Supreme Court New South Wales Medium Neutral Citation: Capital Securities XV Pty Ltd (in liquidation) v Calleja; Calleja PJC Furniture Freighters Pty Ltd v Capital Finance XV Pty Ltd (in liquidation) (No 2) [2020] NSWSC 688 Hearing dates: On the papers; 1 June 2020 Decision date: 03 June 2020 Jurisdiction: Common Law Before: Adamson J Decision: Proceedings 2016/155378 (1) Order that the costs ordered to be paid by Prime in order (4) made on 26 March 2020 be paid on the ordinary basis up to and including 4 October 2017 and on an indemnity basis thereafter. (2) Order that Paul Scanlon (the affected party) be liable for the costs for which Prime is liable to pay Mrs Calleja, with credit to be given for the amount of $152,496.44 referred to in order (4) made on 26 March 2020. (3) Order the affected party to pay Mrs Calleja's costs of the application for third party costs. (4) Liberty to restore the matter on 3 days' notice if required to give effect to these orders. Proceedings 2016/260959 (1) Order that the costs ordered to be paid by Prime in order (5) made on 26 March 2020 be paid on the ordinary basis up to and including 4 October 2017 and on an indemnity basis thereafter. (2) Order that Paul Scanlon (the affected party) be liable for the costs for which Prime is liable to pay the plaintiff (Calleja PJC Furniture Freighters Pty Ltd), with credit to be given for the amount of $17,220.08 referred to in order (5) made on 26 March 2020. (3) Order the affected party to pay the plaintiff's costs of the application for third party costs. (4) Liberty to restore the matter on 3 days' notice if required to give effect to these orders. Catchwords: COSTS — Party/Party or Indemnity — Orders against non-party — Factors relevant to exercise of the court's discretion to award costs against non-parties — Whether in the interests of justice to make third party costs order — director of company — same solicitor acting for party and non-party COSTS — Bases of quantification — Indemnity basis — Where offers were made relying on principles in Calderbank v Calderbank — Whether order for costs on indemnity basis ought be made Legislation Cited: Civil Procedure Act 2005 (NSW), s 98 Contracts Review Act 1980 (NSW) Corporations Act 2001 (Cth), ss 198G, 493, 1335 Legal Profession Uniform General Rules 2015 (NSW), r 76 Legal Profession Uniform Law Application Act 2014 (NSW), s 74 Legal Profession Uniform Law (NSW), s 198 Real Property Act 1900 (NSW), s 57 Suitors' Fund Act 1951 (NSW) Uniform Civil Procedure Rules 2005 (NSW), rr 13.4, 42.21 Cases Cited: Bookarelli Pty Ltd v Katanga Developments Pty Ltd (No 2) [2017] NSWCA 94 Calderbank v Calderbank [1975] 3 WLR 586 Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2017] NSWCA 342 Capital Securities XV Pty Ltd (in liquidation) v Calleja; Calleja PJC Furniture Freighters Pty Ltd v Capital Finance XV Pty Ltd [2020] NSWSC 301 Capital Securities XV Pty Ltd v Calleja (No 2) [2018] NSWSC 1498 Capital Securities XV Pty Ltd v Calleja (No 3) [2018] NSWSC 1501 Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 FPM Constructions v Council of the City of the Blue Mountains [2005] NSWCA 340 Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28 Prime Capital Securities Pty Ltd v Calleja [2017] NSWSC 1801 Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 Category: Costs Parties: Proceedings 2016/155378 Capital Securities XV Pty Ltd (Plaintiff) Elizabeth Ann Calleja (Defendant) Paul Scanlon (Affected party) Proceedings 2016/260959 Calleja PJC Furniture Freighters Pty Ltd (Plaintiff) Capital Finance XV Pty Ltd (Defendant) Paul Scanlon (Affected party) Representation: Proceedings 2016/155378 Counsel: No appearance for Plaintiff N Obrart (Defendant) A W Smith (Affected Party) Solicitors: Atticus Lawyers (Defendant) Summer Lawyers (Affected party) Proceedings 2016/260959 Counsel: N Obrart (Plaintiff) No appearance for Defendant A W Smith (Affected Party) Solicitors: Atticus Lawyers (Plaintiff) Summer Lawyers (Affected party) File Number(s): 2016/155378; 2016/260959 Judgment Introduction 1. By amended notice of motion filed on 24 January 2019, Elizabeth Calleja, the defendant/cross-claimant in proceedings 2016/155378 (the Possession Proceeding), and Calleja PJC Furniture Freighters Pty Ltd (the Company), the plaintiff in proceedings 2016/260959, sought orders, including costs orders, against Capital Finance XV Pty Ltd, now in liquidation (Prime). On 26 March 2020 I made orders, including costs orders in favour of Mrs Calleja and the Company (the applicants or the Calleja interests), who were the applicants on the amended notice of motion: Capital Securities XV Pty Ltd (in liquidation) v Calleja; Calleja PJC Furniture Freighters Pty Ltd v Capital Finance XV Pty Ltd [2020] NSWSC 301 (the Principal Judgment). The Principal Judgment is to be read with these reasons. 2. The applicants seek that the costs the subject of the costs orders in their favour be on an indemnity basis. Further, they seek a third party costs order against Paul Scanlon, who was, at all material times, the sole director of Prime. These reasons address those applications. 3. I note that, in addition to evidence already adduced in the principal proceedings, the Calleja interests relied on further affidavits sworn by Ms Doig on 23 January 2018 (which attached without prejudice offers), 9 April 2020 and 30 April 2020. Mr Scanlon relied on documentary exhibits as well as a formal affidavit of Nicholas Chrisp, an employed solicitor at Summer Lawyers, regarding the liquidation of Prime and an affidavit of Paul Reese, the principal of Summer Lawyers which was sworn on 21 May 2020. Summer Lawyers acted on behalf of Prime in the loan transaction and in these proceedings until Prime's liquidation. Thereafter, Summer Lawyers acted on behalf of Mr Scanlon. Mr Scanlon did not give evidence. The application for indemnity costs The facts 1. Mrs Calleja and the Company rely on the following offers which were made in accordance with the principles of Calderbank v Calderbank [1975] 3 WLR 586: Date of offer/ outcome Offeror Offeree Terms Time open for acceptance 26 April 2017/ rejected 3 May 2017 Mrs Calleja and Company Prime Payment of $169,716 by 60 monthly instalments of $2,828.60; on receipt, all securities discharged and each party bear its own costs. 28 days from date of offer. 28 September 2017/ rejected 29 September 2017 Mrs Calleja and Company Prime Payment of $246,684.93 within 30 days of obtaining financial approval, all securities discharged and each party bear its own costs. Until 4 October 2017 Consideration 1. The court's discretion as to costs includes a power to order that the costs are to be awarded on the ordinary basis or on an indemnity basis: s 98(1)(c) of the Civil Procedure Act 2005 (NSW). 2. The Calleja interests relied on each of the two offers set out above in support of their application for indemnity costs. They contended that it was unreasonable of Prime to reject each of those offers, particularly having regard to the circumstance that the letter which accompanied the first offer set out the facts and their claims in a way which was ultimately vindicated in the Principal Judgment. 3. The first offer (made on 26 April 2017) was for an amount that was less than the set-off amount (in order (4) in the proceedings commenced by Prime) and was, in any event, conditional. The second offer (made on 28 September 2017) was in excess of this amount but was also conditional as it was expressed to be subject to finance. The correspondence between the parties indicates that the Calleja interests set out the basis of their position in detail. The correspondence from Prime indicated that it did not wish to engage in a debate about the relative merits of the parties' legal positions. 4. The further basis on which the Calleja interests seek indemnity costs is that Prime commenced and continued the proceedings "in wilful disregard of known facts" as referred to in Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225; [1993] FCA 801 (Sheppard J): see the summary of principles at 232-234, which was approved in Bookarelli Pty Ltd v Katanga Developments Pty Ltd (No 2) [2017] NSWCA 94 at [10]-[11] (Macfarlan, Payne JJA and Sackville AJA). 5. I am not persuaded that Prime necessarily commenced the proceedings "in wilful disregard of known facts". Even had Prime appreciated the cumulative gravamen of its conduct and the effect of the Contracts Review Act 1980 (NSW), it was still entitled to credit for the benefit conferred on the Calleja interests. In this sense, the proceedings could not be said to have been entirely without merit. However, at the time of the first offer, Prime was appraised of the strength of Mrs Calleja's defence and the claim made by the Company by the letter in which the offer was made, which set out in detail the relevant facts and principles and made some allowance for the benefit which the Calleja interests had received, which it was accepted would have to be accounted for. Nonetheless because the first offer was less than the benefit, it was not unreasonable for Prime to continue the proceedings. 6. By the time the second offer was made, in which the amount of $246,684.93 was offered, albeit conditionally, Prime can be taken to have well understood the basis of Mrs Calleja's defence and the Company's claim and the facts on which the Calleja interests relied. For Prime not to accept the offer at that point, given the detailed exposition of the case by the solicitors for the Calleja interests, was so unreasonable as to warrant costs to be awarded on a higher basis. 7. For these reasons I am persuaded by Ms Obrart that Prime ought be ordered to pay the costs on an indemnity basis from 5 October 2017, being the day after the last day on which the second offer was open for acceptance. I note for completeness that it was shortly after 5 October 2017 that Prime's then solicitors (Summer Lawyers) provided certain key documents to Ms Doig, which she had long been requesting (see [95]-[102] of the Principal Judgment which sets out the narrative of the requests, answers and significance of the documents sought). In these circumstances, Prime can be taken to have been aware at the time it rejected the second offer, in more substantial detail than Ms Doig then was, of the material facts relating to its conduct which would be brought to light if the proceedings were litigated to their conclusion. The application for a third party costs order against Mr Scanlon The general principles 1. Section 98(1)(b) of the Civil Procedure Act 2005 (NSW) provides that the court may determine by whom and to what extent costs are to be paid. Section 98(2) contemplates that an order can be made that a non-party be liable for costs of proceedings. The costs discretion is unfettered although it must be exercised judicially: Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276 (Yu) at [136] (McColl JA, Sackville AJA and Adamson J agreeing). Judicial findings in the Principal Judgment can be used in an application for a third party costs order: Yu at [147]. 2. In Knight v FP Special Assets Ltd (1992) 174 CLR 178; [1992] HCA 28 (Knight), Mason CJ and Deane J at 192 described the proposition that an order for costs may only be made against a party to the litigation as "the prima facie general principle". However, in some circumstances the interests of justice may require that an order be made against a non-party. In Knight, their Honours recognised the following category of case as being one where a third party costs order might be made: "… [W]here 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." 1. While the question whether a third party costs order ought be made ultimately depends on the particular facts of the case, there are various factors which typically give rise to such an application and which may, in some cases, warrant such an order. Basten JA in FPM Constructions v Council of the City of the Blue Mountains [2005] NSWCA 340 (FPM) listed such factors at [210]: "What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria: (a) the unsuccessful party to the proceedings was the moving party and not the defendant; (b) the source of funds for the litigation was the non-party or its principal; (c) the conduct of the litigation was unreasonable or improper; (d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and (e) the unsuccessful party was insolvent or could otherwise be described as a person of straw." The facts 1. The applicants submitted that the present case fell into the category described by Mason CJ and Deane J in Knight and fulfilled all, or at least most, of the criteria in FPM. In order to address that submission, it is necessary to set out in some detail the facts relevant to those criteria. Whether Prime was the moving party in the main proceedings between the parties 1. As set out in the Principal Judgment, Prime commenced the Possession Proceedings against Mrs Calleja on 20 May 2016, seeking an order for possession of the Heatherbrae property, which was her home. The Company subsequently commenced the Company Proceeding which was, in effect, a defensive action, seeking orders setting aside security documents which the Company had executed in relation to its loan from Prime. The source of funds for the litigation The parties for whom Summer Lawyers acted 1. As referred to above, Summer Lawyers acted for Prime in the transaction and the proceedings until they filed a notice of ceasing to act on 24 June 2019. In the written fee agreement between Prime and Summer Lawyers, Mr Scanlon was identified as the "client contact". 2. On 5 March 2019, the applicants filed the notice of motion (the amended version of which is the subject of present consideration) seeking orders which included a third party costs order against Mr Scanlon. In the covering email serving the notice of motion and affidavit in support, Ms Doig asked Summer Lawyers whether they had instructions to accept service on behalf of Mr Scanlon personally. By email dated 11 March 2019, Summer Lawyers confirmed that they did. The fee arrangement between Summer Lawyers and Prime 1. According to Mr Reese's affidavit evidence, the terms of the retainer between Prime and Summer Lawyers were as follows: "Pursuant to the terms of the retainer between Summer Lawyers and Prime, Prime was not liable to pay the fees of Summer Layers (excluding disbursements including Counsel's Fees, Court Fees, Search Fees etc) until the finalisation of proceedings as Summer Lawyers acted on a success basis. Summer Lawyers have not issued any invoices to Prime for work in progress of professional staff of Summer Lawyers." 1. This evidence is consistent with clauses 45-48 of the agreement, which provided: "45. In respect of mortgage enforcement matters, provided we have written the loan, we shall recover our fees from any income generated from the enforcement of the loan. 46. At the conclusion of the matter we will send you a bill for our fees which will set out the total fees charged during the matter. 47. Our bill must be paid in full within 14 days of the date of issue unless other arrangements have been made with us. 48. Unless otherwise agreed with you, we will send you an expenses and disbursement only bill each month which will set out the total expenses and disbursements incurred by us during the relevant period. Our expenses and disbursements only bill must be paid in full within 14 days of the date of issue." 1. Notwithstanding his evidence as to the fee arrangement referred to above, Mr Reese also deposed that (as referred to below) "after accounting for the amount of professional fees invoiced to Prime to date", the balance outstanding from Prime to Summer Lawyers was about $500,000. The relevance of this evidence was that on 10 March 2020 Summer Lawyers lodged a proof of debt with Prime's liquidator in the sum of $500,000 (which is referred to in more detail below). 2. Mr Reese was not required for cross-examination. However, Ms Obrart pointed out, in written submissions, that Mr Reese's evidence that no invoices for professional fees had been issued was irreconcilable with his evidence that invoices had been rendered. When I asked Mr Smith, who appeared on behalf of Mr Scanlon, to explain the inconsistency, he said that the statement made by Mr Reese in his affidavit that no invoices for professional fees had been rendered was incorrect. Mr Smith accepted that the invoice numbered 6693 rendered by Summer Lawyers to Prime on 5 March 2018 in the sum of $194,395.70 (including GST) included an amount of $176,437 for professional fees. Mr Smith was unable satisfactorily to explain why that amount was charged at all given the terms of the fee agreement that professional fees were payable on successful conclusion of the proceedings. 3. Because Mr Reese's evidence as to the arrangement between his firm and Prime was unsatisfactory in the respects referred to above, I am unable to make a finding about the terms of the arrangement between Summer Lawyers and Prime, or Summer Lawyers and Mr Scanlon, or any of the other companies of which he is or was sole director, whether it changed and whether Summer Lawyers has been paid by Mr Scanlon, or associated companies, for the work that it has done. It is sufficient to find that the arrangement between Mr Scanlon and Summer Lawyers appears to have been a close and mutually advantageous one which has continued to the present date. The conduct of the liquidation and the involvement of Summer Lawyers and Mr Scanlon 1. As referred to in [115] of the Principal Judgment, Prime's shareholders resolved to wind it up on 23 April 2019. Mr Scanlon provided a report on Prime's activities to Prime's liquidator on that date which recorded that Prime was indebted to Summer Lawyers in the sum of $403,000. 2. The statements of account provided by Summer Lawyers to Prime's liquidator showed that none of the payments made to Summer Lawyers for the work they had done on the Calleja matters came from funds provided by Prime. The eleven payments made to Summer Lawyers from 4 July 2016 to 28 December 2017 in reduction of their statements of account were made from funds provided by Prime Capital Securities Administration Pty Ltd. The six payments made to Summer Lawyers from 15 May 2018 to 18 September 2018 were made from funds provided by a company called Prime Capital Securities Pty Ltd. This company is to be distinguished from Prime itself, which was known as Prime Capital Securities until 29 November 2017. The name was used by another entity which was registered on 1 December 2017. The circumstances of the change and its consequences are addressed further below. Summer Lawyers' change of client 1. The liquidator of Prime did not engage Summer Lawyers to act for Prime which, following its liquidation, was unrepresented. 2. After Summer Lawyers filed a notice of ceasing to act for Prime, they filed a notice of appearance for Mr Scanlon, who by that time had been joined as a third party respondent to the Calleja interests' application for a third party order for costs against him. According to Mr Reese, Summer Lawyers did not reflect the change in the identity of their client by commencing a fresh statement of account or opening a new file. Rather, they continued to use the statement of account for Prime and the file for Prime to record the amounts owing to them by Mr Scanlon. Mr Reese described this omission as an error on the part of Summer Lawyers. Thus Summer Lawyers' statement of account for Prime (which Summer Lawyers was required to produce on subpoena) showed a figure of $222,520.17 as at the date of the liquidation (23 April 2019) and the figure of $233,484.17 being the total said to be owing up to 13 November 2019. The liquidator's proposal to finalise the liquidation and deregister Prime 1. In his Advice to Creditors dated 10 January 2020, the liquidator said: "As set out in our report dated 23 July 2019 we have received limited records from the director [Mr Scanlon]. Unfortunately we have not received any further records and consequently our investigations into matters such as insolvent trading, preferential payments, uncommercial transactions, etc. cannot progress. … If we do not receive funding within one month of the date of this report then it is our intention to finalise the liquidation and ask the Australian Securities and Investments Commission to deregister the company." 1. The liquidator called a meeting of creditors on 26 February 2020 to be held on 12 March 2020, the purpose of which was to determine the liquidator's remuneration and whether the creditors wished to replace the liquidator. The notice of meeting informed creditors that those who had not already lodged proofs of debt were obliged to submit proofs of debt by 11 March 2020. The notice annexed a list of proofs of debt that had been received by 26 February 2020 which showed (by its absence) that no proof of debt had been lodged by Summer Lawyers. It also showed that $923,655 of the total claimed amount of $1,044,063 was claimed by a single creditor, Hengji Development Pty Ltd, which was not associated with Mr Scanlon. 2. On 10 March 2020, Summer Lawyers lodged a proof of debt in the sum of "$500,000 (estimated)". 3. Mr Reese explained the provenance of that figure in his affidavit of 21 May 2020. He deposed that, notwithstanding the "no-win, no-fee" arrangement between Summer Lawyers and Prime referred to above, he estimated that Summer Lawyers had performed about $500,000 worth of professional work for Prime up to and including 23 April 2019. Mr Reese also deposed that the costs of the appeal, on the ordinary basis, amounted to $50,000. The Calleja interests had been ordered to pay these costs by the Court of Appeal in the proceedings referred to at [111] of the Principal Judgment, which were determined on 26 February 2018. Mr Reese deposed that there was a further sum of $30,000 which was payable by the Calleja interests and which was made up of filing fees and disbursements associated with the appeal. 4. At 10.50am on 12 March 2020 (ten minutes before the creditors' meeting was due to start), Paul Box of QBM Lawyers went to the liquidator's office and lodged the following proofs of debt and proxies from parties related to Prime and/or Mr Scanlon: Creditor Mr Scanlon's relationship with creditor Amount of proof of debt Intercredit Securities P/L Mr Scanlon is sole director $35,071 Paul Scanlon Self $97,410 Prime Capital Securities Administration P/L Mr Scanlon is sole director/secretary $253,080 Prime Capital Securities P/L Mr Scanlon is sole director $211,802 1. As a consequence of the time of lodgement of further proofs of debt, the liquidator adjourned the meeting for seven days to give himself the opportunity to consider them. 2. If Mr Reese's evidence that the arrangement between Prime and Summer Lawyers was a "no-win, no-pay" arrangement was accurate, the liability of Prime to Summer Lawyers was, at best, contingent. At the time the proof of debt was lodged by Summer Lawyers on 10 March 2020, the Court of Appeal had set aside the judgments which had been entered in favour of the Calleja interests and ordered a retrial but the proceedings had not yet been determined again at first instance, although they were listed for hearing to commence on the following day, 11 March 2020. As is recorded in the Principal Judgment, they were heard on 11 and 12 March 2020 but not decided until 26 March 2020 (a week after the adjourned creditors' meeting). 3. On 19 March 2020, at the creditors' meeting, the liquidator informed creditors that he had considered the proofs of debt recently lodged and had allowed the following on the basis that the documentation provided by each creditor did not support any more than the amount allowed: Creditor Amount claimed Amount allowed Summer Lawyers $500,000 $222,520 (being the amount that had been invoiced as at the date of liquidation) Intercredit Securities P/L $35,071 Not disclosed by the evidence Paul Scanlon $97,410 Rejected in full on the basis that Mr Scanlon was not the source of the funds paid. Prime Capital Securities Administration P/L $253,080 $67,184 Prime Capital Securities P/L $211,802 $4,347 1. At the meeting on 19 March 2020, Mr Box, held proxies for Prime Capital Securities Pty Ltd, Intercredit Securities Pty Ltd, Prime Capital Securities Administration Pty Ltd and Mr Scanlon. As Mr Scanlon was not permitted to vote (since his proof of debt had been rejected in full), Mr Box could not use the proxy for Mr Scanlon. 2. The liquidator (as chair of the meeting) noted that Hengji Development Pty Ltd and Balmoral HJ Pty Ltd moved a resolution that he be replaced as liquidator of Prime by David Vasudevan and Gess Rambaldi. Mr Box used the proxies provided by the entities set out above (which were associated with Mr Scanlon) to vote against the resolution. Summer Lawyers also voted against the resolution although the then liquidator had told creditors that his intention was to finalise the liquidation and deregister Prime (rather than seek to recover more funds to be distributed to creditors). Despite the votes against the resolution, it was passed because the liquidator, as chair, exercised his casting vote in favour of the resolution. He did so because the majority of dollar value creditors (but minority in number) was not related to Prime and/or Mr Scanlon and was in favour of the resolution. 3. The conduct of Summer Lawyers in voting against a resolution in a way which would appear to have been inconsistent with their commercial interests (in recovering the amount of the debt allowed) would, on its face, tend to suggest that Summer Lawyers valued their relationship with Mr Scanlon more highly than the recovery of its fees from Prime, which had been allowed at $222,520. 4. Mr Reese explained in his affidavit that Summer Lawyers voted against the resolution because of the firm's past bitter experience, including when a receiver and manager was appointed to one of its clients. The receiver and manager had required production of voluminous books and records of Summer Lawyers, which had required the firm's paralegal and professional staff to spend substantial time (for which the firm was not remunerated) retrieving and collating such documents. Mr Reese deposed that he considered that the prospect of a meaningful return from Prime did not warrant the continuation of its liquidation. Mr Reese also deposed that the appointment of the new liquidator has apparently not improved the prospects of a return to creditors and has given rise to requests for books and records, the cost of retrieval of which has fallen to Summer Lawyers. 5. In the circumstances described by Mr Reese, it was commercially pragmatic for Summer Lawyers to vote to bring the liquidation to an end since this would at least save it the cost incurred in meeting requests for documents from the new liquidators. Further, as their fees had, to the extent set out above, been paid by entities other than Prime, Summer Lawyers may have been indifferent to Prime's liquidation. 6. It is significant that, as soon as Summer Lawyers had ceased to act for Prime, they accepted a retainer from Mr Scanlon personally notwithstanding that the evidence showed that $222,520 was still owed to Summer Lawyers. If their fee arrangement was in fact success-based, it would follow that, at the time Summer Lawyers cast its vote at the meeting of creditors on 19 March 2020, they did not know that they had no right to recover any of the $222,520 (Prime having not yet lost the proceedings). However, as Summer Lawyers were present at the hearing on 11 and 12 March 2020 (as the representatives of Mr Scanlon), they must have had a reasonable appreciation that Prime's prospects of success were remote since it was unrepresented which left the evidence of the Calleja interests unchallenged. Mr Reese was not cross-examined and his evidence did not extend to these matters. The proofs of debt lodged by creditors associated with Prime and Mr Scanlon 1. The Calleja interests tendered documents associated with the proofs of debt lodged by creditors associated with Prime and Mr Scanlon which establish the following. 2. The debt claimed by Prime Capital Securities Pty Ltd comprises several payments said to have been made by it to third parties between 7 September 2017 and 9 January 2020. Each payment in the account ledger identifies a "transaction" to which Prime was apparently a party, followed by a name in parentheses. Seven of such payments record the name "Calleja" in parentheses, four of which identify the payee as Summer Lawyers and the remaining three identify the payee as QBM Lawyers. As referred to above, Prime's name was, until 29 November 2017, Prime Capital Securities Pty Ltd. The new entity with that name was not registered until 1 December 2017. Accordingly, it would appear that there was a degree of laxity in the identification of the payer in the transaction record. The evidence does not establish any connection between the Calleja interests and the company which is now known as Prime Capital Securities Pty Ltd. 3. The debt claimed by Intercredit Securities Pty Ltd in its proof of debt arises from an assignment of a debt in the sum of $35,658.76 owed by Prime to Thomson Geer and Kemp Strang, which are both solicitors' firms. The deed of assignment, dated 14 January 2020, records that, Intercredit Securities Pty Ltd paid Thomson Geer and Kemp Strang the sum of $35,071.96 for an assignment of the debt. 4. The debt claimed by Prime Capital Securities Administration Pty Ltd in its proof of debt comprised various payments made to that company by third parties between 24 December 2015 and 22 December 2017. These payments included seven payments to Summer Lawyers and one payment to QBM, each of which had "(Calleja)" after Prime's name and the date of the payment. 5. The debt claimed by Mr Scanlon in his proof of debt relates to a payment made from an account at Westpac (ending 7134) in the name of "Prime Capital Securities" to discharge Mr Scanlon's liability as a result of a third party costs order made on 7 February 2019 by Scotting DCJ in District Court proceedings brought by Prime against Betty Christou (which are referred to in more detail below). The liquidator of Prime rejected Mr Scanlon's proof of debt at the meeting of creditors on 19 March 2020 on the basis that Mr Scanlon was not the source of the funds paid. These facts tend to show that Mr Scanlon used corporate entities under his control, including Prime, for his own interests and at his own convenience. The conduct of the litigation 1. The third factor referred to by Basten JA in FPM in the passage extracted above is that the conduct of the litigation was unreasonable or improper. 2. The applicants relied on various factors, each of which is addressed below. To the extent to which the primary facts are uncontroversial or are facts which have already been set out in the Principal Judgment, they appear in the narrative below. Prime's precipitate commencement of the Possession Proceeding 1. As set out in [90] of the Principal Judgment, Summer Lawyers (then the solicitors for Prime) sent a letter dated 11 May 2016 to the Company and Mr and Mrs Calleja attaching a notice of default under s 57(2)(b) of the Real Property Act 1900 (NSW). The notice claimed a principal sum of $360,000 and nominated 14 June 2016 as the date by which the default was to be remedied. Prime commenced the Possession Proceeding on 20 May 2016, over three weeks before the time it had stipulated for the default to be remedied had arrived. Prime's ledger which recorded payments made, showed that the Company made payments of $6,000 on 23 May 2016, $380 on 26 May 2016 and $6,380 on 1 June 2016. I infer from the timing of these payments that Mrs Calleja was unaware of the proceedings until after 1 June 2016. 2. This inference is supported by the court record which shows that, on 24 June 2016, Prime applied for orders for substituted service on Mrs Calleja. On 28 June 2016, orders were made for substituted service and provided that service would be deemed to have been effected seven days after a sealed copy of the statement of claim had been affixed to a conspicuous part of the Heatherbrae property and had also been emailed and posted to her. As referred to in [95] of the Principal Judgment, Mrs Calleja first instructed Ms Doig of Atticus Lawyers on 7 July 2016. 3. As referred to in [109] of the Principal Judgment, Mr Scanlon admitted that no statements were provided to Mrs Calleja or the Company until after the commencement of the Possession Proceedings. The misstatement of the principal sum 1. The principal sum of $360,000, which appeared in the s 57(2)(b) notice, was also alleged in paragraph 4a of the statement of claim in the Possession Proceeding to be the amount of the advance. As noted at [92] of the Principal Judgment, this figure was amended to $290,000 in the amended statement of claim which was filed on 9 May 2018 following the delivery of the reasons of the Court of Appeal on 26 February 2018 in Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26. I do not understand there to have been any proper basis for the allegation that the principal sum was $360,000. Although it is referred to in a file note prepared by Baycorp (referred to below), it is not reflected in the transaction documents. Prime's change of name 1. As referred to above, on 29 November 2017, Prime notified the Australian and Securities and Investments Commission (ASIC) of its change of name from Prime Capital Securities Pty Ltd to its present name, Capital Securities XV Pty Ltd. On 1 December 2017, a different corporate entity was registered under that name. 2. This change of name happened after the hearing before Wilson J but before her Honour published reasons or made orders. The Calleja interests did not become aware of the change in name until they conducted further company searches in 2018. Prime did not disclose the name change to the Court or to Westpac, where its account in the name of Prime Capital Securities Pty Ltd (the account number of which ended X224) continued to operate as if a single corporate entity was the account holder. Westpac was unaware of the change as it had not obtained Prime's ACN or ABN at the time the account was opened (in circumstances addressed further below). The non-disclosure of the change led to Wilson J and the Court of Appeal being misled as to Prime's financial position. It resulted in the applications by the Calleja interests for a third party costs order being refused by Wilson J and for security for costs of the appeal being refused by the Court of Appeal. When the change of name was discovered by the Calleja interests and brought to the attention of this Court, through a further security for costs application heard by Fagan J, the Court ordered security for costs. 3. The basis for the above summary of the effect of the change of name and its non-disclosure is set out below. Prime's defence of the application for a third party costs order determined by Wilson J on 19 December 2017 1. Following Wilson J's delivery of reasons and making of orders on 6 December 2017 after the first trial, Mrs Calleja and the Company applied for a third party costs order, which was determined on the papers. Part of the basis of the application was that Prime was a "person of straw" (to borrow the language from the authorities referred to above). 2. Mr Scanlon swore an affidavit on 14 December 2017 which was read in opposition to that application. In paragraph 2 of that affidavit, Mr Scanlon deposed: "I believe the information contained in this affidavit is true." 1. Mr Scanlon annexed to his affidavit two bank statements, said to be those of "Prime Capital Securities Pty Ltd" at Westpac (being the account ending X224) which recorded as follows: Period of statement Closing balance 27 July 2017-22 September 2017 $894,417.35 22 September 2017-13 December 2017 $3,152,326.60 1. Mr Scanlon deposed at [5] of his affidavit: "The account statements referred to at Annexure A and Annexure B are held by Prime." 1. Mr Scanlon addressed Prime's change of name in [6]-[7] and said: "[6] Prime has subsequently changed its name to Capital Securities XV Pty Ltd … Annexed hereto and marked "C" is a true copy of an ASIC Organisation Extract dated 13 December 2017. [7] Prime has changed its name to [sic] for clerical and internal consistency purposes. Other companies under Prime's parent company, Prime IBC Limited …, are named in accordance with the calendar year for the portfolio of loans they hold. Prime was inconsistent and its name has been changed so as to remain consistent with other subsidiary companies." 1. Mr Scanlon also deposed at [8]-[9] of his affidavit of 14 December 2017: "[8] Prime's loan portfolio as at 13 December 2017 exceeds $100,000,000 (the Loan Portfolio). [9] Although Prime is not the owner of real estate in fee simple in New South Wales, Prime is the registered security holder in respect of more than 140 loans including registered mortgages which form part of the security for the Loan Portfolio." 1. On 19 December 2017, Wilson J refused the application, in part on the basis that Prime was not a "person of straw": Prime Capital Securities Pty Ltd v Calleja [2017] NSWSC 1801. Of present relevance, her Honour found, at [26(3)]: "There is no evidence that Prime is insolvent." Her Honour said further at [27]: "On the evidence adduced by Prime, which there is no good reason to reject in the present context, Prime funded its own litigation, and it could not be said to be a straw man. It has considerable monies standing to its credit in a bank account, together with a sizeable loan portfolio, and is capable of meeting an order for costs on an indemnity basis." 1. Her Honour said, in conclusion, at [30]: "The final feature of some significance is the assets Prime has, inclusive of funds standing to its credit. Whilst the unexplained timing of the company's name change, and Mr Scanlon's apparently flexible use of surname and place of birth with respect to his many corporate roles is such as to raise suspicion, I do not conclude that it is necessarily indicative that Prime will not abide by the Court's orders, and pay any costs order made against it. It has the capacity to do so on the evidence." 1. Mr Smith submitted that, as there had been no appeal from Wilson J's order refusing the application for third party costs, it was not open to me to include an order which covered the costs of the proceedings before Wilson J. My reasons for rejecting the argument are set out below where I address the parties' submissions on that issue. Prime's defence of the application for security for costs of the appeal 1. On 12 December 2017, Prime filed a notice of appeal which contained 38 grounds. It also filed a notice of motion for stay of the judgment of Wilson J. 2. By notice of motion filed on 18 December 2017 in the Court of Appeal (before Wilson J had determined the third party costs application), Mrs Calleja and the Company sought security for the costs of the appeal and of the proceedings before Wilson J. Their application was heard and determined by Basten JA on 19 December 2017: Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2017] NSWCA 342. 3. In support of its opposition to the security for costs application, Prime again relied on Mr Scanlon's affidavit sworn 14 December 2017 as well as a further affidavit which he had sworn on 18 December 2017. 4. In his affidavit of 18 December 2017, Mr Scanlon deposed that Prime's total costs for the subject loan as at 14 December 2017 were $256,449.97. A letter from Summer Lawyers dated 15 December 2017 was annexed and stated: "We note that as at 14 December 2017 the following costs remain outstanding: 1. Professional fees $159,542.20 2. Disbursements $11,608.40 3. Counsel fees $4,312.00 Total $175,462.60 We further note that invoices in the amount of $80,987.37 have previously been paid by [Prime] on account of further disbursements." 1. Mr Scanlon also annexed to his affidavit of 18 December 2017 a copy of Prime's ledger which showed the "drawdown" sum to be $290,000, which is to be contrasted with the amount stipulated in the default notice and the statement of claim as filed. 2. Basten JA dismissed the motion for security for the costs of the appeal and ordered that the costs of the motion be the appellant's (Prime's) costs in the appeal. His Honour said, at [27]: "… The basis of the application for costs of the appeal was that the appellant was a shell company having no assets. That was said to be demonstrated by evidence given in the course of the trial that the funds which were disbursed pursuant to the finance facility did not emanate from the appellant." 1. I interpolate that the source of the funds was the subject of findings in the Principal Judgment: see the first three entries in the table at [99], [100] and [155]. In summary, the evidence showed that Prime obtained the funds for the facility from third parties: Dipvis Pty Ltd and Prime Capital Securities Administration Pty Ltd. Dipvis Pty Ltd did not lodge a proof of debt in Prime's liquidation. 2. His Honour continued: "[29] The respondents further submitted that the balance of convenience favours an order for security in circumstances where there is doubt as to whether there will be money available to pay the respondents' costs in the event that the appeal fails; it is appropriate to order security to protect against future dissipation of the funds which are currently available in the appellant's bank account. In short, the respondents submitted that if the appellant has the funds, it can afford to provide security; if it has not (or may not have in the future) it should provide security. As the appellant noted, that submission owes more to ingenuity than to the correct legal test. To the extent that r 42.21(1) is engaged, the Court must have reason to believe that the appellant will be unable to pay the costs of the respondents if ordered to do so, or 'has divested assets' with the intention of avoiding the consequences of the proceedings. [30] The respondents' evidence cast a doubt on the ability of the appellant to pay the costs of the appeal. However, in response, the appellant provided a bank statement demonstrating that considerable sums pass through its account with Westpac and have done so over the past five months, and that its present bank balance is in the order of $3 million. Its principal assets are said to be a loan portfolio of 140 loans. There is, however, no evidence as to its liabilities. That its director, Mr Paul Scanlon, operates a significant financing business through numerous corporate entities is reasonably clear; Mr Scanlon asserted that the Prime group's loan portfolio exceeds $100 million. The internal arrangements within the group are not clear. [31] The appellant has changed its name and, from 1 December 2017, there is a new corporate entity which bears the old name of the appellant. However, the banking records extend from July 2017 through to December 2017 without any break, from which I infer that the records which were those of the appellant remain those of the appellant after the change in the company's name. [32] The respondents also submitted that, given the amounts of money passing through the account, the Court could not be satisfied that the moneys in the account at any point in time were the appellant's moneys. While it should be accepted that there are no details of the company's liabilities, it does not follow that there will not be moneys available to pay the appellant's debts as and when they fall due. The factors that satisfy me that the appellant can (and will be able to) pay any liability for the costs of the appeal are the company's bank balance and the extent of its current loan portfolio. While it is true that the company could be stripped of its assets at some stage in the near future, that possibility is commercially unrealistic. Not only would it place at risk the whole of the company's business (said to involve 140 loan transactions) but it would affect the creditworthiness of the group, which has a substantial loan portfolio. In these circumstances, I am not prepared to order that it provide security for costs of the appeal. [33] I note that this motion has been filed and disposed of with expedition which has prevented an exchange of affidavits and possible resolution by agreement. The costs of the motion should take account of this consideration and the fact that documents sought by the respondents were not provided in a timely fashion. Without challenging that proposition, the appellant noted that bank records had been supplied before the foreshadowed motion for security was filed. Nevertheless, it is appropriate that the costs of the motion, which will be dismissed, be the appellant's cost in the appeal." [Emphasis added and footnotes omitted.] 1. Basten JA's reliance on the truth of Mr Scanlon's affidavits is evident from his Honour's reasons. 2. Subsequent events and evidence exposed the unreliability in Mr Scanlon's evidence referred to above. This evidence, which was obtained for the purposes of the third party costs application, is summarised below, after consideration of the further application for security for costs made by Mrs Calleja and the Company. Prime's amendment to its pleading following the appeal 1. By amended statement of claim filed on 9 May 2018, in addition to the amendments referred to above, Prime joined Commonwealth Bank of Australia trading as Bankwest as the second defendant. It sought against Bankwest restitution of the sum of $152,469.44. On the application of Bankwest, Fagan J, on 11 October 2018, dismissed the amended statement of claim against Bankwest pursuant to Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 13.4 and ordered Prime to pay Bankwest's costs of the proceedings: Capital Securities XV Pty Ltd v Calleja (No 2) [2018] NSWSC 1498. The applicants' further application for security for costs of the proceedings 1. By letter dated 28 June 2018, Ms Doig requested from Summer Lawyers copies of Prime's most recent bank statements incorporating at least the period January 2018 to June 2018 and copies of Prime's financial statements for the 2017 and 2018 years. As no response was received, Mrs Calleja and the Company, by motion filed on 12 July 2018, sought security for costs of the proceedings on the basis that Prime had effectively ceased to carry its sole business of lending during the 2015 calendar year. 2. On 17 July 2018, Ms Doig served a notice to produce on Prime seeking production by 27 July 2018 of Prime's financial statements for the year ending 30 June 2017 and 2018; Prime's profit and loss statement and balance sheet as at 31 March 2018; all agreements with Dipvis Pty Ltd relating to funds deposited into the trust account of Gadens Lawyers on or around 22 April 2015; and Prime's unredacted bank statements for the period from 1 January 2018 to 30 June 2018. 3. No documents were produced by Prime until the hearing of the applicants' notice of motion which was listed on 31 July 2018 before Fagan J. Prime tendered a bundle of Westpac bank statements in the name of "Prime Capital Securities Pty Ltd" for the period 29 December 2017 to 29 June 2018. The statements had the same account number as the statements which had been annexed to Mr Scanlon's affidavit of 14 December 2017 referred to above, which had been relied upon by Prime in the applications before Wilson J and Basten JA referred to above. 4. The applicants tendered evidence which included ASIC documents, the significance of which appears from the reasons of Fagan J extracted below. 5. On 11 October 2018 Fagan J ordered Prime to pay $80,000 by way of security for costs within 14 days of 11 October 2018: Capital Securities XV Pty Ltd v Calleja (No 3) [2018] NSWSC 1501. His Honour also ordered that if security was not paid by that date, Mrs Calleja could apply at any time after 15 February 2019 for the proceedings, that is, the Possession Proceeding, to be struck out. 6. His Honour found: "[10] Ms Calleja has adduced evidence which indicates the plaintiff has ceased trading, probably with effect from the end of 2016. Searches obtained from the Australian Securities and Investment Commission ('ASIC') show that the plaintiff was registered on 20 March 2014. It had the name Prime Capital Securities Pty Ltd until 28 November 2017. By resolution of that date its name was changed to Capital Securities XV Pty Ltd. Then on 1 December 2017 a new corporation was formed with the name Prime Capital Securities Pty Ltd. [11] On 14 November 2017 Paul Scanlon, the sole director and secretary of the plaintiff, deposed that the plaintiff's parent company is Prime IBC Ltd and that this company has a number of subsidiaries 'named in accordance with the calendar year for the portfolio they hold'. I infer from this that the plaintiff, now named Capital Securities XV Pty Ltd, holds or held a portfolio of loans which were advanced by it during 2015. … [13] From these searches and from Mr Scanlon's deposition quoted at [11] above I infer that the plaintiff has not issued further loans since calendar year 2015. In the absence of any more detailed explanation from him of how these multiple subsidiaries carry on business, there appears to be no competing inference let alone any stronger inference. … [15] I infer that the reference to 'our funding loans' is to borrowings that the plaintiff obtained from third parties from which it, in turn, provided finance to its customers. This understanding of Mr Scanlon's evidence is consistent with a trust account statement issued by Gadens/Dentons, the plaintiff's solicitors, recording funds movements for the period 22 April 2015 to 12 May 2015 in respect of the loan to Calleja PJC. That statement shows deposits of approximately $250,000 to the trust account of Gadens/Dentons, from which payments totalling an equivalent amount were made, allegedly by way of advance to Calleja PJC under the disputed loan facility. Two of the deposits came from the ANZ Bank and the other from an entity named Dipvis Pty Ltd. There is no suggestion that the plaintiff had funds of its own in any account with the ANZ Bank or that it was related to Dipvis Pty Ltd. These deposits to Gadens/Dentons were within Mr Scanlon's description of 'funding loans' from third parties. On 1 November 2017 he gave evidence that 'They're drawdowns of our funding lines.'" 1. Of present relevance, his Honour concluded: "[18] … the plaintiff has for all practical purposes ceased to carry on any business except to the extent that it is still endeavouring to recover from Calleja PJC. There is no evidence of any other loan advanced by the plaintiff during 2015 which is still in recovery. The inference that the plaintiff has ceased to conduct business is further supported by the fact it does not have financial statements for of the financial year ended 30 June 2017, for the period ended 31 March 2018 or for the financial year ended 30 June 2018. Documents of that description were sought under a notice to produce served by Ms Calleja. When the notice was called upon during the hearing of the application for security the plaintiff's counsel stated there was nothing to produce and that financial statements for the dates nominated had not been finalised. What counsel meant by "finalised" was not expanded upon. I made it clear that I consider that the notice was wide enough to require production of financial statements prepared for management purposes. [19] It would not be possible to manage a lending business of the type which the plaintiff has conducted without periodic financial reports to show the balance of assets over liabilities, the availability of working capital, revenue and expenditure. If the plaintiff were attempting to trade without such statements of financial position and of financial performance, Paul Scanlon would be unable to discharge his duties under the Corporations Act as a director, he would be unable to guard against the risk of insolvent trading which might give rise to personal liability and he would be unable to ensure compliance of the company with Australian Taxation Office requirements and other revenue and regulatory obligations. [20] Thus the evidence before me on the application for security is to the effect that the only business the plaintiff has ever conducted was that of lending during the closed period of calendar 2015. I infer that business was for all practical purposes wound up nearly two years ago, in December 2016. I infer that the plaintiff would not have owned any real property assets for a business of this nature nor any plant or equipment. In the nature of such a business its assets would have been its loans to customers and its liabilities would have been its borrowings from third party funders. I infer that all of this has been liquidated upon the cessation of business, with the exception of the loan to Calleja PJC." 1. Of the Westpac bank statements tendered by Prime, his Honour said: "[22] The plaintiff tendered statements issued by Westpac Bank for an account No 368-224 in the name Prime Capital Securities Pty Ltd showing transactions between 29 December 2017 and 29 June 2018. On these statements numerous credits and debits are recorded, some of them large, consistent with a lending business being carried on. No Australian Company Number is shown for the bank customer's name and I am not satisfied that this is an account conducted by the plaintiff during the period to which the statements relate. [23] As earlier mentioned the plaintiff ceased to be named Prime Capital Securities Pty Ltd from 28 November 2017 and another corporation was registered in that name from 1 December 2017. ASIC searches tendered by Ms Calleja show that Mr Scanlon has been the sole director and shareholder of five distinct corporations which have all borne the name Prime Capital Securities Pty Ltd for varying periods between 16 December 2010 and the present. He has utilised that corporate name as a revolving door through which a series of discrete legal entities have passed, assuming and then discarding the name. All of them have been under his sole control. [24] In these circumstances, without tender of Westpac records to establish that the present account-holder is the company with the unique Australian Company Number of the plaintiff, I could not be satisfied that these Westpac Bank statements have any relationship to any business activity of the plaintiff or that the credit balance of the account at any date shown on the statements is an asset of the plaintiff, in whole or in part. [25] In an affidavit sworn 14 December 2017 Mr Scanlon referred to two further statements in respect of Westpac account No 368-224 showing transactions in the period 27 July 2017 to 13 December 2017. Redacted copies of these statements were attached to the affidavit. Again they showed transactions consistent with the conduct of a business of lending money. At pars 3 and 4 of this affidavit Mr Scanlon described the statements as being 'in the name of 'Prime Capital Securities Pty Ltd''. In par 5 he deposed that 'the account statements … are held by Prime'. In par 1 he defined the name 'Prime' as meaning the plaintiff. Significantly, Mr Scanlon did not depose that this was an account operated between July and December 2017 by the plaintiff or that the account balance at any time, or any part of such balance was owned by the plaintiff. The curious wording of this affidavit is consistent with the account having been owned and operated from July 2017 onwards by an entity other than the plaintiff but in the name by which the plaintiff was known up until 28 November 2017. [26] In pars 8 and 9 of the affidavit of 14 December 2017 Mr Scanlon deposed that at 13 December 2017 the plaintiff's 'total loan portfolio … exceeds $100,000,000' and that it is "the registered security holder in respect of more than 140 loans including registered mortgages which form part of the security for the" loan portfolio. I do not accept this evidence. It is inconsistent with the other evidence already referred to. At lending rates of 2% per month a portfolio of loans in excess of $100 million would generate annual gross revenue of $24 million. It is inconceivable that the plaintiff would currently have a lending business of this magnitude yet have no financial statements for the past two years. Such a business could not be carried on without the preparation of management accounts at least quarterly and statements of financial position and of trading performance annually." [Emphasis added.] Prime was insolvent or could otherwise be described as a corporate person of straw 1. The evidence tendered on the applications referred to above is relevant not only to the conduct of the litigation by Prime, but also to the factor that Prime is, in effect, a corporate person of straw. 2. In order to address this factor, it is necessary to go into Prime's structure and financial statements in some detail by reference to the evidence before me, much, if not all of which, was tendered by the applicants before Fagan J in the application for security for costs referred to above. ASIC records regarding name, structure and ownership of Prime 1. On 20 March 2014 Prime, which had an ACN of 168 662 173, was registered and Mr Scanlon was appointed as its sole director and secretary. This remained the position until its liquidation. Prime had two issued shares, one held non-beneficially by Prime Capital Nominees Pty Limited (see further below) and the other held beneficially by the company with the registered name "081 171 164 Prime Capital Pty Ltd". Mr Scanlon was the sole director and secretary of each of Prime's shareholders. Each of Prime's shareholders was a wholly owned subsidiary of Prime IBC Limited ACN 159 696 116, of which Mr Scanlon was one of three directors and the sole secretary. Prime IBC Limited, which was incorporated on 30 July 2012 was wholly owned by Global Nominees Pty Ltd, of which Mr Scanlon was sole director, secretary and shareholder. 2. I note that an ASIC Personal Name Extract performed on 14 February 2019 revealed several names which were variations of Paul Scanlan and Scanlon with or without a middle name. The individuals were variously said to have been born either in Brisbane or Sydney. The individual now known as "Paul Scanlon" who was formerly known as "Paul James Scanlan" was shown to be a director of 23 companies, most of which had the word "Prime" or "Capital Securities" in their names. As Mr Scanlon did not give evidence, no explanation has been given to explain these discrepancies. 3. On 30 June 2017 Prime IBC Limited issued 9,000,000 shares. The ASIC Form 484 was signed by Mr Scanlon. Other related entities 1. Mr Scanlon was appointed sole director and secretary of three further companies which were registered as follows: Date registered Name and ACN 24 March 2015 Capital Securities XVI Pty Ltd 604 139 844 28 November 2016 Capital Securities XVII Pty Ltd 616 158 920 1 December 2017 Capital Securities XVIII Pty Ltd 623 196 323 1. I infer from the registration of new companies by reference to particular years: XV, being 2015; XVI, being 2016 and so on, that the business model adopted by Mr Scanlon was to incorporate a new entity for each year's portfolio of loans. This is consistent with the admission made by Mr Ainsworth, Prime's investment associate and investment director, which was tendered by Mrs Calleja and the Company (in paragraph 5 of his affidavit sworn 17 October 2016), that: "… In all of my time at Prime they never provided a loan with a duration of 3 years and in my experience Prime's loans are for a duration of 12 months or less …" 1. It is also consistent with Mr Scanlon's admission in oral evidence in the hearing before Wilson J (which was also tendered by Mrs Calleja and the Company in the proceedings before me): "It is our usual practice [that] our BDMS [Business Development Managers] are instructed we are only able to provide 12 month terms. If people request further terms then our BDMs are authorised to instruct the client that we can lodge it for another term of 12 months provided the client has had good conduct." 1. I accept the applicants' submission that it is unlikely that the 140 loans and the $100,000,000 loan portfolio referred to by Mr Scanlon in his affidavit of 14 December 2017 were loans within Prime's portfolio but rather the total loans were by a number of companies ultimately owned and controlled by Mr Scanlon. 2. On 1 December 2017, a new entity was incorporated with the name of "Prime Capital Securities Pty Ltd"; it had an ACN of 623 195 871. Mr Scanlon was the sole director and secretary of the new entity. It had 500,000 ordinary shares which were held beneficially from 1 December 2017 until 4 March 2019 by a company with the registered name "159 696 116 Prime IBC Ltd" which transferred the shares to Prime Capital Holdings Pty Ltd (ACN 623 510 743) on 4 March 2019. The trust of which Global Nominees Pty Ltd was trustee of shares in Prime for the benefit of Zajasam Pty Ltd 1. Mr Smith relied on the following evidence to show that Mr Scanlon was not solely in charge of all the companies referred to above because others were involved and that he was not the only person to benefit from Prime's financial position. 2. By declaration of bare trust dated 4 April 2014, Prime Capital Nominees Pty Ltd, a shareholder of Prime, declared itself trustee of its shares in Prime (defined as the "Agent" under the deed) for the benefit of Zajasam Pty Ltd (Zajasam), the beneficiary. The trust deed included the following, under the heading "Background": "The Beneficiary proposes to enter into certain financing arrangements with third party borrowers. The relevant financing agreements will be managed by the Agent. The Beneficiary has requested the Trustee to hold its shares in the Agent as bare trustee and nominee for the Beneficiary upon the terms and conditions of this document." 1. Clause 3 of the deed provided as follows: "3 Beneficiary to direct Trustee (a) The Trustee must from time to time at the direction of the Beneficiary: (i) nominate the Beneficiary or any person or entity nominated by the Beneficiary to take a transfer of the Shares; or (ii) otherwise transfer and deal with the Shares and all income and rights accruing from or pertaining to the Shares in any manner as the Beneficiary may from time to time direct. (b) The Trustee must account to the Beneficiary for all amounts received from time to time in respect of the Shares. (c) The Trustee must not transfer or otherwise deal with the Shares or the income and rights accruing from or pertaining to the Shares or do anything or take any action in connection with or related to the Shares other than in accordance with a direction given by the Beneficiary." 1. The deed was executed by Mr Scanlon, as director of Prime Capital Nominees Pty Ltd, on its behalf and by Glenn Wein, as director of Zajasam on its behalf. A company search of Zajasam recorded that Mr Wein was its sole director and secretary and that he held its entire shareholding (two shares) beneficially. 2. Mr Smith also relied on the opening of a Westpac account (with the account number ending X224) in about March 2014 in the name of Prime. The terms of the account were that "all authorised persons must operate and sign together". The authorised persons nominated at the time the account was opened were Mr Scanlon and Mr Wein. 3. On 15 April 2019 (eight days before he resolved to wind up Prime) Mr Scanlon wrote to Westpac to follow up an earlier request for the account opening details and asked it to confirm that the account had always required two signatories to make a payment. The documents which evidenced the opening of the account, together with the confirmation he sought, were sent to Mr Scanlon on 15 April 2019. I note that, in its covering email, an officer from Westpac said: "I have received the original account opening form from our team and regrettably it does not note the ACN or the ABN. I have attached it to this email for your reference." 1. It is important to recall that, although the Westpac account was opened in the name of Prime (which, at the time of the opening of the account was known as Prime Capital Securities Pty Ltd), Prime subsequently changed its name to its present name, Capital Securities XV Pty Ltd (in liquidation) and a different entity took the name Prime Capital Securities Pty Ltd. However, it can be inferred that Westpac did not appreciate that the entity which held the account had actually changed because, as its email of 15 April 2019 recorded, it had not been given either the ACN or the ABN when the account was opened. Thus, Westpac continued to issue account statements in the name of "Prime Capital Securities Pty Ltd", including after 29 November 2017 when the resolution changing the company name was notified to ASIC. This is what resulted in Wilson J and the Court of Appeal being misled as to Prime's financial position. 2. As referred to above, Mr Smith relied on the fact that two signatories were required for this account to rebut the proposition that Mr Scanlon controlled all relevant corporate entities, including Prime or they were the "corporate alter egos of Mr Scanlon". He also submitted that it was not open to me to find that Mr Scanlon acted independently of Mr Wein in withdrawing funds from the Westpac account because Zajasam had "an at least 50% interest in [Prime]". I accept that the terms of the Westpac account were that it could only be operated by two signatories, Mr Scanlon and Mr Wein. However, when the monies were withdrawn from the Westpac account (after the Court of Appeal had rejected Mrs Calleja's application for security for costs), the account holder was an entirely different company from Prime and had simply adopted Prime's old name. In these circumstances, it is not possible to infer what the role of Zajasam was in the transactions at that time. 3. I note that no evidence has been adduced from either Mr Wein or Mr Scanlon. In the absence of any evidence of their relationship, I am not prepared to infer that Mr Wein is relevant to the issues which arise for decision. Whether Mr Scanlon could act on his own or whether he required Mr Wein's concurrence for particular tasks or to obtain particular benefits does not alter the role he played in the actions of Prime in any material way. As the sole director, he was responsible for directing the conduct of the litigation and did so. That some other party might have been entitled to a benefit accruing to Prime does not materially affect Mr Scanlon's role or conduct. I am not persuaded by Mr Smith's submission that the question of who was to obtain any ultimate benefit "looms large". If it had actually loomed large, one might have expected either Mr Scanlon or Mr Wein to give evidence about it. Other proceedings to which Prime was a party 1. In 2017 Prime commenced proceedings in the District Court against Betty Christou. On 14 December 2018 Scotting DCJ ordered Prime to provide security for costs in the sum of $35,000 either by paying that sum into court or providing security in an acceptable manner by 31 January 2019. The matter was stood over to 1 February 2019. On that day, the matter was further adjourned to 7 February 2019. On 7 February 2019, his Honour dismissed the proceedings by reason of Prime's failure to provide security for costs and ordered the plaintiff and Mr Scanlon to pay Ms Christou's costs of the proceedings as agreed or assessed. As referred to above, the costs were paid by Prime Capital Securities Pty Ltd (not Prime) which lodged a proof of debt in Prime's liquidation in that amount. Recent attempts by the applicants to ascertain Prime's financial position 1. On 1 March 2019, Ms Doig served a notice on Summer Lawyers requiring production of Prime's financial statements for the year ending 30 June 2017 and 2018; Prime's profit and loss statement and balance sheet as at 31 December 2018 and Prime's tax returns for the years ended 30 June 2017 and 30 June 2018. 2. By email sent on 4 March 2019, Summer Lawyers responded that, as security for costs had not been paid, the proceedings were stayed and Prime was, accordingly, not obliged to respond to the notice. In an email dated 5 March 2019 Ms Doig pressed for production on the basis that neither Mrs Calleja's cross-claim nor the Company's claim was stayed. No documents have been produced. 3. On 30 April 2019 Ms Doig became aware of Prime's liquidation. She obtained the report on Prime's activities and property received by the liquidator on 23 April 2019, the date of the winding up, which had been signed by Mr Scanlon. Although the list of creditors included Summer Lawyers in the sum of $403,000, Dipvis (which had provided some of the funds for the loan facility to the Company) was not listed as a creditor. The list of assets in the report included an amount said to be outstanding from the Company of "$280,000 + interest + costs". 4. A report by the liquidator to creditors was lodged with ASIC on 2 May 2019. The list of known creditors included Summer Lawyers but did not include Dipvis Pty Ltd. The amounts owing to Prime Capital Securities Administration Pty Ltd and Prime Capital Securities Pty Ltd were still marked "tba" (to be advised). 5. On 24 May 2019 Ms Doig telephoned Mr Bettes, Prime's liquidator, and told him that Mrs Calleja and the Company had filed a notice of motion for final judgment in these proceedings which was listed for hearing on 25 June 2019. The liquidator informed her that Mr Scanlon had not informed him of the proceedings and that the liquidation was currently without funds. Ms Doig sent relevant documents relating to the proceedings to Mr Bettes. Ms Doig contacted Mr Bettes to try to ascertain his attitude to the application. Notwithstanding several attempts, she received no response to her messages or telephone calls. 6. On 23 July 2019, Mr Bettes provided a further statutory report to creditors which compared the assets identified by the liquidator with Prime's report as to its affairs which had been lodged with ASIC upon its winding up. 7. Under the heading "Available Cash", the following was said: "Upon appointment, the liquidator wrote to all major financial institutions seeking information on any accounts held in the company's name. To date, no bank accounts have been identified and accordingly no realisations were made in this regard. Thompson Greer Lawyers, who previously acted as the company's solicitors, have advised that they currently hold $26,000 in their firm's trust account. They have further advised that they are owed approximately $65,000 in outstanding legal fees and accordingly, make claim to the funds held on trust. The liquidator is currently awaiting further documentation from Thompson Greer Lawyers regarding the funds and should any recoveries be made, creditors will be advised in due course." 1. The report also said, of the litigation pending in which Prime was involved (including the present proceedings): "There are currently no funds in the liquidation with which to the [sic] meet the costs of the above mentioned litigation. Without funding the liquidator will have no choice but to concede to the claims made by the relevant parties. If you are a creditor who may be interested in providing funding to assist the liquidator with the costs of the above-mentioned legal proceedings please refer to the Request for Funding section below. …" 1. Under the heading "Solvency Examination", Mr Bettes said: "Based on our preliminary investigations of the company's financials, it appears that the company became insolvent in or around October 2018 when it was unable to provide security for costs pursuant to an order of the Court." 1. I infer that the order for security referred to was the order made by Fagan J on 11 October 2018 that Prime provide security in the sum of $80,000. 2. This statement in the report is to be compared with the admission in [28] of Mr Scanlon's affidavit of 18 June 2019: "The company ceased trading in the days prior to the resolution by its members that it be wound up." 1. Under the heading "Request for funding", Mr Bettes said: "If creditors are not willing to contribute to our costs then I may undertake limited, or possibly no, further action in relation to the matters discussed in this advice and proceed to finalise the liquidation without further notice." Consideration The periods covered by the application 1. Mr Smith submitted that it was both appropriate and necessary for Mrs Calleja and the Company to provide a basis for the application by reference to each of the periods of time set out in the following table: Title Period Description The first trial period 20 May 2016 to 17 December 2017 From the commencement of the Possession Proceedings until the delivery of the principal judgment by Wilson J on 6 December 2017 and the costs judgment on 17 December 2017 The appeal period 12 December 2017 to 26 February 2018 From the filing of the notice of appeal on 12 December 2017 to the determination of the appeal on 26 February 2018 The remittal period 26 February 2018 to 23 April 2019 From the determination of the appeal on 26 February 2018 until the liquidation of the plaintiff on 23 April 2019 The liquidation period 23 April 2019 to present From the liquidation of the plaintiff on 23 April 2019 1. In effect, Mr Smith contended that the only period in respect of which a third party costs order could be made was the remittal period. He argued, as set out below, that this Court either lacks jurisdiction or any proper basis to make a third party costs order that covers any of the other periods. The first trial period 1. Mr Smith argued that in respect of the first trial period, this Court had no jurisdiction to make a third party costs order because Wilson J had refused the application and there was no appeal against the order. I reject the submission. The operative costs orders are the costs orders I made on 26 March 2020. These are the orders in respect of which Mrs Calleja and the Company seek a third party costs order. In these circumstances, Wilson J's refusal of a third party costs order does not operate as an impediment to the present application and does not prevent my ordering Mr Scanlon to pay the costs associated with the first trial. The appeal period 1. The Court of Appeal ordered Mrs Calleja and the Company to pay Prime's costs of the appeal but to have a certificate under the Suitors' Fund Act 1951 (NSW). It was common ground that this Court had no power to interfere with the orders of the Court of Appeal with respect to the costs of the appeal. 2. In so far as costs were incurred by the Calleja interests in the substantive proceedings (but not the appeal) during the period which Mr Smith has defined as "the appeal period", there is no reason why a third party costs order ought not be made in respect of them. Further, Wilson J's refusal of the application was based on evidence which was, at best, misleading. The liquidation period 1. Mr Smith argued that, in respect of the liquidation period, it could not be said that there was any causal connection between Mr Scanlon and the conduct of the proceedings since Mr Scanlon's powers as a director were suspended: ss 198G and 493 of the Corporations Act 2001 (Cth). He relied on Yu at [140] where the Court of Appeal held that there must be "a causal connection between the actions of a non-party and the occasion for ordering costs". 2. I reject this argument. The liquidation of Prime was a voluntary liquidation for which it can be inferred Mr Scanlon was the relevant actor. In essence, Mr Scanlon can be taken to have decided to deprive Prime and its liquidator of the funds to prosecute its claim for possession against Mrs Calleja. I infer that, having succeeded on appeal, he adjudged that it was more advantageous to, in effect, abandon the proceedings, leaving Mrs Calleja and the Company with only the straw man that was Prime against which to enforce an eventual costs order. It is also of significance that Summer Lawyers, who acted for Prime, continue to act for Mr Scanlon in resisting the third party costs order. 3. Mr Smith further submitted as follows: "5.4. On and from the date of the liquidation of Prime, it could not be said that Ms Calleja remained at risk of losing her home. The liquidator of Prime indicated that he had no funds to prosecute any claim against the Applicants. Further, the evidence is silent on what, if any, steps the Applicants took to resolve the proceeding by way of a settlement with the liquidator of Prime. If settlement had been reached, the costs likely to have been incurred would have been considerably less than those since incurred. This is a matter which, juxtaposed with the matters raised at paragraphs [2.7] to [2.9] of the submissions for the affected party dated 11 March 2020 strongly militates against a non-party costs order against Scanlon being made for any costs incurred from 24 April 2019." 1. In effect, Mr Smith submitted that the Calleja interests did not need to prosecute the proceedings because they could simply have settled them with Prime's liquidator. I do not accept this submission. The Calleja interests bore no onus of showing that they had tried to settle the proceedings with the liquidator in order to obtain an order for costs against Prime. They were entitled to file a notice of motion to obtain orders in accordance with the cross-claim and in the Principal claim. The Calleja interests were required to litigate to defend the claim by Prime and to remove the encumbrances over their properties. The question whether Mr Scanlon ought be liable for those costs is a larger question to be determined by reference to the factors outlined in the authorities set out above. Other matters raised by Mr Scanlon in opposition to the application for a third party costs order Factual questions raised by Mr Scanlon 1. In addition to the matters addressed above, Mr Scanlon has raised factual matters in opposition to the application for a third party costs order. In particular, he has sought to go behind the findings in the Principal Judgment by referring to evidence which was not before me in the principal proceedings between Prime and the Calleja interests. 2. Mr Smith contended that the documents referred to as the Baycorp file notes, which were rejected by Wilson J in the first hearing and which led to the appeal to the Court of Appeal being allowed and the order for re-trial being made, were material which could be taken into account on this application. 3. Mr Smith relied on the following passage from the judgment of Leeming JA in Capital Securities XV Pty Ltd (formerly known as Prime Capital Securities Pty Ltd) v Calleja [2018] NSWCA 26 at [119]: "The records for 20 February 2015 reproduced above provide a powerful basis for concluding that Ms Calleja authorised Prime to pay $60,000 to be provided by it to settle in full her company's debt to Baycorp. If, as the file note records, Ms Calleja rang Baycorp directly and said that she wanted to "sif account, offered 60k as full and final" and "explained that she is taking out a loan of $360k only drawing out $150k", that is evidence that Ms Calleja instructed Prime at around the same time to "settle in full". It is powerful evidence insofar as it is approximately contemporaneous, and has been recorded by a non-party. And it is entirely consistent with the instructions given by Prime to its solicitor at Gadens, copied to a Calleja PJC email address, at 11.17am on the same day, referring to earlier discussions and confirming that 'Baycorp are prepared to accept $60,000 as full and final settlement' ..." 1. Mr Smith also relied on what Leeming JA said at [122] as follows: "The Baycorp file note of 20 February 2015 is inconsistent with both accounts given by Ms Calleja. The inconsistency goes not merely to credit, but also to a large issue in the case, namely, whether Prime was authorised to disburse funds to Baycorp as occurred." 1. In effect, Mr Smith contended that the Calleja interests had made a forensic decision not to tender the Baycorp file notes (and alleged that they were inconsistent with their case) but that Mr Scanlon was entitled to rely on them for the purposes of the third party costs application to show that my reasons in the Principal Judgment ought not be accepted as the factual substratum for this application. 2. Mr Smith was unable to point to any authority which would permit me to run a parallel fact-finding exercise on the basis of different evidence adduced on the third party costs application. For the purposes of a third party costs application, the facts found in the principal judgment are a given. As referred to above, the Court of Appeal in Yu at [147] said that the judicial findings in the principal proceedings can be used in an application for a third party cost order. Although, as a non-party, there is no issue estoppel or res judicata against Mr Scanlon, he cannot be in a better position on this application than he would have been had Prime chosen to prosecute, and defend, the principal proceedings. 3. Mr Smith relied on the breadth of the discretion under s 98 of the Civil Procedure Act as authorising such an inquiry. He submitted that if I were to order Mr Scanlon to be liable for Prime's costs on a basis that could be affected by the Baycorp documents, procedural fairness required me to revisit my findings on whether Mrs Calleja authorised the Baycorp loan being paid out with funds advanced by Prime. As is apparent from [49] of the Principal Judgment I found that Mrs Calleja was not aware that Prime was going to pay the Company's debt to Baycorp from the funds advanced pursuant to the loan facility and did not authorise any such payment to be made. 4. Although I do not propose, for the reasons given above, to engage in such a parallel fact-finding exercise, I am not persuaded that the Baycorp file notes would have made a difference to the result of the trial (although I accept, with respect, the Court of Appeal's conclusion that they could have done so when judged from the standpoint of the proceedings at that time). 5. These file notes show that, for a significant period, Mrs Calleja was in default of repaying the Baycorp debt. An email dated 20 February 2015 was sent from Baycorp which was addressed to Greg Conomos (from Gadens Lawyers) and copied to Mrs Calleja and which showed an outstanding balance of $64,918.41 for the Baycorp loan. Ms Hammond wrote, of present relevance: "As per our discussion today, please be advised Baycorp are prepared to accept $60,000.00 as full and final settlement to close the above mentioned file on the conditions that the funds are cleared into Baycorp's account by close of business 26/02/2015." 1. The file notes also record that on 20 February 2015, Mrs Calleja called Baycorp and told them that she was trying to refinance the debt and wanted a pay-out figure for the Baycorp loan. 2. Whether or not Mrs Calleja gave instructions for the debt originally owed to Capital Finance (which had been assigned to Baycorp) to be paid out (as would appear to be the case having regard to the file notes referred to above) or whether it was done without her instructions does not affect the ultimate conclusion that she plainly did not understand the commercial ramifications of the refinance with Prime. I note for completeness that Mrs Calleja gave evidence (by affidavit, which was not challenged) of an email into which she was copied which referred to the Bankwest arrears being paid out by Prime. Although she did not recall receiving the email, she did not, in any event, understand it. In particular, she did not appreciate that Prime was proposing to pay out the Bankwest loan (which carried a significantly lower interest rate) with the proceeds of the new loan. 3. Her response to the Bankwest document displayed a commercial naïveté and was consistent with her being prepared to sign the transaction documents with Prime although they were grossly adverse to her interests. It is entirely possible that, as recorded in the Baycorp documents, she had, either knowingly or unwittingly, instructed Baycorp that the loan was to be paid out. Had she done so, it would have made no commercial sense because of the exorbitant interest rate charged by Prime. The effects of the refinance were, first, to move almost all of hers and the Company's relevant debts (including the Baycorp debt) to a significantly higher interest rate for a fixed short term which neither she nor the Company had a hope of repaying within the time required and to provide Prime with security over the real estate she owned. The improvidence of the finance obtained from Prime was the subject of detailed consideration in the Principal Judgment and will not be repeated here. 4. As the sole director of Prime, Mr Scanlon could have chosen not to wind up Prime and to fund Prime to conduct the principal proceedings. Presumably, if Mr Scanlon had considered that Prime could successfully resist a Contracts Review Act defence by Mrs Calleja, he would have done so. In that event, he would have had the opportunity to tender the Baycorp file notes, give evidence himself and cross-examine Mrs Calleja on the documents Mr Smith has referred to in his submissions. However, Mr Scanlon chose to do none of those things. He chose to wind up Prime and transfer such funds as were available to it to other entities under his control. In these circumstances and having regard to the forensic significance of the documents considered above, I do not propose to take into account in his favour the various forensic points made on his behalf by Mr Smith on the basis of documents not tendered by the Calleja interests which were, accordingly, not before me when I conducted the hearing and delivered the Principal Judgment. The relevant factors 1. I turn now to address the relevant factors identified in Knight and FPM in light of the findings made above. 2. As referred to above, Prime was the moving party in the proceedings. I infer from the evidence relating to Summer Lawyers that the funds for the litigation came from Mr Scanlon. 3. Prime conducted itself in the proceedings in a high-handed and cavalier way. It commenced proceedings before the time specified in the notice of default had expired and claimed significantly more than was due to it on any view. Indeed, it can be taken to have conceded as much by amending its statement of claim to reduce the principal amount. 4. It successfully defeated the applications for security for costs by Mrs Calleja and the Company by relying on Mr Scanlon's affidavit evidence, the falsity of which was established by subsequent evidence referred to above and which was ultimately exposed in the further application for security made before Fagan J. Its conduct in defending the applications for security before Wilson J and Basten JA and for a third party costs order before Wilson J on the basis that it was not impecunious was at least disingenuous. Its conduct in joining Bankwest appears to have been designed to defer the finalisation of the proceedings on an irrelevant and untenable basis. 5. As soon as the further application for security for costs was made on 12 July 2018, Mr Scanlon (as the controlling mind of Prime) appears to have determined that Prime was no longer to be a viable commercial entity. As Mr Scanlon and Mr Ainsworth admitted, the lending business was operated through various corporate vehicles which each had a limited life of a calendar year's business. Mr Scanlon was the person who controlled these entities. The corporate entities, of which Prime was the relevant entity for 2015, relevantly had no assets save for the monies they managed to borrow from third parties to lend to clients, such as the Company. 6. Had the true position been known at the time the proceedings were commenced, Mrs Calleja and the Company would have been in a position to apply for security for costs (since the substantive forensic character of each was as a defendant). That application would have been granted having regard to the lack of assets of Prime, which was, in effect, a corporate person of straw: s 1335 of the Corporations Act and UCPR, r 42.21(d) or (f). In effect, by resisting the third party costs order, Prime is seeking to profit from its own breach in concealing its true financial position and falsely representing that it had substantial assets. Had such an order for security for costs been made at the outset, Mr Scanlon would have had to provide the security or risk having the Possession Proceedings stayed or dismissed. He ought not be in a better position than he would have been had that occurred. By his conduct, he has caused both Mrs Calleja and the Company to incur substantial costs which, unless a third party costs order is made, will be irrecoverable. 7. Though a non-party, Mr Scanlon played an active part in the conduct of the litigation and had a substantial interest in its subject matter. I am persuaded that, for the reasons given above, it is in the interests of justice that a third party costs order be made against him. The present case falls comfortably within the circumstances envisaged by Knight and FPM. 8. It is common ground that Mr Scanlon is entitled to the benefit of the set-off amount provided for in order (4) in proceedings 2016/155378 and order (5) in proceedings 2016/260959 made in the Principal Judgment. Credit to be given to Mr Scanlon for amounts for which Prime was entitled to credit The parties' submissions 1. Mr Smith submitted that there were three categories of payment for which Prime was entitled to credit and which, accordingly, Mr Scanlon ought also be entitled to be given credit if any third party costs order was made against him. First, he submitted that Mr Scanlon should be entitled to credit not only for the amounts specified in the orders in both proceedings which reflected the respective benefits Mrs Calleja and the Company had obtained through the refinance but also for interest on those amounts from the date of refinance. Secondly, he submitted that Mr Scanlon ought be entitled to credit for the amount of Prime's costs of the appeal which were the subject of a costs order by the Court of Appeal in Prime's favour. Thirdly, he submitted that Mr Scanlon ought be entitled to credit for the amount of Prime's costs thrown away which were the subject of an order by Harrison AsJ. 2. Ms Obrart contended that, just as Mr Scanlon could be put in no worse position than Prime for the purposes of a third party costs order, he could not be put in a better position. She argued that the discretion under the Contracts Review Act was wide and that I had exercised it by fixing the amount of the credit without interest and that it was not open to me to adjust that figure in favour of Mr Scanlon. 3. Ms Obrart did not object as a matter of equitable principle to credit being given for the costs orders in favour of Prime. Her objections to such credit being given were practical ones. She anticipated that Mr Scanlon might delay the process of assessment of costs in favour of the Calleja interests on that basis and foresaw difficulties which would arise if, and when, Prime is deregistered (assuming that that has not already occurred) thereby terminating the liquidation and disabling its liquidator from participating in such assessment. Claim for credit for interest 1. Even if I had the power to order that credit be given for interest on the benefits for which provision was made in the orders made at the conclusion of the Principal Judgment, I am not persuaded that Mr Scanlon ought have the benefit of interest. In effect, an order for interest converts a capital sum into an investment which earns income, by way of interest, for the person to whom credit is to be given. Such an order was appropriate in Elkofairi v Permanent Trustee Co Ltd [2002] NSWCA 413 at [80]-[85] (Beazley JA, Santow JA and Campbell AJA agreeing) where the Court determined the interest rate which would be reasonable to allow on the benefit obtained by one of the borrowers in having a mortgage paid out by an incoming lender. However, different considerations apply in the present case in light of Prime's conduct from the outset and throughout the transaction. 2. In the circumstances of the present case, I did not allow interest on the sums for which Prime was given credit. Had Prime accepted the second offer made by the Calleja interests, they would have had the benefit of a greater sum of money. Although my discretion under s 98 of the Civil Procedure Act is wide, I do not consider that it should be exercised in favour of allowing interest to run on the credit amounts for the benefit of Mr Scanlon, particularly in circumstances where I did not allow it to run for the benefit of Prime. Claim for credit for costs orders 1. Had Prime not been wound up, it would have been entitled to have its costs of the Court of Appeal and the costs thrown away assessed set off against the amount for which it is liable to the Calleja interests for costs. 2. Plainly the Calleja interests wish to have the costs assessment undertaken expeditiously. They are concerned that this process might be stymied or delayed either by Prime's inability to participate or its deregistration. I understand from Ms Obrart that they fear that Mr Scanlon might exploit these factors to his advantage. 3. However, it would appear that this scenario has been envisaged by the relevant legislation and rules, which I propose to outline as follows. 4. Section 74(1) of the Legal Profession Uniform Law Application Act 2014 (NSW) (the Application Act) provides that an application for assessment of the whole or part of ordered costs may be made by a person who is liable to pay costs (the Calleja interests in respect of the Court of Appeal costs and the costs ordered by Harrison AsJ) and a person who is entitled to receive those costs (the Calleja interests in respect of the costs orders I have made in their favour). These assessments can occur at the same time and in the course of the same process and give rise to a single application or reference: s 74(4) of the Application Act. 5. Section 198 of the Legal Profession Uniform Law (NSW) (the Uniform Law) relevantly provides: "(8) A costs assessor is to cause a copy of an application for a costs assessment to be given to any law practice or client concerned or any other person whom the costs assessor thinks it appropriate to notify. (9) A person who is notified by the costs assessor under subsection (8)— (a) is entitled to participate in the costs assessment process; and (b) is taken to be a party to the assessment; and (c) if the costs assessor so determines, is bound by the assessment." 1. Rule 76 of the Legal Profession Uniform General Rules 2015 (NSW) (the Rules) provides: "76 Costs assessment—party not participating in assessment For the purposes of section 199 of the Uniform Law, if, after receiving notice under section 198(8) of that Law, a party to the assessment does not participate in a costs assessment, assessment may proceed, and be determined, in the absence of that party." 1. By reason of these provisions, the Calleja interests would be entitled to apply for a costs assessment of the costs to which they are entitled as a consequence of my orders and of the costs which they are obliged to give credit for as a consequence of the orders made by the Court of Appeal and Harrison AsJ. Notice would be given to Prime, as the relevant opposing party. The costs assessor would also be entitled (and obliged, as a matter of procedural fairness) to notify Mr Scanlon of the application for assessment under s 198(8) of the Uniform Law. Once he has been notified Mr Scanlon will be entitled to participate in the costs assessment process, will be a party to the process and, if the costs assessor determines (as he or she could be expected to), will be bound by it: s 198(9). Whether or not the costs assessor determined that Mr Scanlon was bound by the assessment, he would, in any event, be bound to pay the amount for which Prime was liable to pay the Calleja interests since this is the effect of my orders. If either Prime or Mr Scanlon chooses not to participate, the costs assessment can nevertheless proceed in the absence of either or both of them: r 76 of the Rules. 2. I do not envisage that an application will need to be made to this Court regarding costs assessment, having regard to the provisions which I have set out above (which I do not suggest are the only relevant ones). However, I propose to grant liberty to apply to restore the matter in the event that this is thought to be required to give effect to the orders I have made. Orders 1. For the reasons given above, I make the following orders: In proceedings 2016/155378 1. Order that the costs ordered to be paid by Prime in order (4) made on 26 March 2020 be paid on the ordinary basis up to and including 4 October 2017 and on an indemnity basis thereafter. 2. Order that Paul Scanlon (the affected party) be liable for the costs for which Prime is liable to pay Mrs Calleja, with credit to be given for the amount of $152,496.44 referred to in order (4) made on 26 March 2020. 3. Order the affected party to pay Mrs Calleja's costs of the application for third party costs. 4. Liberty to restore the matter on 3 days' notice if required to give effect to these orders. In proceedings 2016/260959 1. Order that the costs ordered to be paid by Prime in order (5) made on 26 March 2020 be paid on the ordinary basis up to and including 4 October 2017 and on an indemnity basis thereafter. 2. Order that Paul Scanlon (the affected party) be liable for the costs for which Prime is liable to pay the plaintiff (Calleja PJC Furniture Freighters Pty Ltd), with credit to be given for the amount of $17,220.08 referred to in order (5) made on 26 March 2020. 3. Order the affected party to pay the plaintiff's costs of the application for third party costs. 4. Liberty to restore the matter on 3 days' notice if required to give effect to these orders. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 03 June 2020