The Federal Court’s latest decision in respect of the North Shore Developments debacle gives us another opportunity to wonder at the gap between justice and law, and how widely at times it yawns.
“Although the fraud itself is to be deplored, the Court’s discretion in relation to costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is not a general power to punish past misconduct.” Justice Geoffrey Kennett.
Having spent five years and a mint of money on an ultimately fruitless quest to rescind a 2017 deed of release Melbourne-based liquidator Robyn Erskine has been ordered to pay half the costs of developer John Haddad, who she’d plotted to pursue for uncommercial transactions if her rescission case had succeeded.
Delivering judgment soon Monday in North Shore Property Developments Pty Ltd (in liq) v Haddad (Costs) [2025] FCA 827 Justice Geoffrey Kennett injected high sodium saline into the terminal wound he inflicted earlier this month, saying that despite Haddad committing fraud, the deceit did not justify the case Erskine brought or her application that costs not follow the event.
“Although the fraud itself is to be deplored, the Court’s discretion in relation to costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is not a general power to punish past misconduct,” the judge said.
“Departures from the general rule that costs follow the event are justified by “misconduct”, not in a general sense, but rather where such misconduct has itself caused or induced the other party to incur costs in litigating.”
It’s an irksome finding for Erskine, who’s burned through bales of taxpayer’s cash to arrive at a scorched earth outcome, there to be presented with a bill halving the defendants’ fare. But his honour did what he could to soothe scorched tissue.
” …. while Mr Haddad was entitled to put the applicants to proof of all aspects of their case, it does not follow that he is entitled to expect a normal costs order if an aspect of the applicants’ case (a) was compelling and (b) demonstrated dishonesty on his part.
“The second is that it follows from the findings set out in the substantive reasons that Mr Haddad (a) swore (albeit did not ultimately rely on) an affidavit parts of which he must have known were false and (b) instructed, or at least allowed, his counsel to put propositions in cross-examination and submissions that he must have known were false.
“These are matters properly to be considered in the exercise of the costs discretion (as to advancing a dishonest case see, eg, Roberts-Smith v Fairfax Media Publications Pty Limited (No 45) [2023] FCA 1474 (Besanko J)).
“Because these considerations affected only one aspect of the proceedings, (albeit an important one), the applicants’ case had significant and obvious weaknesses and the respondents ultimately prevailed, I do not accept that there should be no order as to costs.
“There should be an order in favour of the respondents, but with a significant discount,” he said.
No doubt we should view a significant discount as a small mercy, given a different judge might have have agreed to Haddad’s proposal for costs on an indemnity basis from the date in 2024 when Erskine declined $100,000 offer to settle.
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