Rambaldi (Trustee) v Meletsis, in the matter of the bankrupt estate of Karas (No 3)

Rambaldi (Trustee) v Meletsis, in the matter of the

bankrupt estate of Karas (No 3) [2022] FCA 807

(12 July 2022)

Last Updated: 12 July 2022

FEDERAL COURT OF AUSTRALIA

Rambaldi (Trustee) v Meletsis, in the matter of the bankrupt estate of Karas (No

3) [2022] FCA 807

File number(s):

VID 1279 of 2017

Judgment of:

O'CALLAGHAN J

Date of

12 July 2022

judgment:

Catchwords:

COSTS – costs against a non-party bank – indemnity costs – where

freezing orders had been made against the defendants – where freezing

orders allowed for paying ordinary living expenses or reasonable legal

expenses – whether there was a causal connection between a non-party

bank’s conduct and the parties’ costs – whether bank acted

unreasonably in complying with standard form freezing orders –

indemnity costs ordered

Legislation:

Federal Court of Australia Act 1976 (Cth) ss 43(2), 43(3)(g)

Freezing Orders Practice Note (GPN-FRZG)

Cases cited:

Australian Securities and Investments Commission v One Tech Media

Limited (No 3) [2018] FCA 1071

Bischof v Adams [1992] VicRp 61; [1992] 2 VR 198

Customs and Excise Commissioners v Barclays Bank plc [2006]

UKHL 28; [2007] 1 AC 181

Dunghutti Elders Council (Aboriginal Corporation) RNTBC v

Registrar of Aboriginal and Torres Strait Islander Corporations (No

4) [2012] FCAFC 50; (2012) 200 FCR 154

Knight v FP Special Assets Limited [1992] HCA 28; (1992) 174 CLR

178

Melbourne City Investments Pty Ltd v Treasury Wine Estates Limited

(No 2) [2017] FCAFC 116

Rambaldi (Trustee) v Meletsis (2022) 157 ACSR 652; [2022] FCA 73

Z Ltd v A-Z and AA-LL [1982] QB 558

Division:

Registry:

General Division

Victoria

National Practice Commercial and Corporations

Area:

Sub-area:

General and Personal Insolvency

98

Number of

paragraphs:

Date of last

16 May 2022

submission/s:

Date of hearing:

Determined on the papers

Counsel for the

Plaintiffs:

Mr SJ Maiden QC with Mr AA Segal

Solicitor for the

Plaintiffs:

Frenkel Partners

Counsel for the

Defendants:

Mr M Galvin QC with Mr J Schulz

D E Phillips Solicitor

Mr SL Freire

Solicitor for the

Defendants:

Counsel for

Westpac Banking

Corporation:

Solicitor for

HWL Ebsworth Lawyers

Westpac Banking

Corporation:

ORDERS

VID 1279 of 2017

IN THE MATTER OF THE BANKRUPT ESTATE OF TOM KARAS

BETWEEN:

GESS MICHAEL RAMBALDI IN HIS CAPACITY AS THE JOINT

TRUSTEE OF THE BANKRUPT ESTATE OF TOM KARAS

First Plaintiff

ANDREW REGINALD YEO IN HIS CAPACITY AS THE JOINT

TRUSTEE OF THE BANKRUPT ESTATE OF TOM KARAS

Second Plaintiff

AND:

NICK MELETSIS

First Defendant

HALLMARK GROUP (AUST) PTY LTD (ACN 053 243 995)

Second Defendant

HOWARD RANDOLPH SPEER (and others named in the Schedule)

Third Defendant

ORDER MADE BY: O'CALLAGHAN J

DATE OF ORDER: 12 JULY 2022

1. Westpac Banking Corporation, as a non-party to the proceeding, pay the plaintiffs’ and

the first and second defendants’ costs of the first and second defendants’ applications to

vary the freezing orders heard on 18 March 2022 and 14 April 2022, and of this

application, on an indemnity basis.

REASONS FOR JUDGMENT

O’CALLAGHAN J:

Introduction

1. The plaintiffs and first and second defendants seek indemnity costs against Westpac

Banking Corporation (Westpac) for two interlocutory hearings on 18 March and 14

April 2022, which relate to interim freezing orders that the plaintiffs obtained on 1

March 2022 against the first defendant, Nick Meletsis (Mr Meletsis), and the second

defendant, Hallmark Group (Aust) Pty Ltd (Hallmark), of which Mr Meletsis is the sole

director. The freezing orders were made substantially in the form set out in the Freezing

Orders Practice Note (GPN-FRZG), and provided for the usual exceptions permitting the

defendants to pay living expenses and legal fees.

2. Mr Meletsis operates personal bank accounts with Westpac, as well as business accounts

in the name of entities controlled by him. Following the making of the freezing orders,

Westpac placed a block on bank accounts in the name of Mr Meletsis and his entities.

Although Mr Meletsis was permitted to access money for the purposes of paying his

living expenses and legal fees, he experienced myriad difficulties with Westpac providing

him the necessary access to make these payments in the six weeks following the 1 March

orders. This was despite further orders made on 7 and 14 March to vary the 1 March

orders with a view to permitting specific payments to be made from the Westpac

accounts.

3. On 14 April, I further varied the 1 March orders, as I explain below. At the hearing on

that day, at which Westpac appeared, I reserved the question of whether it, as a

non-party to the proceeding, should pay the plaintiffs’ and the first and second

defendants’ costs of the first and second defendants’ applications to vary the freezing

orders heard on 18 March and 14 April on an indemnity basis. Having directed the

parties and Westpac to provide written submissions on the question, and having

considered them, I formed the view that it was appropriate to determine the question on

the papers.

The freezing orders and the defendants’ access to funds

4. The plaintiffs are the trustees of the bankrupt estate of the fifth defendant, Tom Karas.

The proceeding has a long history. The relevant background to it is set out in Rambaldi

(Trustee) v Meletsis (2022) 157 ACSR 652; [2022] FCA 73 (Davies J). On 17 February

2022, Davies J made final orders in the proceeding including, relevantly, entering

judgment for the plaintiffs against Mr Meletsis and Hallmark. As at 1 March 2022, the

judgment debts owed by the defendants had yet to be finally determined and paid to the

plaintiffs.

5. The defendants filed five affidavits of Mr Meletsis, sworn on 6, 7, 12 and 17 March, and

13 April 2022, in relation to the orders they sought before me at various stages. Westpac

also filed an affidavit of Thi Thuy Vi Nguyen affirmed 21 April 2022, pursuant to a

direction I made at the hearing on 14 April about the issue of costs. I have extracted the

excerpts of correspondence between the parties and Westpac below from these

affidavits.

6. On 1 March, the plaintiffs made an urgent ex parte application for interim freezing

orders. After a hearing that afternoon, I ordered, among others, that freezing orders be

made against the first and second defendants, relevantly in the following terms:

TO: NICK MELETSIS and HALLMARK GROUP (AUST) PTY

LTD (ACN 053 243 995)

This is a ‘freezing order’ made against you on 1 March 2022 by the

Honourable Justice O’Callaghan at a hearing after the Court was given

the undertakings set out in Schedule A to this order.

The Court orders:

...

FREEZING OF ASSETS

6. (a) You must not remove from Australia or in any way dispose of,

deal with or diminish the value of any of your assets in Australia

(‘Australian assets’) up to the unencumbered value of $4,200,000 (the

Relevant Amount).

(b) If the unencumbered value of your Australian assets

exceeds the Relevant Amount, you may remove any of those

assets from Australia or dispose of or deal with them or

diminish their value, so long as the total unencumbered

value of your Australian assets still exceeds the Relevant

Amount.

(c) If the unencumbered value of your Australian assets is

less than the Relevant Amount, and you have assets outside

Australia (‘ex-Australian assets’):

(i) You must not dispose of, deal with or

diminish the value of any of your Australian

assets and ex-Australian assets up to the

unencumbered value of your Australian and

ex-Australian assets of the Relevant Amount;

and

(ii) You may dispose of, deal with or diminish

the value of any of your ex-Australian assets, so

long as the unencumbered value of your

Australian assets and ex-Australian assets still

exceeds the Relevant Amount.

7. For the purposes of this order:

(a) Your assets include:

(i) all your assets, whether or not they are in

your name and whether they are solely or

co-owned;

(ii) any asset which you have the power, directly

or indirectly, to dispose of or deal with as if it

were your own (you are to be regarded as having

such power if a third party holds or controls the

asset in accordance with your direct or indirect

instructions); and

(iii) for the first defendant, the following

property assets in particular (and if any of those

assets have been sold, the net proceeds of the

sale):

[The order described two property

assets.]

(iv) For the second

defendant, the following

property assets in

particular (and if any of

those assets have been

sold, the net proceeds of

the sale):

[The order described seven property

assets.]

...

EXCEPTIONS TO THIS ORDER

10. This order does not prohibit you from:

(a) for the first defendant, paying $2,000 per week on your

ordinary living expenses;

(b) paying up to $25,000 on your reasonable legal expenses;

(c) dealing with or disposing of any of your assets (which

have not vested in your bankruptcy) in the ordinary and

proper course of your business, including paying business

expenses bona fide and properly incurred; and

(d) in relation to matters not falling within (a), (b) or (c),

dealing with or disposing of any of your assets in

discharging obligations bona fide and properly incurred

under a contract entered into before this order was made,

provided that before doing so you give the applicants, if

possible, at least two working days written notice of the

particulars of the obligation.

11. You and the applicants may agree in writing that the exceptions in

the preceding paragraph are to be varied. In that case the

applicants or you must as soon as practicable file with the Court

and serve on the other a minute of a proposed consent order

recording the variation signed by or on behalf of the applicants

and you, and the Court may order that the exceptions are varied

accordingly.

...

PERSONS OTHER THAN THE APPLICANT AND

RESPONDENT

14. Set off by banks: This order does not prevent any bank from

exercising any right of set off it has in respect of any facility which

it gave you before it was notified of this order.

15. Bank withdrawals by the respondent: No bank need inquire

as to the application or proposed application of any money

withdrawn by you if the withdrawal appears to be permitted by

this order.

...

7. The orders also contained a penal notice, in the usual terms, as follows:

TO: NICK MELETSIS and HALLMARK GROUP (AUST) PTY LTD

(ACN 053 243 995)

IF YOU (BEING THE PERSONS BOUND BY THIS ORDER):

(A) REFUSE OR NEGLECT TO DO ANY ACT WITHIN THE TIME

SPECIFIED IN THIS ORDER FOR THE DOING OF THE ACT; OR

(B) DISOBEY THE ORDER BY DOING AN ACT WHICH THE ORDER

REQUIRES YOU NOT TO DO,

YOU WILL BE LIABLE TO IMPRISONMENT, SEQUESTRATION OF

PROPERTY OR OTHER PUNISHMENT.

ANY OTHER PERSON WHO KNOWS OF THIS ORDER AND DOES

ANYTHING WHICH HELPS OR PERMITS YOU TO BREACH THE

TERMS OF THIS ORDER MAY BE SIMILARLY PUNISHED.

8. The freezing orders were made substantially in the form set out in Annexure A to the

Freezing Orders Practice Note (GPN-FRZG) including, as noted in the orders, the

undertakings given to the court by counsel for the plaintiffs. The proceeding was

otherwise adjourned to 7 March.

9. The next morning, Deniz Dostol Berk of Frenkel Partners, the legal representatives for

the plaintiffs, emailed Westpac, attaching a copy of the 1 March orders by way of service,

and identifying a Westpac bank account that the plaintiffs understood to be conducted

by Hallmark. About two hours later, George Kanon, a Risk Analyst at Westpac,

responded to Mr Berk, confirming receipt and that the request was “being looked at as a

priority”.

10. On 3 March, David Phillips, the legal representative for the defendants, emailed Westpac

requesting urgent access by Mr Meletsis to $2,000 for living expenses and $25,000 for

legal expenses, as provided for in the orders. Mr Phillips noted that Mr Meletsis needed

the funds “to pay for his family’s basic needs given that the immediate effect of the

Freezing Orders has been to deny him access to everything”, and the legal fees were

“desperately needed” to confirm counsel’s engagement for the next hearing on 7 March.

Mr Phillips’ email also requested that the $2,000 in living expenses be first drawn from

Mr Meletsis’ personal account and, if there were insufficient funds in that account, that

Westpac transfer the required funds into Mr Meletsis’ personal account from an account

in the name of Genesis Holdings (Aust) Pty Ltd (Genesis), an entity of which Mr

Meletsis was the sole director and shareholder.

11. On the same day, Westpac sent a letter to Mr Meletsis, relevantly in the following terms:

As Westpac Banking Corporation has been put on notice of the Freezing

Order, Westpac Banking Corporation has placed withdrawal

restrictions on the following account(s) to ensure it does not permit or

facilitate a breach of the Freezing Order:

[The letter identified four accounts.]

(Together, the Relevant Accounts)

What this means for you – you will need to attend your local

branch to conduct all permitted withdrawals

Westpac Banking Corporation has placed withdrawal restrictions on

the Relevant Accounts so any withdrawals can only occur at the branch.

This is because Westpac Banking Corporation has no ability to monitor

the Relevant Accounts unless the withdrawal restrictions are in place.

...

Until the Freezing Order is no longer in effect you will need to go into

your local branch to conduct any withdrawals on the Relevant Accounts

permitted under Freezing Order. You can email

[email protected] to advise of the transactions you wish to

conduct and we will confirm whether the withdrawals are permitted

under the Freezing Order before you attend the branch. Please note

that withdrawal requests may not be completed on the same day so we

recommend that you email the withdrawal request through to us at

least 1 – 2 business days beforehand, together with any supporting

documents required, so we can confirm the withdrawal is permitted

under the Freezing Order.

Westpac Banking Corporation has taken the above steps to ensure that

the Bank is compliant with the Freezing Order that have been served on

Westpac Banking Corporation and to ensure that Westpac Banking

Corporation is not helping, permitting or assisting with a breach of the

Freezing Order.

Westpac Banking Corporation is unable to remove the withdrawal

restrictions on the Relevant Accounts until we receive:

(i) A further order from the Court stating that the Freezing Order are no longer in

place; or

(ii) If you provide us with written consent from all the parties named in the Court

proceedings which states that Westpac Banking Corporation is not required to

monitor ... one or all of Relevant Accounts.

12. Westpac also sent letters in similar terms to the entities controlled by Mr Meletsis that

day.

13. On 4 March, Mr Berk emailed Mr Kanon requesting urgent confirmation that Westpac

had taken “all necessary action in accordance with the freezing order”. Mr Kanon

responded about ten minutes later, confirming that Westpac had “actioned the orders

accordingly”.

14. Several hours later, Mr Kanon responded to Mr Phillips’ 3 March email, relevantly as

follows:

We have sent correspondence to your clients ... regarding the process

for requesting payments for expenses and how the branch staff can

assist.

In relation to the $2000 withdrawal for living expenses as per Order

10(a), Mr Meletsis is only able to withdraw those funds from personal

accounts held in his name. You can seek amended orders that allow Mr

Meletsis to withdraw funds in relation to 10(a) from business accounts

that he has authority to or provide written consent from all parties in

this matter to allow this. If you obtain amended orders to allow for this,

then please provide us with a copy and we will make arrangements for

your client.

In relation to the $25,000 withdrawal/transfer for Legal expenses as

per 10(b), we require a tax invoice/s to be sent and reviewed before

permitting payments of this nature.

15. Mr Meletsis deposed that, as at 6 March, he had “yet to be able to obtain access to the

$2,000 living allowance for ordinary expenses”.

16. The parties returned before the court on 7 March. After that hearing, I made orders

varying the freezing order. This included amending paragraph 7(a)(ii) to include in the

definition of “assets” the Genesis bank account identified in Mr Phillips’ 3 March email,

and varying the exceptions to the freezing order, specified in paragraph 10, including to:

(1) remove existing paragraph 10(a) (the general exception for Mr Meletsis to pay

$2,000 per week on his ordinary living expenses);

(2) add new paragraphs to order 10 to allow withdrawals from specific business

accounts (including the Genesis account) for various payments, the nature and

amounts of which were specified in the order;

(3) remove existing paragraph 10(b) (the general exception for the defendants to

pay up to $25,000 on their reasonable legal expenses) and replace it with a

paragraph permitting the drawing of $165,000 from the Genesis account to be paid

to Mr Phillips’ trust account, on the condition that it could only be used for

payment of the first and second defendants’ legal fees and disbursements in the

proceeding and in any appeal for work performed on or after 1 March 2022; and

(4) add a new paragraph providing for the permitted withdrawals from the Genesis

account to be deposited into Mr Meletsis’ personal account, then to be drawn to

meet the permitted payments.

17. The proceeding was then adjourned to 18 March.

18. Mr Berk sent a copy of the 7 March orders to Mr Kanon that evening via email. In that

email, Mr Berk noted that the orders allowed “restricted and specific withdrawals” to be

made from the Genesis account.

19. On 8 March, Mr Phillips emailed Mr Kanon, referring to the 7 March orders and noting

that:

(1) the permitted payments set out in the 7 March orders were entitled to be made;

(2) a tax invoice setting out the defendants’ legal fees was not necessary to permit

payment of the defendants’ legal expenses, as the permitted payment of $165,000

provided in the orders as varied was to be paid into Mr Phillips’ trust account “to

be dealt with in accordance with the Order – nothing to do with the bank”; and

(3) the business account for State Securities Pty Ltd was to be left open and

available for Mr Meletsis to operate, as permitted by the order.

20. On 9 March, Mr Phillips again emailed Mr Kanon, setting out at length nine permitted

payments, requesting that the permitted payments be made, and attaching a copy of

Exhibit NM-5 to an affidavit of Mr Meletsis sworn 6 March which set out the list of

current liabilities of himself personally and his entities, as well as overdue payments.

The email also said “if the Bank does not act in accordance with the above, my clients

have little alternative other than to make an ex parte application to the Court to compel

the bank to make the Court ordered payments. Should that be necessary, this email will

be produced in support of an Order for indemnity costs”.

21. Westpac did not respond to either of Mr Phillips’ 8 or 9 March emails, and on the

evening of 12 March, Mr Phillips emailed Westpac, copying Mr Berk, attaching by way of

service an interlocutory application and supporting affidavit of Mr Meletsis of the same

date. The first and second defendants, by that interlocutory application, sought the

following orders:

1. The discharge of the Freezing Order made 1 March 2022 and varied on 7 March

2022 (Freezing Orders).

2. Further or in the alternative, an interim mandatory injunction requiring Westpac

Banking Corporation Ltd to allow withdrawals in accordance with the Freezing

Orders.

st

nd

3. Orders permitting the 1 and 2 Defendants to give security in lieu of a Freezing

Order pursuant to Order 12(a)(iii) of the Freezing Orders.

4. Pursuant to Rule 36.05 of the Federal Court Rules 2011, an order extending the

st

nd

time within which the 1 and 2 Defendants may file a notice of appeal to the

judgment and orders of Justice Davies made 17 February 2022 in VID1279/2017.

5. Costs[.]

6. Such further or other orders as the Court considers appropriate.

22. On 14 March, Mr Kanon emailed Mr Phillips in response to the “breakdown of the 9

payment requests as per the updated order” of 7 March, relevantly in the following

terms:

Our usual process for allowing payments to be made in accordance with

court orders is for the customer to come into branch to facilitate these

in accordance with branch process and account authorities.

Could you please advise which Westpac branch and which day this

week your client is able to attend to process the 9 payments. Upon your

response we will reach out to the selected branch and confirm with you

your client’s attendance to complete the payments.

23. On 15 March, Mr Kanon emailed staff at Westpac’s Fitzroy branch to advise that Mr

Meletsis would be attending shortly to conduct the nine transfers identified in Mr

Phillips’ 9 March email, and requesting that the transfers be completed “as per your

branch procedure”. The email continued:

If any further withdrawals or transfers are requested by the customer,

please notify our team and we will have to review them to see if they

can be approved. Do not allow any withdrawals/transfers from any

account/s Mr Meletsis has authority to without first seeking our

approval.

24. Mr Phillips spoke with Allison Strickland, a lawyer at Westpac, during the course of the

day. That same day, Ms Strickland emailed Mr Phillips, and relevantly set out the

following process for making additional payments:

Please ... let us know if there are any other expenses Mr Meletsis would

like to conduct that fall within the scope of the Court Orders by

providing details of the proposed payment, the relevant category these

expenses fall into and any invoices to support payment.

Once we have the relevant invoices and details of the transfers, we can

then review and work with the branch. We will then let you know a

suitable time for Mr Meletsis to attend the Fitzroy branch to facilitate

payments.

25. Mr Phillips responded the evening of 16 March, setting out a number of payments which

Mr Meletsis sought to be made from his accounts and enclosing copies of tax invoices in

support of those payments. These payments included various utility bills, interest

payments, and the like.

26. On 17 March, Mr Meletsis attended the Fitzroy branch, but was informed by the Branch

Manager, Anil Dhingra, that the contents of Mr Phillips’ 16 March email had not been

processed. Mr Meletsis had previously spoken to Ms Strickland, and Mr Meletsis

deposed that both Ms Strickland and Mr Dhingra advised him that, while the permitted

payments could be transferred into his personal account and the various Westpac

accounts of his entities pursuant to the freezing orders (as varied), Westpac considered

that the orders did not allow him to use those accounts to make the permitted payments.

27. Mr Meletsis also deposed that, as at 17 March, Mr Phillips had not received the

permitted payment of $165,000 into his trust account.

28. Ms Strickland and Mr Phillips exchanged further emails on 17 March, and arranged for

Mr Meletsis to attend the Fitzroy branch at 9:30am on 18 March to conduct the

payments set out in Mr Phillips’ 16 March email. Ms Strickland also noted that the

branch advised that it was unable to pay invoices via the “BPay” system, but could

instead issue cheques.

29. Mr Phillips also confirmed that Westpac’s attendance at the resumption of the hearing

the next day was not required, as follows:

As discussed I have spoken with the Associate requesting that the

matter be stood down tomorrow morning until 2.15pm to enable the

payment process to be completed and that your attendance is not

required at this time.

30. As was arranged between Mr Phillips and Ms Strickland, Mr Meletsis attended the

Fitzroy branch on the morning of 18 March. Mr Meletsis’ evidence was that it took over

two hours to process 34 payments, and that, in the following weeks, he spent about 25

hours ensuring that the payments had been received by the intended recipients. Mr

Meletsis deposed as to numerous difficulties with these payments, including that:

(1) some electronic funds transfers made on 18 March did not contain any details

or information from which the recipient could determine who made the payment;

(2) he believed that the provider of his life insurance only accepted payments by

direct debit or credit card, and not via cheque as was provided by the bank; and

(3) a local telegraphic transfer had not been received by the Australian Securities

and Investments Commission.

31. The parties attended a further hearing on 18 March. At that hearing, I made orders

further varying the 1 March orders, relevantly:

(1) providing that the Commonwealth Bank of Australia account in the name of Mr

Meletsis’ mother (which, Mr Meletsis deposed, had also been frozen) was not

subject to the freezing orders;

(2) adding a new order 10A which stated that the freezing orders did not prohibit

the transfer of money between specified accounts operated by Mr Meletsis and his

companies;

(3) adding a new order 10B which stated that the freezing orders “did not prohibit

direct debits and similar automatic debits that were in place on each of the

accounts listed in paragraph 10A prior to 1 March 2022 from being given effect for

the purpose of enabling payments permitted by these orders”; and

(4) amending the list of permitted payments, including to provide for monthly

withdrawals of the permitted payments.

32. For reasons which are not entirely clear, and I mean no criticism of any party by this, my

chambers were not provided with a draft form of order reflecting the precise form of the

variations until six days later, on 24 March. A sealed copy of those orders was made

available to the parties on 25 March.

33. On 25 March, Mr Phillips sent a copy of those orders to Ms Strickland via email, and

relevantly stated:

Would you please adhere to the variations made noting that the new

paragraph 10B does not prohibit direct debits and similar automatic

payments that were in place on each of the accounts listed in paragraph

10A prior to 1 March 2022 from being given effect for the purposes of

enabling payments permitted by these Orders. You will further note

that that there is no prohibition on the transfer of money between any

of the accounts listed in 10A for the purpose of payments permitted by

these Orders. There are a number of direct debits that await processing

as well as the bank addressing payment (the bank may need to

reprocess) previous direct debits that have been dishonoured since 1

March 2022.

Given the variations to these Orders, my client now has access to all of

the accounts listed in 10A of the varied Orders for the purpose of

making the permitted payments. My client now has the obligation to

adhere to the Freezing Orders to make the permitted payments which

are all fully disclosed and transparent. If this requires transfer of funds

between accounts, he is able to do so as per Order 10A with no bank

involvement.

34. Ms Strickland responded to Mr Phillips on 28 March, relevantly in the following terms:

I understand from your email that you would like [Westpac] to remove

restrictions that have been placed on your client’s accounts.

It is Westpac’s position that it is unable to remove the restrictions on

your client’s accounts based on the recent Court Orders as the accounts

listed in paragraph 10A of the Court Orders are still subject to the

freezing order. In particular, the Court Orders amended paragraph

7(a)(ii) of the freezing order to exclude a listed Commonwealth Bank

account but did not exclude the bank accounts held with Westpac. As a

result, it is Westpac’s position that the operation of the freezing order

still applies to the Westpac accounts.

...

... Westpac is still required to maintain restrictions on your client’s

accounts as it has been served with copies of these Court Orders. It

cannot otherwise monitor transactions (including direct debits

previously set up) that are not between the accounts listed in paragraph

10A without the current restriction on the accounts. As previously

advised, Westpac requires clear orders from the Court confirming that

they are not required to monitor the accounts. Alternatively, if the

parties to the proceeding agree clearly in writing that these accounts do

not need to be restricted and monitored by Westpac, we would be

prepared to consider this.

Westpac would be happy to assist your client with conducting any

transactions permitted by the abovementioned paragraphs in

accordance with its usual practice of informing

[email protected] via email of the transactions to be

conducted in advance. The Legal Notices team will advise when your

client can attend a branch. Please note that if there are many

transactions that it may take some time for this to be organised.

35. Mr Meletsis again attended the Fitzroy branch on 7 April to withdraw $2,000 in cash for

living expenses. However, he was told by Mr Dhingra that he could not make the

withdrawal and that such payment would require the written authority of Ms Strickland.

Mr Meletsis also deposed that monthly direct debits on his bank accounts for April 2022

for permitted payments had been dishonoured by Westpac.

36. On 12 April, Mr Phillips sent a letter to Ms Strickland, via email, detailing the various

difficulties that Mr Meletsis had had with accessing his accounts for permitted

payments, requesting that Westpac enable Mr Meletsis to access and operate his

accounts for the permitted purposes under the freezing orders, and that, absent such

action, he would commence an urgent application and seek indemnity costs.

37. On 13 April, Mr Phillips forwarded his 12 April email and letter to Esther Nelson, a

Senior Lawyer at Westpac, having received an out of office response from Ms Strickland.

Ms Nelson responded that afternoon, relevantly as follows:

As discussed, in accordance with our usual processes for dealing with

Court freezing orders relating to our customers that Westpac is served

with:

• Westpac places restrictions on the customers’ accounts which

prevents any withdrawals being made unless they are conducted

at the branch. This is because Westpac has no ability to monitor

the customer’s accounts unless the withdrawal restrictions are in

place. Westpac takes this approach to ensure it is compliant with

the court freezing orders it is served with to ensure that Westpac

is not helping, permitting, or assisting with a breach of the court

freezing orders.

• When a withdrawal restriction is placed on an account this means

that:

(i) No withdrawals including electronic withdrawal

transactions are permitted. This includes any direct

debits that have been set up.

(ii) Deposits (including any electronic credits) will still

be accepted into the account but cannot be withdrawn.

(iii) Any redraw facilities on loans will be restricted

• Until the Court Freezing Orders are no longer in effect the

customer will need to conduct any withdrawals through their

preferred branch. The process is that the customer can email

[email protected] to advise of the transactions they

wish to conduct, and Legal Notices will confirm whether the

withdrawals are permitted under the freezing orders before the

customer attends the branch. We generally recommend the

customer provide at least 1- 2 business days’ notice of the

withdrawal, together with any supporting documents required, so

the branch withdrawal is relatively smooth.

From our conversation I understand that your client has raised

concerns about his ability to access funds in his restrained accounts for

his living expenses and also to enable him to run his business. As

discussed, if you are able to provide Westpac with written agreement

from the parties in the proceedings that states that Westpac is not

required to monitor your client’s accounts in accordance with the Court

Freezing Orders then Westpac will remove the restraints over those

accounts. As set out above, Westpac has no ability to monitor or place

limitations on accounts, so this agreement needs to be absolute.

Alternatively if further orders are made by the Court to that affect,

Westpac will comply with them.

38. Following receipt of that email, Mr Phillips contacted my chambers via email, copying

(among others) Mr Berk and Ms Nelson and seeking a hearing for the following day. My

chambers responded shortly thereafter, telling the parties that a hearing would take

place the following day. I also directed that Mr Phillips notify the legal department at

Westpac, including the general counsel, that a legal representative of Westpac was

required to attend the hearing.

39. At the hearing the next morning, Ms S Farrugia of HWL Ebsworth, the solicitors for

Westpac, appeared on its behalf. Ms Farrugia put Westpac’s position this way:

The bank’s position is, quite simply, the bank can only either block the

account in accordance with the freezing order or not block the account.

The position of the bank is set out in an email from Ms Nelson to Mr

Phillips.

...

So the bank’s systems do not permit a partial block on the accounts to

enable those transactions to occur. That also applies to the direct debits

which are mentioned in order 10(b) but not identified. So it’s unable to

permit those transactions to occur without removing all the restrictions

which are on those relevant accounts. Now, if Westpac were to remove

those restrictions on the relevant accounts to enable those transactions

contemplated by the freezing orders to occur, then it may unwittingly

assist or otherwise facilitate a breach of the freezing orders. Now, in

those circumstances, Westpac has maintained the restrictions on the

relevant accounts.

40. In response to a question I asked about what part of the order Westpac said would make

it liable for facilitating a breach of the freezing orders by Mr Meletsis, Ms Farrugia

accepted that there was “no specific order”. After Mr AA Segal, junior counsel for the

plaintiffs, in the course of his submissions identified that the only orders applicable to

the bank were orders 14 and 15, Ms Farrugia put the bank’s position in the following

terms:

I think the concern is because of order 15, which does provide if the

withdrawal appears to be permitted by the order the bank, without the

blocks in place, if there are direct debits which are not listed in the

order – with those direct debits having been previously stopped

because of the block – this is not about the bank wanting to play some

sort of monitoring role, as my learned friend Mr Galvin made a

submission. This is about the bank wanting to comply with the orders.

41. That is, Westpac was “concerned” that order 15, which provided that “[n]o bank need

inquire as to the application or proposed application of any money withdrawn by you if

the withdrawal appears to be permitted by this order”, imposed some obligation upon

Westpac to be satisfied that any such withdrawal did, in fact, appear to be permitted by

the freezing orders.

42. After a brief adjournment to enable Ms Farrugia to obtain instructions, Westpac agreed

that if order 15 were amended to remove the words “if the withdrawal appears to be

permitted by this order”, then it would lift the restrictions on Mr Meletsis’ accounts.

With some reluctance, I made that order so that Mr Meletsis could have access to

necessary funds as soon as possible. I say “with some reluctance” because I did not

understand then, and for reasons I set out below, I do not understand now, why the

alteration to the standard form freezing orders was necessary. I also directed that

Westpac file and serve an affidavit in response to Mr Meletsis’ affidavit sworn 13 April,

including an explanation of the circumstances in which the first and second defendants’

applications to vary the freezing orders heard on 18 March and 14 April became

necessary to be made, and reserved the question of whether Westpac should pay the

plaintiffs’ and first and second defendants’ costs of those applications on an indemnity

basis.

43. Westpac prepared and filed an affidavit of Thi Thuy Vi Nguyen accordingly on 21 April. I

then invited the parties and Westpac to file and serve submissions on the question of

costs, which they duly did.

The submissions

44. Both the first and second defendants, as well as the plaintiffs, now apply for an order

requiring Westpac to pay their costs arising from the defendants’ interlocutory

application dated 12 March 2022, which resulted in the two interlocutory hearings on 18

March and 14 April, on an indemnity basis. Both the defendants and the plaintiffs

submitted that, for the reasons below, such orders would be an appropriate exercise of

the court’s discretion, because there was a real and direct causal connection between

Westpac’s unreasonable conduct and the costs incurred by the respective parties.

45. The defendants submitted that Westpac’s conduct unreasonably hindered the payment

of permitted living and legal expenses, notwithstanding the clear wording of the orders

(which were in the standard form annexed to the Practice Note) and the manifest

intention of the court and the parties. Such disregard for the true purport of the orders

caused unwarranted financial stress and hardship for Mr Meletsis and his family.

46. As to Westpac’s responses to Mr Phillips’ correspondence, the defendants submitted

that:

(1) Westpac’s response to Mr Phillips’ 3 March request, stating that the living

expenses could only be withdrawn from a personal account and requiring the

production of a tax invoice before payment of legal expenses, was unnecessary and

unreasonable;

(2) it was not appropriate for a solicitor to issue a tax invoice for funds which the

solicitor intended to hold on trust pending the completion of work and invoicing;

and

(3) Westpac did not respond to Mr Phillips’ 8 and 9 March requests to process

permitted payments.

47. The defendants also submitted that, when Mr Meletsis did attend the Fitzroy branch as

directed by Westpac, it placed “unreasonable conditions and restrictions on the

processing of permitted payments, including refusing to allow permitted payments the

subject of pre-existing direct debit facilities to be paid by this method” after his

attendance on 18 March, and continued to refuse Mr Meletsis’ attempts to access funds

even after his attendance at the branch on 7 April. The defendants submitted that

Westpac’s contention that its own systems and processes did not allow it to give effect to

the regime embodied in the court’s orders was “no answer” to the criticisms levelled at

Westpac’s conduct, and that, in any event, such limitations were not known to the

defendants until Ms Farrugia made that submission at the 14 April hearing.

48. The plaintiffs adopted the defendants’ submissions. They further submitted that there

was a real and direct causal connection between Westpac’s unreasonable conduct, and

the costs incurred by the plaintiffs to form the basis for the court to exercise its

discretion and order indemnity costs against Westpac, for the following additional

reasons:

(1) Frenkel Partners provided the orders of 1 and 7 March 2022 to Westpac, each

on the day that they were made;

(2) between 8 and 10 March, Frenkel Partners, Mr Phillips, and a representative of

Westpac communicated via email to facilitate a solution for Mr Meletsis to be

provided access to his bank accounts (and those of his entities) in a manner

permitted by the freezing orders;

(3) in particular, on 9 March, Frenkel Partners sent an email to Mr Phillips, copied

to Westpac, which stated, inter alia: “For the avoidance of any doubt, the purpose

of the Orders is not to ‘unfreeze’ the accounts of Mr Meletsis and Genesis Holdings,

but rather, it directs Westpac to allow Mr Meletsis to make specific withdrawals

from those accounts as outlined in the Orders”;

(4) Westpac did not respond to the emails sent by Frenkel Partners between 8 and

10 March;

(5) the 18 March orders varied the freezing orders with the intention, or objective,

to assist Westpac in allowing the defendants access to their bank accounts, but

solely because of the position adopted by Westpac, the costs incurred by the

plaintiffs were in effect wasted; and

(6) until production of Ms Nelson’s email, the plaintiffs were not made aware of

the fact that the defendants’ difficulties were caused by first, Westpac’s incorrect

interpretation of the freezing orders and secondly, Westpac’s internal processes.

49. Westpac submitted that to make a costs order against a non-party, let alone a costs order

on an indemnity basis, is “exceptional” and “rare” and there is no warrant for the court

to do so in the circumstances described below.

50. Broadly speaking, there were two reasons why Westpac submitted that its conduct was

reasonable, and it was therefore not appropriate to order costs against it at all, let alone

on an indemnity basis.

51. First, it submitted, any failure to abide by the terms of the freezing orders exposed it to

the risk of punishment for contempt of court. As I say, at the hearing on 14 April,

Westpac’s submission was that it understood this exposure to arise by reason of order 15,

a contention which was expanded in its written submissions filed a few weeks later.

Order 15, prior to the amendment on 14 April, was in the following terms: “No bank need

inquire as to the application or proposed application of any money withdrawn by you if

the withdrawal appears to be permitted by this order”.

52. In its written submissions, Westpac provided the following “context” for its conduct:

Once Westpac was served with the freezing orders made on 1 March

2022, it was incumbent on Westpac to ensure that restraints were

placed on accounts held or controlled by Mr Meletsis and/or Hallmark

Group (Aust) Pty Ltd so as to prevent them from removing or in any

way disposing of, dealing with or diminishing the value of their assets

up to the unencumbered value of $4.2 million.

Failure to do so exposed Westpac to the risk of being adjudged guilty of

contempt. This exposure is expressly recorded in the penal notice set

out in the freezing orders: any person who knows of the order and does

anything which helps or permits those bound by the order to breach its

terms is liable to punishment.

A person, not directly bound by an order, may be guilty of contempt of

court if that person, with knowledge of the order, does an act which

infringes, or frustrates, the efficacy of the order, and thus interferes

with the due administration of justice. [Citing Ferguson v Eakin [1997]

NSWCA 106 (Powell JA); R v Hinch [2013] VSC 520, [55] (Kaye J);

Fitzsimons v Commonwealth Bank of Australia [2012] NSWSC 660

(Stevenson J).]

In Fitzsimons v Commonwealth Bank of Australia, Stevenson J cited

with approval the following passage from Biscoe, Freezing and Search

Orders, 2nd ed (2008) at [4.12]:

A bank is guilty of contempt if, knowing of a [freezing] order

against the defendant, it allows the defendant to move

money in breach of the injunction, even where the

defendant had not been served with the order and had

therefore not committed any contempt to which the bank

could be an accessary.

These circumstances compelled Westpac to place restrictions on the

relevant accounts, upon it being put on notice of the making of the

freezing orders. Westpac’s conduct thereafter accorded with paragraph

15 of the freezing orders (which formed part of the standard freezing

orders made by the Court), which required Westpac to form a view as to

whether a proposed application of moneys to be withdrawn appeared to

be permitted by the freezing orders.

Further, the plaintiffs served Westpac with the freezing orders and

subsequently sought Westpac’s confirmation that it had “taken all

necessary action in accordance with the freezing order”. These

circumstances placed Westpac in an invidious position if it did not act

promptly to place restraints on the relevant accounts.

53. Westpac’s second reason for its conduct was that, because of the operation of Westpac’s

systems, the regimes agreed to by the plaintiffs and defendants to facilitate the

permitted payments, embodied in the court orders as varied, “could not be implemented

by Westpac as seamlessly as the parties had envisaged”. This was because Westpac’s

systems, as Ms Farrugia explained, did not permit it to place partial restrictions on

accounts. Instead, its “established process” was that which was communicated to Mr

Meletsis on 3 March: for him, upon giving one to two days’ notice, to attend a branch so

that branch staff could process permitted transactions manually. While Westpac

recognised that this would have caused Mr Meletsis “unavoidable convenience”, it

submitted that this process nevertheless enabled Mr Meletsis to have access to permitted

funds.

54. It also submitted that, to accommodate these technical impediments, it offered “practical

solutions” to the parties, including inviting the parties to provide it with a written

agreement that it was no longer required to monitor the accounts, which the parties did

not provide.

55. As to the defendants’ various requests for the permitted payments to be made, and

Westpac’s responses to those requests, it submitted that its conduct was reasonable for

the following reasons:

(1) Contrary to the defendants’ submission, Westpac did not “refuse” Mr Phillips’ 3

March request for payment of Mr Meletsis’ living expenses and legal expenses.

Rather, it took a “cautious”, and not unreasonable, approach, in particular:

(a) Its response that Mr Meletsis could only withdraw funds for living

expenses from a personal account was “informed by a reasonable

construction of the freezing orders” because living expenses can only

apply to natural persons.

(b) Westpac also proposed a solution that the freezing orders be varied

to allow Mr Meletsis to withdraw funds for living expenses from

business accounts, or to provide written consent from all parties.

(c) Westpac’s requirement for a tax invoice to be issued and reviewed

before permitting payments for legal expenses was reasonable in light

of order 15, which required some (albeit low) level of satisfaction that

the withdrawal appeared to be permitted by the orders.

(2) The defendants’ criticism that Westpac did not respond to Mr Phillips’ 8 and 9

March emails was unfair and unjustified, in circumstances where the freezing

orders, as varied by the 7 March orders, identified permitted payments by

reference to an annexure to an affidavit which was not provided to Westpac until

Mr Phillips’ 9 March email.

(3) Westpac did not, contrary to the defendants’ submission, “refus[e] to allow

permitted payments the subject of pre-existing direct debit facilities to be paid by

his method” when Mr Meletsis attended the Fitzroy branch following the 7 March

variation. Rather, its systems did not allow partial restrictions to be placed on

accounts such that direct debit transactions could be permitted while at the same

time prohibiting other internet banking. And in any event, Mr Meletsis’ 16 March

request was not expressly directed to pre-existing direct debit facilities, and the

relevant orders at the time (being the orders as varied on 7 March) “did not

embody a regime which expressly dealt with pre-existing direct debit facilities”.

56. Westpac also submitted that there was no real and direct causal connection between its

conduct and either of the hearings on 18 March or 14 April.

57. For the 18 March hearing, Westpac submitted that it did not attend that hearing because

the defendants’ solicitor had informed it that its attendance was not required. It also

submitted that of the four orders sought by the defendants at that hearing, only one was

directed at Westpac. The balance of the orders sought the discharge of the freezing

orders, permission for the defendants to give security in lieu of the freezing orders, and

an extension of the time to file a notice of appeal. Westpac submitted that “it is not

contended that the orders could have been made without the need for attendances by the

parties”. I understand that submission to be that, even absent the defendants’ ongoing

difficulties with accessing the funds permitted by the freezing orders, the parties would

have needed to attend court on 18 March in any event and accordingly, the costs

incurred in doing so were not caused by Westpac’s conduct.

58. Westpac further submitted that “the parties appreciated, by 18 March 2022, that

paragraph 15 operated to impose a monitoring burden on Westpac, and that a suitable

amendment to that order could ameliorate the issues being encountered by the

defendants”. This was so because, at the hearing on 18 March, senior counsel for the

defendants said:

It’s really [order] 15 that’s the relevant one. From our point of view. The

difficulty with that is that the bank says, ‘Well, we want to be satisfied

as to what the purpose of the payment is. You have to satisfy us.’. And

so the reason I’m not suggesting any change to that order, your

Honour, is because it seems like the penny may have dropped at the

bank and we’re hoping that if these orders are provided to the bank, we

won’t have any more of these sorts of issues.

59. Westpac submitted that, against all this background, and particularly in circumstances

where the defendants told Westpac that it did not need to attend the hearing, “there is

nothing in the circumstances that establishes that Westpac’s conduct was unreasonable,

or sufficiently unreasonable, so as to warrant the exercise of the rare and exceptional

discretion to order that Westpac, a non-party, pay the parties’ costs”.

60. As for the 14 April hearing, Westpac submitted that had it been consulted about the 18

March orders, it would have been able to raise practical difficulties with the parties and

inform them that “by reason of the functionality of Westpac’s systems, the monitoring

burden imposed on Westpac could not be discharged as efficiently as the parties might

have hoped or expected”. Further, it submitted that it had less than 24 hours to respond

to the request received on 12 April, because the defendants contacted my chambers to

seek a hearing in the afternoon of 13 April. Accordingly, Westpac submitted that “the

calling on of the matter on such short notice meant that the plaintiffs’ solicitors were

given about 90 minutes to consider Westpac’s proposal which, if it had been agreed by

the parties, would have obviated the need for the hearing on 14 April 2022”.

61. Westpac again contended that it proposed solutions to the difficulties faced by the

defendants, including in writing to the parties on 28 March to say that “if the parties

agreed in writing that the relevant accounts did not need to be restricted and monitored

by Westpac, Westpac would be prepared to consider this” and that it was happy to assist

Mr Meletsis to conduct the permitted payments in accordance with its usual processes,

to which no response was received. As for Mr Meletsis’ attendance at a branch on 7

April, Westpac submitted that he “did not follow the process which [it] had advised

needed to be followed” and that the attendance was without notice.

62. Westpac submitted that it informed the defendants’ solicitor of its inability to place

partial restrictions on accounts by telephone on 13 April 2022, contrary to the

defendants’ contention that they did not become aware of this restriction until oral

submissions during the 14 April hearing.

Consideration

63. The court has a broad discretion under s 43(2) of the Federal Court of Australia Act

1976 (Cth) to make costs orders, including on an indemnity basis under s 43(3)(g) and

against non-parties. Westpac’s submission is that such orders are not appropriate in the

circumstances of this case.

64. Two questions arise:

(1) Is it appropriate to make a costs order against Westpac as a non-party in

respect of the 18 March and 14 April hearings, and this application?

(2) If yes, should the costs order be the ordinary order (that those costs are payable

on a party/party basis) or an order that they be paid on an indemnity basis?

65. In this case, those questions are to an extent inter-related. The first question requires

consideration of whether there is sufficient connection between the conduct of the

non-party and the costs claimed. The second question requires consideration of whether

there are some special or unusual circumstances to warrant departure from the ordinary

costs order. Here, for reasons that I will explain, Westpac’s conduct is relevant to both

questions, although it is more conveniently dealt with mostly under the rubric of the

second question.

66. For the following reasons, I answer the two questions as follows:

(1) Yes.

(2) The costs are to be paid on an indemnity basis.

The first question: Is it appropriate to make a costs order against Westpac as a

non-party in respect of the 18 March and 14 April hearings, and this

application?

67. While the power under s 43(2) of the Federal Court Act does not explicitly provide for

making costs orders against non-parties, it is well established that the power extends to

such orders. See Knight v FP Special Assets Limited [1992] HCA 28; (1992) 174 CLR 178

at 192 (Mason CJ and Deane J). However, there must be some connection between the

non-party and the proceeding and/or the costs. The nature of this connection was

described by Gobbo J in Bischof v Adams [1992] VicRp 61; [1992] 2 VR 198 at 204–205:

It is not practicable to lay down a set of parameters in advance for there

may be cases where the interests of justice support an order for costs

even though the connection is slender. Thus if a witness deliberately

refuses to answer to a subpoena and thereby causes the case to be

adjourned and so increases costs to the parties, I would have thought

that it was very much arguable that he should bear these extra costs.

There would seem to be no connection in the ordinary sense of that

word between that witness and the proceedings, beyond the fact that he

was a potential witness. It may be said, however, that there is a causal

connection between the non party and the incurring of the costs, a

matter that bears directly on the justice of whether he should be made

to pay costs that he has caused to be incurred.

Again, there may be cases where the connection is significant but not

material to the issue of costs. Thus a person may benefit greatly from a

particular proceeding but may not have any real part in supporting the

proceeding.

The most convenient course is, in my view, to look at both factors in

considering the connection between the proceedings and the non party,

namely, the connection between the non party and the proceedings and

secondly, the causal connection between the non party and the costs.

I have concluded that, without limiting myself to these two matters, I

should take both factors into account in any exercise of discretion. The

connection must be real and direct and it must be material to the issue

of costs. The mere fact that a person may benefit from the litigation will

not, without more, suffice.

See also Dunghutti Elders Council (Aboriginal Corporation) RNTBC v Registrar

of Aboriginal and Torres Strait Islander Corporations (No 4) [2012] FCAFC 50;

(2012) 200 FCR 154 at 169 [81], 170 [88] (Keane CJ and Lander and Foster JJ).

68. In my view, there is a clear causal connection between Westpac’s conduct and the parties

incurring the costs of the defendants’ applications to vary the freezing orders in relation

to both the 18 March and 14 April hearings.

69. For the 18 March hearing, Westpac submitted that there was no causal connection

between its conduct and the parties’ costs because only one of the four orders sought by

the defendants ahead of that hearing was directed at Westpac. But almost all of that

hearing, and no doubt the preparation for it, was occupied with further amending the 1

March orders to facilitate easier access to the permitted payments. The defendants did

not seek the discharge of the freezing orders or the substitution for security in lieu of the

freezing orders at that point, and I made the order for extension of time for the

defendants to file their notice of appeal after a very brief exchange with counsel for the

defendants and with no objection from the plaintiffs.

70. Westpac also submitted that there was no causal connection in circumstances where the

defendants had agreed that Westpac’s attendance at the 18 March hearing was not

required. However, it is clear that the defendants did not press for Westpac’s attendance

because they hoped that the further amendments which were sought (and made) would

facilitate resolution of the issues that the defendants were facing. This is evident from

the email from Mr Phillips to Ms Strickland set out at [29] above, in which Mr Phillips

advised that he had requested the matter, which was originally to be heard in the

morning of 18 March, be stood down until 2:15pm to “enable the payment process to be

completed” after Mr Meletsis attended the Westpac branch.

71. Further, at that hearing, counsel for the defendants submitted that, while the payments

sought up until that point had been made when Mr Meletsis attended the branch, the

proposed amendments to the orders were to “make the future easier”. Counsel also

submitted that the defendants did not propose any change to order 15 of the freezing

orders because “it seems like the penny may have dropped at the bank and we’re hoping

that if these orders are provided to the bank, we won’t have any more of these sorts of

issues”. The defendants reasonably expected that the amendments would facilitate easier

payment of the expenses which were already permitted under the 1 March orders, and it

is clear that the defendants agreed that Westpac did not need to attend the hearing on

that basis. For reasons I shall explain in considering the question of indemnity costs,

Westpac’s conduct in processing the permitted payments was unreasonable and it acted

with disregard for clear court orders providing for those permitted payments. Its

conduct made it necessary for the defendants to seek amendments to facilitate those

payments, and in these circumstances – and where the conduct continued even after the

orders had been amended on 18 March – Westpac cannot rely on the defendants’

agreement that it did not need to attend the hearing to escape liability for costs.

72. Westpac also submitted that by 18 March, the parties appreciated that order 15 imposed

a monitoring obligation because, at the hearing that day, senior counsel for the

defendants submitted “[i]t’s really [order] 15 that’s the relevant one. ... The difficulty

with that is that the bank says, ‘Well, we want to be satisfied as to what the purpose of

the payment is. You have to satisfy us’”. But that was, at most, counsel’s restatement of

Westpac’s position, not his agreement with it.

73. Similarly, I am also satisfied that there is sufficient causal connection between Westpac’s

conduct and the 14 April hearing.

74. Westpac submitted that had it been consulted about the 18 March orders, it would have

been able to tell the parties about the difficulties of implementing those orders due to the

limitations of its systems and processes, and thus the April hearing to further amend the

orders would not have been necessary. But, as I say, Westpac continued to act

unreasonably and in apparent disregard of the freezing orders. This resulted in the need

for the April hearing which was again occupied, for the most part, with submissions

regarding further amendments to the orders so that Westpac could process the

permitted payments.

75. Westpac also submitted that it had less than 24 hours to respond to a request received

on 12 April, and “the calling on of the matter on such short notice meant that the

plaintiffs’ solicitors were given about 90 minutes to consider Westpac’s proposal which,

if it had been agreed by the parties, would have obviated the need for the hearing on 14

April 2022”. But Westpac responded to Mr Phillips’ 12 April email nonetheless. In that

response, despite the 18 March amendments to the court orders, it simply reiterated the

existing process it had earlier outlined and its proposed solution that the parties agree

that Westpac no longer needed to monitor the defendants’ accounts. In my view, the

defendants cannot be criticised for acting with urgency where the payments sought were

for daily living expenses (the critical nature of which is self-evident), and Westpac

remained unmoved.

76. As for the “proposal” which Westpac refers to that, had it been agreed to by the parties,

would have obviated the need for the hearing, I understand this to be the amendment to

order 15. But this amendment was never raised in any correspondence with the parties,

and Ms Farrugia only referred to order 15 after counsel for the plaintiffs identified orders

14 and 15 as being the “only orders that relate to the bank”. I am therefore not satisfied,

had the 14 April hearing not occurred, that Westpac would have proposed that course

and “obviated the need for the hearing”.

77. As for Westpac’s submission that it informed the defendants’ solicitor on 13 April of the

inability to place partial restrictions on accounts, contrary to the defendants’ submission

that they became aware of this at the hearing of 14 April, that is irrelevant. There is no

reason, and Westpac did not advance any, why the defendants becoming aware of those

limitations on 13 April would have avoided the cost of the 14 April hearing.

78. Accordingly, weighing all these factors in the balance, I am satisfied that this is a case in

which it is appropriate to order costs against Westpac as a non-party to the proceeding.

The second question: Should the costs order be the ordinary order (that those

costs are payable on a party/party basis) or an order that they be paid on an

indemnity basis?

79. Costs are ordinarily ordered on a party/party basis, and there must be some special or

unusual circumstance to warrant departure from that usual course. The relevant

principles are well established and usefully set out in Melbourne City Investments Pty

Ltd v Treasury Wine Estates Limited (No 2) [2017] FCAFC 116 at [4]–[5] (Jagot, Yates

and Murphy JJ):

Usually the Court will award costs to the successful party on a

party/party basis, but where the circumstances of the case warrant a

departure from the usual course the Court may order indemnity costs.

The principles relevant to an award of indemnity costs are

well-established. There can be no exhaustive list of the circumstances

that may warrant the exercise of the discretion.

In broad terms an order for indemnity costs requires that some special

or unusual feature arises: Cirillo v Consolidated Press Property Ltd

(formerly known as Citicorp Australia Ltd) (No 2) [2007] FCA 179 at

[3] (Finn J). Indemnity costs are not punitive but are designed for

“compensating a party fully for costs incurred, as a normal costs order

could not be expected to do, when the Court takes the view that it was

unreasonable for the party against whom the order is made to have

subjected the innocent party to the expenditure of costs”: Hamod v

New South Wales (2002) 188 ALR 659 at 665 (Gray J, with whom Carr

and Goldberg JJ agreed). Such circumstances may include where

allegations are made “which ought never to have been made”, where the

case is “unduly prolonged by groundless contentions” (Ragata

Developments Pty Ltd v Westpac Banking Corporation [1993] FCA 115

at [15], [17] (Davies J)), and where “the applicant, properly advised,

should have known that he had no chance of success” (Fountain

Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty

Ltd (1988) 81 ALR 397 at 401 (Woodward J)) or “persists in what

should on proper consideration be seen to be a hopeless case” (J-Corp

Pty Ltd v Australian Builders Labourers Federated Union of Workers

(WA Branch) (No 2) [1993] FCA 70; (1993) 46 IR 301 at 303 (French

J)).

80. As these passages make clear, the circumstances in which a court may order costs on an

indemnity basis are a matter of discretion and the categories of such cases are not

closed.

81. In my view, this is a case in which it is appropriate to compensate the plaintiffs and the

defendants fully for costs incurred because it was unreasonable for Westpac to have

subjected them to the expenditure of costs of the defendants’ applications to vary the

freezing orders heard on 18 March and 14 April.

82. In acting as it did after it was put on notice of the freezing orders, Westpac acted with

disregard for the clear intention of the regime set out in those orders. Westpac submitted

that “[a] person, not directly bound by an order, may be guilty of contempt of court if

that person, with knowledge of the order, does an act which infringes, or frustrates, the

efficacy of the order, and thus interferes with the due administration of justice”. It also

submitted that it was “put in an invidious position” and that “any failure to abide by the

terms of the freezing orders exposed Westpac to the risk of punishment for contempt of

court”. That is not so. Contempt by a non-party requires some intent on the part of the

non-party to frustrate the court’s orders. As Eveleigh LJ observed in Z Ltd v A-Z and AA-

LL [1982] QB 558 at 578:

I think that the following propositions may be stated as to the

consequences which ensue when there are acts or omissions which are

contrary to the terms of an injunction. (1) The person against whom the

order is made will be liable for contempt of court if he acts in breach of

the order after having notice of it. (2) A third party will also be liable if

he knowingly assists in the breach, that is to say if knowing the terms of

the injunction he wilfully assists the person to whom it was directed to

disobey it. This will be so whether or not the person enjoined has had

notice of the injunction.

83. This was emphasised by Lord Rodger of Earlsferry in Customs and Excise

Commissioners v Barclays Bank plc [2006] UKHL 28; [2007] 1 AC 181 at 207

[62]–[64]:

Punishment for contempt of court is the remedy which the law provides

for the addressee’s failure to comply with an injunction such as a

freezing order. Liability is strict and so he may be guilty of contempt

even where he did not deliberately flout the order, the degree of his

fault being relevant in determining the appropriate punishment:

Attorney General v Times Newspapers Ltd [1992] 1 AC 191, 217G-H

per Lord Oliver of Aylmerton.

By contrast, a third party who is notified of an injunction is guilty of

contempt of court only if he knowingly takes a step which will frustrate

the court’s purpose in granting the order. So a bank will be in contempt

only if it knowingly fails to freeze a customer’s account and pays away

sums in the account after being notified of an order. ...

The policy of the law is that a third party, such as a bank, which is

notified of a freezing order, must not knowingly undermine the court’s

purpose in granting the order. ...

84. In Australian Securities and Investments Commission v One Tech Media Limited (No 3)

[2018] FCA 1071, ASIC brought a contempt application against the solicitors for the

defendants where the solicitors had applied certain of the defendants’ funds to legal

expenses over the maximum amount allowed by freezing orders. Justice Moshinsky

found that the solicitors were not guilty of contempt because, as a non-party, the liability

for the contravention was not strict and ASIC could not otherwise establish that the

solicitors effected the relevant payments knowing that to do so would be in

contravention of court orders. His Honour relevantly found at [116]:

In my view, [CCOM Pty Ltd v Jiejing Pty Ltd [1992] FCA 325; (1992)

36 FCR 524] and the authorities to which it refers establish the

following propositions: a person who is not a party to the proceeding

and not bound by a court order is not subject to the strict liability for

contempt that applies to a person bound by a court order that is

breached; a person who is not in terms bound by a court order but who

knows of it and who then does something that disrupts the situation

created by it may, but not necessarily must, be guilty of contempt of

court; and such a person will be guilty of contempt where his or her

conduct, coupled with knowledge of the court order, shows that he is

flouting the authority of the court by doing something that he or she

knows will prevent the court order achieving its intended object. The

effect of these propositions is that an additional element of intention

needs to be established.

85. As these authorities make clear, mere notice of a freezing order is not enough to render a

third party of contempt should the defendant breach it. There must be some element of

intent to assist the breach.

86. The freezing orders of 1 March provided for the payment of Mr Meletsis’ living expenses

and the defendants’ legal fees. Just as a bank should not knowingly assist a defendant to

breach orders prohibiting the disposal of the defendant’s assets, it should also not

knowingly act to frustrate clear court orders providing for certain payments to be made.

As Lord Denning MR said Z Ltd v A-Z and AA-LL [1982] QB 558 at 572, “[e]very person

who has knowledge of [the freezing order] must do what he reasonably can to preserve

the asset”. It follows that such a person should also do what they reasonably can to

facilitate the entire regime contemplated by freezing orders, including any permitted

exceptions.

87. Broadly speaking, Westpac submitted two justifications for its conduct. The first was

because it had some “monitoring” obligation. Whatever that may mean, Westpac’s

conduct went far beyond simply “monitoring” the accounts and satisfying itself that

payments were permitted. Rather, the main justification for Westpac’s conduct

identified in its submissions, both at the 14 April hearing and in written submissions as

to costs, was the limitations of its systems and its “established process” for managing

freezing orders.

88. Most of the defendants’ ongoing issues with accessing funds were attributable to

Westpac’s inability to process payments, or unwillingness to do so outside of its usual

protocol of requiring customers to attend a branch, even where it could easily be

satisfied that payments were permitted. The clearest illustration is Westpac’s response to

this request from Mr Phillips in his email of 25 March:

Would you please adhere to the variations made noting that the new

paragraph 10B does not prohibit direct debits and similar automatic

payments that were in place on each of the accounts listed in paragraph

10A prior to 1 March 2022 from being given effect for the purposes of

enabling payments permitted by these Orders.

89. Ms Strickland’s response to that email was to reiterate Westpac’s position that it was

“unable to remove the restrictions” on the accounts, it could not “otherwise monitor

transactions (including direct debits previously set up)”, and would require “clear orders

from the Court confirming that [Westpac was not] required to monitor the accounts”.

The court orders, as amended, provided that they “did not prohibit direct debits and

similar automatic debits that were in place on each of the accounts listed in paragraph

10A prior to 1 March 2022 from being given effect for the purpose of enabling payments

permitted by these orders”. The orders could not have been clearer. Westpac could easily

be satisfied that such payments were permitted, but it still refused to process those

payments unless Mr Meletsis attended a branch to make the request. Westpac insisted

that it needed a clear order of the court regarding its perceived monitoring obligations,

but then proceeded to ignore other court orders which unambiguously permitted certain

payments.

90. Similarly, the amendments made on 7 March permitted particular payments identified

in an affidavit of Mr Meletsis. Even after having been supplied with that affidavit,

Westpac’s response to Mr Phillips was that “[o]ur usual process for allowing payments to

be made in accordance with court orders is for the customer to come into branch to

facilitate these in accordance with branch process and account authorities”. Again,

Westpac could easily be satisfied that the payments were in fact permitted under the

orders. But again, it insisted on a strict adherence to a protocol which had nothing to do

with that satisfaction.

91. Westpac’s own submission was that, had it been consulted about the 18 March orders, it

“would have been able to inform the parties that, by reason of the functionality of

Westpac’s systems, the monitoring burden imposed on Westpac could not be discharged

as efficiently as the parties might have hoped or expected”. This seems to me to be a

clear recognition that the main reason why Westpac could not facilitate the operation of

the court orders was because of its systems and processes, and not because it could not

be satisfied that the payments were in fact permitted.

92. Further, even where the defendants followed Westpac’s process of attending a branch to

request payments, and Westpac made the payments (presumably having been satisfied

that they were permitted), Mr Meletsis’ evidence, which Westpac did not challenge, was

that there were numerous issues with these payments such that he could not be certain

that they had been received or applied against relevant liabilities (see [30] above).

93. The system that Westpac proposed for processing permitted payments was also

completely unworkable for day-to-day living expenses and emergencies. For example,

Mr Meletsis deposed to the difficulty of being permitted to withdraw cash but not use

credit cards and other electronic forms of payment for living expenses, including

ordering food online when members of his family were in isolation after contracting

COVID-19, paying for nearby parking at an emergency department when his child fell ill,

and booking school holiday activities for his children online. Westpac was also unable to

pay certain bills in the manner required by the biller due to the limitations of its systems.

94. As the parties submitted, it is no answer for Westpac to say that its systems or

established protocols rendered it incapable of abiding by court orders. This is

particularly so where Westpac is a major bank and, on its own evidence, on average

“receives approximately 24 freezing orders each month”. This was not a situation in

which Westpac’s systems were poorly adapted to accommodate a form of order which

was unfamiliar or unknown to it; these were freezing orders made in the standard form

which Westpac receives, on average, almost daily.

95. Westpac submitted that it offered “practical solutions” to the above difficulties, being its

proposal that it would remove the block on the defendants’ accounts if the parties agreed

that Westpac had no monitoring obligations. However, Westpac’s obligations were not a

matter for agreement between the parties to the proceeding. It was for Westpac, not the

parties, to identify and comply with its legal obligations. Contrary to its submission, this

was not a practical solution, and Westpac did not identify any other solutions that it put

to the parties to overcome the limitations in its own systems prior to it proposing the

amendment to order 15 at the April hearing.

96. I accept that Westpac responded to correspondence from the solicitors for the parties,

and did facilitate some payments for the defendants when they followed Westpac’s

process for making them. However, as I say, even when that process was followed, not

all payments were made. Westpac’s conduct frustrated the clear intention of the court

orders, despite those orders being twice amended prior to the 14 April hearing to make

clear what was permitted under them.

97. In my view, this is an appropriate case in which there should be an order for costs on an

indemnity basis to compensate the plaintiffs and the defendants fully for costs incurred

because it was unreasonable for Westpac to have subjected them to the expenditure of

those costs.

Disposition

98. For the reasons I have given above, in the circumstances of this case, it is appropriate to

order costs against a non-party to the proceeding and on an indemnity basis.

Accordingly, I will order that Westpac Banking Corporation, as a non-party to the

proceeding, pay the plaintiffs’ and the first and second defendants’ costs of the first and

second defendants’ applications to vary the freezing orders heard on 18 March 2022 and

14 April 2022, and of this application, on an indemnity basis.

I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the

Reasons for Judgment of the Honourable Justice O'Callaghan.

Associate:

Dated: 12 July 2022

SCHEDULE OF PARTIES

Defendants

Fourth

Defendant:

ESTABLISHMENT 5 DEVELOPMENTS PTY LTD

(ACN 154 426 614)

Fifth

TOM KARAS (A BANKRUPT)

Defendant: