Pages Property Investments Pty Ltd v Attila Boros & Ors

1. [1]

   By my Judgment delivered on 17 September 2020 (“Judgment”), I found that the Plaintiff, Pages Property Investments Pty Ltd (“PPI”) had established certain aspects of its case against Mr Boros. I ordered (at [281]) that Mr Peter Gothard and Ms Robyn Duggan of KPMG be appointed liquidators jointly and severally of Pages Equipment Holdings Pty Ltd (in prov liq) (“PEH”); Pages Sales Pty Ltd (in prov liq); Phire Pty Ltd (in prov liq) and Pages Austructures Pty Ltd, with that order to be entered forthwith; and that the parties otherwise bring in agreed short minutes of order to give effect to the judgment, including as to costs, within 14 days or, if there was no agreement between them, their respective draft minutes of order and short submissions as to the differences between them. I subsequently extended the time for the parties to bring in agreed short minutes of order, by agreement of the parties, although they have not now reached agreement as to consent orders.

The parties’ proposed substantive orders

1. [2]

   By their respective draft orders submitted on 16 October 2020, PPI and Mr Boros both proposed an order for the appointment of liquidators to the companies to which I referred in paragraph 1 above. That order is unnecessary since the Court already made it on 17 September 2020 and it was entered and took effect on that date.

2. [3]

   By its proposed orders, PPI initially sought judgment for PPI against Mr Boros in the amount of $2,551,538 and judgment against the Second Defendant, PEH in the amount of $2,636,428. By submissions dated 21 October 2020, made by leave, PPI corrected an error in its proposed orders to decrease the amount of the judgment sought by PPI against Mr Boros to the amount of $2,538,656 (comprising components of $457,280 and $2,081,376) and against PEH in the lesser amount of $2,617,085 (comprising $590,816 plus $2,029,269). Mr Boros in turn provided short minutes of order which provided for judgment to be entered against him in the amount of $2,480,950.43 (a lesser amount than contained in PPI’s orders) and for judgment to be entered against PEH in the amount of $2,579,159.43, also a lesser amount than proposed in the PPI’s orders.

3. [4]

   These calculations relate, first, to PPI’s claim against Mr Boros as to rent and outgoings under the First Lease (as defined) (Judgment [97]ff). In respect of that claim, I observed (Judgment [112]-[113]) that:

4. [5]

   These calculations also reflect an alternative claim by PPI that PEH pay unpaid rent under the First Lease (as defined in the Judgment) and outgoings plus interest. I observed (Judgment [114]) that:

5. [6]

   In support of its quantification, PPI relied on a further report of the accounting expert whose evidence it led in the proceedings, Ms Bateman, dated 7 October 2020. Mr Boros in turn attaches to his submissions a letter from a Ms Leone, whose qualifications are not identified and whose letter does not contain a statement acknowledging the code of conduct. Ms Bateman calculated the amount payable by Mr Boros pursuant to paragraph 113 of the judgment as $457,280 and the amount payable by PEH pursuant to paragraph 114 of the Judgment as $590,816, inclusive of simple interest at the specified rates. Ms Leone calculated the amount payable by Mr Boros as $424,856 and the amount payable by PEH pursuant to paragraph 114 of the Judgment as $523,065. I can have regard to both calculations not as expert evidence, but so far as they represent a mathematical calculation which could have been undertaken by way of submission.

6. [7]

   PPI points out that the parties appear to agree that the total amount of unpaid rent under the First Lease, for the purposes of paragraphs 113 and 114 of the Judgment was $338,318. The difference between PPI’s and Ms Bateman’s calculation on the one hand and Mr Boros’ and Ms Leone’s calculation on the other arises only from a difference between the parties as to the basis on which interest as to rent and outgoings under the First Lease is to be calculated. Ms Bateman adopts a calculation based on the Reserve Bank of Australia (RBA) Statistics Tables: F5 Indicator Lending Rates for variable overdraft (Schedule 3) and Ms Leone adopting a calculation based on the RBA Statistics Tables: F5 Indicator Lending Rates for variable term loan (Schedule 14).

