Zabusky v Virgtel Limited[2022] QSC 46

SUPREME COURT OF QUEENSLAND

1. [1]
   Against the background of a “decades-long, multi-jurisdictional” dispute, by this proceeding the plaintiffs sought to enforce against the defendant a judgment of the Federal High Court of Nigeria.^[1]  On 12 February 2021, on the basis of a finding that the defendant does not have any assets in Queensland and, accordingly, that Queensland is an inappropriate forum for the resolution of the dispute, Crow J ordered that the proceeding be permanently stayed.^[2]  Subsequently, on 22 February 2021, Crow J made an order that the plaintiffs pay the defendant’s costs of the application (for a permanent stay) and of the proceeding.
2. [2]
   There has been no appeal from Crow J’s decision and there is no challenge to the findings made by his Honour.
3. [3]
   On 21 February 2022, the plaintiffs filed the present application, which seeks an order that the stay be lifted.  The plaintiffs submit that there has been a material change of circumstances^[3] since the stay was granted, justifying an order lifting the stay, because:

   1. (a)
      first, as a consequence of the making of the costs order in the defendant’s favour, the defendant does now have a substantial asset in Queensland; and
   2. (b)
      secondly, in another proceeding subsequent to Crow J’s decision, the plaintiffs contend the defendant made a submission which ought to be construed as conceding that it does have assets in the jurisdiction.
4. [4]
   As to the first point, the defendant submits the costs order made by Crow J in this proceeding cannot give it an asset because the defendant did not put any funds towards payment of the legal costs of this proceeding.  Those legal costs were paid by another entity.    Any money which is received in satisfaction of the costs order will be held on trust for the entity which provided the funds.
5. [5]
   In that regard, there is evidence from Mr Simonet, the director of the defendant, that the defendant’s position has not changed, that it still “does not have any assets in Australia or anywhere else in the world”.  Mr Simonet says that the defendant has been, and remains, without funds to pay lawyers to defend this proceeding; and that for this proceeding, the legal fees incurred by the defendant have been paid by H van Leeuwen Beheer NV.  He also says that for what is called the “main proceeding” (BS6547/05),^[4] the legal fees incurred by the applicants (including the defendant) were paid by Virgtel Global Networks NV and Mr van Leewen and never by the defendant.
6. [6]
   Mr Peeters, who is a director of H van Leewen Beheer NV (Beheer), confirms that all legal fees incurred by the defendant in this proceeding have been paid on behalf of the defendant by Beheer.  Mr Peeters also says that “the Beheer paid the legal fees … on the basis that the Beheer would be entitled to the benefit of any costs order made in favour of Virgtel in the proceeding, as partial indemnity for the legal costs paid by Beheer”.
7. [7]
   For the plaintiffs it was submitted that the defendant’s contention, that the benefit of the costs order made in the defendant’s favour is held on trust, should be rejected because it is not supported by any evidence.  In part, the plaintiffs’ submission is on the basis of an objection to the admissibility of parts of Mr Peeters’ evidence, because it is said he swears the issue – for example, the reference to Beheer as a “third party payer” (a term defined in s 301 of the Legal Profession Act 2007 (Qld)); and the statement made by Mr Peeters that “Virgtel holds the benefit of the costs order dated 22 February 2021 on trust for the Beheer”.  The plaintiffs’ submission, in substance, is that it cannot be assumed from Mr Peeters’ evidence that the arrangement between the defendant and Beheer is such that the benefit of the costs order is held on trust; as opposed to a simple “debtor-creditor relationship”.   The plaintiffs further submitted that Mr Peeters and Mr Simonet in their affidavits refer only to “legal fees”, and not to “disbursements”, such that even if the Court was persuaded that a trust exists, this would not extend to disbursements.
8. [8]
   When this application came on for hearing in the Applications list, it emerged in the course of argument that it might be relevant to have regard to the costs agreement entered into with the defendant’s solicitor, James Conomos Lawyers (JCL).  I adjourned the hearing, to enable evidence of that agreement to be put before the Court, as well as any further submissions the parties wished to make in relation to that costs agreement, and to provide any additional authorities in relation to this first issue (whether, where a party’s costs of a proceeding are funded by a third party, the party holds the benefit of any costs orders in its favour on trust for the third party).
9. [9]
   For the defendant, a further affidavit of Mr Peeters and an affidavit of the solicitor, Mr Conomos, were filed.  For the plaintiffs, a further affidavit of Mr Zabusky was filed.  The content of the affidavits of Mr Conomos and Mr Zabusky go beyond the leave which was granted to file further affidavit material.  Mr Zabusky, in addition, raises extensive disputes as to factual matters in response to the affidavit of Mr Conomos.  Both deponents also include content that I regard as in the nature of submissions.  I do not propose to address the factual disputes raised by this material, which is outside the scope of the issues raised by the application and in any event is not addressed by counsels’ submissions.
10. [10]
    What the additional affidavit of Mr Peeters demonstrates is that Beheer is a party to the relevant costs agreement, as a “third party payer”.^[5]  Mr Peeters says that Beheer is the only party who has provided funds for the legal fees (including disbursements) for JCL for the defendant in this proceeding.  He confirms that Beheer has paid the fees rendered by JCL, which includes legal costs and disbursements, including fees of counsel, and has done so by paying JCL directly.  He also says there is no loan agreement, written or unwritten, between the Beheer and the defendant in relation to the fees that have been paid.
11. [11]
    In support of the proposition that Beheer, the entity which paid the legal costs of the defendant in this proceeding, is beneficially entitled to any amounts that may be recovered under the costs order made in favour of the defendant, the defendant relies upon observations made by Dixon J and Williams J in Australian Workers’ Union v Bowen (1946) 72 CLR 575.  In that case, the plaintiffs in a proceeding were ordered to pay the costs of the Union and a number of its members, who were defendants to the proceeding.  A bankruptcy notice was issued in the names of all the defendants; but in fact two of them had not authorised the issue of the notice.  The issue for consideration by the High Court was whether the bankruptcy notice was valid in those circumstances.  A majority of the Court (Latham CJ, Rich, Dixon and Williams JJ) held that it was not; that as the right to enforce the judgment (the costs order) was a joint right, the bankruptcy notice being authorised by only some of the judgment creditors was invalid.  An argument was raised that, because the whole of the costs incurred by the defendants in relation to the proceeding had been paid by the Union, the Union was entitled to issue the bankruptcy notice, even without the express authority of some of the individual defendants.   Although that argument was not accepted, each of Dixon J (at 588 and 590) and Williams J (at 593) did make observations supportive of the proposition that the Union, having paid all the legal costs, became solely entitled to the benefit of the judgment debt in equity.
12. [12]
    Counsel for the plaintiffs protests that this is mere obiter, and he is of course correct.  However, the proposition does not, on reflection, seem to be a startling one.  Counsel for the plaintiffs also submits that the fact the legal fees were paid directly by Beheer to JCL “decisively resolves” the issue, because no trust can arise in circumstances where the defendant was not, at any time, in receipt of funds made available by Beheer.   Counsel for the plaintiffs further submits that this evidence – that Beheer paid the legal fees by paying JCL directly, and that Beheer was a party to the costs agreement with JCL – represents the only circumstances before the court to ascertain whether the intention of the parties was that the relationship between the defendant and Beheer was that they were trustee-beneficiary or debtor-creditor.
13. [13]
    I do not accept either of those submissions.  The express evidence of Mr Peeters is that Beheer paid the legal fees “on the basis that the Beheer would be entitled to the benefit of any costs order made in favour of [the defendant] in the proceeding, as partial indemnity for the legal costs paid by Beheer”.  That evidence is a clear indication of the intention of the paying party.  Further, I am unable to see why the fact that the legal fees incurred by the defendant were paid by Beheer directly to JCL, rather than via the defendant, affects the conclusion that Beheer is beneficially entitled to whatever may be produced by the costs order made in favour of the defendant.  
14. [14]
    For completeness, I also reject the plaintiffs’ submission that s 33 of the Trusts Act 1973 (Qld) supports lifting the stay.  The plaintiffs contend that s 33 empowers a trustee to expend money to maintain trust property and to pay out of trust money outgoings in respect of the trust property.  They submit the defendants could not be “vexed or harassed”^[6] by responding to litigation which may, if successful, simply see it exercising the express statutory powers afforded to it by s 33, by applying the fruits of the costs orders to pay debts due and owing”.   I regard this argument as straining the application of the section unreasonably.
15. [15]
    I accept the defendant’s submission that, in circumstances where a third party, relevantly Beheer, has paid all the legal costs associated with the proceeding for the defendant, on the basis that it would be entitled to the benefit of any costs orders made in favour of the defendant, the appropriate legal conclusion is that no one but that entity is entitled to the benefit of the costs order.  The costs order is not, properly considered, an asset in the hands of the defendant, to which resort could properly be had by a proceeding seeking to enforce a foreign judgment.  The fundamental circumstance of the defendant has not, on the evidence, changed since Crow J’s decision.  It remains an entity with no assets in Australia or anywhere else.
16. [16]
    As to the second basis for the present application, that arises from a submission said to have been made by the applicants in proceeding 6547 of 2005.  The respondents to that proceeding include Mr Zabusky (the first plaintiff).  The respondents in proceeding 6547 of 2005 applied for an order that a sum of money previously paid into Court by (or on behalf of) the defendant be paid out to them.  The applicants in that proceeding (one of which is the defendant) have costs orders in their favour in that proceeding.  As recorded in the decision of Jackson J in relation to that application:

“The respondents submit that that power extends to payment out of Court in anticipation of a net sum in the respondents’ favour that will be ascertained on set-off of the relevant costs orders.  The applicants submit that no order could or should be made because it is not clear that on set-off the costs orders in favour of the respondents will exceed the costs orders in favour of the applicants by the amount of the money paid into Court or at all.”^[7]

17. [17]
    The plaintiffs say that this submission by the applicants (one of which is the defendant) is inconsistent with the position put by the defendant before Crow J, that it has no assets.
18. [18]
    I reject this submission also.  I do not see how that submission could be read as the defendant contending it has assets within the jurisdiction.  In the matter dealt with by Jackson J the defendant was one of four applicants.  The fact that costs orders in that proceeding, made in favour of a number of parties, one of whom is the defendant, may be set off against costs orders made against those parties, does not mean that the defendant has an asset in Queensland.   The legal costs incurred by the defendant in that proceeding were also paid by a third party.
19. [19]
    As mentioned at the outset, there has been no appeal from Crow J’s decision; and there is no challenge to the factual findings made by his Honour.  I reject the plaintiffs’ submission that the costs order made in favour of the defendant in this proceeding is appropriately to be regarded as an asset of the defendant such as to justify lifting the permanent stay granted by Crow J.   No other basis for lifting the stay has been shown.
20. [20]
    The application is dismissed.  At the time of delivering judgment, I will invite oral submissions in relation to costs.