Pastrello v Pastrello [2025] NSWSC 62 (18 February 2025)

Last Updated: 18 February 2025

Supreme Court New South Wales

Case Name:	Pastrello v Pastrello
Medium Neutral Citation:	[2025] NSWSC 62
Hearing Date(s):	In chambers
Date of Orders:	18 February 2025
Decision Date:	18 February 2025
Jurisdiction:	Equity
Before:	Slattery J
Decision:	Limited order for costs made plaintiff’s favour.
Catchwords:	COSTS – Party/Party – General rule that costs follow the event – Proceedings discontinued or dismissed – plaintiff brings proceedings for the production of documents by the defendants – plaintiff claims he needed the documents to discharge his duties as a director of two companies – defendants are alleged to have withheld documents and only produced them on a piecemeal basis after proceedings commenced – Court appoints receivers and managers to manage the affairs of both companies after the proceedings were commenced – plaintiff no longer wishes to pursue the relief in the proceedings as a result of the appointment of the receivers and managers – defendants accept that the proceedings should no longer be continued – defendants seek an order that each party should bear its own costs of the proceedings – plaintiff seeks an order that the defendant pay the plaintiff’s costs – whether one or other party conducted themselves unreasonably – whether one or other party was likely to have been successful in the proceedings.
Legislation Cited:	Corporations Act 2001 (Cth) ss 198F, 290
Cases Cited:	Australian Securities Commission v Aust-Home Investments Limited [1993] FCA 585; (1993) 44 FCR 194; (1993) 116 ALR 523 Box v Gadsden Pty Limited [2003] NSWSC 748 Estate of Bourke [2024] NSWSC 280 Estate of Lorenzo Antonio Pastrello [2024] NSWSC 734 Geneva Finance Ltd; Quigley (receiver and manager appointed) v Cook [1992] WASC 209; (1992) 7 WAR 496 Minister for Ethnic Affairs (Commonwealth); ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 Saravinovska v Saravinovski [2020] NSWSC 1232 Walden v Foodco Group Pty Ltd [2009] NSWSC 45
Texts Cited:	N/A
Category:	Costs
Parties:	Robert Pastrello (Plaintiff) Eddy Pastrello (First Defendant) Luisa Pastrello (Second Defendant)
Representation:	Counsel: A Avery-Williams (Plaintiff) D Cook SC (Defendants) Solicitors: Colquhoun Murphy (Plaintiff) Assured Legal (Defendants)
File Number(s):	2023/ 461217
Publication Restriction:	N/A

JUDGMENT

1. Robert Pastrello (“Robert”), the plaintiff, commenced these proceedings by Summons dated 20 December 2023 seeking relief that the first and second defendants, Eddy Luigi Pastrello and Luisa Pastrello (“Eddy” and “Luisa”), produce the books and records of two companies, Gratory Pty Limited (“Gratory”) and Eaglehawk Park ACT Pty Limited (“EPACT”), the third and fourth defendants, respectively.
2. In related proceedings on 13 September 2024, this Court appointed Mr Andrew Hayes and Mr Wayne Marshall as joint and several receivers and managers of each of Gratory and EPACT. As result of these orders, it became unnecessary for Robert to press for final relief in these proceedings. He no longer needed access to the books and records of Gratory and EPACT to discharge his duties as a director of those two entities, as the companies’ operations were, by then, in the hands of the receivers and managers. Neither side now wishes to contest this litigation further. But Robert on the one side, and Eddy and Luisa on the other, cannot agree upon how the costs of the proceedings should be borne. Robert seeks an order that his cost be paid by Eddy and Luisa. In response, Eddy and Luisa submit that there should be no further costs orders made to the intent that the cost of the proceedings should lie where they have fallen.
3. Both sides accept that the applicable principle as to the allocation of costs in a case such as the present is the principle McHugh J identified in Minister for Ethnic Affairs (Commonwealth); ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (“Lai Qin”).
4. These proceedings are one component of a suite of litigation being conducted in this Court and the Supreme Court of the Australian Capital Territory among members of the Pastrello family after the death of their patriarch, Lorenzo Antonio Pastrello ("the deceased"). Aspects of the wider background to this family dispute is set out in my June 2024 judgment: Estate of Lorenzo Antonio Pastrello [2024] NSWSC 734 which should be read with these reasons.
5. In short, Eddy and Luisa brought proceedings in Probate and Succession list proceedings (being proceedings 2022/329340) raising issues about the administration of the deceased’s estate. In those proceedings Mr Mark Goodman was appointed as an independent administrator of the estate ("the administrator") on 31 May 2023.
6. Separately, Eddy and Luisa brought proceedings against Robert in relation to the conduct of the hotel and holiday park businesses of Gratory and EPACT, respectively (proceedings 2023/229489). In those proceedings, Lindsay J initially appointed Mr Hayes as a supervisor of Gratory's business operations. After a contested hearing in June 2024, I made orders appointing Mr Hayes and Mr Marshall as receivers of Gratory. Upon the filing of further evidence and the hearing of further submissions those orders were varied on 13 September 2024 to expand the receivership to include EPACT (which conducted the hotel business) as well as Gratory (which conducted the holiday park business on land adjacent to the hotel). This expansion occurred because the original objectives of cost efficiency in a receivership over Gratory alone could no longer be achieved. A receivership of both Gratory and EPACT was required.
7. Many of the issues confronting the receivers in their administration of the affairs of Gratory involved analysis of the accounts of business affairs of EPACT due to the close entanglement of the two business entities. After correspondence attempting to settle this costs issue, at the directions hearing held before the Court on 25 November 2024, the parties agreed upon a program of separate submissions to deal with this issue of costs in chambers.

Applicable legal principles

8. The parties did not contest the legal principles that apply to the present circumstances.
9. The exercise of the Court’s discretion to make an order when the parties have otherwise agreed on the outcome of the proceedings is informed by principles stated in two leading cases. The first is a statement by Hill J in Australian Securities Commission v Aust-Home Investments Limited [1993] FCA 585; (1993) 44 FCR 194 at 201; (1993) 116 ALR 523 (“Aust-Home”) at 530:

“(1) Where neither party desires to proceed with litigation the court should be ready to facilitate the conclusion of the proceedings by making a cost order ...
(2) It will rarely, if ever, be appropriate, where there has been no trial on the merits, for a court determining how the costs of the proceeding should be borne to endeavour to determine for itself the case on the merits or, as it might be put, to determine the outcome of a hypothetical trial ... This will particularly be the case where a trial on the merits would involve complex factual matters where credit could be an issue.
(3) In determining the question of costs it would be appropriate, however, for the court to determine whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them
(4) In a particular case it might be appropriate for the court in its discretion to consider the conduct of a respondent prior to the commencement of the proceedings where such conduct may have precipitated the litigation ...
(5) Where the proceedings terminate after interlocutory relief has been granted, the court may take into account the fact that that interlocutory relief has been granted ... [Footnotes omitted]”.

10. The second is the statement by McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622 at 624-5; [1997] HCA 6:

”In most jurisdictions today, the power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and as a general rule the successful party is entitled to his or her costs. Success in the action or on particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order. When there has been no hearing on the merits, however, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order.
In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.
...
Moreover, in some cases a judge may feel confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried.
...
If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings. [Footnotes omitted]”.

11. These principles have often been applied and were recently applied by the New South Wales Court of Appeal in Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84 and at first instance in Saravinovska v Saravinovski [2020] NSWSC 1232 at [51] and Estate of Bourke [2024] NSWSC 280.

