The Oak Hotel Cessnock Pty Ltd (in liq) v Deputy Commissioner of Taxation

By statement of claim filed on 3 September 2019 The Oak Hotel Cessnock Pty Ltd (the first plaintiff) and the Hunter Valley Dental Surgery Pty Ltd (the second plaintiff) brought proceedings against the Deputy Commissioner of Taxation (the DCT) and the Commonwealth of Australia (the Commonwealth) (together, the defendants). It was accepted that the statement of claim was served on 3 September 2019.

By notice of motion filed on 19 May 2020 the defendants sought that the proceedings brought by the first plaintiff be dismissed for want of due despatch. The defendants also sought an order for costs against Aaron Lucan, the liquidator of the first plaintiff, personally and, in the alternative, against the first plaintiff. It was subsequently accepted that sufficient steps had been taken for the substantive relief no longer to be appropriate and the application for the principal order was withdrawn. The defendants filed an amended notice of motion on 23 July 2020 in which they sought an order that the proceedings be stayed until the first and second plaintiffs had appointed a solicitor or joined a director as a third plaintiff. They also pressed their claim for costs. The defendants also sought an order that the plaintiffs provide particulars of an allegation of serious misconduct in the statement of claim.

By notice of motion filed on 14 September 2020 the plaintiffs sought an order for general discovery against the defendants.

Both notices of motion were listed for hearing together. As orders were sought against Mr Lucan personally, he was separately represented at the hearing of the notice of motion by Mr Johnson, who appeared on his behalf. Mr Ball appeared on behalf of the defendants. Dr Harvey appeared on behalf of the second plaintiff in his capacity as its director. He also foreshadowed that he would appear on his own behalf when he is joined to the proceedings as the third plaintiff and indicated that an amended statement of claim would be filed to reflect his joinder to the proceedings.

Before turning to the question whether the orders sought ought be made, it is necessary to set out the procedural history of the matter in some detail since this is particularly germane to the defendants’ application for costs against Mr Lucan.

There are three separate causes of action alleged in the statement of claim:

In respect of (1), the first plaintiff brings a claim for damages against the defendants which is alleged to arise from the officer’s unauthorised disclosure of information said to be covered by the secrecy provisions of the taxation legislation. The first plaintiff alleges that the officer disclosed to his girlfriend, who was then an employee of the first plaintiff, that the first plaintiff was insolvent. The first plaintiff alleges that this information was disseminated to its creditors, with the consequence that credit was no longer forthcoming and it became insolvent as a result.

The first plaintiff owned and operated a pub in Cessnock known as The Royal Oak Hotel Cessnock. The second plaintiff is the sole shareholder of the first plaintiff. Dr Harvey is the sole director of each of the plaintiffs.

On 7 May 2019, the DCT commenced proceedings in the Federal Court for an order to wind up the first plaintiff on the ground of insolvency under the Corporations Act 2001 (Cth).

As referred to above, these proceedings were commenced on 3 September 2019. They were not properly constituted as there was neither a solicitor on the record nor a director of the plaintiffs named as a plaintiff, as required by Uniform Civil Procedure Rules 2005 (NSW) (UCPR), r 7.1. When the defendants were served their solicitors, Ashurst, filed a notice of appearance. Ms Stewart was the solicitor at Ashurst who had day-to-day carriage of the matter, subject to the supervision of the solicitor on the record, Wen-Ts’ai Lim.

On 6 October 2019, Dr Harvey wrote to the defendants’ solicitors asking for a proposed timetable and suggesting a settlement conference. He also foreshadowed that the statement of claim would be amended.

On the first return date, 23 October 2019, there was no appearance for the plaintiffs. At the request of the defendants, the Court stood the matter over to 20 November 2019. The Court noted that it would issue a letter to the plaintiffs pursuant to UCPR, r 13.6 (which provides that the Court may dismiss proceedings if there is no attendance by a plaintiff after notice has been given) and directed the defendants to notify the plaintiffs of the orders.

On 28 October 2019 the first plaintiff entered into voluntary administration. Mr Lucan of Worrells was appointed the administrator.

On 28 October 2019, the defendants’ solicitors, who appear to have been unaware that the first plaintiff was in voluntary administration, wrote to Dr Harvey informing them of the orders made by the Court on 23 October 2019. They sought an indication by 1 November 2019 as to whether the plaintiffs still proposed to file an amended statement of claim, and if so, when it would be filed.

It would appear that the parties agreed that at the directions hearing on 20 November 2019, the matter ought be stood over for a week to 27 November 2019. On 20 November 2019 Ms Stewart appeared for the defendants and mentioned the appearance of both plaintiffs.

On 20 November 2019, Mr Lucan, who was still administrator of the first plaintiff, sent a report to creditors (the November 2019 creditors’ report). It was common ground that the DCT, as a creditor of the first plaintiff, received that report. I understood it also to be common ground that Ashurst did not act for the DCT in relation to the debt claimed by the DCT against the first plaintiff. Accordingly, there is insufficient basis to infer that the November 2019 creditors’ report came to the attention of the defendants’ solicitors before an affidavit sworn by Mr Lucan on 2 July 2020 was served by him in opposition to the orders sought to which the report was annexed.

In the November 2019 creditors’ report, Mr Lucan informed creditors, of present relevance:

On 22 November 2019 Ms Stewart wrote to Mr Lucan and Dr Harvey and informed them of the order made by the Court on 20 November 2019. They also said:

On 25 November 2019 at 9.15am, Dr Harvey sent an email to the defendants’ solicitors and also to Mr Lucan and Brendan Giles, a Senior Manager at Worrells who worked on the matter with Mr Lucan, to inform them that the short minutes of order proposed were not acceptable. Dr Harvey continued to agitate for a settlement conference with the DCT. Shortly after receiving the email from Dr Harvey, Ms Stewart, at 9.37am, sent an email to Mr Lucan, which was copied to Mr Giles, in which she asked for “an update on the administration and the administrator’s position in relation to the next steps in this proceeding”. I infer from the terms of this email that Ms Stewart was unaware of the terms of the November 2019 creditors’ report.

At 9.57am on 25 November 2019 Dr Harvey emailed the parties to inform them that he agreed with the proposed orders except for the omission of a settlement conference for which Dr Harvey was consistently agitating.

On 26 November 2019, at 9.58am, Ms Stewart, in an email to all parties (including Mr Lucan on behalf of the first plaintiff), responded by saying that her client considered a settlement conference to be premature. In the same email she also said:

On 26 November 2019 at 10.43am, Ms Stewart emailed Dr Harvey and Mr Lucan and informed them that the defendants would seek directions on 27 November 2019 that the plaintiffs file an amended statement of claim by 13 December 2019, the defendants file a defence by 24 January 2020 and the matter be set down for further directions thereafter.

At 11.16am on 26 November 2019, Mr Lucan emailed Ms Stewart (and others) and said:

At 1.10pm on 26 November 2019, Ms Stewart responded to Mr Lucan as follows:

At 5.39pm on 26 November 2019, Ms Stewart sent a further email to Mr Lucan as follows:

At 5.52pm on 26 November 2019, Mr Giles, on behalf of Mr Lucan, sent an email to Ms Stewart to inform her that the timetable was acceptable. Mr Giles sent a further email to Ms Stewart that evening, at 6.13pm, and said:

At 6.44pm on 26 November 2019 Mr Lucan sent an email to Ms Stewart and the other parties in which he said:

This email was the last Ashurst heard from Mr Lucan until seven months later when he wrote to them on 24 June 2020.

At 7.19pm on 26 November 2019, Ms Stewart responded to Mr Lucan’s email and said:

On 27 November 2019, the Federal Court refused Mr Lucan’s application for an adjournment of the originating process in winding up proceedings commenced by the DCT, as petitioning creditor, to permit a creditors’ meeting to consider the proposed Deed of Company Arrangement. The Court ordered that the first plaintiff be wound up and appointed Mr Lucan as the liquidator. The effect of the winding up order was to authorise and entitle Mr Lucan to take control of the first plaintiff’s property (s 471 of the Corporations Act) and to carry on proceedings on its behalf (s 477(2)(a) of the Corporations Act). Mr Johnson accepted the uncontroversial proposition that, upon Mr Lucan’s appointment as liquidator, he became the only person authorised to speak on behalf of the first plaintiff and that Dr Harvey, as its former director, no longer had any such authority.

Ms Stewart appeared on behalf of the defendants at the directions hearing in this Court on 27 November 2019. There was no appearance on behalf of the first or second plaintiff. The Court ordered the amended statement of claim to be filed and served by 24 January 2020, the defence to be filed and served by 21 February 2020 and stood the matter over for further directions on 4 March 2020.

The plaintiffs did not file an amended statement of claim by 24 January 2020.

On 29 January 2020 Ms Stewart emailed Mr Lucan and Dr Harvey requesting confirmation by 31 January 2020 as to when an amended statement of claim would be filed and enquiring whether the first plaintiff (in light of its winding up) intended to continue with the claim relating to alleged misuse of information (being the claim that was brought solely by the first plaintiff).

Dr Harvey (who had no authority to speak on behalf of the first plaintiff) responded by email dated 3 February 2020. Of present relevance he said:

On 7 February 2020, Dr Harvey wrote to Ms Stewart indicating that he needed further information from the DCT “to be able to move forward with the amended statement of claim” and suggested a meeting on 10 February 2020.

By email to Ms Stewart dated 14 February 2020, Dr Harvey said that the Royal Oak Hotel Cessnock would have to close on 17 February 2020. The letter concluded:

Ms Stewart responded by email dated 14 February 2020, which was sent to both Mr Lucan and Dr Harvey. She said, in part:

Dr Harvey emailed Ms Stewart on 18 February 2020 in response to her email of 14 February 2020. He said, of present relevance:

Subsequently, on 27 February 2020, Dr Harvey emailed Ms Stewart to inform her that he had been “advised not to amend the original statement of claim and request that [the defendants] file a defence within 14 days”.

On 27 February 2020, Mr Lucan sent a further report to creditors (the February 2020 creditors’ report). Once again, it was sent to the first plaintiff’s creditors, which included the DCT. It was not, however, sent to Ashurst, the defendants’ solicitors in these proceedings, or otherwise brought to Mr Lim’s or Ms Stewart’s attention.

On 4 March 2020, the matter was listed before the Registrar for further directions. Ms Stewart appeared on behalf of the defendants. There was no appearance on behalf of either of the plaintiffs. The Court made the following orders which were sought by the defendants:

On 10 March 2020 Ms Stewart sent an email to Mr Lucan and Dr Harvey informing them of the orders made by the Court on 4 March 2020. She continued:

On 10 March 2020, Ms Stewart also wrote separately to Mr Lucan, in an email copied to Dr Harvey. She said of present relevance:

On 12 March 2020, Bathurst CJ announced changes to Supreme Court procedure as a consequence of the COVID-19 pandemic, including the following:

As a consequence of the changes in procedure effected by this announcement, all directions hearings before the Registrar which took place on or after 23 March 2020 were conducted by telephone or by audio-visual link (AVL). It was not suggested that this change disrupted the conduct of the proceedings.

On 12 March 2020, Dr Harvey wrote to Ms Stewart in the following terms:

On 7 April 2020, Ms Stewart emailed Mr Lucan and Dr Harvey and proposed the following orders:

She also said:

On 8 April 2020, Ms Stewart sent two emails to Dr Harvey and Mr Lucan. In the first, which was addressed to Dr Harvey, and copied to Mr Lucan, she referred to his letter of 12 March 2020 in which he had represented that the deed of assignment would be executed by 17 March 2020 and that he would send a copy of the executed deed to her. She said:

In her second email to Mr Lucan and Dr Harvey dated 8 April 2020, Ms Stewart sought particulars of paragraph 17 of the statement of claim (which was part of the claim brought solely by the first plaintiff against the defendants) which alleged:

Ms Stewart sought the following further particulars of paragraph 17:

By letter dated 9 April 2020 Dr Harvey notified Ms Stewart that he had suffered a heart attack. He proposed the following further orders:

By email sent at 9.51am on 14 April 2020, Ms Stewart wrote to Dr Harvey (which was copied to Mr Lucan) and said:

By email sent on 14 April 2020 in response, Dr Harvey wrote to Ms Stewart as follows:

On 15 April 2020, the Court made the following orders and directions “by consent of the second plaintiff and the first and second defendants”:

On 22 April 2020 at about 9am, in emails sent to Dr Harvey and Mr Lucan, Ms Stewart reiterated the defendants’ requests for particulars of paragraph 17 of the statement of claim. The email concluded:

On 22 April 2020 at 4.58pm, Ms Stewart wrote to Dr Harvey as follows:

Dr Harvey responded at 7.06 pm that evening and said:

By email dated 24 April 2020, Dr Harvey responded, of present relevance:

By email sent to Ms Stewart at 10.12am on 29 April 2020, Dr Harvey said:

On 4 May 2020 at 8.14am, Ms Stewart wrote to Dr Harvey seeking confirmation that the document referred to in his email was the deed of assignment. She asked for a copy of the document.

At 10.15am on 4 May 2020, Dr Harvey emailed Ms Stewart and informed her that:

On 7 May 2020, Ms Stewart emailed Mr Lucan and Dr Harvey. She said of present relevance:

By email sent at 9.29am on 11 May 2020 to Mr Lucan and Dr Harvey, Ms Stewart said:

On 14 May 2020, Dr Harvey wrote to the defendants seeking an order for discovery.

On 19 May 2020, the defendants filed and served a notice of motion in which they sought the following orders:

In her email of service to Dr Harvey and Mr Lucan, Ms Stewart informed Dr Harvey that the defendants did not consent to the orders for discovery “until the issue of the first plaintiff’s claim is resolved”.

The Court listed the defendants’ notice of motion for directions on 26 May 2020. Ms Stewart served the notice of listing on Mr Lucan and Dr Harvey.

On 25 May 2020, Mr Lucan wrote to the Court as follows:

Mr Lucan did not provide a copy of the letter he had sent to the Court to Ms Stewart. At 9.02am on 26 May 2020, Dr Harvey emailed Ms Stewart, informing her that he had called her at 9am to discuss the directions hearing. He included as an attachment to his email the letter which Mr Lucan had sent to the Court the previous day. This was the first communication from Mr Lucan that Ms Stewart had received since 26 November 2019. As referred to above, Mr Lucan did not send it to Ms Stewart, who received it from Dr Harvey.

At the directions hearing on 26 May 2020, Mr Ball of counsel appeared for the defendants. Dr Harvey appeared for the second plaintiff and mentioned Mr Lucan’s appearance for the first plaintiff. The Court stood the matter over for further directions on 10 June 2020 and reserved the costs of the day.

By email dated 28 May 2020, Ms Stewart wrote to Mr Lucan as follows:

At the directions hearing before the Registrar on 10 June 2020, Dr Harvey appeared on behalf of the second plaintiff and mentioned the appearance of the first plaintiff. Mr Ball appeared on behalf of the defendants. The Court made directions regarding the hearing of the defendants’ notice of motion filed on 19 May 2020 and listed it for hearing on 23 July 2020. The Court noted that the defendants would be making an application that the liquidator pay the defendants’ costs personally.

On 10 June 2020 an employee of Mr Lucan’s firm, Worrells, sent to Ms Stewart a copy of what was described as the “latest report to creditors” in the first plaintiff’s liquidation (the June 2020 creditors’ report). The email was plainly pro forma and said:

There was no indication in the body of the email that it had anything to do with the present proceedings.

The June 2020 creditors’ report informed creditors of a meeting to take place at 10.30am on 25 June 2020. Under the heading “Outstanding Issues” it said:

On 11 June 2020 Ms Stewart wrote again to Mr Lucan and Dr Harvey setting out the orders made by the Court on 10 June 2020. She noted that there was no appearance on behalf of Mr Lucan, who was a respondent to the amended notice of motion. The letter concluded:

On 24 June 2020 Mr Lucan wrote to Ms Stewart. This was the first time he had communicated with the defendants’ solicitors directly since 26 November 2019 (the day before he was appointed as the first plaintiff’s liquidator). Mr Lucan noted that the proceedings had been commenced prior to his appointment and that he had not caused the first plaintiff to take any steps in the proceedings since his appointment. He asserted that “solely due to an administrative error” his letter to the Court of 25 May 2020 was not provided to the defendants’ solicitors. Mr Lucan rejected any assertion that he had acted in any improper manner which might cause the Court to make a costs order against him personally and sought details of the basis on which the order was sought.

By email dated 30 June 2020, Ms Stewart responded in part as follows:

Ms Stewart confirmed that she was instructed to press for orders that he pay the costs of 26 May 2020 and the notice of motion filed on 19 May 2020 on an indemnity basis.

In a further email sent on 30 June 2020 to Mr Lucan and Dr Harvey, Ms Stewart noted that neither had served evidence in accordance with the directions made on 10 June 2020.

By email sent on 30 June 2020, Dr Harvey sent to the defendants’ solicitors a copy of an executed deed of assignment dated 25 June 2020. It was common ground that this deed was ineffective to assign the cause of action as it was conditional and purported to assign future property (any damages awarded to the first plaintiff in the proceedings). Thus, the only relevant effect of the deed dated 25 June 2020 was to confer an irrevocable power of attorney on Dr Harvey to act on behalf of the first plaintiff with respect to the cause of action.

On 14 July 2020, Mr Lucan received the sum of $10,000 in cleared funds from Dr Harvey, being payment of the consideration under the Deed of Assignment.

Mr Lucan swore an affidavit on 22 July 2020 which was read on the applications before me. He deposed that he provided the November 2019 creditors’ report, the February 2020 creditors’ report and the June 2020 creditors’ report to the first plaintiff’s creditors, which included the DCT. He deposed that he provided those reports to Amanda Machielsen, the contact person named on the proof of debt lodged by the DCT. He also deposed that:

When preparing his affidavit of 22 July 2020 Mr Lucan realised that the original deed of assignment dated 25 June 2020 was ineffective to assign the cause of action and arranged for a replacement deed to be executed on 22 July 2020. It was common ground that this deed was effective to assign those causes of action which were capable of being assigned which are described in the replacement deed.

On 23 July 2020, when the matter came before the Registrar, Mr Ball appeared for the defendants. Mr Johnson appeared on behalf of Mr Lucan. Dr Harvey appeared for the second plaintiff and purported to appear for the first plaintiff. The Registrar noted that the defendants proposed to file an amended notice of motion. The matter was again stood over. Subsequently draft consent orders were provided to the Registrar who noted that the first plaintiff had executed a deed of assignment of the first plaintiff’s cause of action against the defendants. Further directions were made.

The matter was listed for hearing before me on 6 November 2020 and heard on that day.

Dr Harvey accepted the need to regularise the proceedings and undertook to file an amended statement of claim which joins him as a plaintiff. There are three remaining applications which need to be addressed separately. The first is the defendants’ application for the costs of the motion, the second is the defendants’ application for particulars; and the third is the first plaintiff’s application for discovery. These will be addressed in turn.

The defendants sought an order that Mr Lucan pay the costs of their application to dismiss that part of the proceedings brought solely by the first plaintiff relating to alleged unauthorised disclosure of its taxation information. From the time of his appointment as the first plaintiff’s liquidator, Mr Lucan was the only person authorised to speak on behalf of the first plaintiff. His silence, as far as the proceedings were concerned, lasted for a seven-month period from 26 November 2019 (on the eve of his appointment as liquidator) until he wrote to the defendants’ solicitors on 24 June 2020.

Mr Johnson submitted that Mr Lucan was not silent at all in that, although he did not communicate with the Court throughout this period, he did communicate with Dr Harvey, who mentioned his appearance on several occasions, and he communicated directly with the defendants by sending the DCT his reports to creditors in November 2019, February 2020 and June 2020. Mr Johnson contended that the reports were ample to appraise the DCT (and through him the Commonwealth) of the first plaintiff’s position with respect to the cause of action based on alleged disclosure: namely, that it would not be prosecuted by the liquidator but may be assigned to a person associated with the second plaintiff (Dr Harvey). While Mr Johnson did not seek to persuade me that Mr Lucan’s silence as far as the Court was concerned was other than unacceptable, he contended that the defendants were, or ought to have been, well aware of what was likely to happen (the action would proceed only if it could be assigned) and ought to have conducted themselves accordingly.

There is a significant distinction between the role of a liquidator in the winding up of a company and the role of a trustee in bankruptcy. Proceedings initiated by a person who subsequently becomes bankrupt are stayed until the trustee elects in writing whether to prosecute or discontinue the action: s 60(2) of the Bankruptcy Act 1966 (Cth). If the trustee does not make such an election within 28 days after notice of the action is served on them by a party to the proceedings, the trustee is deemed to have abandoned the action: s 60(3) of the Bankruptcy Act. There is no equivalent to s 60 in company liquidations.

If a voluntary administrator is appointed to a company, no litigation can be commenced or continued against the company, except with the administrator’s written consent or leave of the court: s 440D of the Corporations Act. If a liquidator has been appointed, there is an automatic stay of proceedings brought against the company, unless the court’s leave is obtained: ss 471B and 500(2) of the Corporations Act. These provisions apply when the company is a defendant, but not where, as here, the company is a plaintiff. Mr Johnson did not suggest that there was any statutory provision which absolved Mr Lucan of the responsibilities to which a party to proceedings in this Court is subject or which would authorise him to refrain from communicating with the Court or the defendants in litigation commenced by a company of which he is the court-appointed liquidator.

As the sole authorised agent of a party to proceedings in this court, it was encumbent on Mr Lucan to participate in the proceedings. Section 56(1) of the Civil Procedure Act 2005 (NSW) provides:

I am obliged, by s 56(2) of the Civil Procedure Act to seek to give effect to the overriding purpose when exercising any power under the Act or the rules and when interpreting any such provision. This includes the power to order costs under s 98 of the Civil Procedure Act.

Section 56(3) of the Civil Procedure Act imposes a duty on parties to civil proceedings “to assist the court to further the overriding purpose and, to that effect to participate in the processes of the court and to comply with directions and orders of the court”.

Mr Lucan is not a party to the proceedings. However, his role in the proceedings is not confined to his role as respondent to the defendants’ notice of motion seeking an order for costs against him personally. As referred to above, he was, until the power of attorney was granted to Dr Harvey by deed executed on 25 June 2020, the sole agent of the first plaintiff from the time of his appointment as liquidator on 27 November 2019. Accordingly, he was the only person who had the capacity to discharge the duty imposed on the first plaintiff by s 56(3) of the Civil Procedure Act. He was a “duly authorised officer” and was therefore the agent through which the first plaintiff could carry on the proceedings: UCPR, r 7.1(4).

It follows that s 56(3) of the Civil Procedure Act obliges a liquidator of a company which has already commenced proceedings to take active steps on behalf of that company to engage with the court’s processes, either by filing a notice of discontinuance, or prosecuting the claim or seeking an adjournment so that the prudence of prosecuting the claim, or assigning it for consideration, can be investigated. Further, it was accepted by Mr Johnson that Mr Lucan, as the first plaintiff’s liquidator, was an officer not only of the Federal Court, which ordered the winding up, but also of this Court. His obligations under s 56(3) of the Civil Procedure Act do not depend on his being an officer of the court since the obligations apply to all parties.

Upon his appointment as liquidator, Mr Lucan became authorised to carry on the proceedings in the name of the first plaintiff. He was, accordingly, obliged to file an affidavit of authorisation under UCPR, rr 7.2(1)(a) and 7.2(3). That he did not do so does not absolve him of the responsibilities imposed on him by s 56(3) of the Civil Procedure Act.

This Court is not unsympathetic to the position of liquidators who may be expected to need time to work out whether to continue proceedings on behalf of a company. However this does not excuse, much less justify, a failure to communicate with the other parties and the Court. It is plain from the November 2019 creditors’ report that Mr Lucan, before his appointment as liquidator, had no intention of prosecuting the action on behalf of the company. This was not communicated to the solicitors on the record for the defendants for a period of about six months. During the course of that time, the defendants incurred costs, including the costs of the application to have the alleged unauthorised disclosure claim brought by the first plaintiff struck out for want of prosecution.

It is no answer to say, as Mr Johnson did, that Mr Lucan in fact informed the defendants of his intentions with respect to the litigation because the DCT was a creditor of the first plaintiff and received the reports to creditors. The DCT was entitled to appear in person, by an authorised solicitor or by a legal practitioner: s 15 of the Taxation Administration Act 1953 (Cth). The DCT chose to engage solicitors for the purposes of these proceedings. A party to proceedings is obliged to communicate with the solicitors on the record for the party. As referred to above, Ashurst was the firm of solicitors on the record for the defendants in the proceedings. Mr Lim was named as the legal representative at that firm and Ms Stewart was the named contact person. Her phone number and email were set out on documents filed on behalf of the defendants. In the context of proceedings in this Court, it is irrelevant that Ms Machielsen was the contact person named on the proof of debt lodged by the DCT, since Ms Machielsen had no authority to act on behalf of the defendants in these proceedings, once a notice of appearance had been filed by Mr Lim on their behalf.

Very little was required of Mr Lucan. All he needed to do was to inform the defendants and the Court that he had no intention of prosecuting the claim of alleged unauthorised disclosure on behalf of the plaintiff but that he was seeking to assign the cause of action to Dr Harvey. As long as he had done so and periodically informed the Court, Dr Harvey and the defendants of the status of the proposed assignment, he would not have exposed himself to an adverse costs order. By failing to do the little that was required of him, Mr Lucan has caused the defendants, whose solicitors have evidently sought to discharge the duties owed by the defendants to the Court and the other parties to the proceedings, to incur unnecessary costs.

I reject Mr Johnson’s submission, in reliance on Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (Lai Qin), that there is no warrant for an adverse costs order to be made in circumstances where one party has withdrawn an application before it has been determined on the merits. I regard the present case as falling squarely within the category referred to by McHugh J in Lai Qin at 624 where the court is “able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action”. The defendants’ solicitors sought, time and again, to communicate with Mr Lucan, who had been prepared to communicate with them after he had been appointed administrator but who fell unaccountably silent as soon as he was appointed as the first plaintiff’s liquidator. Dr Harvey proved himself to be an unreliable source of information as to the progress, or lack thereof, of the assignment of the first plaintiff’s cause of action and had, in any event, no authority to speak on its behalf.

Mr Johnson submitted that there was no basis on which I could conclude that Mr Lucan had acted with impropriety such as would warrant an order for costs against him personally. He contended that, as Mr Lucan had not been required for cross-examination, I could draw no inferences as to his state of mind to the requisite standard. In Mead v Watson [2005] NSWCA 133, the Court of Appeal (Sheller, Ipp and Tobias JJA) said at [14]:

Mr Lucan’s inaction lasted for such a long period as to be inconsistent with “mere negligence or mistake”. However, it was at least that. I am satisfied that it is appropriate to hold Mr Lucan liable for the costs.

The further question arises whether Mr Lucan ought be ordered to pay the defendants’ costs of the motion on an indemnity basis or on the ordinary basis. An order that costs be paid on the indemnity basis is appropriate when the impugned conduct of the party in relation to the litigation itself is such as to warrant it: Mead v Watson, at [8]-[9].

The evidence is insufficient to explain Mr Lucan’s non-compliance with the court’s directions and with his obligation under s 98(3) of the Civil Procedure Act. Mr Lucan, who swore an affidavit in opposition to the defendants’ application for costs, has omitted to provide any explanation to the court for his lengthy silence in communications with the Court or with the defendants’ solicitor. In these circumstances, I am entitled to infer that any explanation would not have assisted his opposition to the defendants’ application. The lack of explanation for defaults is relevant to the discretion whether to order costs and on what basis: see the factors listed in s 58(2) of the Civil Procedure Act.

I reject Mr Johnson’s submission that an order for indemnity costs is only appropriate in situations where impropriety of a high order was established. An order for indemnity costs is appropriate where a party’s conduct exhibits a degree of unreasonableness such as to warrant an order on a higher basis than the ordinary basis. In my view, the defendants have established that Mr Lucan’s conduct in the present case falls into to that category. His lengthy silence for a period in the order of seven months has not been explained. The consistent and persistent efforts of the defendants’ solicitors (in fulfilment of the defendants’ duty under s 56(3) of the Civil Procedure Act) to get Mr Lucan to answer correspondence and engage with the Court’s process went unrewarded. Mr Lucan’s inaction bespeaks a gross breach of his statutory obligation under s 56(3) of the Civil Procedure Act. It caused the defendants to incur the costs of a subsequently withdrawn application to have the unauthorised disclosure claim dismissed for want of due despatch. It also caused this Court to have several directions hearings in which little, if anything, was achieved to advance the proceedings. I am satisfied that Mr Lucan’s conduct warrants an order that he pay these costs on an indemnity basis.

Mr Johnson submitted that, if the order for costs sought by the defendants was appropriate, it ought be made against the first plaintiff. I reject that submission. Although the duty under s 56(3) of the Civil Procedure Act was imposed on the first plaintiff as a party, it could only act through the human agency of Mr Lucan. Mr Lucan’s actions caused the first plaintiff to be in breach of its obligations under s 56(3) of the Civil Procedure Act. The effect of ordering the first plaintiff to pay the defendants’ costs would be to visit the consequences of Mr Lucan’s conduct (or, more accurately, his inaction) on the first plaintiff’s creditors. I am not persuaded that this is appropriate since Mr Lucan ought be held responsible for his own conduct.

As set out above, the defendants have sought particulars of paragraph 17 of the statement of claim. Dr Harvey’s answer to the request was that it was not a proper request as it was a matter for evidence. In his oral submissions he referred to the evidence on which he relied for the allegation, which was as follows:

The unauthorised disclosure of taxation information by an officer of the ATO can amount to a criminal offence: s 355-25, Sch 1 of the Taxation Administration Act. In substance, the first plaintiff’s allegation in paragraph 17 of the statement of claim is that a taxation officer unlawfully disclosed information concerning its taxation affairs to third parties and that the defendants are liable for that unauthorised disclosure. It is a very serious allegation.

UCPR, r 15.1 requires a party to provide all particulars of any claim or other matter pleaded by the party as are necessary to enable the opposing party to properly identify the case to be met.

The basic functions of particulars include: to define and limit the issues between the parties; to inform the parties of the nature of the evidence required to be adduced; to ensure procedural fairness; and to assist in the efficient conduct of the proceedings. A party is only obliged to supply the best particulars which the party is able to supply at the time of their provision. If necessary, the particulars provided can be supplemented after other interlocutory procedures have been completed, such as discovery or interrogatories. Generally, a party is bound, at the trial, by the particulars.

Particulars must be given of all the matters, facts and circumstances relating to allegations of behaviour in the nature of fraud (UCPR, r 15.3) which would include allegations of unauthorised disclosure of taxation information. The defendants have sought particulars of the information which it is alleged was disclosed concerning the first plaintiff and how it was disclosed. They are entitled to those particulars in so far as they can presently be given. As referred to above, a party is required only to provide the best particulars available at the time of the provision of particulars. Thus Dr Harvey, as the assignee of the cause of action from the first plaintiff, is obliged to give those particulars. The identification of evidence to be relied on in support of the allegation is no substitute for particulars, which have both a defining and limiting function.

For the reasons given above, the defendants are entitled to an order for particulars.

Dr Harvey, on behalf of all plaintiffs, sought discovery against the defendants. An order for general discovery (which is what is sought) would require the defendants to search all their records and identify all documents which could be relevant to the proceedings. I am not persuaded that it would be appropriate to make such an order in the circumstances of the present case.

Dr Harvey’s evidence established that on 24 February 2019 he made a request to the defendants under the Freedom of Information Act 1982 (Cth) (FOI Act) for details regarding Mr Duckett and the first plaintiff in the period from 25 February 2018 to 24 February 2019. The officer authorised under s 23(1) of the FOI Act responded by letter dated 26 March 2019 and said that 18 documents had been identified as falling within the scope of the request. Some parts of the documents were blanked out or otherwise redacted on the basis that they were irrelevant (s 22 of the FOI Act) or exempt under ss 47E or 47F of the FOI Act.

Dr Harvey directed my attention to Tugrul v Tarrants Financial Consultants Pty Limited (No 5) [2014] NSWSC 437 at [64] and [73] in which Kunc J stressed the importance of parties co-operating with each other to ensure that relevant documents were provided without the need for the court’s formal processes to be invoked.

Dr Harvey has not issued a notice to produce for any of the documents on the list provided with the DCT’s FOI response. He has sufficient information at his disposal to do so. The further documents he seeks may entirely obviate the need for more onerous processes such as discovery. In these circumstances, I am not persuaded that discovery is necessary, since what Dr Harvey wants to obtain may be able to be obtained more readily and cost-effectively by a notice to produce.

There is a further reason why discovery is presently not warranted. Dr Harvey has not yet particularised the first plaintiff’s claim based on alleged unauthorised disclosure. The defendants are entitled to the best particulars that he is presently able to provide. Further, the evidence has not yet been served. There is much to be said for discovery (even if it might ultimately be appropriate) being deferred until after the claim has been particularised and all of the plaintiffs’ evidence has been adduced. As I said in Commonwealth Bank of Australia v Goater [2016] NSWSC 710 at [33]:

Accordingly, the application which the plaintiffs purported to make by motion for discovery ought be dismissed. I say “purported” to make because, Dr Harvey was, at the time the motion was filed on 14 September 2020, not yet a party to the proceedings. As this deficiency is shortly to be remedied and does not affect the outcome of the motion, it is sufficient to note it.

For the reasons set out above, I make the following orders and notations: