Michaela Manicaros v Commercial Images (Aust) Pty Ltd

Here, her Honour addressed whether, and in what circumstances, costs may be ordered against an objector to an application by a provisional liquidator/liquidator for approval of remuneration. In the present matter it was alleged that exceptional circumstances existed for making an order for costs against the objector given his conduct. Having regard to the way in which he had pursued his opposition to the remuneration application, her Honour held that the costs of the application for remuneration by the provisional liquidator and the costs of the present application should be met by the second respondent on the standard basis.

Brown J

20 May 2022

By way of brief background, the first respondent had been ordered by the Court to be wound up and a disputed contest in relation to a claim for remuneration by the provisional liquidator subsequently arose. [4], [5]. The second respondent, ultimately the sole active objector, raised serious allegations of misconduct against the provisional liquidator [1] which were later abandoned. Thereafter he informed the provisional liquidator that the claim for remuneration would no longer be opposed and likewise the allegations would no longer be pursued. [52].

The novelty of this application for costs

The provisional liquidator sought costs on either an indemnity or standard basis. [28]. At the outset her Honour noted that whilst it is uncommon for costs to be awarded against an objector, that rule is not absolute. [27]. Here, it was relevantly alleged that the second respondent had acted with an ulterior motive, had harassed and caused the provisional liquidator “serious and unjustified trouble and/or was in the position of an adversary not simply a contradictor”. [2].

Her Honour acknowledged that the application was unusual and only brought in exceptional circumstances. [27], [31], [34].

Consideration

Assessing the merit of the objections was problematic in that the factual basis of them had not been ventilated in a clear or thorough manner. [35]. In addition, there was sparse authority on the threshold question of whether costs should be ordered despite the usual order, which Her Honour attributed to either the rarity of costs being awarded against objectors or the fact that decisions as to costs are not published. [43]. She clarified that:

“Whether or not costs are awarded is determined by whether or not the objector raises bona fide objections which are “properly and justifiably advanced, even if unsuccessfully” rather than seeking to stall the process using the tactics of technical and artificial objections, in which case costs including indemnity costs may be awarded against the objector. Costs may also be awarded against the objector if the objections are made for an ulterior purpose”. [43].

In seeking indemnity costs, the provisional liquidator submitted that the objections had resulted in “serious and unjustified trouble and harassment” potentially amounting to an abuse of process (see Batistatos v Roads and Traffic Authority (NSW) (2006) 226 CLR 256, [14]). [44]). His primary argument was that it did not appear that the second respondent had been motivated by a genuine purpose in making the objections and that rather they were an attempt to circumvent proceedings against him in the District Court. [102].

Her Honour did not accept that the evidence supported those arguments and accordingly it was not appropriate to order indemnity costs. [103]–[105]. Her view was that costs on the standard basis were appropriate given the second respondent’s pursuit of serious allegations which were abandoned on the basis that he conducted himself as an adversary in the proceedings, which raised exceptional circumstances (see Longley v Chief Executive, Department of Environment and Heritage Protection (2018) 3 Qd R 459, [135]–[136]). [106], [115]. She stated:

“While courts should be hesitant to make such orders so as not to discourage objectors from making objections to a remuneration application as they are entitled to do, that is not an unbridled right”. [107].

Disposition

Her Honour ordered that the second respondent pay the provisional liquidator’s costs to be assessed on the standard basis and that the costs of and incidental to the provisional liquidator’s application not otherwise recovered from the second respondent as a result of the costs order made against him be costs in the winding up of the company. [118].

A Jarro