In the matter of A.C.N. 607 358 887 (formerly known as Carzapp Pty Ltd) (No 3)

The Court delivered its judgment in these proceedings on 8 November 2019: In the matter of A.C.N. 607 358 887 (formerly known as Carzapp Pty Ltd) [2019] NSWSC 1561 (the “Principal Judgment”). On 26 February 2020 the Court delivered its judgment as to the costs of the proceedings: In the matter of A.C.N. 607 358 887 (formerly known as Carzapp Pty Ltd) (No 2) [2020] NSWSC 144 (the “Costs Judgment”). These reasons assume a familiarity with both the Principal Judgment and the Costs Judgment and should be read with them. Defined terms in the Principal Judgment and the Costs Judgment have the same meaning in these reasons.

At the conclusion of the Costs Judgment I said:

Pursuant to my invitation to receive any further submissions, Mr Rosenblatt, on behalf of the Administrators indicated he wished to make submissions to the effect that the apportionment of the costs liability as between Twinkledom (90%) and Busy Traveller (10%) should not extend to their liability to the Administrators. In coming to the views which I expressed in the Costs Judgment, I had in fact taken into account the Administrators’ opposition to the liability to them being split in that way.

Nothing which Mr Rosenblatt put in his further submissions has persuaded me to a different conclusion. For the purposes of the apportionment, I see no relevant distinction between the position of Twinkledom and Busy Traveller vis-à-vis the Administrators and the position of those companies vis-à-vis Marcus and Graham.

At the outset of the costs argument before me on 24 February 2020, the Court was informed that Twinkledom and Busy Traveller had agreed between themselves that they would bear any liability for the costs of the proceedings as to 90% and 10% respectively. That agreement could not govern those companies’ liability to any of the defendants. As I said in paragraph [18] of the Costs Judgment, I gave no weight to how the plaintiffs agreed between themselves that the costs liability should be divided between them.

Mr T J Morahan of Counsel prepared the written costs submissions of Busy Traveller dated 31 January 2020. In that document he summarised the submissions of Graham, Marcus and the Administrators as to costs and then proceeded immediately to make Busy Traveller’s submissions that “It is respectfully submitted that the proportion of the costs to be paid should be 90% by the first plaintiff and 10% by the second plaintiff”.

Because those submissions followed immediately after a summary of both sets of defendants’ submissions as to costs, I understood Busy Traveller’s submission to relate to any liability which it may have had to any of those defendants, including the Administrators. At the hearing before me today, Mr Morahan confirmed that was his intention. Nevertheless, as it is not stated in terms, I do not think any criticism can be made of Mr Rosenblatt for not reading the submissions that way. There can be no doubt that the primary thrust of Busy Traveller’s submissions was that the Administrators were not entitled to any costs.

Twinkledom’s written costs submissions dated 31 January 2020, prepared by Mr L T Livingston of Counsel, did not address the point of proportional liability. However, in Twinkledom’s submissions in reply dated 19 February 2020, Mr Livingston wrote “Twinkledom accepts that, as between it and the second plaintiff, it is appropriate that Twinkledom pay 90%, and the second plaintiff pay 10%, of Mr Meyerowitz’s and Mr Lasarow’s costs of the proceedings”. Again, no criticism can be made of Mr Rosenblatt in circumstances where the Administrators were not referred to in the submission just quoted and, like Busy Traveller, Twinkledom’s primary submission was that the Administrators were not entitled to any orders as to their costs.

At the hearing on 24 February 2020, I pressed Mr Livingston in relation to the apportionment (T2:32-43):

Again, without being critical of anyone, Mr Livingston’s response to me did not mention the Administrators.

I also took the matter up with Mr G O’Mahoney of Counsel, who appeared for Graham and Marcus (T10:16-T11:5):

Critically, immediately after the exchange which I have just set out, I invited Mr Rosenblatt to make his submissions on behalf of the Administrators and he said (T11:9-13):

I was in no doubt that all of the defendants resisted any apportionment of the plaintiffs’ liability to any of the defendants, and recorded as much in the Costs Judgment, where I said:

Mr Rosenblatt’s position was that the Costs Judgment had not expressly considered the position of the Administrators in relation to the question of apportioning the plaintiffs’ costs liability. Notwithstanding having made the submissions that I have recorded in paragraph [12] above, he submitted that had not been given an opportunity, and now on behalf of his clients wished, to put submissions as to why the circumstances of the Administrators were materially different to those of Marcus and Graham in relation to the question of apportioning the plaintiffs’ liability to them. No other party opposed the Administrators being given that opportunity.

Mr Rosenblatt made three submissions as to why Twinkledom and Busy traveller should be jointly and severally liable to the Administrators for the full amount of costs that might be payable.

First, he submitted that Twinkledom and Busy Traveller did not contend for an apportionment in respect of any liability they might have for the costs of the Administrators. I did not understand that to be the case and Mr Morahan of Counsel confirmed that his submissions (see paragraph [6] above) were made in relation to all of the defendants. However, nothing turns on this in circumstances where no one objected to the Administrators making their further submissions.

Second, it was submitted that apportioning the plaintiffs’ liability to the Administrators did not “justifiably and reasonably arise” from the Costs Judgment.

After referring to what I had said in paragraph [16] of the Costs Judgment (set out in paragraph [13] above), the Administrators’ submissions continued:

I do not agree. The Administrators’ argument does not cause me to depart from what I said in paragraph [16] of the Costs Judgment. My overall impression was, and remains notwithstanding the Administrators’ further submissions, that even in relation to the challenge to the appointment of the Administrators, Busy Traveller played no more than a minor supporting role. Viewing the hearing in its entirety, I am unable to accept the Administrators’ characterisation that the role of Busy Traveller was “pleading and running the Invalidity Case in equal measure with [Twinkledom]”.

Third, the Administrators’ submitted that giving effect to the apportionment as between the plaintiffs would have an unintended consequence. The submissions were:

There are two difficulties with these submissions.

First, even assuming Busy Traveller was financially better able than Twinkledom to meet any costs liability, ability to pay is not a proper basis on which to allocate responsibility for costs. In any event, this submission was rendered hypothetical by the discovery shortly before this latest hearing before me that Busy Traveller has in fact been deregistered for some months.

Second, I do not accept, on the material before me, the injustice feared by the Administrators is a real one (assuming it to be a relevant consideration). All the Court does know is that the Administrators are protected by the fact that the Court has concluded that the Administrators are entitled to set off any amount which, as liquidators, they might have to pay to Twinkledom against Twinkledom’s liability to them (as administrators) for the costs of these proceedings (see paragraph [91] of the Costs Judgment). Although there was no evidence before me as to the likely amounts to be set off, Mr Rosenblatt fairly accepted that there was a possibility that the set off might substantially, if not completely, satisfy the Administrators’ entitlement to 90% of their costs against Twinkledom.

None of the reasons advanced on behalf of the Administrators justifies the Court departing from the orders which it foreshadowed at the conclusion of the Costs Judgement. As discussed with the parties at the conclusion of the latest hearing, these reasons will be published electronically to avoid the costs of a further appearance, and the final orders proposed at the end of the Costs Judgment will be made in chambers.