In the matter of Sirrah Pty Ltd

By Interlocutory Process dated 4 July 2024, Mr Domenic Calabretta “on behalf of” the Third Defendant, Ms Michelle Harris (“MH”), initially sought orders that the Plaintiffs pay MH’s costs of earlier proceedings (“Principal Proceedings”) brought by the Plaintiffs, Mr Gregory Harris and Ms Monica Brown as executors of the estate of the late Aileen Harris, as a derivative claim on behalf of the First Defendant, Sirrah Pty Ltd (in liq) (“Sirrah”), against, inter alia, Mr William Harris (“WH”), MH and Harris Health Care Pty Ltd (in liq) (“HHC”) as agreed or assessed. Mr Calabretta also sought an order that, upon his giving the usual undertaking as to damages and until further order, some $750,000 or such other sum as the Court reasonably determined be retained by the Plaintiffs in their solicitor’s trust account. It appears that Mr Calabretta purportedly brought that application in his capacity as receiver purportedly appointed to MH’s assets on 18 June 2024, although it is now common ground that that appointment was invalid.

On 15 July 2024, I ordered that:

At the commencement of the hearing of these separate issues on 29 July 2024, Mr Calabretta sought leave to file an Amended Interlocutory Process, which identified the capacity in which he sought the relevant orders as receiver and manager of MH’s property and sought an additional order (which he ultimately did not press) that:

This application, as it has developed, has raised wider and more difficult issues than had initially appeared to arise from the form of the Interlocutory Process and the terms on which leave was reserved to MH to bring a costs application. I pause to note that an incorporated legal practice trading under the name “Yates Beaggi Lawyers”, trading through two or possibly three different companies and two different trusts in the relevant period, has been involved in this matter in several capacities, including as the solicitor acting for MH and other Defendants in the Principal Proceedings, through two companies which purportedly appointed Mr Calabretta as receiver to MH’s assets, and now as the solicitor acting for Mr Calabretta in the proceedings. I will use the term “YBL” throughout this judgment to refer to that practice. Given the uncertainty as to which company and trust was from time to time providing legal services under that name, a reference to “YBL” does not indicate which entity was providing those services at a point in time.

I should also note that Mr Calabretta initially named Mr Hayes, the liquidator of Sirrah as First Defendant in the proceedings and as a respondent to the Interlocutory Process, although no relief was sought against him in the Interlocutory Process. That course was improper, because Sirrah and not Mr Hayes as its liquidator was the First Defendant in the proceedings, no relief was sought against Mr Hayes as its liquidator and he was neither a necessary nor a proper party to the proceedings. Ms Nolan, who appeared for Mr Calabretta, accepted that an order should be made substituting Sirrah for Mr Hayes as the First Defendant, and that Mr Hayes should be excused from further attendance at the commencement of the hearing. I will address the costs implications of that matter below.

I now set out a chronology of events, which extend to the date of the hearing of this application. I will refer below to the affidavit evidence, from which this chronology is partly drawn.

From late September 2018 or early October 2018 until 23 October 2020, a company associated with Mr Amirbeaggi, ACN 627 087 030 Pty Limited (“ACN 030”) as the trustee for the YBL Trust (“2020 Trust”), was the registered owner of the business name “Yates Beaggi Lawyers” (Ex R1, 55-56) and was the only entity that could carry on business under that name, pursuant to s 18 of the Business Names Registration Act 2011 (NSW).

In the first half of 2020, Mr Amirbeaggi took steps directed to establishing a new entity, ACN 640 543 979 Pty Ltd (“ACN 979”), to conduct legal services in place of ACN 030. Mr Amirbeaggi’s affidavit evidence, to which I refer below, is that ACN 979 as trustee for the YBL 2020 Trust “traded as YBL” from 14 May 2020 until 31 March 2024 (Amirbeaggi 29.7.24 [4]). Plainly, that statement can be no more than Mr Amirbeaggi’s subjective understanding. An exhibit to Mr Amirbeaggi’s affidavit set out correspondence with the Law Society of New South Wales in that respect and the parties and the Court directed attention, on the first day of the hearing, to when ACN 030 ceased to provide legal services and ACN 979 commenced doing so.

