Failing to adequately discharge one’s onus has come back to bite a Sydney liquidator who now has an adverse costs order attaching to whatever assets the company he controls might possess.
As is explained by NSW Supreme Court judge Kate Williams In the matter of Pacific Steelfixing Pty Ltd (No 2) [2021] NSWSC 1129, whilst O’Brien Palmer partner Daniel Frisken did prove insolvency in the principal proceedings heard back in April of this year, he did not prove that preferences identified during the course of those proceedings were unfair or more importantly voidable, a critical feature of any adequate discharge.
“The significance of the preference issue on the facts of this case emerged during the hearing as a consequence of the incomplete state of the first plaintiff’s investigations into the second plaintiff’s affairs at the time these proceedings were commenced (and even as at the commencement of the final hearing).” Justice Kate Williams.
When the parties – Frisken as plaintiff and liquidator of Pacific Steelfixing and the Deputy Commissioner of Taxation (DCoT) as defendant and recipient of said preferences – came to the question of costs their positions predictably varied.
Frisken submitted that because he had been successful on the question of insolvency, and because the insolvency question was, “the central issue in the dispute” he should only have to pay half of the DCoT’s costs on the ordinary basis.
The DCoT submitted that its costs of the proceedings (including the costs of its submissions on costs), should be paid personally by Frisken as first plaintiff with no order made against the company as second plaintiff.
The DCoT however stopped short of asking the court to deny Frisken his right of indemnity from Pacific Steelfixing’s assets.
Weighing up the competing submissions, her honour disagreed with the submissions of Frisken’s counsel.
“The insolvency issue and the preference issue were of equal importance,” she said because they were both “elements of the question whether the relevant payments were voidable transactions”.
As it happened the preference question arose late, and in her judgment on the costs question the judge provided helpful insights as to why.
“The significance of the preference issue on the facts of this case emerged during the hearing as a consequence of the incomplete state of the first plaintiff’s investigations into the second plaintiff’s affairs at the time these proceedings were commenced (and even as at the commencement of the final hearing),” she said.
The moral of this tale? Always ensure one’s onus is adequately discharged.
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