In the matter of Bailey Roberts Group Pty Ltd (in liq)

1. [1]

   In two proceedings heard together in February 2025, the Plaintiff, Financialstrategy.com.au Pty Ltd (“FPL”) brought claims of breach of contract and oppression in relation to the affairs of Bailey Roberts Group Pty Ltd (in liq) (“BRG”). The two proceedings address successive time periods. The earlier proceedings (“2021 Proceedings”) were brought by FPL with leave against BRG, which is in liquidation; Bailey Financial Management Ltd (“BFM”); LAT Wealth Holdings Pty Ltd (“LAT”); Bailey Wealth Management Pty Ltd (“BWM”); Fumar Pty Ltd (“Fumar”) (which has since been deregistered) and Sustain Holdings Pty Ltd (“SHL”). I will refer to those parties (other than Fumar) as the “2021 Defendants”. Claims brought against two individuals, Mr Bailey and Mr Thomas, in the 2021 Proceedings were previously dismissed, but further claims were brought against them in the later proceedings (“2023 Proceedings”).

2. [2]

   By my judgment delivered on 20 March 2025 (Re Bailey Roberts Group Pty Ltd (in liq) [2025] NSWSC 227) (“Primary Judgment”), I dismissed both proceedings and indicated that I would hear the parties as to costs. This judgment deals with several questions arising in respect of costs. I note, for completeness, that I was informed in the course of the hearing of this application that FPL has appealed against the order dismissing the 2021 Proceedings but no appeal has been brought in respect of the order dismissing the 2023 Proceedings.

The Principal Judgment

1. [3]

   I should first note several of my findings in the Primary Judgment. I dealt with several aspects of the case put by FPL by reference to Mr Roberts’ evidence, in paragraphs [14]–[15], [18]–[19] and [23]–[24] of the Primary Judgment, as follows:

2. [4]

   These findings are significant, as I will note below, less because they were directed to the giving of false evidence by Mr Roberts, and more because they evidence the false premise of the case that was brought by FPL in the 2021 Proceedings and then relied upon to support its claim for loss in the 2023 Proceedings against Mr Bailey and Mr Thomas.

3. [5]

   I also noted (at paragraph [95] of the Principal Judgment) various matters on which the Defendants had relied to seek to justify suspension of Mr Roberts’ and FPL’s access to BRG’s computer systems (as defined) and observed (at paragraph [96] of the Principal Judgment) that FPL admitted part but not all of that conduct by a Reply filed in the course of the hearing, shortly before Mr Roberts was to be cross-examined. It is important to recognise that the failure to admit those matters, prior to that point, put the Defendants to the costs of proving them, and substantial evidence was obtained on compulsory process, and led, in order to do so. I also referred (in paragraph [147] of the Principal Judgment) to a statement of agreed facts, as to which agreement was reached only very late in the proceedings, comprehensively demonstrated the extent to which FPL had retained information concerning, and had continued contact with, its clients notwithstanding its claim to the contrary in the proceedings.

4. [6]

   I observed (at paragraphs [164]–[165] of the Principal Judgment), in findings that were partly favourable to FPL that:

5. [7]

   Mr Hartford-Davis, with whom Mr Dziubinski appears for FPL, places significant weight on these paragraphs in submissions, and contends that they indicate an order for indemnity costs should not be made against FPL. I do not accept that submission. These paragraphs indicate the possibility that FPL could properly have advanced a significantly narrower case than that which it in fact advanced, which acknowledged that it had copied information relating to the relevant clients, without BRG’s authority; that it had contact information which allowed it to continue contact with many of those clients and had done so; acknowledged that, contrary to Mr Roberts’ evidence in the proceedings, it had not suffered the loss of many of its clients; and focused on those clients which it had not retained, notwithstanding that it retained their information and the ability to communicate with them. That is not the case which FPL brought, on a basis that was contrary to the facts that were known to it through Mr Roberts; it is, instead, a proper case which FPL could have, but did not, bring in the proceedings.

6. [8]

   I also observed (in paragraphs [169]–[170] of the Principal Judgment), with reference to Mr Goodyer’s expert evidence that:

7. [9]

   I also referred (at paragraphs [172] and [175] of the Principal Judgment) to difficulties with Mr Goodyer’s report, including that:

8. [10]

   I also observed (at paragraph [180] of the Principal Judgment) that:

9. [11]

   Mr Hartford-Davis relies on several of these observations to contend, in effect, that FPL failed in its claim only because its expert evidence did not properly quantify its loss. That proposition is radically incomplete. FPL failed because the fundamental premise of its case, derived from Mr Roberts’ evidence, was that BRG’s conduct had deprived it of any information concerning its clients and the ability to contact those clients, and it had thereby lost a significant number of clients. That proposition was false, although I have noted above that a different and substantially narrower case would have been available to FPL, namely that it lost a number of clients notwithstanding that it had copied their information without authority and retained the ability to contact them. The false basis of FPL’s case, arising from Mr Roberts’ evidence and then reflected in FPL’s instructions to Mr Goodyer, had the consequence that the parties and the Court, were required to address allegations as to a course of events which plainly had not occurred rather than the narrower questions which would have arisen on a properly founded case.

10. [12]

    I also observed, in respect of FPL’s claim for compensation for oppression (at paragraph 203 of the Principal Judgment) that:

11. [13]

    In respect of the 2023 Proceedings, I observed (at paragraphs [231] – [233] of the Principal Judgment) that:

12. [14]

    I also dealt with several matters put by FPL in the 2023 Proceedings that were alleged to constitute oppression, which I held were either not established or did not support the relief sought or both. Although FPL’s failure on those matters would not in itself have warranted an order for indemnity costs in favour of Mr Bailey and Mr Thomas in the 2023 Proceedings, I find below that the fact that the claim in the 2023 Proceedings wholly depended on the claim in the 2021 Proceedings, which had the false basis which I have noted above, whether alone or combined with those matters, warrants an order for indemnity costs in favour of Mr Bailey and Mr Thomas and against FPL.

Affidavit and other evidence

1. [15]

   I now turn to the evidence read in this application and then deal successively with the several applications brought by the 2021 Defendants, Mr Bailey and Mr Thomas.

2. [16]

   Mr Bailey, who seeks orders as to costs in the 2023 Proceedings, reads the affidavit dated 28 April 2025 of his solicitor, Mr O’Connor, who referred to his experience, the terms of his firm’s engagement in the proceedings, the evidence led by FPL in the 2021 Proceedings and then in the 2023 Proceedings, and my findings as to aspects of the evidence given by Mr Roberts in respect aspects of FPL’s case. Mr O’ Connor also refers to my findings in several paragraphs of the Principal Judgment, to which I have referred above. Mr O’Connor also gave evidence as to the costs incurred by Mr Bailey in the defence of the proceedings, which was not challenged in any material respect in this application, although I will refer below to the submissions made by FPL in opposition to Mr Bailey’s gross sum costs application in the 2023 Proceedings. Mr O’Connor also gave evidence that at least 85% of his firm’s actual professional fees and all of Counsels’ fees and disbursements were likely to be recoverable on an indemnity basis, and that a lesser percentage of his firm’s professional costs and Counsels’ fees and all of the disbursements would be recoverable on an ordinary basis. Mr O’Connor also outlined calculations of costs that would be recoverable on an alternative bases, in reliance on a Calderbank [Calderbank v Calderbank [1975] 3 All ER 333] letter, and alternatively on an ordinary basis. Mr O’Connor also gave evidence, as to which no serious challenge was raised, of the costs that Mr Bailey would incur in this application. Mr Bailey tendered a bundle of invoices issued by his solicitors (Ex 1D.1) and also tendered paragraphs in each of Mr Roberts affidavits dated 24 April 2024 and 26 November 2024 (Ex 1D.2) where Mr Roberts indicated that he was the sole director and shareholder of FPL and was authorised to make the affidavit on FPL’s behalf.

3. [17]

   The 2021 Defendants, who seeks costs orders in the 2021 Proceedings, and Mr Thomas, who seeks costs orders in the 2023 Proceedings, read the affidavit dated 6 May 2025 of Mr Thomas, which referred to several unsuccessful attempts to resolve the proceedings with Mr Roberts. Mr Thomas there referred to a conversation with Mr Bailey in October 2023 (Thomas 6.5.25 [11]) in which Mr Roberts said, in the context of reference to settlement, that “both [Mrs Roberts] and I are committed to seeing this through to the end”. Mr Thomas also referred to a conversation on the second day of the hearing on 5 May 2025 when Mr Roberts said (Thomas 6.5.25 [15]) that:

4. [18]

   Mr Thomas also refers to Mr Roberts’ claim to wish to drive industry “change” by the proceedings and to his saying that:

5. [19]

   The 2021 Defendants and Mr Thomas also read the affidavit dated 7 May 2025 of their solicitor, Mr Webb, who refers to the history of the proceedings, previous costs orders made in the proceedings, and the substantial costs incurred by the 2021 Defendants and Mr Thomas in the 2021 Proceedings and the 2023 Proceedings. Mr Webb expresses his view that the costs incurred by these parties in the proceedings were reasonable, by reference to several matters, although the 2021 Defendants and Mr Thomas do not bring a gross sum costs application so it is not necessary to determine that matter. He also estimates the costs of this application and refers to offers made by the 2021 Defendants and Mr Thomas on which they rely to support alternative claims for indemnity costs. Mr Webb also there addressed the position in respect of FPL and observed that Mrs Roberts is a 50% shareholder in FPL, which is the trustee of the Roberts Family Trust, and Mr Roberts and Mrs Roberts are two discretionary beneficiaries of the Roberts Family Trust. Mr Webb refers to the profit and loss statements of the Roberts Family Trust, produced pursuant to a notice to produce, which indicate that Mrs Roberts has lent substantial amounts to the family trust in the financial years ended 30 June 2022 – 30 June 2024; the trust suffered a net loss of $175,309 in the financial year ended 30 June 2024 and has negative net equity of $632,980. Mr Webb also refers to a submission previously made by Mr Hartford-Davis (who also appeared for FPL and Mrs Roberts in the security for costs application) that Mrs Roberts stood behind FPL. Mr Webb also referred to a spreadsheet produced on subpoena (Ex J1, CB 251; MFI 4) which records numerous loans from Mrs Roberts to FPL, a substantial payment to the Department of Justice in respect of security for costs and at least three payments by Mrs Roberts to the trust account of FPL’s solicitors. I proceed on the basis that Mrs Roberts made a substantial contribution to the funding of the proceedings.

6. [20]

   FPL and Mrs Roberts in turn read the affidavits dated 30 May 2025 and 15 July 2025 of their solicitor, Mr Wallman. Mr Wallman’s evidence, in his first affidavit, is that the invoices rendered by his firm in these proceedings had been rendered to FPL, and implicitly not to Mrs Roberts, although that is not inconsistent with Mrs Roberts funding FPL’s payment of those invoices and she made some direct payments to Mr Wallman’s firm. By his second affidavit, Mr Wallman gave evidence that he did not receive instructions from Mrs Roberts in relation to any aspect of the conduct of the litigation, other than the third party costs application against her; his instructions were received solely from Mr Roberts; and Mrs Roberts had informed him (plainly directing her attention to relevant factors identified in the case law) that:

7. [21]

   Mr Wallman also gave evidence, on information and belief from Mr Roberts, that the “benefactor” to which Mr Roberts had referred in conversations with Mr Thomas was a family friend, to whom reference had been made in the security for costs application as I noted above. Mr Wallman’s evidence was also that Mr Roberts had also used that term to refer to that friend in discussions with Mr Wallman in the course of the proceedings and that Mr Wallman had no contact with that friend and received no instructions from him in the course of the proceedings.

8. [22]

   FPL also tendered an independent expert report of Mr Goodyer (Ex P1 in this application) on which it relied in the proceedings, which I had addressed in paragraphs [169]ff of the Primary Judgment. Mr Goodyer’s report referred to Mr Roberts’ affidavit filed on 4 November 2021 in the primary proceedings (marked MFI 2 in this application); Mr Roberts’ (false) evidence as to his inability to contact his customers after he was prevented from accessing FPL’s databases and email account on 1 September 2020; and to his claim that FPL had lost 27 managed discretionary account (“MDA”) clients from its client books as a result of the actions taken by the Defendants. Mr Goodyer also there referred to the instructions given to him, including that:

9. [23]

   Mr Hartford-Davis in turn drew attention to other aspects of Mr Roberts’ evidence in his affidavit dated 4 November 2021, to which I had referred in the Primary Judgment, including that FPL was servicing 168 clients as at 1 September 2020, which comprised 43 MDA clients and 125 retail and brokerage clients (Roberts 4.11.21 [122]) and that only 16 of the 43 managed discretionary account clients that FPL was servicing as at 1 September 2020 had reengaged FPL’s services (Roberts 4.11.21 [123]). It appears that the difference between the 43 MDA clients serviced at 1 September 2020 and those 16 clients gives rise to the reference to 27 MDA clients in Mr Goodyer’s expert report. The Defendants in turn refer to Mr Roberts’ evidence (Roberts 4.11.21 [147]) that, given the losses that he claimed that FPL had suffered, he and Mrs Roberts had to utilise their retirement savings to keep the business afloat and pay legal fees, as a matter relevant to the impecuniosity of FPL.

10. [24]

    The parties tendered a chronological bundle in both proceedings which included without prejudice except as to costs correspondence on which the Defendants relied for an alternative claim to indemnity costs (for example Ex J1, CB 138, 142, 154, 216); financial statements for the Roberts Family Trust for the year ended 30 June 2024 (Ex J1, CB 174), which establish that Mrs Roberts has lent substantial sums to the Trust which presently has a significant deficiency in assets against liabilities; the Trust tax return for the year ended 30 June 2024 (Ex J1, CB 189) which indicates that the Trust incurred a significant taxable loss of $173,454 in that financial year and had current liabilities in excess of $1 million which substantially exceeded its current assets of $25,356 and its total assets of $372,789; and had incurred tax losses in each of the financial years since 1 July 2020.

The 2021 Defendants’ application for indemnity costs application in the 2021 Proceedings

1. [25]

   First, by their interlocutory process filed on 7 May 2025 in the 2021 Proceedings, the 2021 Defendants seek an order that FPL pay their costs of the whole of the proceedings on the indemnity basis. Mr Turnbull, who appeared for the 2021 Proceedings, accepted in the course of the submissions that that order would require modification since Williams J had previously ordered that FPL pay the 2021 Defendants costs of a security for costs application on an ordinary basis until 2 August 2023 and on an indemnity basis from that date.

2. [26]

   The applicable principles are well-established and were not in dispute. Section 98(1)(c) of the Civil Procedure Act 2005 (NSW) (“CPA”) permits the Court to order costs on an ordinary or an indemnity basis. Rule 42.2 of the Uniform Civil Procedure Rules (“UCPR”) provides that, unless the Court orders otherwise or the rules otherwise provide, costs payable are to be assessed on an ordinary basis. Rule 42.5 of the UCPR deals with an order for costs on an indemnity basis. Costs are awarded on an ordinary basis unless there are exceptional circumstances: Leichhardt Municipal Council v Green [2004] NSWCA 341. An order for indemnity costs is not made to punish an unsuccessful plaintiff for persisting with a case that fails, but to compensate a successful defendant fully for costs incurred, when the Court takes the view that it was unreasonable for the plaintiff to have subjected that party to the expenditure of costs: Hamod v New South Wales (2002) 188 ALR 659; [2002] FCAFC 97 at [20]. Whether an indemnity costs order should be made depends, at least in part, on whether there was a relevant delinquency on the part of the unsuccessful party: Oshlack v Richmond River Council (1998) 193 CLR 72 at 89; [1998] HCA 11. In Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 7) (2008) 65 ACSR 324; [2008] NSWSC 199, McDougall J observed (at [24]) that there must usually be some special or unusual feature to justify departure from the ordinary rule as to costs, and that delinquency is not necessary for an order for indemnity costs, but is relevant to whether it should be made. The relevant principles were also considered by the Court of Appeal in Cabport Pty Ltd v Marinchek (No 2) [2013] NSWCA 131 at [6], where the Court observed that an order for indemnity costs may be made where a party’s conduct in proceedings is plainly unreasonable or involves an element of delinquency. I have here drawn on my summary of these principles in Sheridan v Colin Biggers & Paisley [2019] NSWSC 621 at [16].

3. [27]

   Mr Hyde, who appears for Mr Bailey, draws attention to the applicable case law and submits that:

4. [28]

   Mr Hartford-Davis in turn submits that:

5. [29]

   Mr Hartford-Davis also submits, by reference to authority, and I accept that, an adverse credit finding, on its own, is insufficient to justify an order for indemnity costs: Christofidellis v Zdrilic [2000] FCA 679 at [29]; MCG Group Pty Ltd v Ftrus Pty Ltd [2017] FCA 359 at [14]; Harrison v Schipp (2002) 54 NSWLR 738; [2002] NSWCA 213 at [137] (“Harrison v Schipp”); Short v Crawley (No 40) [2008] NSWSC 1302 at [15].

6. [30]

   Mr Turnbull, who appears for the 2021 Defendants, in turn submits that:

7. [31]

   Mr Turnbull also submits, implicitly in support of the 2021 Defendants’ application for indemnity costs, that:

8. [32]

   I do not necessarily accept that the case would not have proceeded had Mr Roberts not given false evidence in support of FPL’s claim; however, I accept that any case brought by FPL on the basis of a true account of events, which acknowledged that it had not lost access to client information and had not lost its ability to contact the clients, would have been entirely different to the case to that which FPL brought.

9. [33]

   Mr Turnbull also refers to several of the adverse credit findings that I made in respect of Mr Roberts, to which I referred above, and submits that:

10. [34]

    Mr Hartford-Davis responds that, as I noted above, the adverse credit findings made in the Principal Judgment were made in respect of Mr Roberts, who is the sole director and shareholder in FPL, rather than FPL, and are not sufficient in themselves to justify an order for indemnity costs. I accept that submission. However, as I find below, the matters which were the subject of the false evidence given by Mr Roberts were directed to central elements of FPL’s claim that BRG’s conduct had caused FPL to lose access to information concerning its clients, had prevented it contacting its clients, and had brought about the loss of a substantial number of those clients in that way. Mr Roberts’ false evidence as to those matters falsified the fundamental premise of the case put by FPL, even if it left open the possibility that a substantially narrower case could have been advanced by FPL had Mr Robert given honest evidence. I return to that matter below.

11. [35]

    As I noted above, Mr Hartford-Davis responds to Mr Turnbull’s submission that FPL’s claim for loss case was tied to the loss of clients, by pointing to my finding that BRG’s conduct was likely a cause of the loss of some clients to FPL, and that FPL had failed to quantify the loss attributable to the clients that were lost. That submission does not answer the difficulty that FPL’s case was not merely that many clients were lost, but that they were lost because BRG’s conduct deprived it of client information and the ability to contact those clients, and both those propositions were false. Here, FPL chose to bring its case on that false basis, rather than by reference to the loss of some clients that occurred notwithstanding (contrary to the case it put) it had neither lost access to client information nor the ability to contact its clients. Mr Hartford-Davis also submits that FPL’s case failed on the basis that it had not adequately quantified its loss. While it is true that that was one cause of the case’s failure, another cause of its failure was the fact that its case, as put, was advanced on a false basis, and FPL never sought to develop a narrower case based on a true account of events.

12. [36]

    In summary, I have observed above that the fundamental premise of FPL’s case, derived from Mr Roberts’ evidence, was that BRG’s conduct had deprived it of any information concerning its clients and the ability to contact those clients and that it had thereby lost a significant number of clients. That proposition was false; FPL (through Mr Roberts) must have known that it was false; and it had the consequence that the parties were required to address allegations as to a course of events which plainly had not occurred rather than the narrower questions which would have arisen on a properly founded case. I am satisfied that is a sufficient basis to order that FPL pay the 2021 Defendants’ costs of the 2021 Proceedings on an indemnity basis, excluding those costs of the security for costs application that are already payable on an ordinary basis.

The 2021 Defendants’ alternative application for indemnity costs

1. [37]

   Alternatively, the 2021 Defendants seek orders for costs on an indemnity basis, over several periods, by reference to several Calderbank letters. There was here no dispute as to the applicable principles. Mr Hyde submits that:

2. [38]

   Mr Turnbull similarly submits that:

3. [39]

   Mr Hartford-Davis in turn submits that:

4. [40]

   I also have regard to the summary of the applicable principles by Ward J (as the President of the Court of Appeal then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[15]. I also summarised those principles in Re Alsafe Security Products Pty Ltd (atf Alsafe Trust) (in liq) [2016] NSWSC 575 at [8] as follows:

5. [41]

   I recognise that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Ofria v Cameron (No 2) [2008] NSWCA 242 at [20]. I also addressed the applicable principles in Alora Davies Developments 104 Pty Ltd (in liq) v Raphael [2024] NSWSC 735 at [3]ff (“Alora Davies”) and Re Mobius Distilling Pty Ltd (in liq) (No 2) [2025] NSWSC 649 at [10]ff on which I have drawn for this summary.

6. [42]

   Mr Hartford-Davis also draws attention to Robb J’s observation in Galati v GC NSW Pty Ltd (No 2) [2020] NSWSC 420 at [74] that:

7. [43]

   The 2021 Defendants here rely on four successive offers of compromise. First, by letter dated 25 March 2022 (Ex J1, CB 138), BRG offered to transfer remaining retail superannuation, brokerage and risk commission clients to an AFSL holder of which FPL was representative, on terms that FPL would transfer its shares in BRG, Super Advisor Pty Limited (“Super Advisor”) and Brite NSW Pty Ltd (“Brite NSW”) to BRG within seven days for nominal consideration; and the proceedings be dismissed with no order as to costs. That offer involved an element of compromise as to the costs of the proceedings and was open for 14 days.

8. [44]

   By letter dated 12 October 2022 (Ex J1, CB 142), BRG, Mr Bailey and Mr Thomas made an offer that required FPL to transfer its shares in BRG, Super Advisor and Brite NSW to a nominated transferee or transferees of those Defendants’ choice within seven days for nominal consideration; provided for FPL to pay a fixed sum of costs to Messrs Thomas and Bailey, consequent upon the costs order made in November 2021 by Rees J; and for the proceedings be dismissed with no order as to costs. That offer also involved an element of compromise as to the costs of the proceedings and was open for six days.

9. [45]

   By letter dated 4 October 2023 (Ex J1, CB 154), LAT, SHL and Mr Thomas made an offer that the proceedings be dismissed with no order as to costs and Mr Thomas would pay $38,100 for FPL’s shares in Brite. That offer also involved an element of compromise as to the costs of the proceedings, added a payment for the shares in Brite NSW and was open for fourteen days.

10. [46]

    By letter dated 17 February 2025 (Ex J1, CB 216), the 2021 Defendants, Mr Thomas and Mr Bailey made an offer that the 2021 Proceedings be dismissed with no order as to costs and the costs order made by Rees J on 10 November 2021 be vacated; the 2023 Proceedings be dismissed, with FPL to pay a sum on account of the Defendants’ costs, which was half of the money FPL had paid into Court, and the balance of those moneys be returned to FPL; and the shares in Super Advisor and Brite NSW be transferred to the Defendants for nominal consideration. That offer also involved an element of compromise as to the costs of the proceedings; was made in the course of the final hearing; and was open for only two days.

11. [47]

    Mr Turnbull submits that it was unreasonable for FPL to reject these offers where FPL knew the falsity of Mr Roberts’ own evidence in support of its claim; each of the offers effected a separation of each sides’ commercial interests, which was sensible where the relationship between Mr Roberts, on one side, and Messrs Bailey and Thomas, on the other, had broken down; and each of the offers was made after the Defendants in the 2021 Proceedings had served their evidence. Mr Turnbull also submits that FPL (thorough Mr Roberts) ought to have known that the expert evidence of Mr Goodyer, on which FPL relied to quantify its damages claim, was premised on false assumptions. He acknowledges that:

12. [48]

    Mr Hartford Davis responds that the first offer, with its requirement for the transfer of the shares in Super Adviser and Brite NSW for nominal consideration, does not support an order for indemnity costs. He submits that it was not unreasonable for FPL to reject the second offer where it was only open for acceptance for six days “in circumstances where it raised very serious allegations of breach of directors’ duties, threatened a cross-claim, and threatened reporting Mr Roberts to ASIC; this offer was also conditional on FPL relinquishing its shares in BRG, Super Advisor and Brite for a nominal sum; and “this offer was in substance an invitation to capitulate and relinquish the Super Advisor and Brite shares for nominal consideration” and “involved no genuine compromise by the [D]efendants, other than giving up part of whatever claim for costs they would have had at 12 October 2022.” Mr Hartford-Davis submits and I accept that it was not unreasonable for FPL not to accept the third offer where it would have left the position in respect of Mr Bailey unresolved.

13. [49]

    Mr Hartford-Davis submits that it was not unreasonable for FPL not to accept the fourth offer for overlapping and further reasons and also (in his submissions in response to Mr Hyde’s submissions) that:

14. [50]

    On balance, although with hesitation, I would not have made an order for indemnity costs by reference to these letters. I recognise that FPL should have recognised that its claims were put on the false premise noted above and were undermined by its failure to quantify damages on an appropriate basis; the element of compromise in these offers was real; on the other hand, a more limited and truthful case could have succeeded, and it would have been difficult for FPL and it is not possible for the Court to value the shares in Brite NSW and Super Advisor, even in the context of the breakdown of the parties’ relationship. I cannot form an affirmative view that it was unreasonable for FPL to reject those offers on this basis.

15. [51]

    In the further alternative, the 2021 Defendants sought an order that FPL pay their costs of the 2021 Proceedings on an ordinary basis. FPL did not resist an order on that basis but I will not make it where I have held that an order for costs should be made on an indemnity basis.

Third party costs order in the 2021 Proceedings

1. [52]

   The 2021 Defendants also seek an order in the 2021 Proceedings that Ms Alexandra Roberts, Mr Roberts’ wife, pay their costs of the proceedings in the same amount as that for which FPL was liable, or alternatively that FPL and Mrs Roberts be jointly and severally liable for those costs. They also purported to seek such an order on behalf of Mr Thomas and Mr Bailey in the 2021 Proceedings, although it does not seem to me that they had standing to do so. Nothing turns on that matter since I will not make such an order for the reasons noted below.

2. [53]

   There was also no contest as to the applicable principles here. Mr Turnbull submits that:

3. [54]

   I also summarised the applicable principles in Re H & H Funding Pty Ltd (in liq) (rec and mgr apptd) [2024] NSWSC 248 at [14]ff as follows:

4. [55]

   Mr Turnbull submits, in support of this application, that:

5. [56]

   Mr Turnbull also submits that:

6. [57]

   Mr Hartford-Davis in turn submits that:

7. [58]

   Importantly, Mr Hartford-Davis also points to several cases which indicate that the Court will exercise caution in making a non-party costs order where funding is provided by the spouse or a family member of a party to the proceedings. Mrs Roberts here was the spouse of Mr Roberts, and the evidence suggests that she provided funding to FPL in order to advance Mr Roberts’ interest in the litigation. Here, the close relationship between Mr Roberts and FPL works to Mes Roberts’ advantage, by contrast with the position in respect of indemnity costs, where it worked to Mr Roberts’ disadvantage.

8. [59]

   In Citrus Queensland Pty Ltd v Sunstate Orchards Pty Ltd (No 10) [2009] FCA 498, Collier J declined to make a third party costs order against the wife of an applicant in proceedings, notwithstanding that she appears to have taken a more active role than Mrs Roberts took in these proceedings, by providing instructions to prosecute the claims and throughout the proceedings. Collier J there observed (at [22]–[23], [32] and [35]) that:

9. [60]

   In KSMC Holdings Pty Ltd t/as Hubba Bubba Childcare on Haig v Bowden (No 3) [2020] NSWCA 158, Payne J similarly declined to make a third party costs order against the parents of a party who had funded his conduct of proceedings and observed (at [45] and [50]) that:

10. [61]

    In Skelin v Self Care Corporation Pty Ltd (No 2) [2022] FCA 50, Burley J also declined to make a third party costs order against a spouse who had partly funded proceedings; recognised the significance of the fact that the spouse had not given instructions in respect of the proceedings; found that she was not the “moving party or a real party” to the proceedings, although she had provided some but not all funds for the proceedings; and held that it would not be just and equitable for her to be visited with a costs order in the relevant circumstances.

11. [62]

    Here, I have found that FPL’s conduct of the proceedings was at least unreasonable, and arguably improper; I do not find that Mrs Roberts stood to receive any direct return from the proceedings, although that would likely have benefited indirectly from a recovery by FPL as trustee of the trust; FPL is likely not insolvent, although it and the trust are plainly impecunious and dependent on continuing financial support from Mrs Roberts and possibly Mr Roberts; and there is no reason to think that Mrs Roberts had an active involvement in the conduct of the litigation and the uncontested evidence to the contrary, notwithstanding that Mr Roberts told Mr Thomas of her support for the proceedings. On balance, I am not persuaded that it would be a proper exercise of discretion to make a third party costs order against Mrs Roberts, where, consistent with the case law, the funding that she provided to FPL provided is readily explicable by her wish to assist her husband, albeit in the context of the litigation, rather than by her taking any active role in promoting the conduct of the proceedings.

Order for payment of security for costs out of Court in the 2021 Proceedings

1. [63]

   The 2021 Defendants also sought an order that an amount paid into Court by FPL as security for their costs under the orders made by Williams J on 22 September 2023 (“Security Orders”) be paid out to BFM together with any interest on that amount. This matter, and any implications of the appeal brought by FPL in the 2021 Proceedings received little attention in submissions at the hearing and, if this order is pressed, the parties should address it in the draft orders and submissions as to orders to which I refer in paragraph 83 below.

Mr Bailey’s claim for indemnity costs application in the 2023 Proceedings

1. [64]

   By his Interlocutory Process filed on 30 April 2025 in the 2023 Proceedings, Mr Bailey sought an order that FPL pay his costs of the 2023 Proceedings from 22 May 2023 to 20 March 2025 inclusive on an indemnity basis, or otherwise on the ordinary basis. The latter order was not opposed by FPL.

2. [65]

   As I noted above, although Mr Bailey was not party to the 2021 Proceedings, Mr Hyde made detailed submissions as to the conduct of those proceedings, which were adopted by Mr Turnbull. That course was reasonably adopted by Mr Hyde, where, as I noted above, it was common ground in the substantive hearing that the outcome of the 2021 Proceedings was critical to FPL’s success in the 2023 Proceedings and, indeed, that FPL could not establish its claim to compensation against Mr Bailey or Mr Thomas in the 2023 Proceedings if it failed to establish its claim for compensation against the 2021 Defendants in the 2021 Proceedings. It follows that, if FPL failed in its claim for compensation in the 2021 Proceedings on a basis that involved allegations that should not have been made, or where it should have known that claim had no reasonable chance of success, or that claim was made in disregard of the known facts, then that matter would necessarily impact the outcome of the 2023 Proceedings and would be relevant to Mr Bailey’s claim for indemnity costs in the 2023 Proceedings.

3. [66]

   Mr Hyde in turn submits that:

4. [67]

   In oral submissions, Mr Hyde also pointed to FPL’s failure in other aspects of the 2023 Proceedings (T23). It seems to me that FPL’s failure as to those matters would not have warranted an order for indemnity costs, but for the fact that that its success in recovering compensation in the 2023 Proceedings depended on its success in the 2021 Proceedings which was in turn vitiated by the manner in which the 2021 Proceedings were conducted.

5. [68]

   I have addressed the applicable principles as to indemnity costs above. As I noted above, the fundamental premise of FPL’s case in the 2021 Proceedings, which was essential to its claims in the 2023 Proceedings and was derived from Mr Roberts’ evidence, was that BRG’s conduct had deprived it of any information concerning its clients and the ability to contact those clients and that it had thereby lost a significant number of clients. That proposition was false; FPL (through Mr Roberts) must have known that it was false; and it had the consequence that the parties were required to address allegations as to a course of events which plainly had not occurred rather than the narrower questions which would have arisen on a properly founded case. I am satisfied that is sufficient basis to order that FPL also pay Mr Bailey’s costs of the 2023 Proceedings on an indemnity basis, excluding those costs of the security for costs application that are already payable on an ordinary basis.

Mr Bailey’s claim for a gross sum costs order in the 2023 Proceedings

1. [69]

   Mr Bailey also sought a gross sum costs order. By a revised schedule provided in the course of the hearing (MFI 3), Mr Bailey recalculates the gross sum costs claimed so as not to claim indemnity costs prior to 2 August 2023, in a period in which the costs ordered by Williams J in the security for costs application were ordered on an ordinary basis.

2. [70]

   There was again no dispute as to the applicable principles. Mr Hyde refers to applicable case law including Hamod v State of New South Wales [2011] NSWCA 375 at [813] (“Hamod”) and Kostov v Zhang (No 2) [2016] NSWCA 279 at [19]. I also summarised the applicable principles in Re Beverage Freight Services Pty Ltd [2020] NSWSC 797 (“Beverage Freight”) and in Alora Davies at [8] on which I have here drawn.

3. [71]

   Section 98(4) of the CPA relevantly provides that the Court may make an order to the effect that a party to whom costs are to be paid is entitled to a specified costs order instead of assessed costs. That power is commonly exercised in complex cases, having regard to the several matters identified by Beazley JA (with whom Giles and Whealy JJA) agreed in Hamod at [816]–[817], but the power is not limited to such a case: Simone Starr-Diamond v Talus Diamond (No 4) [2013] NSWSC 811 at [8]; Beverage Freight at [19]. The power to make such an order should only be exercised where the Court considers it can do so fairly between the parties, including achieving an appropriate sum on the materials available to it, and the Court will typically apply a discount to professional fees in assessing costs on a gross sum basis, although there are cases in which it has not done so. In particular, a gross sum costs order may be made to avoid the expense, delay and aggregation involved in litigation arising out of an assessment: Harrison v Schipp at [21]. Where a gross sum order is made, the Court is not required to undertake a detailed examination of the kind which would be undertaken in a cost assessment in determining a gross sum payable and will adopt a “broad brush” approach: Hadid v Lenfest Communications Inc [2000] FCA 628 at [35]; Harrison v Schipp at [22]; Beverage Freight at [19].

4. [72]

   Mr Hyde points to the substantial costs, in excess of $500,000, incurred by Mr Bailey in defence of the proceedings. He also points to several matters indicating FPL’s impecuniosity and submits, and I accept, that “there is every reason to believe that [Mr] Bailey … will not fully recover his costs and, as such, [he] should not be put to the further expense of undergoing an assessment”. He also submits, and I accept, that there is clear evidence before the Court as to the basis on which costs have been charged as well as the nature and the amount of the disbursements which have been incurred by Mr Bailey, and that evidence is sufficient for the Court to have confidence that it can reach a gross sum fairly between the parties upon the materials that are available. He also submits that:

5. [73]

   Mr Dziubinski responded, in oral submissions, that such an order should not be made, first, because the 2021 Defendants and Mr Thomas do not seek such an order and, second, because there is a possibility of duplication of costs between the 2021 Proceedings and the 2023 Proceedings. Mr Dziubinski drew attention to several attendances recorded in the invoices issued by Mr Bailey’s submissions to Mr Bailey that record consideration of issues in the 2021 Proceedings. I do not accept that those attendances raise any real risk of duplication, where the fact that FPL’s claim for compensation in the 2023 Proceedings depended on its claim for compensation in the 2021 Proceedings meant that Mr Bailey’s legal; representatives necessarily had to address the issues in the 2021 Proceedings; the attendances to which Mr Dziubinski points do not involve substantial time periods or substantial costs; and there is no reason to think that the gross sum costs claimed, which are discounted against the actual costs incurred which Mr Bailey, would exceed the costs recoverable on assessment.

6. [74]

   I am satisfied that the matters noted above support a gross sum costs order in favour of Mr Bailey; Mr O'Connor’s evidence allows those costs to be fairly quantified in accordance with Mr Bailey’s revised calculation; and the matters raised by Mr Dziubinski in submissions do not provide reason not to make that order or to question the calculation of the costs claimed.

Mr Bailey’s alternative claim

1. [75]

   Alternatively, Mr Bailey sought an order that FPL pay his costs of the proceedings from 11 February 2025, or alternatively 18 February 2025, to 20 March 2025 on the indemnity basis, and otherwise on the ordinary basis, referable to a Calderbank letter and gross sum costs orders referable to that alternative basis of costs. Mr Bailey relies on the Calderbank letter dated 17 February 2025 (Ex J1, CB 216), which I have addressed above. I have also referred to Mr Hartford-Davis’ submissions as to that letter above.

2. [76]

   On balance, and again with hesitation, I would not have made an order for indemnity costs by reference to this letter for the same reasons I would not have done so in respect of the offers made by the 2021 Defendants and Mr Thomas. I recognise that FPL should have realised that its claims in the 2021 Proceedings, on which its claim against Mr Bailey in the 2023 Proceedings depended, were put on the false premise noted above and were undermined by its failure to quantify damages on an appropriate basis; the element of compromise in those offers was real. However, as I noted above, a more limited and truthful case could have succeeded, and it would have been difficult for FPL, and it is not possible for the Court, to value the shares in Brite NSW and Super Advisor, even in the context of the breakdown of the parties’ relationship. I cannot form an affirmative view that it was unreasonable for FPL to reject this offer on this basis.

Order for payment of security for costs out of Court in favour of Mr Bailey in the 2023 Proceedings

1. [77]

   Mr Bailey sought an order that an amount paid into Court by FPL under the Security Orders be released and paid out to him. I made that order by consent.

Mr Bailey’s claim for a gross sum costs order as to the costs of this application

1. [78]

   Mr Bailey also sought an order that FPL pay the costs of these proceedings quantified in a gross sum. I am satisfied that Mr O'Connor’s evidence sufficiently supports the quantification of this claim and a gross sum costs order should be made for the same reasons that it should be made in respect of the principal proceedings.

Mr Thomas’ claim for indemnity costs application in the 2023 Proceedings

1. [79]

   By his interlocutory process filed 7 May 2025, Mr Thomas in turn seeks an order that FPL pay his costs of the 2023 Proceedings on an indemnity basis, although that order would also need to be modified to reflect the terms of the order made by Williams J as to the costs of the security for costs application. I will make that order, as modified, for the same reasons that I will make such an order in respect of Mr Bailey’s claim to indemnity costs of the 2023 Proceedings.

2. [80]

   Alternatively, Mr Thomas seeks indemnity costs by reference to Calderbank letters, or costs on an ordinary basis. I would not make an order for indemnity costs by reference to the Calderbank letters for the same reasons I did not do so in the 2021 Proceedings. I need not make an order for costs on an ordinary basis where I have ordered costs on an indemnity basis, with the modification noted above.

Third party costs order in the 2023 Proceedings

1. [81]

   Mr Thomas also seeks a third party costs order against Mrs Roberts in the 2023 Proceedings. I will not make that order for the same reasons that I did not do so in the 2021 Proceedings.

Order for payment of security for costs out of Court in favour of Mr Thomas in the 2023 Proceedings

1. [82]

   Mr Thomas sought an order that an amount paid into Court by FPL under the Security Orders be released and paid out to him. I made that order, although FPL did not consent to it, where there was no tenable basis for FPL to oppose it in circumstances that an order for costs on an ordinary basis was not opposed and no appeal had been brought by FPL against my judgment in 2023 Proceedings.

Orders

1. [83]

   I direct the parties to bring in short minutes of order to give effect to this judgment within seven days, and, if there is any disagreement as to those orders, submissions not exceeding five pages in Arial font 12 and one and a half spacing.