7. [8]

   PPI submits, and I accept, that interest in respect of the First Lease should be calculated on the basis set out in that lease. Clause 13.3 provides that the tenant must pay interest to PPI on any Rent, the Operating Costs or other money payable by it to PPI and unpaid for 10 business days at the “Default Rate”, which is defined in cl 1.1 as “the rate which is 2% per annum above the highest overdraft rate charged as at the due date for payment by [PPI’s] bank for commercial loans in excess of $100,000”. As PPI points out, Ms Bateman’s calculations adopt the RBA indicator lending rate for small business overdrafts whereas Ms Leone’s calculation adopts the rate for small business variable term loans, which is a lower rate than the overdraft rate. Ms Bateman’s calculations allow the 2% additional interest provided within the definition of Default Rate, which is not included in Ms Leone’s calculation. In further submissions, by leave, Mr Boros confirmed that Ms Leone had, by contrast, used interest rates applicable to term loans rather than overdrafts and questioned the inclusion of the 2% margin in Ms Bateman’s calculation. I am satisfied that Ms Bateman’s calculation of these figures properly reflects the terms of the First Lease.

8. [9]

   The parties proposed orders reflect, third, PPI’s claim for monies paid by PPI to the benefit of PEH. I observed (Judgment [127]) that:

9. [10]

   I also observed (at Judgment [132]) that:

10. [11]

    PPI points out that the parties appear to agree, in relation to paragraphs 127 and 132 of the Judgment, that the increase in the ANZ Debt was $1,658,931; additional interest paid to 30 June 2020 was $240,028; an additional “lines fee” paid to 30 June 2020 was $105,944; and PPI paid stamp duty of $4,032, totalling $2,008,935. PPI points out that pre-judgment interest on those amounts to 30 June 2020 was $47,158 and no alternative figures are provided by Mr Boros in his submissions as to orders. PPI submits that ongoing interest and line fees should, in principle, be calculated to the date of judgment, 17 September 2020, and updates that calculation to $2,026,296 and the damages calculated for the purposes of paragraph 127 to $2,081,376 and for paragraph 132 to $2,026,269. I accept those calculations are properly founded.

The parties’ proposed costs orders

1. [12]

   Turning now to the question of costs, I had observed (Judgment [280]) that:

2. [13]

   In Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], the Court of Appeal noted that:

3. [14]

   That principle has been recognised and applied in earlier and several later cases. In Hughes v Western Australian Cricket Association (Inc) (1986) ATPR 40-748 at 48,136, Toohey J noted, with reference to authority, that where a litigant had succeeded only upon a portion of its claim, the circumstances may make it reasonable that it bear the expense of litigating that portion upon which it failed, and that a successful party who had failed on certain issues may not only be deprived of the costs of those issues but may also be ordered to pay the other parties’ costs of them. In Short v Crawley (No 40) [2008] NSWSC 1302 at [33], White J noted, with reference to authority, that the entitlement to costs, even of a plaintiff which enjoyed substantial success was potentially:

4. [15]

   PPI submit that, subject to an additional order, and except so far as costs are “not” (which appears to be an error) the subject of previous costs orders, Mr Boros and PEH pay 60% of their costs of PPI’s proceedings, as agreed or as assessed, on the ordinary basis. PPI submits that the usual outcome is that it would, as the “successful party” be entitled to an order for the whole of its costs, but it submits that the 40% reduction in its costs which it concedes is a “generous” deduction for the time devoted to the claims in the proceedings for which it did not succeed. PPI also submits, and I accept, that PPI faced ongoing difficulties throughout the proceedings in obtaining relevant books and records from Mr Boros and other Defendants, and that a substantial amount of time during the hearing (and, necessarily, in preparation for it) was directed to issues on which PPI succeeded, namely Mr Boros’ failure to keep proper books and records and the application to wind up the several corporate Defendants on just and equitable grounds. PPI also points to several other matters which increased its costs of the proceedings, including Mr Boros’ advice that he would be reading affidavits of witnesses which ultimately were not read and Mr Boros’ unsuccessful set-off defence in relation to an alleged loan to Mrs Page.

5. [16]

   In respect of PPI’s claim for costs against PEH, it submits that PEH resisted the claims against it until it was placed in provisional liquidation shortly before the hearing; that PPI succeeded on two substantial money claims against PEH in the proceedings; that PPI’s claim for surrender of the Second Lease (as defined) was not pursued as a result of PEH entering voluntary administration shortly before the final hearing and its subsequent provisional liquidation; and that PPI was ultimately successful in obtaining a winding up order against PEH.

6. [17]

   Mr Boros submits, by reference to a list of allegations in several iterations of the Statement of Claim, that many allegations put by PPI were not pursued or were not successful and that PPI had adopted “an unethical position” which he described as “machine gunning” in the proceedings. I do not accept that those terms are appropriate, although it is plain that PPI advanced and pursued a significant number of claims on which it did not succeed, either in respect of liability or in respect of establishing damages. In further submissions, by leave, Mr Boros contends that the claims on which PPI was successful only required “minor or very little evidentiary argument or presentation and were based heavily on Ms Bateman’s reports”. I do not accept the first part of that submission, where the claims as to failure to keep adequate accounting records and as to winding up on the just and equitable ground required extensive evidence, but the second part of that submission supports PPI’s claim for the costs of Ms Bateman’s reports which I address below. On that basis, Mr Boros submits that he and PEH should pay 20% of PPI’s costs of the proceedings.

7. [18]

   On balance, I am satisfied that the majority of the evidence on which PPI relied, and the majority of the time at the hearing, went to the issues on which it was successful, and an order that Mr Boros and PEH pay 60% of PPI’s costs will fairly reflect the outcome of the proceedings. I am also satisfied that, given the extent to which PPI succeeded and the amount of its recovery, and also bearing in mind the significant parts of the case which it pursued on which it failed or could not establish damages, Mr Boros and PEH should (as PPI contends) pay 60% of PPI’s costs of the proceedings as agreed or as assessed.

8. [19]

   PPI also submitted that a specific order should be made that Mr Boros and PEH pay its costs of engaging Ms Bateman as an expert in the proceedings, to the extent those costs would not have been recovered under the costs order. In the course of the Judgment, I noted several claims where PPI had sought to establish damages referable to the costs of Ms Bateman’s work. I observed, for example, in respect of Mr Boros’ breach of his duties in respect of PPI’s failure to keep adequate financial records that:

9. [20]

   In response to PPI’s claim as to Ms Bateman’s costs, Mr Boros repeats the proposition that PPI has “machine gunned unsustainable allegations” and submits that he should be required to pay 15% of Ms Bateman’s costs; that an itemised account should be provided; and that “due to the Court’s decision not to delay the hearing, Mr Boros did not have the ability to fund an expert witness”.

10. [21]

    PPI submits that it would not have been exposed to the significant costs of obtaining accounting evidence from Ms Bateman but for Mr Boros’ failure to ensure that PPI complied with its obligations under s 286 of the Act to maintain proper accounting records. It seems to me that that is relevant to the costs of the proceedings, so far as it plainly made the task of leading expert accounting evidence more expensive for PPI than it would otherwise have been. As to the costs of Ms Bateman’s report, Mr Boros submits, in further submissions by leave, that a substantial amount of her work was directed to other companies, repeats the proposition that she should provide an itemised account, and submits that no more than 15% of her total account should be paid.

11. [22]

    On balance, I accept PPI’s submission that, notwithstanding the difficulties with aspects of Ms Bateman’s evidence to which I referred in the Judgment, and the fact PPI was not successful in all of the claims as to which Ms Bateman led evidence, I should order that Mr Boros and PEH pay PPI’s reasonable costs of engaging Ms Bateman as an expert in the proceedings as agreed or as assessed. If no agreement is reached between the parties as to those costs, it will be a matter for a costs assessor to determine the amount of Ms Bateman’s fees that were reasonably incurred and are properly recoverable by PPI as disbursements.

12. [23]

    Accordingly, I make the following orders: