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- Unreported Judgment
Queensland Maintenance Services Pty Ltd v Zullo (No 2) QDC 229
DISTRICT COURT OF QUEENSLAND
Queensland Maintenance Service Pty Ltd (in liquidation) v Zullo (No 2)  QDC 229
QUEENSLAND MAINTENANCE SERVICE PTY LTD (IN LIQUIDATION)
FRANK GERARD ZULLO
4712 of 2015
District Court of Queensland
7 September 2016 - Ex tempore
RS Jones DCJ
C Wilson for the applicant
D Williams for the respondent
McInnes Wilson lawyers for the applicant
Acuity Legal for the respondent
Queensland Maintenance Services (in liquidation) Pty Ltd v Zullo (No 2)  QDC 229
- HIS HONOUR: Yesterday, on 6 September 2016, I dealt with proceedings involving QMS Holdings (in liquidation) and Zullo. After hearing submissions on the substantive matter, the proceedings were adjourned to allow me to consider the submissions made, and also to, accommodate a prior commitment of one of the counsel involved, the matter was adjourned to 3.30pm.
- At that time, I gave my reasons and made various orders. The substantive orders were: (1) leave was granted for the applicant to discontinue the proceedings and (2) each of the parties were to bear their own costs of the proceedings up to the 6th of September 2016. The liquidators who were seeking leave to discontinue, were also seeking costs up until the 15th of December 2015, and the relevance of that date will become apparent in a moment. The respondent did not oppose discontinuance but wanted an order that the applicant should pay his costs of the proceedings.
- At about ten past 5 on 6 September 2016, after giving my reasons and making orders, the applicant then sought its cost of the proceedings that day. These are the reasons of the orders that I propose to make.
- The respondent was the sole director of the applicant company while it was solvent. In September 2012, the company was wound up in insolvency, and liquidators were appointed. Following a public examination of the respondent on 4 March 2015, on 18 November 2015, a letter of demand was sent to the respondent’s solicitors concerning certain moneys expended by the company in February 2007. Those moneys were, on their face at that time, seen to be associated with the respondent’s purchase of a Ferrari motor vehicle but recorded falsely in the company financial records. That demand was rejected, and on 3 December 2015, the applicant commenced proceedings. There were amendments to the originating application, and on 3 June 2016, a detailed statement of claim was filed together with an amended originating application.
- On 12 August 2016, the appellant filed an application seeking the leave to discontinue its action against the respondent, and ancillary orders, including that the respondent pay its costs for the proceedings up to 15 December 2015. As I said, that date is an important date, as it was at that time that the respondent and an accountant named Mr Whimp filed certain affidavit material. It was said that it was the information contained in those affidavits that caused the liquidators to reconsider their position concerning the litigation and, indeed, to discontinue the proceedings.
- In paragraph 18 of the applicant’s submissions, it was put in these terms:
QMS seeks its costs of the proceedings up until 15 December 2015, being the date upon which the respondent filed his affidavit deposing for the first time (a) that the part payment for the Ferrari had been a payment as an advance to the shareholder Gelding Pty Ltd paid directly to the respondent’s benefit because the respondent is a beneficiary of the Gelding Trust and (b) the entry in the records as “playground renovations” was an error.
- It needs to be noted that despite having the affidavits in their possession since 15 December 2015, the application for leave to discontinue was not filed until some eight months later and, in the meantime, the applicant had filed and served amended pleadings. For reasons given yesterday, I made various orders, most relevantly being, as I have said, leave to discontinue, and each party bear their own costs up to date. The applicant’s application for the costs of yesterday’s proceedings is essentially based on various offers made to resolve the matter. On 21 July 2016, about three weeks before the application to discontinue was filed, solicitors for the liquidators wrote to the respondent’s solicitors. That correspondence relevantly contained the following:
Having now considered your client’s material in detail, and having regard to the above comments about costs, our client makes the following offer:
- (1)The parties consent to the following orders:
- (a)the proceeding be discontinued;
- (b)the funds held in court as security for costs, together with any accretions thereon, be released to the plaintiff;
- (c)there be no order as to costs.