By a supplementary submission made on 30 July 2024, with Ms Nolan’s consent, Mr Zahra and Mr Anderson, who appear for the Plaintiffs, accepted that:

Where that is the position for which Mr Calabretta contends, and the Plaintiffs now do not contend to the contrary, I will assume without deciding that that is the position. It is not necessary to decide whether that position involved contraventions by ACN 979 of either or both s 212 of the Legal Profession Uniform Law (NSW) 2014 and s 18 of the Business Names Registration Act 2011 (NSW) and I make no comment and no finding as to that question.

On or about 2 June 2020, YBL provided a Legal Services Agreement and Costs Disclosure letter bearing that date (Annexure MJH-1 to MH’s affidavit) (“LSA”) on the letterhead of “Yates Beaggi Lawyers” to HHC, WH and MH and the LSA was signed by MH on 12 June 2020. A footer at the bottom of the first page of the LSA referred to ACN 979 atf the YBL 2020 Trust trading as Yates Beaggi Lawyers which would, in ordinary circumstances, create a strong inference that ACN 979 in that capacity was then trading under that name. The LSA stated that “we” (being “YBL”) would be pleased to provide services on a specified basis. The LSA relevantly provided for the payment of funds into trust in advance of the work that was to be carried out and also provided for the grant of equitable charge and security interest “in favour of YBL” in respect of the clients’ present and after acquired property and any real property owned by them, to secure payment of any amount that remained unpaid on any tax invoice issued by YBL to the clients. The LSA was signed for “Yates Beaggi Lawyers” by Mr Amirbeaggi who was described as a “solicitor Director”.

From 25 September 2020 until 10 May 2024, ACN 979 as trustee for the YBL 2020 Trust, or possibly in its own right for part of the period, was the registered owner of the business name “Yates Beaggi Lawyers” (Ex R1, 57-58, 59-60).

Over five days in late March 2021, I heard the Principal Proceedings. The claim against MH was much narrower than the claim against WH, and, in the course of the hearing on 31 March 2021, the Plaintiffs indicated they did not press that claim and the proceedings against MH were dismissed. I delivered judgment in the Principal Proceedings on 23 April 2021 ((2021) 152 ACSR 212; [2021] NSWSC 413) (“Principal Judgment”). The Court of Appeal subsequently dismissed an appeal from the Principal Judgment in Harris v Harris [2021] NSWCA 329.

By a further judgment delivered on 7 May 2021 ([2021] NSWSC 492) (“Costs Judgment”), I dealt with orders to be made in respect of those proceedings and with a claim for costs made by MH against the Plaintiffs. I there observed (at [11]-[15]) that:

From 8 April 2024, ACN 674 955 287 Pty Limited (“ACN 287”) as trustee for the YBL 2024 Trust became the registered owner of the business name “Yates Beaggi Lawyers” (Ex R1, 61-62).

By a Deed of Appointment and Indemnity dated 18 June 2024 (Ex A2) (“Deed of Appointment”), ACN 287 as trustee for the YBL 2024 Trust purportedly appointed Mr Calabretta as receiver to MH’s assets, relying on the LSA. The Deed of Appointment recited that MH had charged the Secured Property (as defined) to ACN 287; it is now common ground that recital was incorrect. ACN 287 purported to appoint Mr Calabretta as receiver and manager of the Secured Property, defined as “all present and after acquired property (with no exceptions or exclusions) and any real property owned by” MH. It is now common ground that appointment was not effective.

On 4 July 2024, over three years after I delivered the Costs Judgment in respect of the costs of the proceedings, Mr Calabretta filed the Interlocutory Process to which I referred above, “on behalf of” MH.

On 29 July 2024, the day of the hearing of this application, ACN 287, ACN 979 and Mr Calabretta executed a Deed of Novation which referred, in Recitals B and C, to a “c[l]erical error” by which ACN 287 as trustee for the YBL 2024 Trust was identified as appointing Mr Calabretta as receiver to MH’s assets pursuant to the LSA and indicated the parties wish to correct that error by novating the Deed of Appointment to ACN 979 as trustee for the YBL 2020 Trust. Recital D recorded that ACN 979 in that capacity “is and was at all material [sic] times in a position to rightfully and fully perform all obligations that exist” under the Deed of Appointment. By cl 2.1 of the Novation Deed, the parties agree, on and from the “Effective Date”, 29 July 2024, to the novation of the Deed of Appointment to ACN 979 as trustee of the YBL 2020 Trust on the terms of the Deed. I will address the provisions that seek to effect the novation below.

