Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd (Costs)

1. [1]

   I heard and determined these proceedings on 2 March 2026: Big Sky Capital Pty Ltd atf the Montana Investment Trust v TEB Group Management Pty Ltd [2026] NSWSC 152. I gave judgment for the Plaintiff without trial in circumstances where the Defendants did not appear. I provisionally ordered that the First Defendant pay the Plaintiff’s costs of the proceedings. By these reasons I determine the Plaintiff’s application to vary that costs order.

2. [2]

   The Plaintiff seeks by variation that its costs be paid:

   1. (1)

      by the First Defendant up until the Second Defendant was joined to the proceedings;

   2. (2)

      by the First and Second Defendants from when the Second Defendant was joined;

   3. (3)

      on an indemnity basis; and

   4. (4)

      in a gross sum determined by the Court pursuant to s 98(4)(c) of the Civil Procedure Act 2005 (NSW) (CPA).

3. [3]

   In support of its application the Plaintiff has filed brief written submissions and a supporting affidavit of its solicitor, Mr Christopher Scott Nielsen, affirmed on 5 March 2026. The Defendants did not avail themselves of the opportunity to respond to the application. They filed no submissions or evidence.

The Second Defendant’s liability

1. [4]

   The Plaintiff was entirely successful against the Second Defendant in circumstances where he did not file a List Response and failed to appear at the hearing. The usual position is that costs follow the event albeit they remain in the discretion of the Court: Uniform Civil Procedure Rules 2005 (NSW) r 42.1; CPA s 98(1)(a).

2. [5]

   I have already ordered that the First Defendant is liable for the Plaintiff’s costs of the proceedings. The question here is whether the Second Defendant should share that liability from 1 July 2025 being the date he was joined to the proceedings.

3. [6]

   There is authority that where one of several defendants is not an active party to the proceedings, and cannot be said to have contributed significantly to the plaintiff’s costs, the inactive defendant should not be burdened with the whole costs liability: Probiotec Ltd v University of Melbourne (2008) 166 FCR 30; [2008] FCAFC 5 at 49 [73] (Rares J, Finn J agreeing); Highfields Australia Pty Ltd v Advanced Motor Dealers Group Pty Ltd (recs and mgrs apptd) (No 2) [2024] NSWSC 35 at [17] (Richmond J). However, the Court’s discretion is ultimately informed by what is just having regard to the circumstances of the case: The Owners – Strata Plan No 68372 v Allianz Australia Insurance Ltd (No 2) [2015] NSWSC 729 at [22] (Ball J, as his Honour then was).

4. [7]

   In the circumstances of these proceedings, I have concluded that costs should not be ordered against the Second Defendant, subject to one qualification.

5. [8]

   First, the Second Defendant did not take a substantively active part in the proceedings. He filed no appearance and did not retain solicitors. He did not plead to the claim or prepare evidence. While Mr Nielsen deposes at paragraph 39 of his affidavit that “Big Sky, TEB and Mr Schuh attended a private mediation” on 5 December 2025, it is not clear to me that Mr Schuh was attending in his personal capacity as opposed to as the sole director of the First Defendant, particularly where he had not appeared in the proceedings and he had to attend in any event to provide instructions on behalf of the First Defendant.

6. [9]

   The Plaintiff draws my attention to two emails from Mr Schuh which are said to demonstrate that he actively disputed his liability despite not having filed a List Response. It is difficult to find that correspondence can outflank the absence of any List Response and the inference that arises in consequence.

7. [10]

   On 25 February 2026 at 3.59 pm, Mr Schuh emailed the Plaintiff’s solicitors and relevantly said:

8. [11]

   This email was sent in response to correspondence from the Plaintiff’s solicitors indicating that it had received Mr Hudson’s Notice of Ceasing to Act in relation to the First Defendant. While perhaps infelicitously expressed, my reading of this passage is that Mr Schuh is indicating that he and his company are not in a position to satisfy any judgment given against them, in that they “can’t perform”, such that “there is nothing to gain from us pushing forward at this point in time”.

