GPL ordered to pay SPLs costs out of own pocket

Liquidator Schon Condon.

When you’re down it’s harder to dodge the blows, and that’s an adage to which Sydney liquidator Schon Condon can well attest after copping his second personal costs order in less than two months.

On Monday Federal Court judge Jane Jagot ordered Condon to pay from his own pocket the costs of KordaMentha’s Rahul Goyal and Jennifer Nettleton, who had brought an indemnity costs application against Condon after racking up expenses defending actions brought by Condon in his position as general purpose liquidator (GPL) of ACN 154 520 199 Pty Ltd, which was formerly known as ABC Refinery.

The KordaMentha pair are the company’s special purpose liquidators (SPLs), having been installed by major creditor the Deputy Commissioner of Taxation (DCoT) back in April, 2017.

The DCoT and the company have been at loggerheads for quite a few years now over input tax credits and whether the company was entitled to claim them in its capacity as a refiner of precious metals.

The directors deny that the DCoT has a case and have found much to disapprove of in respect of Goyal and Nettleton’s work and fees, which is not surprising given the focus of that yet to be realised work is to identify claims against the directors. 

Last year Condon formed the view that Goyal and Nettleton may have passed information to the DCoT that constituted a breach of their fiduciary duties to the company.

As it turns out, they hadn’t and in Deputy Commissioner of Taxation v ACN 154 520 199 Pty Ltd (In Liq), in the matter of ACN 154 520 199 Pty Ltd (In Liq) [2020] FCA 609, the consequences of Condon’s pursuit of the KordaMentha pair is laid bare.

Not only has Condon been ordered to pay the SPL’s costs out of his own pocket without recourse to the assets of the company.

Upon the application of Goyal and Nettleton, who apparently want to rub the salt right in, he’s been prevented from any indemnity that might be provided by a third party – most likely the company’s directors who aren’t short of a quid.

Justice Jagot agreed, finding that Condon’s approach was unreasonable and that his pursuit of the emails constituted an abuse of process. 

“In the present case I consider the GPL’s conduct from 16 October 2019 onwards, when the substance of the email correspondence was disclosed, to have been unreasonable,” the judge said.

“In circumstances where I consider the GPL’s conduct to have been unreasonable from 16 October 2019 onwards it is appropriate to make an order for indemnity costs from that date onwards and for the GPL to be personally liable for those costs,” Justice Jagot said. 

“The purpose of such an order is not to punish the GPL but is to give effect to the finding of unreasonable conduct of the GPL on and from that date. 

“Having reached the conclusion I have, as to unreasonable conduct by the GPL, it would be inappropriate for the GPL not to be personally liable for the costs and, to that end, not (sic) to be able to have recourse to any right of indemnity the GPL might have excluding such rights in relation to the defendant.”

We don’t know how much is to come out of Condon’s pocket to cover the SPL’s expenses but the order represents the second such blow to Condon in less than six weeks.

On April 7 Justice Kelly Rees of the NSW Supreme Court came to similar conclusions about Condon and unreasonableness In the matter of Azmac Pty Limited (in liquidation) (No 2) [2020] NSWSC 363

“ … it seems to me that Mr Condon had put himself in a difficult situation by having used some of the net proceeds of sale of Azmac’s land to pay his solicitors and himself without first notifying the plaintiff what he proposed to do. This was imprudent,” Justice Rees observed.

“I thus consider that Mr Condon’s actions fall within the description of unreasonable and unnecessary,” she said. 

“It does not seem to me to be just that his costs of these proceedings, which he provoked, should be borne by the creditors of Azmac including the plaintiff. 

“Otherwise, the plaintiff, having completely succeeded, will effectively be partially funding Mr Condon’s legal costs,” the judge said. 

While Justice Rees’ orders didn’t restrict Condon from obtaining an indemnity from a third party or external source, it almost certainly wasn’t necessary. 

Unlike ABC Refinery, it seems unlikely that there’s a director with a deep pocket or related parties with an interest in the Azmac administration standing by to bail him out. Support INO’s continued chronicling of the insolvency sector.

Further reading:

At Liberty To Make Misery But So Far Nothing To Show

Liquidator To Appeal Personal Costs Order

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