Hall Chadwick duo dodge personal costs order

Cameron Shaw and Richard Albarran have been ordered to pay a rival liquidator’s costs but avoided having to pay them personally after they unsuccessfully sought to have a special purpose liquidator (SPL) appointed to Perth Fashion Council WA (In Liquidation) (PFCWA).

“The function of a costs order is not simply to ‘reward’ a successful party for their win. Particularly where the defendant is the successful party, a costs order protects the defendant from the costs incurred as a result of the plaintiff’s action, regardless of how vigorously the application is opposed.” Judge Marcus Solomon.

In Perth Fashion Festival Pty Ltd (In LIQ) -v- Fashion Council WA Ltd (In LIQ) [2022] WASC 210 Supreme Court of West Australia judge Marcus Solomon describes how, after refusing Shaw and Albarran’s SPL application in June this year, he issued the usual invitation to the parties in respect of costs.

PFCWA liquidator Kim Wallman, who had been neutral on the SPL application but sufficiently involved to act as contradictor, asked that Albarran and Shaw pay his costs personally.

The HLB Mann Judd WA Partner had argued that there was no utility in appointing an SPL given the lack of funds, the defences available to the directors and the fact that at the time Shaw and Albarran applied to have Westburn Advisory’s Shumit Bannerjee appointed SPL, there was no funding agreement in place.

The attempt to appoint Bannerjee SPL came after the Hall Chadwick pair had earlier sought and failed to install him as Wallman’s replacement, they being liquidators of Perth Fashion Festival (PFF), which has proved as a creditor in the PFCWA liquidation.

Shaw and Albarran had calculated that they had a claim in the liquidation of PFCWA for more than $510,000 and didn’t want Wallman finalising the winding up, which is what he had told creditors was the most sensible course given the lack funding and difficulties he’d identified in pursuing the PFCWA’s directors for insolvent trading.

The pair had agitated for Wallman to call a meeting for creditors to consider replacing Wallman but not enough creditors were onside, with the ATO voting against a switch.

Next they made the SPL application, arguing that Hall Chadwick would be prepared to fund the SPL in the event that he commenced proceedings against the directors. By this time Shaw and Albarran had clocked up well in excess of $300,000 in fees on the PFF job.

Last week the judge found that the Hall Chadwick pair’s actions fell short of the threshold necessary for him to find that their actions were unreasonable or improper.

“The plaintiff’s liquidator was moved by the provisional nature of the investigations to date and the inability of the defendant’s liquidator to advance further investigations,” he said.

“For the reasons I explained, the application was not granted. But it was not so unreasonable a position, that the usual rule should be displaced.”

However he wasn’t prepared to accept Shaw and Albarran’s case that Wallman shouldn’t get his costs when he asserted a uniformly neutral position.

“I do not accept the submission that the defendant’s professed neutrality ought to deprive the defendant of its costs,” he said.

“The position adopted by the defendants was appropriate in all the circumstances. The function of a costs order is not simply to ‘reward’ a successful party for their win,” the judge said.

“Particularly where the defendant is the successful party, a costs order protects the defendant from the costs incurred as a result of the plaintiff’s action, regardless of how vigorously the application is opposed.”

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