9. [12]

   On 27 February 2026 at 12.59 pm, Mr Schuh sent an email to the Plaintiff’s solicitors relevantly in the following terms:

10. [13]

    Here the Second Defendant seems to dispute his liability to the Plaintiff in respect of the loan monies. However, this email was sent one working day prior to the hearing, after the Plaintiff had prepared its evidence and submissions. In its written submissions, the Plaintiff does not draw the Court’s attention to any earlier correspondence in which Mr Schuh disputes his liability to the Plaintiff (except for the email set out above). And, as I have said, he did not file a List Response.

11. [14]

    Insofar as the Plaintiff was required to correspond with Mr Schuh in preparation for the hearing, that correspondence was either directed jointly to him and the First Defendant’s solicitors, or to him solely once the First Defendant’s solicitors purported to cease to act for the company. The Second Defendant cannot be said to have put the Plaintiff to any meaningful further expense acting in his personal capacity.

12. [15]

    These facts, taken together, satisfy me that the Second Defendant was not a substantively active party in the proceedings.

13. [16]

    Secondly, and relatedly, it was the First Defendant which put in issue Mr Schuh’s liability to the Plaintiff.

14. [17]

    In its original Commercial List Statement filed on 1 November 2024 (CLS), the Plaintiff contended that the First Defendant alone was liable to the Plaintiff for $3.85 million. The Plaintiff claimed that the $6 million received from the First Defendant on 19 September 2024 was to be allocated first to Mr Schuh’s debt, with the balance received on account of the First Defendant’s liability under the Share Sale Deed: CLS at [C20]. The Plaintiff’s position was aligned with Mr Schuh’s interest.

15. [18]

    The First Defendant disputed that claim in its Commercial List Response (CLR) filed on 21 February 2025. It argued that its $6 million payment was made solely in satisfaction of its liability and was unrelated to Mr Schuh’s loans: CLR at [C20].

16. [19]

    This joinder of issue precipitated the Plaintiff’s joining Mr Schuh in its Amended Summons (AS) and Amended Commercial List Statement (ACLS) filed on 2 July 2025. In that amended pleading, the primary relief sought by the Plaintiff remained the payment by the First Defendant of $3.85 million. It was only in the alternative that the Plaintiff sought that the Second Defendant repay $1.1 million. Ultimately the Plaintiff sought and obtained judgment against both Defendants at the hearing, of which intention it gave due notice to the Second Defendant.

17. [20]

    The Plaintiff submits that Mr Schuh stood to benefit personally from the First Defendant’s defence of the proceedings, because if the First Defendant’s position was that its $6 million payment was partially made in satisfaction Mr Schuh’s loan, then he would have no liability to the Plaintiff. But that was not the First Defendant’s position. The First Defendant pleaded the opposite case.

18. [21]

    Mr Schuh’s liability to the Plaintiff was raised by the First Defendant. Had the First Defendant not joined issue with the Plaintiff on this point, it is likely that Mr Schuh would never have been joined to the proceedings.

19. [22]

    Thirdly, the lion’s share of the evidence prepared by the Plaintiff for the hearing was in response to the First Defendant’s Cross-Claim filed on 21 February 2025. The Court Book comprised over 15 volumes. Counsel for the Plaintiff indicated at the hearing that, where the Cross-Claim was not being prosecuted, only one folder was relevant to the Plaintiff’s claim: Tcpt, 2 March 2026, p 6(22). The Second Defendant was not a party to that Cross-Claim.

20. [23]

    For these reasons, I consider that the First Defendant alone should bear the Plaintiff’s costs of the proceedings.

21. [24]

    The qualification to which I adverted above is the Plaintiff’s motion for substituted service of the AS and ACLS on the Second Defendant. On 14 August 2025, Peden J determined that motion in the Plaintiff’s favour (with the consent of the First Defendant) and ordered that the Plaintiff’s costs of the motion be costs in the cause. It would be unjust to visit those costs on the First Defendant.

22. [25]

    Accordingly, the First Defendant should pay the Plaintiff’s costs of the proceedings, except for the Plaintiff’s costs of attempting to serve Mr Schuh and of its motion filed on 4 August 2025. The costs of that motion, and the costs in relation thereto, should be payable by the Second Defendant alone.

Indemnity costs

1. [26]

   The Plaintiff seeks that its costs be paid on an indemnity basis.

2. [27]

   In James v Douglas [2016] NSWCA 178 at [63], Meagher JA (with whom Leeming and Simpson JJA agreed) collected some of the principles informing the exercise of this discretion:

3. [28]

   The Second Defendant is only liable for the costs of service on him and the substituted service motion. The effect of the Plaintiff’s submission is that Second Defendant evaded service, and its costs should be awarded on an indemnity basis. While the Plaintiff’s characterisation of Mr Schuh’s conduct is arguable, I cannot properly determine that issue here. I do not consider that there is some “special or unusual feature” of that motion that would justify a departure from the usual rule, particularly in circumstances where Peden J ordered that the costs of the motion be costs in the cause. The Second Defendant is to pay those costs on the ordinary basis.

4. [29]

   The First Defendant’s conduct is another matter. The Plaintiff’s claim was relatively straightforward. The First Defendant’s Cross-Claim was significantly more complex and was responsible for the vast majority of the Court Book. The First Defendant ultimately failed to prosecute its Cross-Claim, after putting the Plaintiff to the time and expense of preparing a response to it. It was on the basis of the Cross-Claim that the Court allocated three hearing days to the matter.

5. [30]

   Justice Peden made the usual order for hearing on 12 December 2025. Mr Nielsen’s evidence makes plain that the First Defendant failed to respond to the Plaintiff’s attempts to prepare the documents required by that order. Moreover, the First Defendant failed to comply with the order of Rees J made on 12 September 2025 that it provide a verified list of documents in response to discovery categories.

6. [31]

   Finally, the Cross-Claim was struck out and judgment entered in circumstances where the First Defendant did not bother to appear, putting the Plaintiff to needless expense: D’Cruz v Coutinho (Costs and Final Orders) [2025] NSWSC 201 at [8] (Hammerschlag CJ in Eq).

7. [32]

   The First Defendant’s conduct of the proceedings caused unnecessary delay and expense. It failed to comply with orders of the Court and did not prosecute its Cross-Claim. It did not appear at the hearing. In accordance with settled principle, I am comfortably satisfied that the First Defendant should pay the Plaintiff’s costs on an indemnity basis.

Gross sum order

1. [33]

   The Plaintiff also seeks that its costs be payable in a gross sum instead of being referred for assessment.

2. [34]

   The Court of Appeal (Payne, McHugh and Free JJA) set out the principles which may justify the making of such an order in Rahman v Rahman (No 2) [2025] NSWCA 266 at [61]–[64] as follows:

3. [35]

   The Court will only make a gross sum order where there is a good reason to do so. This is such a case.

4. [36]

   The First Defendant in particular bears much of the responsibility for the costs incurred by its unprosecuted Cross-Claim. As neither Defendant appeared at the hearing, I have little confidence that they would participate constructively, or indeed at all, in an assessment process. Further, the inference I draw from the Defendants’ non-appearance, together with Mr Schuh’s correspondence and the reason for the withdrawal of the First Defendant’s solicitors, is that they are unlikely to be able to satisfy the judgment, let alone any costs liability. To require the Plaintiff in these circumstances to pursue an assessment of its costs is likely to cause it to suffer further delay and incur further costs which it may not recover. Finally, I am satisfied that Mr Nielsen’s evidence (addressed below) provides a sufficient basis for the Court to determine costs fairly between the parties.

5. [37]

   These reasons provide a proper basis to exercise the Court’s discretion to make a gross sum order, and I propose to do so.

6. [38]

   In paragraphs 68 to 95 of his affidavit, Mr Nielsen sets out the method by which he calculated the Plaintiff’s costs of the proceedings. Exhibited to his affidavit are detailed line-item records of solicitors’ fees, Counsel’s fees and disbursements. Corresponding invoices are also included. I accept that his analysis is careful and informed by his considerable experience.

7. [39]

   A party which is registered for GST, and therefore entitled to the benefit of an input tax credit, will not be allowed to recover legal costs inclusive of GST on an assessment: Gagner Pty Ltd t/as Indochine Cafe v Canturi Corporation Pty Ltd (2009) 262 ALR 691; [2009] NSWCA 413 at 723 [152]–[153] (Campbell JA, Macfarlan JA and Sackville AJA agreeing). At paragraph 94 of his affidavit, Mr Nielsen deposes that the Montana Investment Trust, on whose behalf the Plaintiff brings these proceedings as a trustee, is not registered for GST. In those circumstances, costs should be allowed inclusive of GST, and all the amounts below are so expressed.

8. [40]

   Mr Nielsen has removed a substantial amount of costs charged by his firm which would not be recoverable on a costs assessment. This leaves total recoverable solicitors’ fees in the sum of $389,429.70. Counsel’s fees for the proceedings come to $58,905. Other disbursements have been incurred in the amount of $24,712.18.

9. [41]

   For his firm’s recoverable fees, Mr Nielsen proposes that 70% of those costs ought to be allowed on the ordinary basis, and 85% of those costs be allowed on an indemnity basis, based on his experience of the costs assessment process. I will allow those costs at 60% and 80% respectively, to account for the savings of time and expense of a gross sum order and to ensure that the Defendants are not prejudiced by this abbreviated approach.

10. [42]

    Mr Nielsen proposes that Counsel’s fees be discounted by 7% to align them with the guidelines for junior counsel promulgated by the Costs Assessment Rules Committee. I agree with this course.

11. [43]

    I will allow other disbursements at 100% in accordance with the usual method adopted on an assessment.

12. [44]

    Given the conclusion I have reached concerning the Second Defendant’s liability, it is necessary to disaggregate from the total amounts those costs which are referable to the service of the AS and ACLS on the Second Defendant, and the costs of the substituted service motion. Having reviewed the schedules of costs myself, and doing the best I can on a broad-brush approach, those costs include the following:

    1. (1)

       recoverable solicitors’ fees of $14,900, 60% of which is $8940;

    2. (2)

       Counsel’s fees of $2475, 93% of which is $2302; and

    3. (3)

       disbursements of $3516.

13. [45]

    Therefore, I will order that the Second Defendant pay the Plaintiff’s costs in a gross sum of $14,758.

14. [46]

    It follows that the costs for which the First Defendant is liable are (rounding down):

    1. (1)

       recoverable solicitors’ fees of $374,529, 80% of which is $299,623;

    2. (2)

       Counsel’s fees of $56,430, 93% of which is $52,479; and

    3. (3)

       disbursements of $21,196.

15. [47]

    The First Defendant is therefore to pay the Plaintiff’s costs in a gross sum of $373,298.

Interest

1. [48]

   I granted leave for the Plaintiff to calculate pre-judgment interest payable on the judgment in accordance with s 100 of the CPA. Mr Nielsen sets out those calculations at paragraphs 102 to 109 of his affidavit.

2. [49]

   That interest has been calculated in accordance with Practice Note SC Gen 16 and commences on the dates which the evidence discloses as being when the respective amounts became payable to the Plaintiff by the Defendants. I accept those calculations.

Orders

1. [50]

   I make the following orders:

   1. (1)

      Order 1 of the orders made on 2 March 2026 (the Primary Orders) is varied to read “The First Defendant is to pay the Plaintiff $2,750,000 together with pre-judgment interest of $330,226.23 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.

   2. (2)

      Order 2 of the Primary Orders is varied to read “The Second Defendant is to pay the Plaintiff $1,100,000 together with pre-judgment interest of $138,957.57 calculated in accordance with s 100 of the Civil Procedure Act 2005 (NSW)”.

   3. (3)

      Order 4 of the Primary Orders is set aside.

   4. (4)

      The First Defendant is to pay the Plaintiff’s costs of the proceedings (other than the costs referred to in Order 5 below) on an indemnity basis in the specified gross sum of $373,298.

   5. (5)

      The Second Defendant is to pay the Plaintiff’s costs of its attempts to serve him with the Amended Summons and Amended Commercial List Statement, and the substituted service motion in relation thereto, on the ordinary basis in the specified gross sum of $14,758.