North Shore Property Developments - Case Update

The Federal Court has now ruled on the issue of costs after dismissing an application by Robyn-Lee Erskine of Brooke Bird, the current liquidator of North Shore Property Developments, to rescind a settlement agreement entered into by the company’s former liquidator. The liquidator had alleged that Eddy Haddad, a party to the settlement, had made fraudulent representations during the negotiation of the settlement. Despite finding that Mr Haddad had presented the former liquidator with a fabricated valuation report as to the properties in question, the Court was not persuaded that the previous liquidator relied on the report when entering into the settlement deed. As a result, the Court dismissed the application.

On the issue of costs, the liquidator argued that Mr Haddad’s fraudulent conduct should disentitle him from recovering costs. The Court rejected this argument, finding that although the fraud was “to be deplored”, the Court’s discretion to order costs under s 43 of the Federal Court of Australia Act 1976 (Cth) is not a general power to punish past misconduct. Here, the fraudulent conduct did not bring about the litigation in the sense required to justify a departure from the usual costs rule.

However, the Court acknowledged that Mr Haddad had maintained a dishonest stance during the proceedings—filing an affidavit containing false statements and instructing counsel to cross-examine on points he knew were untrue—which was relevant to the exercise of the Court’s discretion.

Balancing all considerations—including the respondents’ ultimate success, the dishonesty maintained in the litigation, and weaknesses in the liquidator’s case—the Court ordered that the liquidator pay 50% of the respondents’ costs, rather than the full or indemnity amount sought.

Read the decision HERE.

Professionals involved:

• David Pritchard SC of 3 St James’ Hall with Angus Macauley of 12 Wentworth Selborne Chambers (instructed by Piper Alderman) for the respondents

• Scott Aspinall of Sixth Floor Selborne Wentworth Chambers (instructed by Norton Rose Fulbright) for the liquidator