Andrew Fielding as Liquidator of Lyngray Developments Pty Ltd v Dushas & Anor [2012] QDC 242

DISTRICT COURT OF QUEENSLAND CITATION: Andrew Fielding as Liquidator of Lyngray Developments Pty Ltd v Dushas & Anor [2012] QDC 242 PARTIES: ANDREW FIELDING AS LIQUIDATOR OF LYNGRAY DEVELOPMENTS PTY LTD (IN LIQUIDATION) ACN 084 052 371 (Plaintiff) v SASHA DUSHAS (First Respondent) and SOTIRI THOMAS DUSHAS (Second Respondent) FILE NO/S: 3517 of 2008 PROCEEDING: Costs order ORIGINATING COURT: District Court of Queensland DELIVERED ON: 30 August 2012 DELIVERED AT: Southport HEARING DATE: 27 March 2012 JUDGE: Newton DCJ ORDER: That there be no order as to costs. COUNSEL: Mr T Pincus for the plaintiff Mr C D Coulsen for the first defendant SOLICITORS: MacGillivrays for the plaintiff Rudkin Hitchcock Grant Lawyers for the first defendant. [1] Judgment was given on 11 May 2012 dismissing the applicant liquidator’s application for an order that monies be paid to the Company in liquidation for the benefit of creditors. Written submissions with respect to costs have been provided on behalf of the applicant and the first respondent. [2] Rule 681(1) of the Uniform Civil Procedure Rules 1999 provides that: -- 1 of 3 -- 2 Costs of proceeding, including an application in a proceeding, are in the discretion of the court but follow the event, unless the court orders otherwise. [3] The first respondent submits that in this matter costs should follow the event and, accordingly, the first respondent should have the costs (including reserved costs) of and incidental to the proceeding. [4] In support of this submission it is contended that the evidence for the most part was uncontroversial, in that there was no issue of fact to be determined with respect to the manner of making the payments or the application of the monies received. Importantly, submits the first respondent, the central document was the ledger, being part of the books and records of the company. This document was in the power and possession of the liquidator and in respect of which disclosure was resisted. [5] The first respondent claims that the liquidator did not contest the accuracy or veracity of the books and records, notwithstanding it was open for him to do so. In these circumstances there can be no criticism, it was said, of the first respondent as to the manner in which the proceeding was conducted and there are no unusual circumstances which would justify the displacement of the general rule – namely, that costs should follow the event. [6] In the written submissions of the applicant, attention is drawn to the variations in the position taken by the respondent prior to the commencement of the proceedings in relation to the payments made by the company to the mortgage account of the daughter of its director. In particular the applicant notes that the first respondent: a) had initially told the applicant that the payments were made pursuant to a rental agreement between the first respondent and the company and that they were not applied against her mortgage; b) said that it was always her intention to retain ownership of the property and she only agreed to sell it towards the end of 2005 when she could no longer afford to make the mortgage payments, notwithstanding that the company made all payments between June 2002 and September 2005; c) contrary to her previous position, conceded that the payments were made into the mortgage account whilst claiming that they were effectively by way of rent – the rental agreement allegedly being with Ms Gray and Mr Crawford rather than with the company; d) maintained that the payments were actually made by Ms Gray and Mr Crawford, rather than the company; e) conceded that Ms Gray and Mr Crawford often could not afford to make the payments; and -- 2 of 3 -- 3 f) despite being in possession of five or six boxes of material, failed to provide any documentation to support the purported rent agreement or any other aspect of her account. [7] In these circumstances it may be accepted that it was indeed appropriate for the liquidator to commence the proceedings given the substantial payments made by the company to the mortgage account over a substantial period of time. The variations in the position of the first respondent in relation to the payments continued when a new version was provided in the respondent’s defence, involving payment of rent which was always made with a view to subsequent purchase. The applicant, not unreasonably, suggest that this was designed to justify alleged rental payments in a sum which conveniently matched the respondent’s mortgage obligations. [8] The applicant liquidator notes that the defence refused to acknowledge even that the company had made the payments to the mortgage account; pointing out that this was never acknowledged, including in the affidavits of the first respondent and Ms Gray. Although the first respondent said in her evidence at trial that she had seen the extent of the company’s use of the property for business purposes, she pleaded that she was unaware of any arrangement involving benefit to the company other than accommodation for Ms Gray and Mr Crawford. The pleadings did not include reference to the company’s use of the premises or to a loan account comprising a benefit despite the financial position of Ms Gray. The respondent’s affidavits did not refer to such an alleged benefit although Ms Gray did make reference to the use of the property partly as an office. It may be noted that at trial the use claimed was far more extensive than that of an office. [9] The liquidator contends that evidence could have been adduced at trial by the respondent (at least from Ms Gray and, presumably, from Mr Crawford) as to the capacity of Ms Gray to make repayments to the company of amounts recorded as loans from the company. By February 2006 these ‘loans’ exceeded $200,000. The applicant, in cross-examination of the first respondent and Ms Gray, demonstrated that the respondent was aware that the sole source of income of Ms Gray was the company itself. Thus the payments must have come from the company. Cross examination further elicited that the company ceased trading as from 1 April 2005 and had been unable to make the monthly payments regularly prior to that time. [10] Although the applicant liquidator failed in his claim against the first respondent, the decision, as explained in paragraph 42 thereof, was based on a lack of evidence relating to the terms of any loan account which may have been raised by the company against Ms Gray. Despite my suspicions as to the manner in which Ms Gray (and Mr Crawford) used the company account for personal expenses, the evidence was silent as to the establishment of a loan account and as to the terms and conditions of repayment of any loans. No genuine attempt was made by the first respondent to establish that the loans were a benefit to the company in that there existed any realistic prospect of repayment. [11] I accept the submission of the applicant liquidator that this is a case in which the conduct of the respondent, both prior to and after the commencement of the proceeding, makes it appropriate to order that there be no order as to costs. Order accordingly. -- 3 of 3 --