DISTRICT COURT OF QUEENSLAND

1. [1]
   This is an appeal from the refusal on 15 October 2002 by the Queensland Building Tribunal to order that the respondents pay the appellants’ costs of proceedings in the tribunal. The respondents are the liquidators of a company, Forboyz CMS Pty Ltd, which on 20 March 2000 filed in the tribunal an application against the appellants seeking $293,286 on a quantum meruit.  The applicant company was at that time already in liquidation, as was disclosed in the application.  The appellants sought security for costs, and on 26 September 2000 a member of the tribunal ordered the applicant to provide security, by payment of $23,750 to the tribunal’s trust account, for any costs which the tribunal should order in favour of the appellants against the applicant.  The applicant’s claim was stayed until that payment had been made. 

2. [2]
   That payment was not made, and on 4 April 2001 a member of the tribunal ordered that the application be struck out because of the failure to provide the security for costs, and that the applicant pay the respondents’ costs of the application for security for costs, and the application to strike out the proceeding, as agreed or to be assessed on the Supreme Court scale. There was no agreement and ultimately these costs were assessed by the tribunal at $12,345.10, by an order made on 11 March 2002. On 13 September 2002 the appellants filed an application with the tribunal seeking an order that the costs of the proceeding be paid personally by the liquidators of the applicant, that is, by the respondents. That application was heard on 8 October 2002, and on 15 October 2002 the tribunal refused the application, and ordered the appellants to pay the costs of the application.

3. [3]
   The tribunal member refused the application on two grounds, either of which would have been sufficient. The first was that the issue of costs of the proceedings had been resolved on 4 April 2001, so the tribunal had no power left to make any further order for costs. The second was that the conduct of the respondents was not such as to justify making an order for costs against them personally, since the liquidators had not behaved unreasonably or improperly, nor had there been any maladministration or misconduct.

Arguments for the appellants

4. [4]
   The appellants submitted that the tribunal was not, in relation to this application, functus officio, since it had not, until this application was heard, considered whether to exercise the jurisdiction, which it had accepted it had,^[1] to make an order for costs against a person not a party to the proceeding before it.  It was also submitted that the appellants had not been heard in relation to the issue of costs at the time when the earlier costs order had been made, against the applicant, since on that occasion the tribunal had simply published its decision and made an order without any further submissions.  Accordingly the question of whether there ought to be any particular order for costs had not previously been argued on behalf of the appellants. 

5. [5]
   It was further submitted that the tribunal had applied the wrong test in deciding whether to order costs in such circumstances, because the discretion of the tribunal was not fettered in any way. It was also submitted that there had been inappropriate conduct on the part of the respondents, in opposing the application for security for costs on the ground that the appellants were the cause of the company’s impecuniosity, a proposition rejected by the tribunal in making the order for security for costs, and in failing to discontinue the proceeding once the order for security for costs was made, and it had been decided not to comply with it. It was also submitted that the respondents had an interest in the proceedings because their costs (as liquidators) would be paid first out of the funds available for distribution on liquidation, so that any money recovered by the proceedings would have been of benefit, at least potentially, to them.

Was there jurisdiction to make the order?

6. [6]
   The respondents submitted that the question of costs had been dealt with, on the publication of the reasons for making an order that the action be struck out, and that although the appellants may not have been present when the order was made, they were present when the application was argued, and had the opportunity at that time to submit that an order for costs should be made against the liquidators personally. They did not do so, and indeed the order for costs against the applicant company was the order sought by the appellants at that time. Accordingly the appellants had elected to obtain a costs order against the company, and were bound by that election. Costs orders would not be made against both the company and the liquidators. Once the question of costs had been dealt with, that issue would not be reopened by the court.

7. [7]
   Reference was made to the decision of the High Court in Autodesk Inc v Dyason [No 2] (1993) 176 CLR 300, a case concerning the circumstances under which the High Court would reopen a decision on the merits of an appeal.  No case was relied on specifically dealing with the question of whether an order for costs against a non-party could be made after an order for costs had already been made against a party, or whether an application for an order for costs against a non-party could be made after the time when an order dealing with the substantive matter, and the costs as against the party, had been made.