- (2)Once the orders in (1) have been sealed and issued by the Court, the parties release each other from any claims arising out of Mr Zullo’s acquisition of the 2007 Ferrari F430 Spider.
- It is to be noted that on the 21st of July 2016, when that letter was written, was a Thursday. The offer was said to be open only until 4 pm the following Monday. The offer was rejected, and detailed reasons were given for that rejection. About one month later, on 23 August 2016, the solicitors for the respondent wrote to the solicitors for the liquidators a detailed letter which concluded with the following counter-offer:
It is clear from the matters raised herein that your client is exposed to significant cost orders. However, in an effort to minimise any further expense to either party, our client instructs that he will agree to the following orders:
- 1.That pursuant to rule 3042 of the UCPR, the applicant have leave to discontinue its claim subject to these proceedings –
…claim subject of these proceedings against the respondent.
- 2.That the applicant not bring any further court proceedings against the respondent based on the same or similar allegations the subject of these proceedings without leave of the court.
- 3.The applicant pay the respondent costs fixed in the sum of $30,000.
- 4.That the security for costs held by the court in the sum of $20,000 be applied in part satisfaction of the respondent’s costs pursuant to rule 676(c) of the UCPR.
- 5.The applicant pay the respondent the balance of the costs, being $10,000, within fourteen (14) days of the date of the order, seek such further or other order as the court deems fit.
- That offer was rejected, and on 2 September 2016, the solicitors for the liquidators wrote to the respondent’s lawyers a letter said to be “without prejudice save as to costs.” That letter relevantly provided:
In your letter dated 23 August 2016, you state that the costs incurred by your client between 16 December and 23 August were $20,968.95, including GST. These costs appear high to us but, nonetheless, even if these costs are accepted, you will appreciate that to the extent your client is successful in obtaining an order for those costs, your client’s tax costs will be likely to be in the order of approximately $13,979.30. To avoid the cost and inconvenience of taxation and the like, our client offers to consent to the following orders:
- (a)Pursuant to rule 3042 of the UCPR, the applicant have leave to discontinue its claim the subject of these proceedings against the respondent.
- (b)The applicant not bring any further court proceedings against the respondent based on the same or similar allegations the subject of these proceedings without leave of the court.
- (c)Each party bear its own costs.
- (d)The $20,000 sum held by the court in respect of security for costs be released to the applicant.
- (e)Such further order as the court deems fit.
- The letter is also said to have been made pursuant to the principles in Calderbank v Calderbank, a well-known case concerning costs. It is to be noted that the orders that I made were, if not in identical terms, to the same effect as the proposed orders (a), (b), (c) and (d) identified above. Again, it is to be noted that this letter was written on a Friday, and the offer for it was only left open until midday the following Monday.
- I have concluded the appropriate course of action is to make no orders as to costs concerning the cost of yesterday’s proceedings for the following reasons. First, each party was as equally unsuccessful in the contested aspects of the proceedings. Second, the time limit imposed on the offer was unreasonable, particularly given the intervention of the weekend. Third, the offer really offered little by way of any meaningful compromise when, up until 15 December 2015, the respondent would have already had to meet his legal fees which would be expected to be considerable. Fourth, even after that date, further legal fees were incurred in circumstances where, as I indicated yesterday, had the liquidators acted in a more prudent and timely way, there would have been no need for further proceedings, including the amendment to the originating application, and the filing and serving of a statement of claim which consisted of a number of significant and new prayers for relief.
- Finally, numerous requests for extensions of time were sought and granted and, as I have already indicated, the amended statement of claim contained further and alternate relief to that that had originally been sought. And, as was canvassed yesterday, since 15 December 2015, because of the conduct of the liquidators, the respondent has had to incur further legal costs. For those reasons, the orders that I make is that I make no order as to the costs of the proceedings on 6 September 2016. Came a long way to hear that.
- MR WILSON: That’s fine, your Honour.
- HIS HONOUR: Is there anything arising out of that?
- MR WILSON: No. That’s perfect, your Honour.
- Published Case Name:
Queensland Maintenance Services Pty Ltd (in liquidation) v Zullo (No 2)
- Shortened Case Name:
Queensland Maintenance Services Pty Ltd v Zullo (No 2)
 QDC 229
07 Sep 2016