Also on 29 July 2024, Mr Amirbeaggi sent an email to Ms O’Mahoney of the firm of Walsh & Blair Lawyers (“WBL”), which had previously provided independent advice to MH. That email addressed the circumstances of that advice as follows:

The first sentence of that email seems to me to misstate the issue that WBL needed to consider, in advising MH, where the appointment of Mr Calabretta by an entity which was not the secured creditor was not merely one made by an “incorrect” entity, but one that was necessarily ineffective, as Ms Nolan accepted in the hearing before me. There is no evidence of a response to MH or her solicitors to this communication.

Mr Calabretta reads MH’s affidavit dated 24 July 2024 of MH. MH’s evidence is that she received legal advice from WBL with respect to her engagement of “YBL” and her obligation to meet payment to “YBL”. She did not disclose the content of that advice in her affidavit and was not bound to do so, where she is entitled to claim legal professional privilege in that advice. MH also refers to her execution of the LSA with “YBL”, in a manner that does not identify which entity was trading under that name and was party to the LSA. She refers to receiving tax invoices totalling $444,274.62 from “YBL”, again without identifying which entity she understands to be described in that way. Her evidence is that, of those invoices, a sum of $468,566.15 became due at the conclusion of the hearing on 1 April 2021, although she does not explain how the amount due to “YBL” exceeded the amount that it had invoiced to her. MH’s evidence is that she has been informed by YBL that amount has not been paid by the Defendants or by her and remains outstanding. She does not explain how that has arisen, where “YBL” had purportedly appointed Mr Calabretta as receiver and manager to WH’s assets in 2022 and earlier judgments of the Court noted steps that he was then taking to realise WH’s assets.

MH also outlines the work she did in respect of the proceedings; notes that she is informed by “YBL” that it sought to recover those costs against WH and HHC “without success” and she says that:

MH also refers to the purported appointment of Mr Calabretta as receiver and manager of her property by “YBL” on 18 June 2024, which it is now common ground was invalid. Her evidence in that respect indicates that she must understand the reference to “YBL” to be to ACN 287, the entity which appointed Mr Calabretta as receiver on that date. It appears clear that MH, in her affidavit, did not recognise that the entity trading as “YBL” at the time she entered the LSA was a different entity to ACN 287.

The Plaintiffs read an affidavit dated 26 July 2024 of their solicitor, Mr See, in response to Ms Harris’ affidavit. That affidavit exhibits company extracts of several companies associated with the legal practice trading as “YBL” and Australian Business Register and Business Name searches for associated entities. I have addressed the matters established by those documents above.

By an affidavit dated 29 July 2024, Mr Amirbeaggi, who is a solicitor in the incorporated legal practice trading as “Yates Beaggi Lawyers”, the sole director of ACN 287 and director of ACN 979 gives evidence that, on receiving the Plaintiffs’ outline of submissions in this application, he realised that he had made an “administrative error” in the appointment of Mr Calabretta by ACN 287 and that that appointment should have been made by ACN 979. Mr Amirbeaggi also refers to the execution of the Deed of Novation between ACN 287, ACN 979 and Mr Calabretta on 29 July 2024, the morning of this hearing, to which I referred above. Mr Amirbeaggi also addressed the registration of ACN 979 as an incorporated legal practice on 14 May 2020 and referred to correspondence relating to the transfer of the business name “Yates Beaggi Lawyers” from ACN 287 to ACN 979 and says that ultimately occurred on 6 November 2020. His evidence was that ACN 979 then traded the law practice of “YBL” from 14 May 2020 to 31 March 2024, although that evidence appears to omit reference to the change in the nature of the entity operating the practice during that period.

As I noted above, the first question to be determined as a separate question is whether this application could properly be commenced by Mr Calabretta “on behalf of” Ms Harris. This question is now, in its narrowest form, straightforward. Ms Nolan acknowledges that the application was not properly commenced in that form and, on that basis, seeks leave to file the Amended Interlocutory Process by which the proceedings would be described as brought by Mr Calabretta in his capacity as receiver and manager of the property of MH, and initially sought (but does not now press) leave nunc pro tunc for Mr Calabretta in that capacity to seek that relief. I would readily have allowed that amendment if Mr Calabretta had validly been appointed as receiver to MH’s assets. I should not permit that amendment if that is not the case, since he would then lack standing to bring the proceedings and the amendment would be futile.

Mr Calabretta’s amendment application therefore raises the question whether Mr Calabretta was validly appointed receiver and manager of MH’s assets. Mr Zahra drew attention to the several entities which had conducted business under the name “Yates Beaggi Lawyers” over the relevant period and pointed out that ACN 287, which appointed Mr Calabretta as receiver, was a different legal entity and trustee of a different trust to the earlier entities and did not exist at the time the LSA was executed or the legal services were provided by YBL to Ms Harris. That was sufficient to establish that ACN 287 was not entitled to appoint Mr Calabretta as receiver to MH’s assets. Ms Nolan properly accepts that, prior to the execution of the Deed of Novation on the first day of hearing of this application, Mr Calabretta was not properly appointed as receiver of MH’s assets, because (Mr Calabretta contends) ACN 979 was the provider of the relevant legal services and ACN 287, which appointed Mr Calabretta as receiver to MH’s assets, was not party to the LSA and had no basis on which to do so. Mr Calabretta relies on the Deed of Novation to address that difficulty, on the premise that ACN 979 was party to the LSA and had the power to make that appointment which was regularised by the Deed of Novation. As I noted above, I assume, without deciding, that ACN 979 (rather than ACN 030) was conducting a legal service under the name “YBL” when the LSA was executed and was party to the LSA.

The question therefore arises whether the Deed of Novation had either prospective or retrospective effect to appoint Mr Calabretta as receiver to MH’s assets. This question can be determined on either a narrower or wider basis.

Turning first to the narrower basis on which this issue can be determined, I noted above that cl 2.1 of the Deed of Novation records the parties’ agreement that, on and from the “Effective Date”, 29 July 2024, ACN 287 as trustee of the YBL 2024 Trust novates the Deed of Appointment to ACN 979 as trustee of the YBL 2020 Trust on the terms of the Deed. That clause draws attention to the operative provisions of the Deed of Novation.

Clause 2.2(a) of the Deed of Novation then records that the parties agree, from the Effective Date, that ACN 979 as trustee of the YBL 2020 Trust is substituted for ACN 287 as trustee of the YBL 2024 Trust, “as if [ACN 979 as trustee of the YBL 2020 Trust] had originally been the party to the [Deed of Appointment] instead of” ACN 287 as trustee of the YBL 2024 Trust [emphasis added]. Mr Zahra submits that this clause, which seeks to have retrospective effect by the use of the term “originally”, albeit operating retrospectively from the “Effective Date”, is inconsistent with the legal nature of novation.

It seems to me that cl 2.2(a) of the Deed of Novation is not effective to achieve a retrospective operation, at least against third parties, by reason of the nature of a novation. Mr Zahra here draws attention to JD Heydon, Heydon on Contract: The General Part, 2019, [13.480], where the author describes novation as a:

Mr Zahra also refers to ALH Group Property Holdings Pty Ltd v Chief Cmr of State Revenue (2012) 245 CLR 338; [2012] HCA 6 at [12], the High Court described the elements of a novation as follows:

This description of the elements of novation was applied by the Court of Appeal in Kai Ling (Australia) Pty Ltd v Rosengreen [2019] NSWCA 3 at [18]-[19].

This clause also cannot be read as having only a prospective operation, where that would not give effect to the parties’ objective intent that is reflected by the words “as if as if [ACN 979 as trustee of the YBL 2020 Trust] had originally been” party to the Deed of Appointment. That result cannot be avoided by the fact that, in reply submissions, Ms Nolan accepted that the Deed of Novation should only operate prospectively, where that is not what this clause provides.

Second, cl 2.2(b) of the Deed of Novation provides that:

The purported ratification of acts done by ACN 287 as trustee of the YBL 2024 Trust under the Deed of Appointment cannot take effect where it would disadvantage MH in this way. In Davison v Vickery's Motors Ltd (in liq) (1925) 37 CLR 1 at 19, Isaacs J (dissenting, but not on this point, which it was not necessary for the other members of the Court to address) observed that, on ratification, an agreement is as a general rule deemed by a fiction to have been made by an antecedent authority to the person actually making it; but that fictions are not arbitrary and are not allowed to work an injury and, where an injury would be caused by the operation of the fiction, it cannot be invoked to alter the general course of the law. That approach was followed at first instance by Cohen J in NM Superannuation Pty Ltd v Hughes (1992) 27 NSWLR 26; (1992) 7 ACSR 105 and that aspect of his Honour’s reasoning was approved in the Court of Appeal’s judgment in Hughes v NM Superannuation Pty Ltd (1993) 29 NSWLR 653; (1993) 11 ACLC 923 at 655. This clause also cannot validate the appointment of Mr Calabretta as receiver of MH’s assets.

Third, cl 2.3 of the Deed of Novation provides that, relevantly, ACN 979 as trustee of the YBL 2020 Trust “enjoys all the rights and benefits of” ACN 287 as trustee of the YBL 2024 Trust under or in respect of the Deed of Appointment. That clause does not assist Mr Calabretta, because (as is now common ground) ACN 287 as trustee of the YBL 2024 Trust did not have the right to appoint him as receiver of MH’s assets, and ACN 979 as trustee of the YBL 2020 Trust therefore does not obtain a right that ACN 287 did not have. For these reasons, the operative terms of the Deed of Novation are not effective, as a matter of their proper construction, to validate the appointment of Mr Calabretta as receiver of MH’s assets, retrospectively or prospectively.

I now turn to the wider basis on which I would reach the same result. In oral submissions, Ms Nolan submitted (T14) that:

I recognise that the LSA permitted the appointment of an “external controller” to realise the security granted by MH, on non-payment of MH’s invoices, although it did not specify the means by which such an appointment would be made, presumably leaving that matter to the general law. It is, of course, commonplace that a receiver may be appointed by an instrument in writing and, had ACN 287 been party to the LSA and a creditor of MH, it is likely that its appointment of Mr Calabretta as receiver of MH’s assets would be valid. Assuming without deciding that ACN 979 was conducting the relevant legal services business and was party to the LSA and a creditor of MH, it could now appoint a receiver to MH’s assets by a straightforward Deed of Appointment, although it has chosen not to take that course. It is also uncontroversial that the appointment of a receiver is invalid where the appointor lacks authority to make it, for example, where the assignment of the underlying debt to the appointor had not been completed when the appointment was made: Harris & Lewin Pty Ltd (in liq) v Harris & Lewin Agents Pty Ltd (1975-76) CLC 40-216.

Counsel were unable to locate, and I have also been unable to find, any case in which the appointment of a receiver had been previously accepted, where it was sought to be achieved by novating an agreement that invalidly appointed that receiver to a new entity that could have, but had not previously, appointed that receiver. I recognise that the case law has described the manner in which receivers are generally appointed, although I do not treat that description as necessarily exclusive of other means of appointment. In R A Cripps and Son v Wickenden (1973) 1 WLR 944 at 953-954, Goff J, described the process of appointment of a receiver as follows:

In NZI Securities Australia Ltd v Poignand (1994) 51 FCR 584; (1994) 123 ALR 11; (1994) 14 ACSR 1, the Full Court of the Federal Court observed that:

Perhaps unsurprisingly, these cases do not recognise the possibility of appointment of a receiver by novating an agreement that invalidly appointed that receiver to a new entity that could have, but had not previously, appointed that receiver. I have also been able to find no reference to that possibility in the discussion of receivers appointed without authority in O’Donovan, Company Receivers and Administrators, [7.9910]ff. The concept of novation is discussed in another context, but I have also been unable to find any reference to a possible appointment of a receiver in this manner in the comprehensive discussion of the English law in Lightman & Moss on the Law of Administrators and Receivers of Companies, 6th ed, 2017 or in Kerr and Hunter on Receivers and Administrators, 21st ed, 2020.

I now return to Mr Calabretta’s acknowledgement, through Ms Nolan, that the Deed of Novation here creates a “fiction.” That is not usually the case in respect of a novation, which ordinarily discharges a previous legal relationship and creates a new legal relationship in the manner recognised in the case law. The position differs here, and it seems to me that Ms Nolan was correct in characterising the position here as a “fiction”, because (1) it is now accepted that ACN 287 had not validly appointed Mr Calabretta as receiver, where it was not party to the LSA and had no contractual basis to do so; (2) on the assumption that ACN 979 was party to the LSA, it could have, by a separate instrument or by a term in the Deed of Novation, made a new appointment of Mr Calabretta as receiver to MH’s assets, but it did not expressly do so; (3) instead, by the Deed of Novation, a new contract was substituted for the old, in a manner that was obscure as to whether that occurred only prospectively or purportedly operated retrospectively; and (4) perhaps putting the argument in a more analytical way than Ms Nolan did, Mr Calabretta now puts either that the creation of that new contract validated his previously invalid appointment as receiver of MH’s assets, or that it brought about a new appointment.

As I noted above, Counsel were unable to find, and I have also been unable to find, any case in which the appointment of a receiver had been previously accepted, where it was sought to be achieved by novating an agreement that invalidly appointed that receiver to a new entity that could have, but had not previously, appointed that receiver. I therefore approach the question whether a receiver can be validly appointed in that manner as a matter of first impression. I am not persuaded that principles of novation should be extended beyond the existing case law to allow the appointment of a receiver, from an uncertain date, in this obscure fashion, and I am satisfied that the Court should not extend the operation of those principles in that way. I reach that result because the appointment of a receiver, whether to property of an individual or property of a corporation, has a public character, even when made under an instrument, and is not merely the private act of the contracting parties. The person to whose property the receiver is appointed, the community and the Court must be able to determine whether and when that appointment took effect, and I do not consider that there is any reason to extend principles of novation to permit the appointment of a receiver in a manner that is likely to, and here does, obscure the answer to those fundamental questions. Where I have not been taken to any authority that binds me to accept the appointment of a receiver by A by the novation of an invalid appointment by B to A, which seeks to have (at least in part) retrospective effective, I will not take that course. While I am prepared to assume that, as a matter of contract, A, B and a receiver can commit themselves to a fiction, I can see no reason why their doing so should have the result that the non-parties to that contract should then be bound by that fiction.

It seems to me that, here, the Deed of Novation did not effectively create the “fiction” (to use Ms Nolan’s frank term) that it sought to achieve, that validated the previous and ineffective appointment of Mr Calabretta, because it substituted new obligations for the old but did not retrospectively change the fact that the previous appointment of Mr Calabretta was ineffective nor bring about a new appointment of Mr Calabretta as receiver without any express statement that it sought to do so. There is no reason for the Court to strain here to adopt a “fiction”, again using Ms Nolan’s term, where there was no apparent reason that ACN 979 (assuming it was party to the LSA) could not have simply undertaken a new and straightforward appointment of Mr Calabretta as receiver to MH’s assets, had it wished to do so, rather than taking this convoluted approach.

I have not neglected Ms Nolan’s submission that this conclusion would not promote the just, quick and cheap resolution of the real issues in dispute in the proceedings for the purposes of s 56 of the Civil Procedure Act 2005 (NSW). First, this provision does not impact on the substantive legal question whether the Deed of Novation was here effective to validate the earlier appointment of Mr Calabretta as receiver or bring about a new appointment of Mr Calabretta as receiver to MH’s assets. Second, that section binds the parties and their legal representatives as well as the Court, and there is no explanation why ACN 979 did not simply make a new appointment of Mr Calabretta as receiver, if it sought to achieve that simple result. Importantly, this result does not prevent ACN 979, assuming that it was party to the LSA, from making a valid appointment of Mr Calabretta to MH’s assets in the straightforward way which was always open to it but which it has not adopted. Mr Calabretta may then bring a further application for MH’s costs of the Principal Proceedings in his capacity as receiver then validly appointed to MH’s assets, after first paying any costs that may be ordered against him in respect of this application, as contemplated by r 12.10 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). I return to the question of costs below.

For completeness, Mr Calabretta did not contend that the Deed of Appointment itself could be rectified, or that principles of construction could be applied, to treat ACN 979 rather than ACN 287 as the entity appointing Mr Calabretta. There would have been little scope for that contention where (notwithstanding the reference to a ““c[l]erical error” in the recitals to the Deed Of Novation) it appears that the Deed of Appointment effected its intention, that the entity then operating the YBL business appoint Mr Calabretta as receiver to MH’s assets, although that appointment was not valid.

For these reasons, I conclude that Mr Calabretta was not validly appointed as receiver to MH’s assets and has no standing to bring this application. Mr Calabretta’s application for leave to amend the Interlocutory Process should not be allowed on that basis.

The second question is whether Mr Calabretta, if he had standing to pursue the application, could meet the requirements to exercise the liberty to apply in respect of costs that was previously reserved to MH, namely that MH pay or confirm that she accepted liability to pay costs, in the light of the matters noted in the Costs Judgment and any independent advice that she had obtained. It is not strictly necessary to answer this question, where I have concluded above that Mr Calabretta was not validly appointed as receiver to MH’s assets and does not have standing to bring the application. However, I will briefly address the question against the contingency of an appeal.

Ms Nolan relies, simply enough, on MH’s affidavit to establish the matters relevant to the second question. Mr Zahra rightly points out that MH’s affidavit appears to have been prepared under a misunderstanding as to the entity with which she had entered the LSA. Mr Zahra submits that there are several reasons that the Court should not be satisfied that Ms Harris had received “adequate independent legal advice” in connection with her acceptance that she is liable to YBL for the entire amount that it claims is outstanding to it $468,566.15. I recognise that MH’s legal advisers had likely not been informed of relevant facts, including the fact that Mr Calabretta had been appointed by a party which was not entitled to make that appointment, before giving advice to MH. I also recognise that it is possible that MH’s legal advisers have given adequate legal advice to MH, at least by reference to the information then known to them, and MH has disregarded that advice. In any event, Ms Nolan submits, and I accept, that the leave granted to MH to pursue a claim for costs contemplated that she might obtain independent advice, which she has done, and did not require or permit an assessment by the Court as to the adequacy of that advice.

I am satisfied that MH has confirmed that she accepts liability to pay the costs of the Principal Proceedings and that she has obtained independent advice in respect of that decision, where she gives independent evidence to that effect. Had Mr Calabretta been validly appointed as receiver to MH’s assets, I would not have dismissed the application on this basis.

For these reasons, the separate questions should be answered as follows:

Mr Zahra submits that the Interlocutory Process at least as it existed until the commencement of the hearing on 29 July 2024 was “doomed to failure” and that costs should be awarded against Mr Calabretta on an indemnity basis. An order for indemnity costs may be made where the conduct of a matter is unreasonable, not by way of any punishment of the party that conducts proceedings in that way, but in order to compensate the party which is subjected to additional costs by reason of the unreasonable conduct of proceedings. I summarised the applicable principles in Re Gemi 169 Pty Ltd [2024] NSWSC 615 at [44] as follows:

I accept that the application was doomed to fail until the Deed of Novation was executed, although the position was more complex after that document was executed on 29 July 2024. Ms Nolan submitted that any costs order in favour of the Plaintiffs should exclude time spent in submissions on 29 July 2024 in addressing documents relating to the change of the entity by which YBL conducted business in the first half of 2020 and that each party should pay their own costs as to that matter. I do not consider that such an exclusion is warranted. First, the documentation was exhibited to Mr Amirbeaggi’s affidavit and was properly addressed; second, the time spent accept that submission was limited, and any benefit from exclusion of those costs would likely be outweighed by the additional costs and complexity that would introduce in any assessment of costs; and, in any event, I have not determined the question of which entity was conducting the business at the relevant time, but simply assumed the position for which Mr Calabretta contends, which the Plaintiffs do not contest.

For these reasons, Mr Calabretta should be ordered to pay the Plaintiffs’ costs of and incidental to the application up to the close of 28 July 2024 and from 29 July 2024 on an ordinary basis. Mr Calabretta should also be ordered to pay Mr Hayes’ costs of and incidental to the application on an indemnity basis, where there was no proper basis to join Mr Hayes as party to the application. I have referred above to the application of UCPR r 12.10, reflecting wider principles of abuse of process, in respect of any further application made by Mr Calabretta for an order for costs in MH’s favour, if he is future validly appointed as receiver to MH’s assets: see also Idoport v National Australia Bank Ltd [2006] NSWCA 202 at [29], Pi v Zhou [2016] NSWCA 148 at [23], Webster v Super Smart Strategies Pty Ltd [2017] NSWSC 531 at [57]–[61] and Sheridan v Colin Biggers & Paisley [2019] NSWSC 621 at [26]ff. I will grant leave to the parties and Mr Hayes as liquidator of Sirrah to apply, by an application brought within 14 days, for quantification of the costs of the application on a gross sum basis, in order to avoid the delay that would result from an assessment of costs.

For these reasons, I order that: