any genuine dispute, thus avoiding a cost order if they had a proper claim, which was never brought.
And its far to late now.
We will next week also seek an order that the companies execute loan documents over QLD and provide details of the repudiation including the removal of the security which formed part of the variation which has now been repudiated.
The repudiation of the variation allows for the original security to be demanded.

Next, we plan to seek an order for the removal of the Harold Sealy security to be removed, based on the advances no funds from him would have been used in this project,

A liquidator doing a forensic tracking will find much has been lent to inter company loans without security ... so we would then move to allow the court to appoint our liquidator as provisional liquidator over the group.

Silly thing is I tried to settle, I offered time after time to meet and resolve this .... i could have been a big help, as you know I could have arranged to fund the South Australian project as well

Have a nice weekend (it just does not get any better than this)

(Grammatical and spelling errors as per original document.)

214. Again, in my opinion, this email is written for the purpose of trying to secure a settlement which, at least until this point of time, was the plaintiffs’ and Mr Byrnes’ plan.
215. This is made clear, in my opinion, by an email sent the next day to the defendants’ solicitors, Johnson Winter & Slattery, their former Adelaide solicitors, Dr Low and Mr Armstrong and other parties. He wrote:

Pardon my cut and pasted extracts.

There are 2 winding up applications which I have held back in having filled till now.

I have, so you can be clear copied the initial draft on the Hardell application which is shown below.

Next I have obtained a chronology from Justin which will be used to prepare as a supporting affidavit from him as to the facts nd circumstances.

I will provide an additional affidavit attaching the correspondense clearly outling our postion and requesting info re the demands.

There is not nor has there ever been any proper dispute and or cross claim by Hardell or ny Haris entity.

I have bent over backwards to try and encourage fruitfull discussion.

Every time I do I get feedback of derogritory and defamatory comments directed t me.

I have always acted with a sense of deciency and always used manners. I have offered to try and resolve this.

I am not stupid, a melt down of all harris companies will not get back 100c in the dollar, given that you people don’t even have the manner to discuss I am left with no choice.

The applications are now ready for filing and we will proceed.

In the attempt to save your groups ultimate collapse I urge you to make an immediate and direct contact with me by mobile this morning so s to set up an urgent conference to resolve this.

Very very ;ast chance

(Grammatical and spelling errors as per original document.)

216. This email, in my opinion, establishes that the plaintiffs and Mr Byrnes were using the winding up procedures in Pt 5.4 of the Act for the purpose of debt collection, not for the purpose for which the procedure was designed. The final two paragraphs of the email establish that.
217. On 7 February 2008 the defendants’ solicitors wrote again to Mr McCartney enclosing the email which they had received from Mr Byrnes that day which suggested that an application had been made under s 459P of the Act. They wrote:

In view of the matters noted, we request that you provide us with a response to our letter to you of 1 February 2008 without further delay, given that you now appear to be acting on behalf of the two entities associated with Mr Byrnes in relation this matter on instructions from Mr Byrnes. More importantly however we reiterate that our clients have not been served with any statutory demand.

The only documents which have been provided to our clients have been Notices of Assignment and a letter from Mr Byrnes dated 18 December 2007. None of these documents could possibly constitute a valid statutory demand under the Corporations Act which could be relied upon in an application under Section 459P of the Corporations Act.

We also request that you provide us with a copy of the “statutory demand” which you intend to attach to the Originating Process.

Our clients reserve all of their rights.

218. On the same day Mr McCartney wrote to the defendants’ solicitors advising that he had not received a letter of 1 February and asking it to be sent again, which it was.
219. Mr McCartney’s reply to the three letters written by Johnson, Winter & Slattery on 21 January 2008, 1 February 2008 and 7 February 2008 was somewhat laconic. He said:

I suspect the issues that you raise will be addressed in the due course of litigation. I am not particularly sure that the responses that you seek have any particular relevance to the matters at hand. I will however give those matters some consideration.

220. Mr Byrnes received a copy of Mr McCartney’s email to Johnson, Winter & Slattery and replied to it sending a copy to Ms Thomson at Johnson, Winter & Slattery. But his email adds nothing to the statements already made except he reiterates the threat of winding up proceedings.
221. No explanation has been given as to why the plaintiffs, Mr Byrnes and the plaintiffs’ solicitors were not prepared to accede to the reasonable requests made by the defendants’ solicitors. They could easily have sent copies of any statutory demands which had been served at that time. There does not, it seems, to be any reason not to. Mr McCartney’s reply which is referred to above suggests, as his behaviour generally in the proceedings confirms, that he was not in control of the proceedings. The proceedings were being run by Mr Byrnes. However, that is no consolation for Mr McCartney or his firm. He and they had a responsibility like his client not to use the winding up procedure except for the purpose for which it was designed.
222. The separate proceedings were commenced on 28 March 2008 in the New South Wales Registry of this Court in which CBH and Alpha sought the winding up of the defendants under s 459P of the Corporations Act. CBH and Alpha relied upon the failure by the defendants to comply with statutory demands. In each proceeding a copy of the statutory demand was said to be attached to the originating process.
223. Annexed to each of the originating processes was a creditor’s statutory demand for payment of a non-judgment debt which was in each case said to be dated 18 December 2007 and said to be under the hand of James Warren Byrnes but was unsigned.
224. Also annexed to the originating process was an affidavit of Mr Byrnes under s 459E of the Corporations Law but which was also not signed or witnessed.
225. In both cases, Mr Byrnes deposed to the following:

1. I am a consultant authorised by the Creditor to swear this Affidavit.

2. I have reviewed the amounts owed by the Debtor to the Creditor and believe there is no genuine bona fide dispute to the amount claimed by the Creditor.
   
3. I confirm that the amount is currently due and payable.
   
4. I have provided the debtor with notices of assignment.
   
226. On 1 April 2008 Mr Pridmore conducted electronic searches at the Federal Court and discovered that the originating applications in these proceedings had been filed.
227. On 4 April 2008 the defendants’ solicitors wrote to Messrs Simmons and McCartney advising them that they had become aware that winding up applications had been filed but had not been served, but that in any event the winding up applications were themselves based upon statutory demands that also had not been served. They wrote:

We also advised that we had instructions to accept service of any statutory demands.

We have not received any statutory demands directed to Hardel or Avpri since 7 February 2008 or at all. The registered offices of Hardel and Avpri have not received any statutory demands since 7 February 2008, or at all.

In addition to our correspondence advising you that service had not occurred, your client Mr Byrnes was so advised in various correspondence, including letters dated 8 January 2008, 11 January 2008, 21 January 2008 (which was forwarded to you on 1 February).

Mr Byrnes has therefore been aware since at least 8 January 2008, and you have been aware since at least 1 February 2008, that our clients’ position is that they have not been served with any statutory demands. Despite this, neither you nor your client has forwarded us or our clients the statutory demands which are now attached to the Applications.

In our correspondence we have also made it clear that if statutory demands were served, our clients would dispute the amount of the alleged debts, that your clients had taken an assignment of the alleged debts (or had any interest at all in the alleged debts) and Mr Byrnes’ capacity to deal with the alleged debts.

Rather than forwarding us copies of the statutory demands alleged to have been served (which we requested by letter dated 7 February 2008), Mr Byrnes has apparently now sworn before you two affidavits to the effect that Hardel and Avpri have been served with the statutory demands attached to the Applications. Furthermore, Mr Byrnes deposes that there is no genuine bona fide dispute as to the amount claimed, contrary to our earlier correspondence.

In these circumstances, there are serious issues concerning and arising from Mr Byrnes’ allegation that there has been service of the statutory demands in the form attached to the Applications. It follows therefore that there are serious issues regarding the underlying basis of the Applications.

We invite your clients to discontinue the proceedings immediately. Please provide us with a sealed copy of the Notice of Discontinuance of both proceedings within seven days.

228. The defendants were served on 7 April 2008.
229. On 8 April 2008 Mr McCartney replied:

Attached please find Mr Byrnes’ response to your facsimile letter of 4 April 2008.

I would point out that your repetitious statements that your clients have not been served with stat demands is (sic) not in itself any form of evidence of the fact.

Our instructions are clear on the issue of service and the applications on foot have been filed based on those instructions. If you dispute service your options are clear.

That is one matter. The other which needs to be resolved is how your clients propose to repay the monies owed to our clients. You appear to be silent on this point. Our view is that your clients are insolvent and to date all conduct supports that conclusion.

Rather than continue with strident denials of service you should put on some evidence but make sure that evidence includes proof of solvency.

As you know we are authorised to accept service.

230. It is somewhat surprising to have a party’s solicitor enclose his client’s reply to the opposing solicitor’s correspondence. However, Mr Byrnes wrote:
231. Mr McCartney sent on Mr Byrnes’ email. In that email, Mr Byrnes wrote:

Mr McCartney has forwarded me your letter and I have responded as follows.

Your letters of the 1st and 7th of February 2008 presuppose that the creditors proposes to issue fresh demands.

The creditors are not disposed to issue fresh demands and rely upon the demands sent in December last year.

The applications to wind up are based on the demands issued sent and deemed served last year, your proposition that the demands were not served is an issue for evidence.

Again the creditors rely on the demands served last year which are out of time.

Your constant repeating of we don’t have the demand is a matter for evidence; a copy of the demand attaches to the application to wind up. You should however review the vast correspondence that was issued from my office that referred to demands. (Jones v Dunkel)

Your client’s baseless allegation of genuine monetary dispute is tiresome.
They have never articulated the proper basis for a genuine and bonified dispute.

In fact, I invite you (your office) or staff) to properly particularize in detail the basis for the dispute.
In doing so I draw your attention to the agreements entered into by Harris and co ... please do not waste your and my time with fairy tales about non existent damages.
The only defense is one of solvency, a test your client cannot meet.

As for the comment that rather than provide details of demands you take acceptation to the creditors fulfilling there rightful obligation, your firm were advised with a short but precise response, that the issues raised was and is a matter for evidence.

You invite the creditors to discontinue and provide sealed orders.

In the words of Daryl Kerrigan “Tell em there dreaming”

Instead of making silly demands and again more hollow threats, I again ask you for the last time; show us your bonified dispute.

rather than waste our time with request that you clearly know the creditors will reject, I would suggest before the advertising and notification starts that your client gets on a plane and fly’s to Sydney were he can sit with the creditors and there representatives and lawyers and we will entertain a settlement of the claim. I have even advised your client after receiving instructions that the creditors would consider buying stage 2 to clear the debt (at current market value) (englobo, undeveloped) if this assists.

The creditors would prefer money than land, the creditors have had numerous offers from Harris and co and your client by his actions at least has confessed in part that the debt is owed, but I am advised that if the debtor and guarantor wish to remain solvent they will need to have the creditor withdraw. the only way that will happen is with a short minutes of order setting out payment and or payment terms, I suggest your client arranges a substantial amount of money before he travels to Sydney is he is inclined not to want to sell the land.
The current debt due and payable is in excess of 4 million dollars

(Grammatical and spelling errors as per original document.)

232. Mr McCartney’s statement that the defendants’ statements that they had not been served with the statutory demands was not itself evidence of the fact of non-service is, of course, correct. However, he had been put on notice prior to the issue of these proceedings, and was put on notice again immediately after the issue of the proceedings, that the defendants maintained that they had not been served with the statutory demands. Notwithstanding he was so advised, he caused the proceedings to be issued.
233. Mr Byrnes also was well aware of the defendants’ position and he was prepared to allow the matter to be dealt with as an issue in the proceedings. Like Mr McCartney, he was prepared to leave the question of whether there was a genuine dispute for determination in the proceedings. He was not prepared to address either issue at that early stage of the proceedings.
234. Even after these proceedings were issued, Mr Byrnes made it clear that the plaintiffs’ motivation for the bringing of the proceedings was to obtain an offer of settlement from the defendants in relation to the dispute. The plaintiffs were prepared to settle by way of receiving money or buying into the development itself. That is clear by what is said in the penultimate paragraph of the email mentioned above.

THE FINANCIAL CAPACITY OF THE PLAINTIFFS TO PAY COSTS

235. Mrs Byrnes has filed an affidavit in which she has exhibited financial statements for CBH and ALF, a wholly owned subsidiary of CBH. She deposes that Australian Corporate Restructuring Services Pty Ltd (ACRS), also a wholly owned subsidiary of CBH commenced trading on 1 July 2007 providing aid to companies in financial distress and has returned a significant profit in the previous financial year. No financial statements are exhibited in regard to ACRS. No consolidated accounts are exhibited.
236. The purpose of her evidence is to establish that the first plaintiff is in a position to meet any order for costs and, in those circumstances, no order for costs should be made against the non-parties. Mrs Byrnes has deposed that CBH is a parent company of a number of subsidiaries and also acts as a trustee company. It is involved in property development. When entering into a property development it usually causes a special purpose vehicle to be incorporated which is wholly owned by CBH in its own right or as trustee for one of the trusts it acts as trustee for.
237. Mrs Byrnes has deposed that CBH has the financial capacity to meet any costs orders that may be made in the subject proceedings.
238. CBH’s balance sheet shows that it has a deficiency of assets. Notwithstanding the asset deficiency, the accounts have been prepared on the going concern basis because “the company has received a guarantee of continuing financial support from the director to allow the company to meet its liabilities and it is the director (sic) belief that such financial support will continue to be made available”. Its current assets amount to just over $4.365 million. Almost the whole of the company’s current assets is a secured loan (mortgage) described in the accounts as “held-to-maturity investments”. The accounts do not disclose the mortgagor. No current liabilities are disclosed but there is a non-current liability of almost $5.6 million, being a debt owed to Mrs Byrnes. The terms of the debt to Mrs Byrnes are not disclosed in the accounts. However, CBH’s Profit and Loss Statement shows interest paid of $363,730 which was presumably paid on this debt. Presumably because the mortgage loan given by the company is included as a current asset, recourse can be had to it for the purpose of the company meeting its debts as and when they fall due but there is a dearth of information in that regard.
239. CBH made a trading loss in 2007 of $5,510 on an income of $1.075 million but paid directors’ fees of $300,000 and bonuses of $260,000.
240. On the face of it, CBH has sufficient current assets to meet an order for costs. However, if Mrs Byrnes were to demand the amount owing to her then the company’s liabilities would exceed its assets and it would not be able to meet an order for costs.
241. The balance sheet of ALF also shows that it has a deficiency of assets just under $60,000. It has total current assets of $687,000 and no non-current assets. Its current assets comprise trade debtors. It has a current liability to CBH of $650,000. The liability to CBH is not shown as an asset in CBH’s accounts unless it be part of the “hold-to-maturity investments”. Nevertheless, on a consolidated basis, CBH’s assets would be reduced and its deficiency of assets would increase by that amount. It does not appear that ALF would necessarily be able to meet any order for costs. In any event, ALF is not a party and no order for costs is sought against it. The same might be said of ACRS. It is not a party and no order for costs is sought against it. Because ALF and ACRS are wholly owned subsidiaries of CBH, the only way that the defendants could have recourse to their assets is if the defendants caused CBH to be wound up.
242. In my opinion, the financial statements do not disclose that the first plaintiff could meet any order for costs. Dr and Mrs Low have not adduced any evidence of Alpha’s financial circumstance and therefore there is no evidence that the second plaintiff could meet any order for costs.

THE DEFENDANTS’ CONTENTIONS

243. It is, and always has been, the defendants’ position that they have not been served with any statutory demands and that therefore the presumption under s 459F could not arise. The defendants contended that Mr Byrnes has never produced copies of the actual statutory demands which he alleges were served.
244. On 19 March 2008 Mr Byrnes swore an affidavit pursuant to s 459E of the Act stating that he believed there was no genuine and bona fide dispute as to the amount claimed by CBH and Alpha. Exhibited to that affidavit was, as required, what was said to be the statutory demands which had been served.
245. It has always been the defendants’ position that there was a genuine dispute as to the debts which are the subject of these proceedings and that Mr Byrnes was well aware of that prior to the issue of the winding up applications.
246. The defendants contend that Mr Byrnes, and thereby the plaintiffs, have engaged in a crude and heavy-handed attempt to apply as much pressure to the defendants as possible by whatever means with a view to extracting a payment from the defendants, despite there being a genuine dispute as to the existence and quantum of the alleged debts.
247. It was contended that the first notices of assignment sent by email on 18 December 2007 and by facsimile on the same date was signed by Mr Byrnes alone and not by the purported assignor. They were the only copies of the notices of assignment the defendants received prior to the purported date of the statutory demands. However, on 20 December 2007 the defendants were sent the second notices of assignment purported to have been signed by each of Mr Byrnes, Catherine Byrnes and Elizabeth Low. The third notices of assignment were sent to the defendants’ solicitor on 1 February 2008.
248. It was contended that Mr Byrnes was well aware that prior to the winding up proceeding being commenced the defendants had not been served with the statutory demands; that they disputed the existence of the debts; that they disputed the assignment of the debts and Mr Byrnes and the plaintiffs’ capacity to deal with those debts. Notwithstanding those matters of dispute, the winding up proceedings were commenced. The defendants contend that the plaintiffs and Mr Byrnes continued to prosecute the winding up proceedings in an endeavour to pressure the defendants into paying the alleged debts right up until the time of their capitulation at the trial.
249. The defendants contend:

The statutory demands were issued, and the winding up proceedings were commenced and maintained, for the purposes of recovering the alleged debts from the defendants. Further, the winding up proceedings were issued and maintained despite Byrnes (and CBH and Alpha) being informed that the defendants had not received the statutory demands (and with you refusing to provide them a copy prior to issuing the winding up proceedings), and hence with the purpose of using a threat of winding up to secure payment of a contested debts without giving the defendants a fair or proper opportunity to contest, or seek to set aside, the statutory demand.

MR LAZAR’S CONTENTIONS

250. Mr Lazar has filed an affidavit in opposition to the claim for costs. He said that he is the sole director and secretary of BAA. He is separated from his wife and he is not sure that she has been served with any of the documents in the proceedings. He said that he has no involvement in the proceedings and has not received any benefit as a result of these proceedings. He said that his involvement in the proceedings came to an end prior to the commencement of the proceedings.
251. As has been shown, Mr Byrnes included Mr Lazar in a number of the communications he had with the defendants. He and BAA are also parties to the deeds of assignment but it is not clear from the deeds what the true position in in regard to the parties’ relationship with each other. The deeds do not disclose whether Mr Lazar and BAA will gain by the recovery of the debts. Indeed, for reasons already given, BAA’s position is somewhat ambiguous. I suspect that there are other commercial arrangements in existence between the non-parties and the plaintiffs of which I am not aware.
252. Whilst Mr Lazar says that his and BAA’s involvement ceased before the issue of proceedings, they were involved as at 17 December 2007 when the deeds of assignment were apparently executed. He also received copies of an email from Mr Byrnes on 7 January 2008. The defendants’ solicitors wrote to him on 21 January 2008 accusing him of approaching their financiers and requiring him to desist from doing so. Mr Byrnes sent Mr Lazar further emails of 22 January 2008, 23 January 2008 and 2 February 2008. However, there is no evidence that he was involved after 2 February 2008 which was about six weeks before these proceedings were commenced. However, he and his wife are beneficiaries of the Coomera Trust.

DR LOW’S CONTENTIONS

253. Dr Low has deposed that Contor, Cobra and Alpha have not contributed financially to the conduct of these proceedings or to the proceeding in which the defendants are plaintiffs. He says also neither he nor his wife have contributed financially to the conduct of these proceedings. He said that he and his wife do not stand to obtain a direct benefit in the event that the debt is ultimately recovered from the respondent. All funds, he says, are to be directed back to the beneficiaries of the Coomera Trust.
254. Dr Low does not say who has the responsibility for the plaintiffs’ legal costs. Alpha is a plaintiff. Alpha and CBH appointed Mr Byrnes and ALF to make the demands and “to liaise with lawyers on behalf of the trustees”. It is hard to imagine, unless there was some side agreement, that Alpha was not responsible for the joint trustees’ legal costs.
255. Mrs Low is a beneficiary of the Coomera Trust as trustee for the Coomera Discretionary Trust. Dr Low and Mrs Low are directors of the joint trustee, Alpha. Dr Low’s accountant is the appointor of the Trust. It is somewhat disingenuous to claim that he and his wife do not stand to obtain a direct benefit in any recovered debts.
256. Indeed, Dr Low engaged Mr Byrnes and CBH and ALF to recover those debts. He went to the trouble of causing Contor and Cobra to sell the debts to Alpha on behalf of the Coomera Trust of which his wife is a beneficiary on behalf of a discretionary trust.
257. Dr Low has said in his affidavit that he is “surprised and disappointed by the way in which the Proceedings have been conducted in recent times that Simmons and McCartney lawyers and Mr Byrnes have had for the procedure and orders for the Court (sic)”.
258. He says he is “shocked by the dramatic turn of events which now disclose some serious difficulties in terms of the conduct of the matter and raise the prospect of very substantial cost orders against my wife and I”.
259. He concludes his affidavit by saying that he believes that the sum of $1.8 million is owing by Hardel to the Coomera Unit Trust and $2.3 million is owing by Avpri to the Coomera Unit Trust.
260. However, Dr Low was kept abreast of the circumstances as they unfolded. Mr Byrnes sent him the communications to which I have referred and others. Dr Low must have known of the manner in which Mr Byrnes and CBH were going about recovering these debts. He was also aware that the defendants disputed that the debts were owing; that proper notices of assignment had been given; and that statutory demands had never been served.
261. Mrs Low has sworn an affidavit in relation to the application for costs itself on 8 October 2008. She discloses in that affidavit that she is a beneficiary of the Coomera Discretionary Trust which, itself, is a beneficiary of the Coomera Trust. She does not say, nor does Dr Low in his affidavits, whether Dr Low is also a beneficiary. She says she generally speaking does not take any active role in her husband’s business dealings but leaves him to make decisions of what he might think is best for the family. She says that she executed the deed of assignment, the notices of assignment and the minutes of meeting of the Coomera Trust after discussions with her husband and acting upon his advice.
262. She said:

At all times, I understood that Mr Byrnes was responsible for the conduct of the proceedings. I had no ongoing involvement. My husband and I expected that the proceedings would be conducted in a proper and legitimate matter particularly in light of the appointment of Simmons and McCartney Lawyers and Mr Byrnes (sic) representations to my husband from Mr Byrnes that he had significant experience in debt collection matters.

She also said that she has no direct interest in the proceedings because all funds are to be directed back to the beneficiaries of the Coomera Trust.

263. Mrs Low’s evidence is also somewhat disingenuous. It has to be remembered that Mr Byrnes’ involvement was brought about by Mr Lazar introducing Dr Low’s accountant to Mr Byrnes and whilst Dr Low has deposed that he did not wish to engage Mr Byrnes, a fact which I find hard to believe, Mr Byrnes started acting anyway.
264. The events which unfolded are the result of Dr and Mrs Low wishing to recover what they said was the amount owing by the defendants to their companies.
265. Whilst it may be right to say that the deeds of assignment of 17 December mean that any monies recovered become an asset of the Coomera Trust, Mrs Low is a beneficiary of that trust as trustee of the Coomera Trust and beneficiary of the Coomera Discretionary Trust.
266. As I have already said, the second applicant and Dr and Mrs Low relied upon an affidavit of Mr Christian Moore, their solicitor who has exhibited to his affidavit a number of self-serving letters written by him to the solicitors for the plaintiffs and one of the non-parties, Simmons and McCartney Lawyers. In a letter dated 21 October 2008 he described their conduct as “tardy and unprofessional” which has “brought our clients into disrepute”. In that letter, he seeks indemnity from CBH and Mr Byrnes in relation to any adverse costs orders that might be made.
267. Mr Byrnes was not overwhelmed by the claim for indemnity from Mr Moore. He replied in lieu of Mr McCartney, who seemed not to reply to any correspondence but to leave it to his client to do so. Mr Byrnes described the letters from Mr Moore as a “self-serving load of rubbish”.

MR BYRNES’ CONTENTIONS

268. In a long email written in the same tone as his other correspondence, Mr Byrnes claims that it was Dr Low’s and Mrs Low’s failure to make themselves available to give evidence which meant that the proceeding could not go forward.
269. Mr Byrnes did not tender any affidavit sworn by him subsequent to the dismissal of these proceedings but, of course, the first applicant did rely upon his earlier affidavit of 29 May 2008. Reliance was also placed by the first applicant upon the financial statements which were exhibited to Mrs Byrnes’ affidavit.

SIMMONS AND MCCARTNEY’S POSITION

270. The solicitors, Simmons and McCartney, did not file any affidavit evidence in opposition to the orders which were sought against them.

THE JURISDICTION TO AWARD COSTS AGAINST NON-PARTIES

271. Section 43 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) empowers the Court to award costs. It provides:

43(1) Subject to subsection (1A), the Court or a Judge has jurisdiction to award costs in all proceedings before the Court (including proceedings dismissed for want of jurisdiction) other than proceedings in respect of which any other Act provides that costs shall not be awarded.

(1A) In a representative proceeding commenced under Part IVA or a proceeding of a representative character commenced under any other Act that authorises the commencement of a proceeding of that character, the Court or Judge may not award costs against a person on whose behalf the proceeding has been commenced (other than a party to the proceeding who is representing such a person) except as authorised by:

(a) in the case of a representative proceeding commenced under Part IVA—section 33Q or 33R; or

(b) in the case of a proceeding of a representative character commenced under another Act—any provision in that Act.

(2) Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.

272. The opening words of s 43 can be ignored because s 43(1A) is not relevant on this application. The words in parentheses in s 43(1) may be ignored. The exception in s 43(2) is also not relevant. Stated simply, ss 43(1) and (2) for the purpose of this application can be understood to read:

43(1) The Court has jurisdiction to award costs in all proceedings before the Court other than proceedings in respect of which any other Act provides that costs shall not be awarded.

(2) The award of costs is in the discretion of the Court.

273. Section 43(1) does not speak of awarding costs in favour of or against the parties but awarding costs “in all proceedings before the Court”. Section 43(1) is in like terms to s 32 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act). That section provides:

The Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit.

274. In Bent v Gough [1992] FCA 267; (1992) 36 FCR 204, the Full Court of the Federal Court determined that s 32 of the Bankruptcy Act empowered the Court to make an order for costs against the liquidator who was not a party in the bankruptcy proceeding.
275. That decision was given about three weeks before the High Court’s decision in Knight v F.P. Special Assets Ltd [1992] HCA 28; (1992) 174 CLR 178. In that case, the High Court was concerned with s 58 of the Supreme Court Act 1857 which provided, “The Supreme Court shall have power to award costs in all cases lawfully brought before it and not provided for otherwise than by this section.” Order 91 rule 1 of the Rules of Court of the Supreme Court of Queensland provided that costs should be in the discretion of the Court.
276. The High Court held that the discretion to award costs was not confined to the parties to the proceeding but that the Rules conferred jurisdiction to make orders for costs against non-parties and, in that case, the receiver.
277. The decision in Knight v F.P. Special Assets Ltd [1992] HCA 28; 174 CLR 178 and its application to s 43 of the Federal Court Act was considered by the Full Court of the Federal Court in Caboolture Park Shopping Centre Pty Ltd (in liquidation) v White Industries (Qld) Pty Ltd [1993] FCA 471; (1993) 45 FCR 224. The Full Court said at 229:

There seems no reason to doubt that s 43 confers upon the court jurisdiction to award costs not only against persons who are parties but also against persons who are not. Clearly the section is no narrower than the provisions of O 91, r 1 of the Rules of the Supreme Court of Queensland considered by the High Court in Knight v FP Special Assets.

278. It follows that this Court has the power to award costs against a person not a party to the proceedings: see also Gore v Justice Corporation Pty Ltd (2002) 119 FCR 429.

CAN AN AWARD OF COSTS BE MADE AGAINST NON-PARTIES AFTER THE DISMISSAL OF THE PROCEEDINGS?

279. The non-parties argued that the Court could not now make an order that they pay costs because the proceedings had been dismissed by my orders made on 27 August 2008.
280. In Caboolture Park v White Industries [1993] FCA 471; 45 FCR 224, it was argued that the Court’s jurisdiction under s 43 to award costs ceased at the time that judgment was entered. It was submitted in that case that “once the original action or proceedings had been completed by entry of judgment there was no longer a ‘proceeding’ before the Court in respect of which a cost order could be made” (at 230).
281. That argument was rejected by the Court as being inconsistent with the definition of “proceeding” in s 4 of the Federal Court Act which is defined to mean:

... a proceeding in a Court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal;

282. The Court said at 230:

The context of the Act provides no indication that the words defining the grant of jurisdiction in s 43 of the Act have a temporal meaning which limits the jurisdiction conferred to a jurisdiction which terminates when a judgment has been pronounced and extracted in the proceeding that has invoked the jurisdiction.

The Court said at 231:

What s 43 requires is that the jurisdiction to order costs be one limited to costs relating to a proceeding. In other words, there is no jurisdiction to order costs at large. There has to be or have been, within the Court’s jurisdiction, instituted a proceeding. It is irrelevant, subject to the application of common law principles discussed later, that judgment has been given and entered.

283. That decision was followed by Chernov J in the Supreme Court of Victoria in U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd [1998] VSC 13; (1999) 1 VR 204. His Honour held that orders for costs are truly supplemental and do not affect the legal impact of the earlier judgment. He said at 208:

Consequently, it is my view that the entry of judgment in this case did not deprive the court of jurisdiction to hear and determine an application under s. 24(1) of the Act for an order that the non-party respondents pay U.T.A.’s costs incurred in relation to its proceeding against U.T.S.A. and Titan.

284. It follows therefore that the Court would have jurisdiction to order costs against the non-parties in these proceedings even though orders have already been made dismissing the proceedings.

DOES S 1335(2) PREVENT AN AWARD OF COSTS AGAINST A NON-PARTY?

285. The non-parties argued that s 1335(2) of the Corporations Act is a bar to making an order in a proceeding under the Corporations Act against a non-party. Section 1335(2) provides:

The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.

286. A winding up application has its genesis in Pt 5.4 of the Corporations Act. “[C]ourt” is defined in s 58AA of the Corporations Act. A winding up application is a “proceeding” under the Corporations Act and “Court” includes the Federal Court of Australia which has jurisdiction by reason of s 58AA of the Corporations Act.
287. The non-parties contended that s 43 of the Federal Court Act does not apply in circumstances where “any other Act provides that costs shall not be awarded”. The Corporations Act, it was contended, was an Act to which s 43 applied and s 1335(2) limited the power to award costs to a party to the proceeding.
288. The Act which is referred to in s 43(1) is any Commonwealth Act: s 38 of the Acts Interpretation Act 1958 (Vic). The Corporations Act is an Act of the Commonwealth and so, to that end, it could be an Act referred to in s 43(1) of the Federal Court Act.
289. However, the exceptive words in s 43(1) (ignoring the exceptive words in the introduction to the subsection which are irrelevant) do not and are not intended to apply to any Act which has been passed subsequent to the enactment of s 43(1) of the Federal Court Act: Rose v Hvric [1963] HCA 13; (1963) 108 CLR 353 at 357.
290. In that case the High Court was concerned with s 74(1) of the Justices Act 1958 (Vic) (the Justices Act) which allowed a court to impose a penalty other than an imprisonment if the court thought the justice of the case would be thereby better met. Section 74(1) commenced: “Except by the right expressly enacted ...”. The Justices Act came into force on the same day as the Licensing Act 1958 (Vic) (the Licensing Act) so by force of the Acts Interpretation Act 1958 (Vic) it can be construed as coming into operation simultaneously.
291. Section 154 of the Licensing Act provided for a penalty of imprisonment for a term not less than six months or more than 12 months for a second offence of selling liquor without a licence. The question for the Court was whether the exceptive words in s 74(1) meant that the Court could not exercise the power in s 74(1) to reduce a penalty to something less than imprisonment if the justice of the case would be better met. The Court said:

Because this is so, exceptive words such as those which introduce s. 74(1) have no legal effect beyond saving earlier enactments which otherwise would be inconsistent with the provision introduced. In regard to later enactments they “go no farther than the general law”: Garnett v Bradley (1878) 3 App. Cas. 944, at p. 965 and “are not really necessary because if the later Act shows a contrary intention the earlier enactment cannot control it. But they remind us of the general rule”. So Isaacs J. observed in Bennett v. Minister for Public Works (N.S.W.) [1908] HCA 50; (1908) 7 C.L.R. 372, at p. 384, speaking of the exceptive expression “unless the contrary intention appears”. Whatever the verbal formula employed, it cannot have in regard to later legislation any greater force or value than that expression. As Keating J. remarked in Chorlton v. Lings (1868) L.R. 4 C.P. 374, “to do more would be exceeding the competency of parliament with reference to future legislation” (1868) L.R. 4 C.P., at p. 395.

The Court said at 359:

The general provision of s. 74(1) of the Justices Act is accordingly prefaced by words which have a saving effect as regards earlier enactments and serve as a reminder in relation to later, meaning in regard to both that the general provision which follows is not to be denied any of its operation save by something actually inconsistent with it in the operation of another enactment.

292. Section 43 authorises the Court to make an order for costs against a non-party. The exceptive words in the body of s 43 do not by themselves limit the operation of s 43 by any later Act. Section 43 of the Federal Court Act was enacted before s 1335(2) of the Corporations Act. It cannot control that subsection. A later Act could limit the operation of s 43 but that would raise the question of the construction of the later Act.
293. Therefore, the question which is to be determined is whether s 1335(2) as a later enactment has the effect of limiting the operation of s 43(1) to a party or a party to a proceeding brought under the Corporations Act.
294. The non-parties’ argument was accepted by Jenkinson J in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; (1992) 39 FCR 193. In that case, Jenkinson J held that s 43(2) had to be read subject to s 1335(2) which limits persons whom the Court may direct to bear the costs of the proceeding to those who are parties to the proceeding. He thought, however, an application could be made to join a person as a party to obtain an order for costs.
295. That decision was approved by Lindgren J in Australian Forest Managers Ltd (in liq) v Bramley (1996) 136 ALR 431. In that case, Lindgren J said at 441:

The terms of s 1335(2) of the Law are mandatory: once a proceeding before a court is seen to be one “under” the Law, s 1335(2) requires the costs of the proceeding to be borne by a party or parties. The court’s discretion relates only to how the costs are to be so borne. Such terms are inconsistent with an exercise of the power given by s 43 of the FCA Act to order a non-party to pay costs. The excepting words in s 43(2) of the FCA Act are apt to refer to, inter alia, a provision of such a nature.

296. The non-parties contended that I should follow the decision of Jenkinson J in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; 39 FCR 193 and Lindgren J in Australian Forest Managers Ltd (in liq) v Bramley 136 ALR 431. Both those decisions were given prior to the enactment of the Corporations Act but s 1335(2) has been re-enacted in the Corporations Act. There is nothing in the Corporations Act itself which would allow those decisions to be distinguished. I should as a matter of comity and unless I think the decisions to be plainly wrong follow them.
297. However, there are decisions of the Supreme Court of Victoria and the Supreme Court of New South Wales which need to be considered. In U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd 1 VR 204, Chernov J was concerned with an application by the defendant to a proceeding for an order that two non-parties pay the costs of the proceeding. His Honour assumed, but later decided otherwise, that the proceeding with which he was concerned was a proceeding under the Act.
298. The two non-parties sought to set aside the notice of motion seeking costs on two grounds. First, because judgment had been entered and therefore there was no jurisdiction for the Court to exercise its discretion under s 24(1) of the Supreme Court Act 1986 (Vic) (SC Act (Vic)) to order that costs be paid by the respondents; and secondly, because s 24(1) of the SC Act (Vic) which gave the Court jurisdiction to award costs was to be read subject to s 1335(2) of the Corporations Law.
299. As I have already observed, the first argument was rejected by the Court following the decision of this Court in Caboolture Park v White Industries [1993] FCA 471; 45 FCR 224. His Honour then turned to consider the effect of s 1335(2).
300. Section 24(1) of the SC Act (Vic) relevantly provided:

Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court ... is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.

301. His Honour concluded that s 1335(2) did not fall within the words “otherwise expressly provided ... by any other Act” in s 24(1) of the SC Act (Vic). He found that the exceptive words of s 24(1) had no legal effect beyond “saving earlier enactments which otherwise would be inconsistent with the provision introduced”: Rose v Hvric [1963] HCA 13; 108 CLR 353 at 357. He addressed the question whether s 24(1) of the SC Act (Vic) was limited by s 1335(2) of the Corporations Act. The real question was whether s 1335(2), being a later enactment, evinced an intention to limit the operation of s 24(1) of the SC Act (Vic).
302. His Honour traced the legislative history of s 1335(2). He noted that the English Judicature Acts of 1873-1875 did not address all of the anomalies which then existed in relation to the Court’s powers in relation to costs. Costs in the common law courts were entirely creatures of statute: Garnett v Bradley (1878) 3 App Cas 944 at 962. On the other hand, the Court of Chancery claimed to have power to deal with costs at its discretion although there was some uncertainty as to the extent of that power. The authorities suggested that the position in equity continued after those Acts. He noted that s 5 of the Judicature Act 1890 (UK) which gave the Court expanded jurisdiction to award costs resolved the uncertainty. That section relevantly provided:

subject to the ... Acts and the Rules ... and to the express provisions of any statute ... the costs of and incidental to all proceedings in the Supreme Court ... shall be at the discretion of the Court or Judge and the Court or Judge shall have full power to determine by whom and to what extent such costs are to be paid.

He noted that it was not until 1928 that s 5 of the Judicature Act 1890 (UK) was adopted in Victoria as s 32(1) of the Supreme Court Act 1928 (Vic) (now s 24(1) of the SC Act (Vic)). Section 32(1) gave the Court jurisdiction to deal with all questions of costs, including proceedings under the Companies Act. Before the Uniform Companies laws of 1961, there was no equivalent of s 1335(2) in the Victorian legislation. There was on his Honour’s reasons no need for s 1335(2) because s 32(1) gave the Court power to award costs in all proceedings and therefore s 1335(2) was not picked up by the Victorian Companies Act of 1938 or its consolidation in 1958.

303. He turned his attention to the New South Wales jurisdiction. He noted that New South Wales did not adopt the Judicature Acts until 1970 when the Court was given the statutory provision equivalent to s 5 of the Judicature Act 1890 (UK). In the meantime, the predecessor of s 1335(2) was introduced into the Companies Act 1936 (NSW) (the Companies Act) by s 365(2). Section 365(2) eventually became s 1335(2). His Honour said at 211:

It seems fairly clear that this subsection was an enabling provision, intended to give the Supreme Court in New South Wales a similar discretion to that which was given to English Courts in 1890 and to the Victorian Supreme Court in 1928. Bearing in mind that s. 24(1), or its equivalent, was in force in Victoria and England, there was no need to introduce in those jurisdictions a provision such as s. 365(2) of the Companies Act of New South Wales. On the other hand, there was reason to pass such legislation in New South Wales in 1936 if its Supreme Court was to have a wide discretion to award costs in a proceeding under the companies legislation.

304. Because there was no general power in New South Wales of the kind given by s 5 of the Judicature Act, it was arguable that the Courts did not have the power to award costs in matters under the Companies Act. The enactment of s 365(2) was to put beyond doubt the Courts’ power to award costs for proceedings under that Act. It was not enacted to limit the circumstances in which costs might be awarded. Thus it was that his Honour held that s 365(2) at the time of its introduction was an enabling provision, not a limiting provision.
305. His Honour also noted that the equivalent of s 365(2) was not introduced into Victorian law until 1961 at the time of the Uniform Companies legislation in the form of s 363(2). His Honour pointed out that there was no need to introduce such legislation into the Victorian Uniform Companies legislation because the position was covered by s 24(1) of the SC Act (Vic).
306. Moreover, his Honour observed was that there was no need to continue with s 365(2) in the New South Wales legislation after the New South Wales Parliament adopted the Judicature Act in 1970 but the provision has remained and has become s 1335(2).
307. For those reasons, his Honour found that s 1335(2) was intended to be an enabling provision, not a limiting provision. In those circumstances, it did not limit the provisions of s 24(1) of the SC Act (Vic).
308. His Honour concluded and said at 212:

Whatever may be the position in relation to s. 43 of the Federal Court of Australia Act, s. 1335(2) does not so inhibit the jurisdiction of this court on the question of costs as was contended for by the respondents.

309. His Honour’s analysis of the legislative history of s 1335(2), in my opinion, has the same application in the construction of s 43 of the Federal Court Act.
310. The decision in U.T.S.A. v Ultra Tune 1 VR 204 was followed by Brereton J in Re Struthers (liq of Project Management, Architecture and Construction Interiors Pty Ltd) (No 3) [2005] NSWSC 1113; (2005) 56 ACSR 238. His Honour said at [50]-[51]:

At first sight, the suggestion that the Commonwealth Parliament has enacted a provision to detract from the existing costs powers of courts in which it invests jurisdiction to deal with proceedings under the Corporations Act is a surprising one. But were it not for the judgment of Chernov J in UTSA, despite these initial impressions about s 1335, I would unquestionably have followed Wridgemont and Australian Forest Managers, particularly given Lindgren J’s strong endorsement of Wridgemont, and also given that those cases had been followed in this court by Bergin J. However, in circumstances where there has been, since Australian Forest Managers, what impresses me as a compelling analysis of the history and purpose of the section by Chernov J — the benefit of which does not appear to have been afforded to Bergin J when her Honour came to consider the point — and where Ryan J, albeit without reference to the authorities, had adopted an opposite approach, I consider that I am at liberty to give effect to my own views.

I agree with Chernov J that s 1335 should not be construed as a limiting provision, but as an enabling one. Its history shows that it was intended to confer a jurisdiction or a power to make costs orders when there was doubt as to the existence that power, at least in the equitable jurisdiction of this court in this state. If there were no s 1335(2), the court would not be without power to make costs orders in proceedings under the Act; it would have all its powers under the Supreme Court Act and the Civil Procedure Act. Section 1335 was not intended to limit such other powers to make costs orders as the court already enjoyed, but to supplement them. In my opinion, the current provisions ought not be taken as intended to exclude the power of courts under, for example, Civil Procedure Act, s 98, and UCPR, r 42.27, to make costs orders which are designed to protect the processes of the courts and the integrity of those processes and the procedural rights of parties who litigate in those courts.

311. Professor Dal Pont GE in Law of Costs (2nd ed, LexisNexis Butterworths, 2009) says, after referring to Jenkinson J’s decision:

[22.11] ...

As a significant proportion of proceedings under the Corporations Law are heard before the Federal Court, it appears strange that that court — which by s 43(1) of its Act is conferred the jurisdiction to award costs in all proceedings before it except those ‘in respect of which any other Act provides that costs shall not be awarded’ — should be denied the jurisdiction to make a non-party costs orders in this context. In that s 1335(2) simply replicates the former s 533(2) of the Companies Code, enacted prior to the courts’ recognition of a jurisdiction to order costs against non-parties, it could not have been intended to deny that jurisdiction. Certainly this has not been the approach of other judges when ordering costs against directors, receivers or liquidators of companies as litigants. Moreover, s 43(2) deals with the court’s discretion, not its jurisdiction, which is the province of s 43(1), and which is not expressed ‘[e]xcept as provided by any other Act’.

[22.12] The fact remains that s 1335(2), as a more specific provision than either s 43(1) or 43(2), could be argued to prevail. Even so, it does not necessarily follow that s 1335(2) should be seen as ousting the operation of s 43(1) or 43(2), which provisions can arguably operate consistently with s 1335(2). To remove any degree of uncertainty, however, it would be useful if the legislature either reworded s 1335(2) to extend to non-parties, or defined the term ‘party’ more extensively. This is more pressing following the replacement of the Corporations Law with the Corporations Act 2001 (Cth), which comes within the phrase ‘any other Act’ in s 43(2).

In any case, Jenkinson J in Re Wridgemont Display Homes referred to O 71 r 10(4) of the Federal Court Rules, which empowers the court to order a person who is or claims to be a creditor, contributory or officer of the company to be added as a respondent in proceedings under the Corporations Law. According to his Honour, this power could circumvent the lack of jurisdiction just mentioned, allowing it to be exercised in a case where the court considers that such a person ought to bear the costs of the proceeding.

312. Like Brereton J, I would have, but for the decision of Chernov J, followed the decisions at first instance in this Court. However, in my opinion, Chernov J’s reasoning is compelling and I think should be adopted. For the reasons given by Chernov J in relation to the legislative history of s 1335(2), s 1335(2) does not limit the operation or reach of s 43(1) of the Federal Court Act.
313. It would be surprising if Parliament intended in enacting the Corporations Act to limit the circumstances where this Court might make an order for costs to parties or parties to the particular proceeding and to exclude from the scope of an order for costs non-parties who would, if it were not for the proceeding being brought under the Corporations Law, be liable to pay the costs of a party to the proceeding.
314. In my opinion s 1335(2) does not have the effect of preventing this Court from making an order for costs against non-parties in proceedings brought under the Corporations Act.

CAN THE NON-PARTIES BE JOINED AS PARTIES?

315. The defendants contended that in the event that the decisions of this Court in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; 39 FCR 193 and in Australian Forest Managers Ltd (in liq) v Bramley 136 ALR 431 are to be preferred to the decisions of in U.T.S.A. Pty Ltd (In liquidation) v Ultra Tune Australia Pty Ltd 1 VR 204 and Re Struthers (liq of Project Management, Architecture and Construction Interiors Pty Ltd) (No 3) [2005] NSWSC 1113; 56 ACSR 238 then I should make an order joining the non-parties as parties for the purpose of avoiding the consequences of s 1335(2).
316. The defendants contended that I could make an order under O 6 r 8 of the Federal Court Rules and/or rule 2.13 of the Federal Court (Corporations) Rules 2000 (the Corporations Rules). It was accepted that I would not make an order for joinder unless I was first satisfied that it was appropriate to make an order for costs against those non-parties.
317. The defendants relied upon the dicta in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; 39 FCR 193 in support of this contention. In that case, Jenkinson J said that the obstacle which was presented by s 1335(2) on his construction of that subsection “may, and in an appropriate case should, be obviated by the exercise of the power conferred by Order 71, rule 10(4)” to join a non-party whom the Court considers ought to bear the costs of the proceedings. The equivalent of O 71 r 10(4) is now rule 2.13 of the Corporations Rules.
318. Rule 1.3 of the Corporations Rules provides that those rules apply to a proceeding in this Court under the Corporations Act: Rule 1.3(1)(a). The rules also provide that the other rules of the Court apply to the extent they are relevant and not inconsistent with the Corporations Rules: Rule 1.3(2). It follows that an examination of the Corporations Rules must be made to determine whether a source of power exists for the joinder of non-parties to a proceeding under the Corporations Act.
319. Rule 2.13 deals with creditors, contributories and officers of a corporation and empowers the Court to give leave to allow such persons to be heard in a proceeding without becoming a party to the proceeding. Rule 2.13(3) provides:

(3) The Court may order that a person who is, or who claims to be, a creditor, contributory or officer of a corporation be added as a defendant to the proceeding.

320. None of the non-parties claim to be or are creditors of the defendants. Whether they are creditors of the plaintiffs does not appear to be relevant. Rule 2.13(3) could be used to join shareholders, directors and other officers of a corporation to a proceeding where it appears that their conduct has been such that it would be appropriate to make orders for costs against them. I agree with Jenkinson J’s observations.
321. However, I also think O 6 r 8 is a source of power. That rule is relevant and not inconsistent with Rule 2.13(3): Rule 1.3(2). Order 6 rule 8 provides:

(1) Where a person who is not a party:

(a) ought to have been joined as a party; or

(b) is a person whose joinder as a party is necessary to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon:

the Court may order that the person be added as a party and make orders for the further conduct of the proceeding.

(2) A person shall not be added as an applicant without the person’s consent.

322. “Proceeding” is defined in s 4 of the Federal Court Act to mean:

... a proceeding in a court, whether between parties or not, and includes an incidental proceeding in the course of, or in connexion with, a proceeding, and also includes an appeal.

323. Because a proceeding includes any incidental proceeding in the course of the proceeding, it includes an application by a party for costs.
324. Where an application for costs is made against a non-party in a proceeding and because that application is incidental to the proceeding, the Court can order that a non-party be joined to ensure that all matters in dispute may be effectually and completely determined and adjudicated upon.
325. The present Federal Court Rules were promulgated before it was fashionable in legislation of this kind to identify the objects and purposes of the Rules. Rules of Court are made to establish procedures for arriving at a just resolution of a civil dispute.
326. In that regard, all unnecessary cost and delay is to be avoided and, instead, efficiency at an affordable cost provided it is consistent with justice is to be promoted.
327. The Federal Court Act and Rules recognise that the Court may make orders for costs against non-parties in accordance with the general rules relating to costs: Knight v F.P. Special Assets Ltd [1992] HCA 28; 174 CLR 178. That jurisdiction must carry with it the power to enforce any order that justice demands be made. If it be necessary to make an order that the non-party be made a party so that an order can be made that the non-party pay that party’s costs then it must be assumed that the Court has jurisdiction to make the non-party a party to the proceeding. Order 6 rule 8 gives that power to the Court.
328. Where it appears that a non-party ought to be held liable to pay a party’s costs the Court can, in my opinion, utilise O 6 r 8(1)(b) to join that non-party to the proceeding.
329. It follows therefore that if I am of the opinion that any of the non-parties should be ordered to pay the defendants’ costs and contrary to my opinion s 1335(2) prevents any such order being made, I can make an order joining those non-parties as parties to the proceedings.
330. If such an order is made, and so as to avoid any doubt I intend to make those orders, s 1335(2) on the construction given to it by Jenkinson J and Lindgren J would not stand in the way of an order for costs against the non-parties after they become parties.
331. The defendants contended, however, that there was no need to make an order joining Simmons and McCartney, the plaintiffs’ solicitors, given that there is an express power under O 62 r 9(1) of the Federal Court Rules. That rule provides:

(1) Without limiting the Court’s discretion to award costs in a proceeding, if costs are incurred improperly or without reasonable cause, or are wasted by undue delay or by any other misconduct or default, and it appears to the Court that a legal practitioner is responsible (whether personally or through a servant or agent), the Court may, after giving the legal practitioner a reasonable opportunity to be heard, do any of the following:

(a) disallow the costs as between the legal practitioner and the legal practitioner’s client;

(b) if the legal practitioner is a barrister — disallow the costs as between the barrister and the barrister’s instructing solicitor;

(c) direct the legal practitioner to repay to the client, costs which the client has been ordered to pay to another party;

(d) direct the legal practitioner to indemnify any party other than the client against costs payable by the party indemnified.

332. It was contended because of that express power in the Rules there was no need to make an order joining the solicitors as a party to the proceedings.
333. Simmons and McCartney did not take issue with the proposition that the Federal Court Rules empowered the Court to make an order against them. They simply argued that such an order should not be made.
334. The matter to which I now advert therefore was not the subject of argument but I am not sure that the defendants’ contention is correct. The question raised is, if s 1335(2) of the Corporations Act prevents an order being made against a non-party, does O 69 r 9(1)(d) of the Federal Court Rules notwithstanding empower the Court to make such an order?
335. The defendants relied upon a decision of Master Coulehan of the Supreme Court of the Northern Territory in Construction Enterprises Pty Ltd v Lafarge Plasterboard Pty Ltd [2002] NTSC 21 for the proposition that an order for costs could be made against solicitors without making the solicitors parties and notwithstanding s 1335(2) of the Corporations Act.
336. That case concerned an application to set aside a statutory demand pursuant to s 459G of the Corporations Act. Shortly after the proceeding was commenced, the plaintiff was wound up by order of the Supreme Court of New South Wales. The defendant sought costs against the plaintiff’s solicitor who had pursued the application on the part of the plaintiff, notwithstanding that the plaintiff had been wound up before the hearing of the application and notwithstanding that the liquidator was unaware of the application.
337. The Master thought he was constrained by the decisions in Re Wridgemont Display Homes Pty Ltd [1992] FCA 604; 39 FCR 193 and in Australian Forest Managers Ltd (in liq) v Bramley 136 ALR 431 from ordering costs against persons who were not parties. However, he was of the opinion that O 63.21 of the Supreme Court Rules of the Northern Territory, which provides for the costs liability of a legal practitioner where the legal practitioner has caused costs to be incurred improperly or without reasonable cause or be wasted by undue delay or negligence or by some other misconduct or default, was not in conflict with either the Corporations Regulations or s 1335(2).
338. As already adverted to, if the Supreme Court Rules of a jurisdiction are relevant and not inconsistent with the Corporations Rules, the Court can have regard to those Rules in a proceeding under the Corporations Act.
339. However, that is not, it seems to me, the question that needs to be addressed. The question in issue is whether the Rule is inconsistent with s 1335(2) of the Corporations Act.
340. The Master relied upon two decisions for the second proposition that the rule was not inconsistent with s 1355(2): Myers v Elman [1940] AC 282 and Caboolture Park v White Industries [1993] FCA 471; 45 FCR 224. I am not sure how those cases support the proposition that there is no conflict between the Rules of Court of the Supreme Court of the Northern Territory and s 1335(2) of the Corporations Act. The first case stands for the proposition that the High Court in England has power to order a solicitor to indemnify a party who has been injured by the solicitor’s default. The power rests upon the Court’s jurisdiction over its own officers. That proposition can no longer be doubted. The second case, a decision to which I have already referred, is authority for the proposition that the Federal Court has the power to award costs against a non-party and, in that case, the solicitors for a party.
341. The power to award costs against a non-party, and in particular against a solicitor, are not the questions in issue. The question, further refined, is whether the Court can award costs against a legal practitioner who is a non-party. The Master, it seems to me, with respect, did not address that issue.
342. If the jurisdiction to award costs against a solicitor emanates from the Rules of Court, then the first consideration is whether those Rules are inconsistent with an Act of the Parliament. The power to make Rules of Court is given by s 59 of the Federal Court Act which is to make Rules not inconsistent with the Federal Court Act for and in relation to the practice and procedure to be followed in the Court. In particular, the Court may make Rules in relation to the costs of the proceedings in the Court: s 59(2)(o). However, the Court cannot make Rules relating to costs inconsistent with s 43 of the Act. That section allows the Court to make orders for costs other than in proceedings in respect of which any other Act provides that costs shall not be awarded. If, contrary to my opinion, the Corporations Act prevents the Court from making any order for costs against a non-party, the Federal Court Rules could not overrule that statutory injunction and empower the Court to make such an order. Subordinate legislation such as the Federal Court Rules cannot, in the absence of express statutory power, repeal or amend an Act of the Parliament. If the Rules are inconsistent with the Corporations Act, then they could not empower the Court to make an order that the Corporations Act forbids: Wardley Australia Ltd v State of Western Australia [1992] HCA 55; (1992) 109 ALR 247 per Toohey J at 281; Mahfoud v Minister for Immigration, Local Government and Ethnic Affairs [1993] FCA 313; (1993) 43 FCR 217.
343. If the jurisdiction to make an order for costs against a legal practitioner is independent of the Rules of Court and arises out of the Court’s power over its own officers, that power must be understood to be and will always be subject to any Act which limits the power. Thus, if the power to award costs against a legal practitioner who is a non-party is inconsistent with an Act of the Parliament, the statute must prevail. It seems to me therefore that the solicitors, Simmons and McCartney, are in the same position as the other non-parties. If the Corporations Act does not allow the Court to make orders against non-parties, the solicitors must, if such an order is to be made, be joined as parties.
344. Because these matters were not argued, I will not dwell upon them.
345. It seems to me that it would be appropriate to treat Messrs Simmons and McCartney the same as the other non-parties and if I were of the opinion that an order ought to be made against the solicitors, Messrs Simmons and McCartney, that an order should be made joining them as parties to the proceedings in order that the order can be made.
346. That raises the next question as to what orders should be made.

THE ORDERS TO BE MADE

347. On 25 August 2008 I made an order that the defendants have their costs thrown away by reason of the adjournment on an indemnity basis, but reserved the question as to whether those costs were to be paid by the plaintiffs, the plaintiffs’ solicitors or their counsel. On 27 August 2008, after dismissing the proceedings brought by the plaintiffs, I reserved the question of costs including the costs thrown away, the subject of the order made on 25 August 2008.
348. As I have already said at [53], there can be no doubt that the defendants must be entitled to their costs as against the plaintiffs on a party and party basis. The plaintiffs, for reasons unexplained, failed to prosecute the proceedings and the proceedings were dismissed. However, the defendants seek orders on an indemnity basis against the plaintiffs.
349. I have been asked to infer that the plaintiffs did not proceed with their winding up applications because neither Mr Byrnes nor Mrs Low were prepared to give evidence and subject themselves to cross-examination. It was put that their cross-examination would have exposed irregularities in the assignments of the debts, the notices of assignment and the failure by the plaintiffs to serve a statutory demand.
350. I am not in a position to make the findings which would need to have been made if the proceedings had proceeded to trial and judgment.
351. It is not possible to determine whether the statutory demands were in fact ever served on the defendants in accordance with the Act. Mr Byrnes contends they were and the defendants contend they were not received. That was an issue to be determined at the trial but the proceedings were dismissed for the reasons given. I do not think, in the absence of hearing the witnesses whose evidence is relevant to this issue and particularly Mr Byrnes, the issue can be resolved. Moreover, the resolution of that issue would be undesirable after the proceedings were dismissed at the behest of the defendants: Australian Securities Commission v Australian Home Investments Ltd (1993) 116 ALR 523 at 530.
352. In that case, the Court was required to consider the question of costs where the applicant had sought and obtained the appointment of a receiver to the respondents’ property. The appointment was subsequently revoked but without an inquiry into the merits. The respondents sought an order for costs. Hill J considered the authorities and said:

These cases seem to me to support the following propositions being made.

(1) Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order: Stratford and the SEQEB case.

(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial: Stratford, supra. This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.

(3) In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them (SEQEB, supra).

(4) In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation: cf Sunday Times Newspaper Co Ltd v McIntosh (1933) 33 SR(NSW) 371.

(5) Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted: cf Re Asiatic Electric Co Pty Ltd (in liq) [1973] 1 NSWLR 603 at 606, a case which, however, depended upon the specific wording of the statute under consideration.

353. In Gribbles Pathology Pty Ltd v Health Insurance Commission (1997) 80 FCR 284, Finkelstein J said at 287:

For my own part I should wish to emphasise that in the absence of a hearing on the merits it is difficult to see how any order, other than an order that each party bear its own costs, can be made except in special circumstances. To do otherwise would require some prediction of the outcome of the case. It seems to me that the third proposition stated by Hill J was intended to cover the situation where the Court was in fact able to form a clear view about the merits of a case without a trial. So, if a claim is patently hopeless that would be a good reason to make an order for costs against the claimant. Likewise if a defence was bound to fail that would be good reason for awarding costs in favour of the claimant. But I venture to suggest that there will be very few cases where the issues will be sufficiently clear, in the absence of a hearing, for an order for costs to be made in favour of a party.

354. Debelle J agreed with the decision in Gribbles Pathology Pty Ltd v Health Insurance Commission 80 FCR 283 in Boscaini v Corporation of Kensington and Norwood [1999] SASC 327 and said at [22]:

I immediately acknowledge the assistance of Hill J but suggest that proposition (3) is of limited assistance. The fact that a party has not conducted himself reasonably may disentitle him to costs. But, beyond that, the reasonableness of the conduct of the parties is not likely to assist in determining whether the applicant should recover his costs. The real question is whether the applicant had reasonable prospects of success. It seems preferable, therefore, to express proposition (3) in different terms.

355. As my reasons show, the inquiry that I have undertaken is as to the reasonableness of the conduct of the plaintiffs and the non-parties. There are three questions to be determined.
356. The first question for decision is whether the plaintiffs (and the non-parties) acted reasonably in bringing winding up proceedings.
357. The second question to be determined is whether the plaintiffs (and the non-parties) acted reasonably in the prosecution of the proceedings having been put on notice that the defendants claimed never to have been served with the statutory demands and the defendants’ requests for the deeds of assignment.
358. The third question to be determined is whether the plaintiffs (and the non-parties) acted reasonably between 22 August and 27 August 2008 when these proceedings were dismissed.
359. The three questions I have posed mean that I disagree with respect with Debelle J’s decision in Boscaini v Corporation of Kensington and Norwood [1999] SASC 327. A party may behave so unreasonably in the bringing or conducting of proceedings so that an order for costs against that party is required in the interests of justice without ever deciding whether the party had a good cause of action.
360. Finkelstein J cast some doubt on the third principle referred to by Hill J. I do not need to decide whether I agree with the proviso mentioned by Finkelstein J because, in my opinion, at the very least this is one case where the issues are sufficiently clear, in the absence of a hearing, for orders for costs to be made.
361. The plaintiffs’ behaviour, which was demonstrated by Mr Byrnes’ emails and correspondence generally prior to the commencement of proceedings, was quite unreasonable. Mr Byrnes behaved like a bully as he claimed to be. He threatened the defendants and Mr Harris with all sorts of commercial harm. His communications were calculated to induce fear into the defendants. His threats, if carried out, would have ruined the defendants in circumstances where he knew the defendants took issue with the debts. His actions were taken for the benefit of the plaintiffs and for the assignors, Cobra and Contor. The threats which were made prior to the proceedings commencing indicate that the proceedings were to be used for a collateral purpose; namely, the recovery of a debt, rather than for the purpose for which the proceedings were designed; namely, the winding up of an insolvent corporation. The proceedings were an abuse of the Court’s processes.
362. That finding is enough, it seems to me, to make the order sought by the defendants that the plaintiffs pay the defendants’ costs on an indemnity basis: In the matter of Bond Corporation Holdings Ltd (1990) 1 WAR 465; Packer v Meagher (1984) 3 NSWLR 486. In Ragata Developments Pty Ltd v Westpac Banking Corporation (1993) 217 ALR 175, Davies J said at [7]:

... it is not open to an individual Judge to award costs having regard to his own view as to the adequacy of party/party costs so fixed. An award of costs on an indemnity basis may be made only in a special case, where the circumstances justify departure from the ordinary principle. The circumstances must be such as to justify an award indemnifying the successful party in respect of all of the costs incurred, save only as to those costs which are unreasonable in amount.

The very nature of the award of costs on an indemnity basis gives a guide to the type of case in which such an award is appropriate. Thus, indemnity costs may be awarded where unsuccessful proceedings have been brought and prosecuted, not for the bona fide purpose of protecting and enforcing a legal right, but to achieve an ulterior or extraneous purpose.

However, there are further reasons for making the orders.

363. The plaintiffs’ and Mr Byrnes’ behaviour, after the commencement of the proceedings, has also been unreasonable. The defendants have always maintained that they did not receive the statutory demands. They requested on a number of occasions a copy of the statutory demands but none was provided. The plaintiffs have refused to cooperate with the defendants and have refused to provide evidence of the service of the statutory demands said to have been served upon the defendants. The plaintiffs have provided the defendants with three different notices of assignment. No explanation was given for the discrepancies. They have done nothing to cooperate in these proceedings. In my opinion, the plaintiffs, by reason of the conduct of Mr Byrnes, involved themselves in a vindictive campaign which consisted of bullying and threatening in an endeavour to frighten the defendants and Mr Harris into paying what the plaintiffs claim to be owing to them by reason of the deed of assignment.
364. The plaintiffs’ conduct from 22 to 27 August 2008 was also unreasonable. It is to be remembered that the plaintiffs’ application was for the winding up of the defendants. Their letter of 22 August 2008 was quite inconsistent with the basis upon which the applications were made. Whether the defendants were intending to sell land of the value mentioned in the letter of 22 August is, in my opinion, not to the point. The plaintiffs’ application was for winding up an insolvent company, not for the purpose of debt collecting. Their conduct of 22 August was further evidence of the collateral purpose which motivated the plaintiffs to bring these proceedings.
365. The plaintiffs had no right, after receiving the defendants’ communications indicating that the application for an adjournment would be opposed and receiving advice from my chambers that the matter would proceed on 25 August 2008, to absent themselves from the proceedings for the purpose of having counsel make an application for an adjournment.
366. The matter was adjourned because the plaintiffs indicated their solicitors and counsel and witnesses would be available on Wednesday, 27 August 2008. On 26 August 2008 the plaintiffs tried to discontinue these proceedings. That failed and the proceedings were dismissed on 27 August 2008.
367. The plaintiffs’ conduct after the commencement of these proceedings and up until the time of the dismissal of the proceedings has been entirely unreasonable. For those further reasons, there will be an order that the plaintiffs pay the defendants’ costs on an indemnity basis.

COSTS TO INCLUDE AN AFFIDAVIT IN NSD 584 OF 2008

368. As I have said in [2] of these reasons, these reasons should be read with the reasons in Hardel Investments Pty Ltd (ACN 083 276 000) v Consolidated Byrnes Holdings Limited (ACN 111 052 585) [2009] FCA 400 given today. I have made no order for costs in that proceeding for the reasons given.
369. However, the affidavit sworn by Peter William Harris on 28 April 2008 which was filed in that other proceeding was used extensively in these proceedings and for the purpose of these reasons. Indeed, the defendants filed an affidavit in each of these proceedings sworn by Mr Harris on the same day in which he referred to and relied upon his affidavit sworn in the other proceeding. In that way the affidavit was used in these proceedings.
370. It would be appropriate to allow the defendants the costs of that affidavit even though it was filed in the other proceeding because it contained the relevant information relied upon by the defendants for the defence of these proceedings. The costs which the defendants are entitled to recover on the orders in these proceedings shall include the costs of the preparation, swearing and filing of Mr Harris’ affidavit sworn on 28 April 2008 and filed in action number NSD 584 of 2008.

COSTS AGAINST THE NON-PARTIES

371. That leaves for consideration whether orders for costs should be made against any of the non-parties.
372. Mason CJ and Deane J (with whom Gaudron J agreed) said in Knight v F.P. Special Assets Ltd [1992] HCA 28; 174 CLR 178 at 192-193:

For our part, we consider it appropriate to recognize a general category of case in which an order for costs should be made against a non-party and which would encompass the case of a receiver of a company who is not a party to the litigation. That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.

373. It cannot be thought, as some of the non-parties contended, that the High Court was intending to lay down the only category of case in which an order for costs may be made against a non-party.
374. The discretion to award costs against a non-party is unfettered except that it must be exercised judicially. Having said that, the cases identify the principles upon which the exercise of the discretion might be exercised.
375. In Vestris v Cashman (1998) 72 SASR 449 at 467, I said, when a member of the Supreme Court of South Australia:

The circumstances in which it is just to order costs against a person who was not a party to the litigation will be both rare and exceptional: see Aiden Shipping Ltd v Interbulk Ltd per Lord Gough of Chieveley. If the order for costs which is sought against non-parties in lieu of, in substitution for or complementary to an order for costs against a party, the circumstances for making such an order will not arise unless there is some connection or association between the party to the litigation and the non-party against whom the order for costs is sought. The connection must be of a kind that makes it just to make an order for costs in that the connection must be material to the question of costs: see Bischof v Adams (1992) 2 VR 198 at 205.

376. The ordinary rule is that only parties to the proceedings will be subject to costs orders but that rule will give way where “within the circumstances of the particular case, it is just and equitable that a non-party pay the costs of a party to the litigation”: Vestris v Cashman 72 SASR 449 at 469.
377. The categories of costs in which a court may order a non-party to pay costs are not closed: Applicant NAGM of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs [2002] FCAFC 396; (2002) 125 FCR 488. In that case, at [62] the Court said:

There are certain categories of cases in which the jurisdiction to award costs against a non-party has been exercised, if not frequently, then with some degree of regularity. One such category is where the non-party is considered to be the “real party” to the litigation: Knight v Special Assets at 188 per Mason CJ and Dean J. Another is where the non-party is a legal representative of a party to the proceedings. A costs order may be made, for example, against a solicitor in consequence of his or her conduct in the litigation: Caboolture Park at 231. While s 43 of the Federal Court Act empowers the Court to make a costs order against a legal representative of a party, a second source of jurisdiction is the “implied”, “accrued” or “inherent” jurisdiction of the Court over its own officers: Caboolture Park at 231.

378. However, the Court also made it clear that the jurisdiction is not limited to those particular categories of cases: at [63].
379. In Naomi Marble and Granite Pty Ltd v FAI General Insurance Company Ltd (No 2) [1998] QSC 18; (1999) 1 Qd R 518, Shepherdson J identified categories of cases where it might be appropriate to make an order for costs against a non-party. He said at 545:
     1. Where a person has some management of the action e.g. a director of an insolvent company who causes the company improperly to prosecute or defend a proceeding (191).
        
     2. Where a person has maintained or financed the action (citing Singh v. Observer Ltd [1989] 2 All E.R. 751).
        

Balcombe L.J. was a member of the Court of Appeal in each of Bahai v. Rashidian and Symphony Group and in Symphony Group went on to say that he accepted that the categories which he had set out were neither rigid nor closed.

To the above two categories of non-parties against whom costs orders may be made the following can be added:

(a) Where the unsuccessful party is a corporation (as is the case here) the director or directors who have the right to control the corporation; (Oz B and S Pty Ltd v. Elders IXL Ltd [1993] FCA 371; (1993) 117 A.L.R. 128 (Einfeld J.); Re Land and Property Trust Co. Plc. [1991] 1 W.L.R. 601 at 604-605 and H. Leverton Ltd v. Crawford Offshore (Exploration) Services Ltd – unreported decision on costs of Garland J. in Queens Bench Division dated 11 October 1996).

(b) In the situation of a party to litigation who was an insolvent person or a man of straw, a person who has played an active part in the conduct of the litigation and who has an interest in the subject matter of the litigation (Knight v. F.P. Special Assets Limited at 193 in a passage I set out earlier in these reasons).

(c) Where the non-party is the effective litigant standing behind the actual party – Knight v. F.P. Special Assets Limited at 202 (per Dawson J.).

(d) Where the non-party is funding or otherwise financially assisting the unsuccessful party to the litigation and stands to benefit if that party has been successful (Re Foster; Ex parte Foster v. Duus (1994) 121 A.L.R. 494 at 503; (Einfeld J.) H. Leverton Ltd v. Crawford Offshore (Exploration) Services Ltd).

(e) Where a non-party has supported the unsuccessful party and has done so acting in bad faith towards the other parties and towards the court such as by giving false testimony or forging documents or preventing relevant documents being discovered (H. Leverton Ltd v. Crawford Offshore (Exploration) Services Ltd).

380. As I have already said, I am not satisfied that either of the plaintiffs are in a position to satisfy an order for indemnity costs which is the order I propose to make against them. As I have already said, CBH’s financial position is that Mrs Byrnes would be in a position to cause CBH not to be able to pay costs if she called upon the amount owing to her. Dr Low has not descended into advising the Court of the financial position of Alpha.
381. In my opinion, the plaintiffs may well be incapable of satisfying the orders for costs which are to be made against them.
382. In those circumstances, the defendants are entitled to ask the Court to make orders against any of the non-parties who have joined in or maintained these proceedings for the same ulterior and collateral purposes as the plaintiffs.
383. There can be no doubt in my mind that an order for costs should be made against Mr Byrnes who has been the conductor of the vindictive campaign which has been maintained against the defendants. His conduct has been reprehensible and he should be made a party to the order for costs. So also should Mrs Byrnes. She caused CBH to commence these proceedings for the ulterior and collateral purposes which I have identified. She has allowed CBH to be used as a debt collector and has caused CBH to improperly bring these proceedings. She has done nothing to restrain Mr Byrnes in his conduct. Of course, she was a party to his appointment on 17 December 2007. There will be an order for costs against Mrs Byrnes.
384. In my opinion, Dr Low and Mrs Low also should be ordered to pay the defendants’ costs on an indemnity basis.
385. Although they protest that they had little or nothing to do with the conduct of these proceedings and would claim to be affronted by the conduct of which they have been made aware, those claims and those denials cannot be reconciled with the information which Mr Byrnes supplied Dr Low from time to time.
386. Dr Low and Mrs Low assigned Contor and Cobra’s debts to CBH and Alpha so that they could bring these proceedings. They also have used the proceedings for the same improper and collateral purposes as the plaintiffs. They have done nothing to restrain Mr Byrnes in his conduct throughout the proceedings.
387. The solicitors, Simmons and McCartney, have not sought to explain their conduct in any way. They have, in my opinion, failed as officers of the Court to conduct themselves appropriately.
388. The plaintiffs’ solicitors would have been aware prior to the commencement of these proceedings that the proceedings were to be instituted for an ulterior or collateral purpose. They were aware of Mr Byrnes’ communications with the defendants and the defendants’ agents. They could not have failed to be aware that these proceedings were to be commenced for an ulterior or collateral purpose.
389. Moreover, they should have responded to the defendants’ request in relation to the statutory demands and the notices of assignment. It was inappropriate to merely ignore those matters and to assert that they would be matters for issue at trial.
390. The letter they wrote on 22 August 2008 and the request for an adjournment and for the hearing on 25 August 2008 to be by way of video were all inappropriate having regard to the fact that the proceedings had been set for hearing on 25 August 2008. The fact that the defendants were to sell $9 million worth of property was irrelevant.
391. The solicitors failed to advise the defendants’ solicitors that neither they nor Mr Byrnes would be attending Court on 25 August 2008 until the morning of 25 August 2008. The failure to have counsel available on the hearing of the proceedings indicated a lack of respect for the Court.
392. On 22 August 2008 the solicitors were aware that the defendants would oppose the application for an adjournment and the Court would not permit the plaintiffs to appear by videolink. Notwithstanding that awareness, they took no steps to have counsel or their witnesses available for the hearing on 25 August 2008. Moreover, they did not advise the defendants that they would not be appearing.
393. On 26 August 2008 they inappropriately attempted to discontinue those actions. When that step failed on 27 August 2008 they simply did not appear indicating very shortly before the hearing that the plaintiffs would consent to dismissal of the action with costs assessed or agreed. Notwithstanding that the matter was listed for trial on 27 August 2008, they failed to appear.
394. In my opinion, in all those circumstances, the solicitors have failed to prosecute these proceedings for the appropriate purpose and after the commencement of the proceedings have failed to prosecute the proceedings diligently and appropriately.
395. They should also be subject to an order that they pay the defendants’ costs on an indemnity basis.
396. That leaves Mr and Mrs Lazar. It must be said immediately that there is no evidence that Mrs Lazar had any awareness of any of the circumstances relating to these proceedings either before or after they were commenced and there should be no order for costs made against her.
397. The evidence discloses that Mr Lazar was aware of Mr Byrnes’ various demands made prior to the commencement of the proceedings. He was also a director of BAA which purported to take an assignment of the Contor and Cobra debts in October 2007, and he made demands upon the defendants in relation to those debts.
398. He was also copied in to correspondence between Mr Byrnes and the defendants’ solicitors in January 2008, and was aware that the defendants had disputed that the statutory demands had been served and disputed the debts and their assignment.
399. Lastly, he is a beneficiary of the Coomera Trust.
400. However, I am not satisfied that Mr Lazar played any active part in the commencement of these proceedings or the maintenance of these proceedings after their commencement. It is true, as I have said, that he was aware of the commencement of the proceedings and of the defendants’ assertions. There is, however, no evidence that he did anything active in maintaining the proceedings.
401. There will be no order for costs against Mr Lazar.
     

I certify that the preceding four hundred and one (401) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander.

Associate:

Dated: 29 April 2009

Counsel for the First Plaintiff:	Mr G Dart
Solicitor for the First Plaintiff:	Simmons & McCartney Lawyers & Attorneys
Counsel for the Second Plaintiff:	Mr A Lazarevich
Solicitor for the Second Plaintiff:	Simmons & McCartney Lawyers & Attorneys
Counsel for Mr and Mrs Byrnes:	Mr G Dart

Solicitor for Mr and Mrs Byrnes:	Simmons & McCartney Lawyers & Attorneys
Counsel for Dr and Mrs Low:	Mr A Lazarevich
Solicitor for Dr and Mrs Low:	Aejis Legal
Counsel for Mr and Mrs Lazar:	Mr P Quinn
Solicitor for Mr and Mrs Lazar:	Stewart Rattray Lawyers
Counsel for the Defendants:	Mr R Whitington QC with Mr S Doyle
Solicitor for the Defendants:	Johnson Winter & Slattery

Date of Hearing:	31 October 2008
Date of Judgment:	29 April 2009