8. [8]
   That is not surprising, as there is clear authority to the contrary. In Caboolture Park Shopping Centre Pty Ltd v White Industries (Qld) Pty Ltd (1993) 45 FCR 224, a lengthy Federal Court proceeding had concluded with an order dismissing the applicant’s claim, and giving judgment for the respondent on the cross-claim in a substantial amount.  The applicant was ordered to pay the costs of the claim and cross-claim.  A special order was made as to how those costs were to be ascertained, but that is irrelevant for present purposes;  what matters is that the proceeding was concluded and the costs were dealt with as between the parties.  The applicant subsequently went into liquidation, and the costs order against the applicant was not pursued, the respondent believing that any attempt to do so would be futile.  Subsequently by a motion filed in the proceeding the respondent sought an order that the costs be paid by the solicitors who had commenced the proceeding for the applicant, and acted for the applicant for most of the lengthy trial, until they withdrew following the insolvency of the applicant’s parent company.

9. [9]
   Prior to the determination of substantive questions of whether an order should be made against the solicitors,^[2] the issue of whether there was jurisdiction to entertain the application was raised in the Federal Court and referred by way of case stated to the Full Court.  This is the report of the decision on that issue.  The argument of the solicitors was essentially the same argument accepted by the tribunal here, and supported by the respondents before me:  that once the proceedings had been concluded and an order for costs had been made against a party there was no jurisdiction for the court to reopen the case:  see p. 227.  That argument was advanced with particular reference to the terms of the section empowering that court to deal with the question of costs:  Federal Court of Australia Act 1976 (Cth) s 43, which relevantly provided:

“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.”

10. [10]
    The equivalent provision in the relevant Act here, Queensland Building Services Authority Act 1991, s 95 provided:

3. “(1)
   The tribunal may, on application by a party to a domestic building dispute, make such orders and directions as may be just to resolve the dispute and any other matters at issue between the parties.

2. (2)
   …

3. (3)
   …

4. (4)
   In the exercise of its jurisdiction under this section, the tribunal may exercise any one or more of the following powers –

…

7. (g)
   award costs.”

11. [11]
    This is analogous, since the power to award costs is conferred “in the exercise of its jurisdiction under this section”, that is to say the jurisdiction to “make such orders and directions as may be just to resolve the dispute and all other matters at issue between the parties.”

12. [12]
    The Full Federal Court said that the jurisdiction to award costs had not been narrowly defined by parliament, and the court was able to make such orders for the payment of costs as may be required for the just disposal of all proceedings brought before it: p. 229. The court said that what was required by s 43 was that the jurisdiction to order costs be one limited to costs relating to a proceeding:  p. 231.  “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.”  The court went on to consider an alternative basis for jurisdiction, the ability of the court to enforce a duty owed by a practitioner to the court, which does not arise in the present case, the respondents not being practitioners.  In the course of this however a reference was made to earlier authority to the effect that that jurisdiction could be exercised notwithstanding that judgment in the action had already been given:  Simes v Gibbs (1838) 6 Dowl 310;  Re Grey [1892] 2 QB 440. 

13. [13]
    In the context of the exercise of jurisdiction under s 43, however, the court recognised that once a judgment had been formalised in accordance with the court rules the court thereafter lacked power to make an order which altered or set aside that judgment, subject to certain severely circumscribed exceptions: p. 234. However, the order sought in that case (as in this) was not an order which involved any variation or alteration of the order previously made. It was in a sense an order which was supplemental to the order previously made. The court approved a statement in Preston Banking Co v William Allsup & Sons [1895] 1 Ch 141 at 143-4 permitting supplemental orders.  The making of a supplemental order had also been approved by the Court of Appeal in Re Scowby [1897] 1 Ch 741, at 754.  The court held that the order sought was properly characterised as one supplemental to the orders already made, and therefore the existence of those orders did not stand as a bar to the application for an order against the solicitors.  The court said at p. 236:

“The issues involved where a claim is made against a solicitor for costs by a party to the litigation have not been determined by the judgment which has been entered.  They remain yet to be resolved.”

14. [14]
    In my opinion the decision of the Full Federal Court is persuasive authority, and it ought to be followed in the present case.^[3]  The order sought in the present case is truly supplemental to the earlier order of the tribunal.  It does not involve any variation of that order, nor does it breach the rule requiring finality of proceedings.  This decision is inconsistent with there being any election to seek costs against either a party or a non-party:  plainly an order can be sought against a non-party notwithstanding that an order has already been made against a party, although the court did regard the fact that the order made against  the party would be futile as a relevant consideration.  The same consideration applies here.  The position would be different if the tribunal had previously considered but rejected submissions that an order for costs should be made against the respondents, but that was not the situation here.  The first occasion when such an order was sought was in the application filed on 13 September 2002, and accordingly the tribunal in my opinion had a clear jurisdiction to entertain that application.  It was in error in concluding to the contrary.  It is therefore necessary to consider the second ground upon which the application was rejected.

Did the discretion as to costs against a non-party miscarry?

15. [15]
    It was submitted by the appellants that the discretion to order costs against a non-party is not fettered in any way. That however appears to be contrary to the statement of Mason CJ and Deane J in Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 192, that a judge does not have “an unfettered discretion to make any order that he or she chooses.   The wide jurisdiction conferred by the rule must be exercised judicially and in accordance with general legal principles pertaining to the law of costs.”  Their Honours went on to note that the prima facie position is that an order for costs is only made against a party to the litigation.  Their Honours continued: 

“We consider it appropriate to recognise 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.”

16. [16]
    In my opinion it is significant that in that passage there is no reference to any misconduct or inappropriate behaviour on the part of the non-party. That this was so was recognised recently in Clutha v Millar (No 5) [2002] NSWSC 833 by Austin J at para [31].  In that case however his Honour went on to note that in Knight v FP Special Assets their Honours at p. 191 had also pointed out that the availability of an order for security for costs at an early stage of litigation would in many situations be a strong argument for refusing to exercise a discretion to order costs against a non-party.

17. [17]
    Presumably the point of that comment was that, if a defendant had failed to make an application for security for costs at an early stage, the difficulties the defendant faced later in the action when substantial costs had been incurred might be seen to have been avoidable. In the present case, an application for security for costs was made at an early stage, and indeed was successful. The costs sought to be recovered include the costs of that application. Given that the applicant was a company in liquidation an application for security for costs was clearly appropriate. No doubt some of the costs associated with that application were incurred because the application was resisted. It was the respondents who decided to resist the application, on grounds that were unsuccessful; as the application was appropriate, the cost of that (so far as it was an application for security for costs) application was not something that the appellants could and should reasonably have avoided.

18. [18]
    The position is different however in the case of the application to strike out the proceeding. That application could easily have been avoided. Sometimes when an order for security for costs is made the court at the same time imposes a time within which such security must be provided, in default of which the proceeding is struck out automatically without further application.^[4] Alternatively, the appellants could have taken advantage of the fact that, when the order for security for costs was originally made, the tribunal stayed the applicants’ claim against the respondents until the security be paid, or until further order.  It would have been open to the appellants simply to have relied on the protection provided by that stay.  The company was in liquidation, and either the liquidators would provide the security and the claim would proceed, or the liquidators would decide not to provide the security and proceed with the winding up, after which the company would be dissolved.  In terms of avoidability of the costs therefore the costs of the application for security for costs were not really avoidable, but the costs of the second application were.

19. [19]
    That is not to suggest that there was anything improper in making the second application, or even that it was inappropriate. But the consideration referred to in Knight v FP Special Assets at p.191 seems to be directed to avoidability of the difficulty associated with the impecuniosity of the other party to the litigation, rather than requiring any wrongdoing or inappropriate conduct on the part of the applicant for the order for costs against the non-party.

20. [20]
    The tribunal member in refusing to make an order against the liquidators referred to a different decision of Austin J, in Cresvale Far East Ltd v Cresvale Securities Ltd (No 2) [2001] NSWSC 791.  The tribunal member said in relation to that case:

“It is clear from the review of cases conducted by the court that it is necessary to demonstrate exceptional circumstances before an award for costs is made against the liquidator personally.  The court was not satisfied that it was necessary to demonstrate corruption, maladministration or misconduct of equivalent degree before an order were to be made personally against the liquidator.  It considered that an order might be made where liquidators have behaved unreasonably or improperly.”

21. [21]
    When considering the decision in Cresvale, it is necessary to bear in mind that that case was decided under the provisions of rules of court in New South Wales which limit the circumstances in which costs may be awarded against a non-party:  see para 26.  His Honour noted that it had been decided in the earlier New South Wales case of Wentworth v Wentworth [2000] NSWCA 530 that the effect of those rules was to abolish the category of case relied on by the High Court in Knight v FP Special Assets (supra), in the passage quoted earlier.  Accordingly there was no question of making an order against the liquidators on the basis that they fell within that category.  There is however no relevant rule applying to the operations of the tribunal which would have the effect of excluding that category of case from the scope of an order for costs against a non-party.  The restrictions on the circumstances under which an order for costs can be made against liquidators in New South Wales arising from the terms of restrictive rules of court in that state will necessarily not apply to a decision of the tribunal in Queensland.

22. [22]
    It seems to me that in this way the tribunal may have fallen into error in relation to the exercise of the discretion. The tribunal member appears to have taken the view that an order for costs against liquidators could only be made in circumstances where such an order could be made within the restrictive provisions of the New South Wales rules, but in my opinion that is not so. Those rules do not apply in Queensland, and there is no equivalent which was applicable to the tribunal. The High Court has recognised that an order for costs against a non-party may properly be made, in accordance with a general discretion to award costs against a non-party fettered in the way that was described by the High Court, in, among other categories, the situation described in the passage quoted earlier, which does not involve any misconduct on the part of the persons concerned. In my opinion it was open to the tribunal to make an order against the respondents if it was satisfied that the requirements of that category had been made out, and that it was appropriate to do so.

23. [23]
    The requirements of the category are that the party to the litigation is an insolvent person or a man of straw, which was the case here, the non-party had played an active part in the conduct of the litigation, which was the case here since the litigation was commenced at the direction of, and remained under the control of, the liquidators, and where the non-party, or some person on whose behalf he or she is acting or by whom she or he has been appointed, has an interest in the subject of the litigation. That was also the case here: the liquidators were acting in the interest of the creditors, who had an interest in the subject matter of the litigation because, if the claim against the appellants had been successful, additional funds would have been recovered and thus available to be distributed among the creditors in the winding up. In my opinion in the present case all the requirements in that category are clearly established. Their Honours then said that an order for costs should be made against the non-party if the interests of justice require that it be made.

24. [24]
    The tribunal member did not decide whether the interests of justice required that the order be made; the tribunal member did not appreciate that that was the relevant test to be applied in the circumstances of the present case. Accordingly the discretion miscarried,^[5] and it is necessary for it to be exercised afresh on appeal.  It was not suggested by either party that, if I was of the opinion that there had been some error of law in the exercise of the discretion, the appropriate course was to remit the matter to the tribunal to have the discretion exercised afresh.  Although there is power to remit for rehearing as a result of an appeal to this court in s 92(6) of the Queensland Building Tribunal Act 2000, the court can also vary or reverse the tribunal’s decision, and that involves making the decision which ought to have been made by the tribunal if the correct test had been applied.

Was there inappropriate conduct by the liquidators?

25. [25]
    It may be relevant if there was some inappropriate conduct on the part of the liquidators,^[6] that is, that the liquidators had done more than simply what is to be expected of someone charged with conscientiously gathering in the assets of the company so that they can be distributed and the company wound up.  In the present case there was no finding by the tribunal that it was inappropriate for a liquidator conscientiously seeking to gather the assets of the company to commence the claim in the tribunal against the appellants.  Indeed it does not appear to me that there was any real attempt to show that in the material before the tribunal.  I am not satisfied that there is anything in the material which would justify a conclusion that it was inappropriate for the respondents to have made the claim in the tribunal at all.

26. [26]
    With regard to the resistance to the application for security for costs, the first point that must be noted is that the application was heard in conjunction with two other applications, one raising the question of whether the liquidators had capacity to prosecute the application in the tribunal and the other whether the tribunal had jurisdiction to grant the relief sought. The former issue was not pursued by the appellants in the light of the material filed on behalf of the respondents, and on the second point the appellants were unsuccessful, the tribunal holding that it did have jurisdiction in the matter although not to make a declaration which was part, but not all, of the relief claimed.

27. [27]
    In relation to the issue of security for costs, it was submitted on behalf of the appellants that the claim was inflated and not bona fide, and that argument was rejected by the tribunal.  On the other hand the tribunal rejected an argument on behalf of the applicant that the appellants’ conduct contributed to the insolvency of the applicant:  this was the argument that it was submitted ought not to have been run, and amounted to inappropriate resistance of the application.  However the tribunal expressed its conclusion as being that the applicant had “not made out its case for the application of this factor in the exercise of my discretion as to whether security should be ordered.”  There is certainly no finding that the proposition was clearly wrong, or unarguable.  It also appears that there was no great volume of material directly concerned with this factor;  the tribunal mentioned only one paragraph of one affidavit. 

28. [28]
    Another issue on which the applicant was unsuccessful was an argument that security should not be ordered in respect of the whole proceeding, but that a further application could be made prior to the hearing. Pursuing that argument however would not have much effect on the costs. There is some authority that in an appropriate case two applications (or even more) can be made. The submission on behalf of the applicant that any order would stifle the litigation was rejected as not a conclusive factor, in the absence of any ability to draw any conclusions as to the likely outcome of the litigation, and because it did not appear that those standing to benefit from the litigation were themselves impecunious.

29. [29]
    My overall impression therefore is that, in relation to the application heard on 8 September 2000 which led to the order for security for costs on 26 September 2000, the appellants were successful in relation to some matters but unsuccessful in relation to others, and there was nothing to suggest that the approach adopted by the respondents in relation to any part of that application was inappropriate, even though it was not in all respects successful from the point of view of the applicant company.  Notably, it was in a number of respects successful, and it might be thought that the appellants had done well to obtain an order for costs in respect of that application.

30. [30]
    With regard to the application to strike out the proceeding in the tribunal, I have already said something about whether that application was avoidable. There does not appear to have been any inappropriate conduct on the part of the respondents in relation to the question of costs, or the application to strike out. I do not accept that there was any obligation on the respondents to discontinue the proceeding, given that it had been stayed. Overall, in my opinion it has not been shown that there was any inappropriate conduct on the part of the liquidators, any conduct which was inconsistent with the obligation on a liquidator conscientiously to pursue the duty of gathering in the assets of the company.

Approach to the discretion

31. [31]
    It does not necessarily follow however that an order for costs against the liquidators will not be made. It was once recognised that orders for costs were not made against liquidators in such circumstances: Hession v Century 21 South Pacific Ltd (1992) 28 NSWLR 120 at 123.^[7]  A liquidator has the important function of gathering in the assets of the company, and a responsibility to the creditors and shareholders to do so, and accordingly ought to be pursuing claims where it appears that persons may be liable to the company but are not making payments voluntarily.^[8]  One would expect the mere fact that such a claim ultimately failed would not ordinarily result in an order for costs against liquidators.

32. [32]
    I note that there is some British authority drawing a distinction between an order for costs against liquidators in their capacity as liquidators and an order for costs against liquidators personally.^[9]  The former is regarded as an order which is to be satisfied out of the assets of the company, although it is treated as part of the liquidators’ costs of the winding up so that they are payable first out of those assets.  But if those assets are insufficient even to meet the costs, they do not have to be paid out of the liquidators’ own pocket.  An order that the costs be paid by the liquidators personally however is an order that they be paid, if necessary, out of the liquidators’ own pocket.  I have not seen that distinction drawn in the Australian cases to which I have referred, and the position in Queensland seems to be that if an order for costs is made against liquidators it is treated as an order against them personally:  Belar Pty Ltd v Mahaffey [2002] 1 Qd R 477 at 491.^[10] 

33. [33]
    The particular position of a liquidator was discussed in Emanuele v Hedley (ACT Supreme Court, Higgins J, 19-12-97, unreported).^[11]  Apart from noting the established significance of an ability to apply for an order for security for costs, his Honour said that it was necessary to consider whether the liquidator caused the other party to incur costs, a matter of some significance in that case because there was another plaintiff pursuing the action anyway.  His Honour also concluded that a costs order would not be made against a liquidator who had acted with due diligence.

34. [34]
    That would appear to be consistent with the outcome in a Queensland case, Re SCA Properties Pty Ltd (In Liquidation) [1999] QSC 180, 17 ACLC 1.  In this case the liquidator of one company appealed against the decision of a liquidator of another company (SCA) to admit certain proofs of debt in the winding up of SCA.  In the judgment the question of whether the debts claimed were properly owing was investigated in some detail, and as a result Ambrose J expressed satisfaction that the liquidator of SCA was clearly and unarguably correct in admitting the proofs.  Indeed, his Honour expressed the view that it was an appeal which ought never to have been instituted, and described the whole exercise as simply a waste of court time, involving unnecessarily incurring significant costs.  Accordingly he ordered that the costs be assessed on an indemnity basis and, because of concern about whether the applicant company would have sufficient funds to meet a costs order, made the order that the liquidator pay the costs of the respondents to be assessed on an indemnity basis. 

35. [35]
    Although there was some discussion about wrongdoing in that case, and the conclusion that the proceeding ought never to have been brought, that appears to have been directed to the question of whether costs should be assessed on the standard or on an indemnity basis, rather than the question of who would be ordered to pay them. The latter seems to have been justified simply on the basis that it appeared unlikely that the company in liquidation would have sufficient funds to meet the orders. His Honour inferred that some creditor of that company had persuaded the liquidator to launch the appeal, and presumably saw an order against the liquidator as a means of indirectly making that creditor responsible for the costs, on the assumption that the liquidator had obtained an indemnity from that creditor. It is therefore not at all clear from this decision that some wrongdoing or inappropriate conduct on the part of the liquidator was regarded as being necessary before an order could be made against the liquidator, although given that that was a case where his Honour was satisfied there had been inappropriate conduct in bringing the proceeding at all, the decision is certainly not authority for the proposition that that may not be required.

36. [36]
    There is however an earlier Queensland case which does appear to stand for the proposition that it is not necessary to show misconduct or unreasonable or improper behaviour on the part of a liquidator. In Kemp v Coastal Constructions Pty Ltd (Appeal No 171/92, Qld Court of Appeal, 17.03.93, unreported) an order was made that the costs of a successful appellant be paid by the liquidators of the respondent company.  The background to this decision appears in the reported judgment of the Court on the appeal:  Re Kemp [1994] 1 Qd R 285, although in the report the reasons conclude with a reference to the costs of the appeal being paid by the respondent.  That was the order in the reserved judgment, but when it was delivered the appellant sought to make a submission that the costs be paid by the liquidators, and as a result that part of the order was vacated.  Submissions were then received from both parties, and the Court delivered a separate judgment on 17 March 1993. 

37. [37]
    It is quite a short judgment, although not ex tempore.  It does not contain any discussion of principle, and therefore it is a matter of trying to work out from the very brief discussion why the order was made, and what this indicates about the correct approach when considering making an order against a liquidator.  The Court first confirmed that there was jurisdiction to make the order, and noted that if the appellants were confined to a remedy against the respondent company there was some risk that the costs would not be recovered.  The Court considered that “it is just that [the liquidators] rather than the appellant should bear any risk of the company’s assets being insufficient to meet the liability.”  What was said in relation to the behaviour of the liquidators was merely that the appellant’s claim “has been resisted in rather a technical way without any great regard to minimising expense;  the liquidators have no special claim to consideration on the question of costs.”  The difficulty with that passage for my purposes is that it is not clear whether the second comment was one which arose specifically because of the conduct of the liquidators in that action, which was the subject of some criticism in the reported judgment, or whether it was intended to lay down a broader principle that liquidators in general have no special claim to consideration on the question of costs.

38. [38]
    To consider the background to that application, the company in liquidation was a building contractor, and the appellant claimed to have been owed money for work done. The appellant had given notice of claim of charge under the Subcontractors Charges Act, and had subsequently issued a plaint out of the District Court seeking to recover a fund which was to be paid into court by agreement by the employer.  Promptly after the plaint was issued the employer did pay the money into court, and for that reason the employer was not joined.  The liquidator had asserted that the action was not properly constituted unless the employer was a party, and that as a result pursuant to the Act the charge was extinguished.  Subsequently the appellant gave a further notice of charge, and commenced a further proceeding in the District Court against both the company and the employer.  Although the company was already in liquidation, leave was not sought under the Corporations Law to commence the action until afterwards.  When that leave was sought the application was resisted on the ground that the action was futile, the charge having been already extinguished because of the earlier proceeding.  That argument succeeded at first instance, but on appeal the Court of Appeal held that the first action was validly constituted, and that leave ought to be given.  Although the liquidators were ultimately unsuccessful in their resistance to the application for leave, it could hardly be said that their position was unarguable or a waste of the court’s time, since it had succeeded at first instance. 

39. [39]
    The Court said at p. 289:

“The provisional liquidators are no doubt using funds which might otherwise go to creditors, including perhaps the appellant, to pay for this litigation.  It seems to us to be undesirable that there be any further fragmentation of the issues, leading to the expenditure of inordinate sums of costs on what is, after all, a fairly small dispute.  The respondent is in the hands of provisional liquidators who will, not doubt, do nothing to inhibit the earlier economical final disposition of the appellant’s claim to the charge.  It is unfortunate that there have been at least four hearings related to the claim, with no final resolution.” 

Hence the comment in the later reasons that the resistance to the claim had been in rather a technical way.  There was therefore certainly some disapproval on the part of the Court of the attitude of the liquidators, and in these circumstances I would be wary about regarding the decision as authoritative for the proposition that it is not necessary for there to have been something inappropriate in the conduct of the liquidators before an order for costs was made against them.  Nevertheless, it does appear that the Court was particularly motivated to make the order in this case because of a desire to avoid the risk that the assets of the company would not be sufficient to meet the order for costs.^[12]

40. [40]
    That decision did not escape criticism. In a case note in (1993) 67 ALJ 706-7 the learned author described it as “plainly wrong” because it appeared to disregard the special position of the liquidator and the earlier authorities that it was not appropriate to make an order for costs against the liquidator personally unless the liquidator has done something to make himself personally liable for the costs.^[13] 

41. [41]
    Nevertheless the decision was cited with approval, and (it seems to me) taken further by the Court of Appeal in Belar Pty Ltd v Mahaffey [2000] 1 Qd R 447 at 491.  In that case the liquidators of an insolvent trustee company had taken proceedings in the District Court against certain beneficiaries of a particular trust.  The liquidators were successful in the District Court, but an appeal to the Court of Appeal was allowed, and it was ordered that the action be dismissed.  The action had been brought in the name of the company, and in relation to costs the Court said at p. 491: 

“When an insolvent company, under the control of a liquidator, unsuccessfully bring litigation against another party, a simple order for costs against the company would carry a considerable risk and in some cases a virtual certainty that the costs would not be recovered.  The present case is of this kind.  The most usual order in such a case is that the liquidator pay the costs, and it is recognised that this makes the liquidator personally liable for such costs.”

42. [42]
    As authority for this proposition the Court referred to Kemp (supra), Re Wilson Lovett & Sons Ltd [1977] 1 All ER 274, and Re Newark Pty Ltd [1993] 1 Qd R 409 at 420.  Re Wilson Lovett & Sons Ltd is the English authority that when a liquidator brought proceedings in his own name he was personally liable for an order for costs, but when the proceedings were brought in the name of the company an order for costs could not be made against him.  The only part of this passage which could be said to receive any support from that decision is the proposition that when an order for costs is made against the liquidator it makes the liquidator personally liable for such costs.  Indeed the decision was cited for that same proposition in Re Newark Pty Ltd (supra), a case where the proceeding was brought by the liquidator in his own name to recover payments alleged to have been void as preferences. 

43. [43]
    In that case Thomas J, with whom the other members of the Court agreed, said at p. 420:

“The usual order in litigation between a liquidator and adverse parties where the liquidator’s claim fails, is that the liquidator pays the costs, and it is recognised that this makes him personally liable for the costs.” 

ReWilson Lovett & Sons Ltd was cited.  Where the liquidator was the party that was always the case, and therefore such an order was appropriate in that case.  But it appears that the Court of Appeal has now simply equated the position of a liquidator suing in the name of the company with the position of a liquidator suing in his own name.

44. [44]
    The Court in Belar (supra) continued on page 491: 

“It is usual in such cases to permit the liquidator to recover costs so far as this is feasible, from company assets, provided there has not been misconduct or other unusual circumstances.  The exercise of such a discretion by the courts along the above lines is consonant with the principles under which orders for costs may be made against non-parties.”

For this proposition the Court cited Knight v FP Special Assets (supra), Kemp (supra) and Bent v Gough (1992) 36 FCR 204, a decision of the Full Federal Court which endorses the existence of a jurisdiction to order costs against liquidators, although in that case it was expressly recognised by Black CJ at p. 210 that the special position of a liquidator was very relevant to the exercise of the discretion.  In that case the Full Federal Court confirmed an order that liquidators pay personally costs of a “hazardous piece of litigation.”  The Court in Belar does not seem to have taken up the view of Black CJ about the special significance of the position of the liquidator.

45. [45]
    Ultimately in that case the Court, noting that full submissions had not been received as to whether the costs should be paid by the liquidators, gave the parties the opportunity to be heard in relation to that issue. Further lengthy submissions were in due course made, and further reasons of the Court were published on 16 March 1999.^[14]  These are more than sufficient to dispel any lingering doubts as to the law in Queensland in relation to orders for costs against liquidators where they bring proceedings in the name of the company in liquidation which prove to be unsuccessful, although again there is no reference to any of the authorities to the contrary to which I have referred.  The Court said at para [2]: 

“The adversarial costs of unsuccessful litigation brought by an insolvent company are commonly ordered against the liquidators personally.  If it were otherwise, the orders for costs in such cases would be empty gestures in favour of successful litigants who have been brought to court by persons exercising control over companies that they know to be insolvent.  No doubt the exposure to such a liability normally results in the liquidators first obtaining or securing suitable funds or indemnities from interested creditors.”

46. [46]
    Later in their reasons at para [8] the Court said that submissions received on behalf of the liquidators were “founded upon the erroneous premise that the liquidators could be required to pay costs only if a finding was made against them of misconduct or incompetence in the commencement or conduct of the action.” The Court dealt with an issue about whether natural justice had been afforded the liquidators, and continued, “But more importantly the discretion to make a costs order of the kind proposed is not limited to cases where liquidators are shown to be guilty of impropriety or lack of bona fides. Furthermore, such an order in the present case sits comfortably with the principles under which orders for costs may be made against non-parties. [The Court cited the passage from Knight at p. 192-3, and Bent v Gough (supra), and referred to a submission about Knight].  There is however nothing in the judgments in that case which would confine it to say receivers as distinct from liquidators, or any reason in principle why liquidators should be exempt from such a risk.  If the position were otherwise liquidators could hold to ransom any alleged debtor, and it would not be easy to prove misconduct.”  The Court added a further consideration which does not apply in the present case which need not therefore be mentioned.

47. [47]
    In the light of this decision it is now abundantly clear in Queensland that, while anything in the nature of inappropriate conduct, or worse, by liquidators may be a factor which would reinforce the appropriateness of an order for costs against them personally, the dominant consideration in deciding whether to exercise the discretion to make an order for costs against the liquidators is that, unless such an order is made, the successful party to the litigation would not obtain an indemnity in respect of that party’s costs, and will be left with a hollow order against the company. That approach is entirely inconsistent with the approach adopted by the tribunal in the present case.

48. [48]
    When the matter is approached in the manner indicated by the Court of Appeal in Belar (supra), it is sufficient to say that there is no reason shown by the circumstances of this matter to depart from the approach indicated in that case.^[15]  There is certainly no material to show that the order for costs against the applicant company will be sufficient, and I did not apprehend that counsel for the respondents was arguing that it would be.  The submissions on behalf of the respondents were really directed to establishing that there was not such serious misconduct on the part of the liquidators as to justify overcoming a strong prima facie reluctance to make an order for costs against liquidators personally, submissions which really become irrelevant in the light of the approach adopted by the Court of Appeal.  It follows that the tribunal member did not exercise the discretion as to costs on the correct basis, and that, when it is exercised on the basis laid down by the Court of Appeal in Queensland, the basic outcome is an order that the liquidators pay the costs of the appellants of the proceedings in the tribunal to be assessed. 

49. [49]
    It is however necessary to consider whether there is any particular reason why that prima facie position should be departed from in the particular circumstances of this case. Two considerations particularly arise: the first is that, as I have indicated earlier, the application for security for costs which was made who sought other relief, which was not given. It does not seem to me that there is any good reason why the liquidators should have to pay personally the costs of seeking other relief. Because there was one application, the appropriate order is that the liquidators pay half the appellants’ costs of the application which led to the order of 26 September 2000. The other matter which requires particular consideration is the application to strike out the proceeding. For reasons given earlier, the costs of that application were in my opinion avoidable and, consistently with the approach of the High Court in Knight (supra), the costs of that application which led to the order of 4 April 2001 should not be recovered from the liquidators.  Otherwise however there is nothing in the material to justify any department from the “usual order” that the appellants pay the costs of the proceeding in the tribunal.

50. [50]
    If it were necessary to show that there is some good reason relating to the conduct of the liquidator to justify an order for costs against the liquidator, so that it is necessary to show more than the mere fact that an order for costs against the company would not, or would be unlikely to, provide the successful party with the appropriate indemnity in respect of the costs,^[16] in my opinion in the circumstances of this case the appellants have not shown that, and I would not exercise my discretion in their favour.  However, as I understand the effect of the decisions in Belar (supra), it is sufficient for the successful party to show that an order for costs against the company would be unlikely to result in an effective indemnity, for an order for costs to be made against liquidators (regardless of the propriety of their conduct), and the only issue is whether there is some discretionary consideration which would justify exercising the discretion against the successful party, such as the avoidability of all or some of the costs.  That is the basis upon which I approach the exercise of the discretion;  because that was not the basis adopted by the tribunal member, it follows that that exercise of discretion was vitiated by error of law.  The liquidators should also pay the costs of the appeal.

51. [51]
    I might add however that I reach this conclusion with some regret, since it appears that the approach adopted by the Queensland Court of Appeal is significantly different from that adopted by other courts in Australia, and in England, and that the Court of Appeal in Queensland has not really explained why the considerations which are regarded as so significant by those other courts deserve in Queensland so little weight. I do recognise the force of the reasoning in the Court of Appeal decisions, but would have found them more convincing if they had at least dealt with the reasoning in the authorities elsewhere. However, the discretion is not unfettered and must be exercised judicially and in accordance with general legal principles as laid down by the Queensland Court of Appeal.

52. [52]
    My other comment is that I can sympathise with the member of the tribunal whose decision I am reversing on appeal. No doubt neither the decision in Caboolture Park Shopping Centre (supra), nor any of the Queensland Court of Appeal decisions as to how the discretion should be exercised, was cited to that member when the application was argued, since none of them was cited to me.