The dispute in the proceedings – Robert’s perspective

12. Lai Qin makes clear that the Court should not embark on a mini trial of the proceeding to determine the costs outcome of proceedings which neither party wishes to pursue to finality. Rather the Court should undertake a short overview of the issues and the cases of each party that is sufficient to enable the Court to reach a determination on the questions of costs posed by Lai Qin.
13. Robert’s December 2023 Summons was accompanied by his affidavit of 19 December 2023 which has set out the background to his request for documents from Eddy and Luisa.
14. At all relevant times, Robert was a director of Gratory and EPACT together with the defendants, Eddy and Luisa. The working relationship between Robert on the one hand and Eddy and Luisa on the other, broke down no later than 2022, impairing the operation of both Gratory and EPACT. Robert claims in these proceedings that information coming to his attention about the affairs of EPACT and Gratory caused him to begin seeking documents from the defendants because he had been excluded from his role as director in the management of these companies. Robert claims that before he commenced these proceedings he was becoming concerned about the termination of an agreement between EPACT and Urban Stays Pty Ltd (“Urban Stays”), a company managing holiday rentals at at EPACT’s premises, about non-compliance with orders made by the local council relating to the premises and about the filing of tax returns for Gratory, which were said to be overdue.
15. Robert first requested documents (concerning the dispute with Urban Stays) on 23 February 2023. Between then and the commencement proceedings on 19 December 2023, Robert’s solicitors (Colquhoun Murphy – “CM”) corresponded with Eddy and Luisa’s solicitors (Assured Legal Solutions – "ALS"). This correspondence occurred on approximately fortnightly for about 10 months. Robert claimed to have had little satisfaction from this correspondence and says as a result that he commenced these proceedings. From a review of the correspondence it may be inferred that few documents were produced by Eddy and Luisa during this period and the correspondence is reflective of the wider hostile stand-off between these parties.
16. As a director of Gratory and EPACT, Robert claimed in this lengthy correspondence that he was entitled as of right to inspect and take copies of the books and records of the two companies. He undoubtedly holds such a right: Geneva Finance Ltd; Quigley (receiver and manager appointed) v Cook [1992] WASC 209; (1992) 7 WAR 496 (“Geneva Finance”) in which Owen J (as his Honour then was) comprehensively discussed the applicable authorities, Box v Gadsden Pty Limited [2003] NSWSC 748 per Austin J at [23] and Corporations Act 2001 (Cth) s 290. The evidence suggests that production of some the documents requested occurred over time but was still incomplete (at least according to Robert) at the time the proceedings commenced.
17. It is not necessary for the purposes of assessing the burden of costs on Lai Qin principles to canvass the detail of the evidence presented on these issues by the parties. The following general conclusions can be drawn from the material provided to the Court.
18. At the time of commencing proceedings, many of the documents sought in the Summons had not been produced. These documents include invoices relating to credit card expenses.
19. After the Summons was filed on 20 December 2023, Eddy and Luisa produced further documents pursuant to orders of the Court. These additional documents produced included AMEX statements and St George Visa statements. These were provided in February 2024. Further AMEX statements were provided in June 2024. How necessary, or even relevant these documents were to the potential directors’ task of preparing financial statements for Gratory and EPACT is uncertain. Neither this Court nor Robert can really determine that without examining what was produced.
20. This Court made orders in proceedings 2022/32934 (the estate proceedings) on 14 June 2024 requiring Eddy and Luisa to take all reasonable steps to prepare tax returns for EPACT. That meant Robert was thereafter relieved from undertaking the primary work associated with those tax returns and he dropped his claims for most of the other documents (which were mainly relevant to preparing tax returns). However, Robert still pressed for access to documents known as the “NewBook” electronic financial reports used in EPACT’s and Gratory’s business. In July 2024, Eddy and Luisa provided further invoices in support of payments made during the companies’ business made to suppliers and login details for gaining "read-only” access to the NewBook payment system.
21. Between 29 July 2024 and the Court’s orders on 13 September 2024, Robert complained about the adequacy of his access to the NewBook system, which he claimed did not work for him. In response, Eddy and Luisa alleged that he had adequate access to it and that he should not encounter difficulties. It is not possible for the Court to resolve which side of the dispute is correct. But the dispute was persistent, aggravating and was never satisfactorily resolved.
22. With this background, Robert submits that Eddy and Luisa's unreasonable conduct led Robert to commence the proceedings and that Robert had requested on no less than 17 occasions the provision of books and records concerning expenditure on the holiday park, the dispute with Urban Stays and access to the accommodation booking system run by EPACT. Robert submits that because Eddy and Luisa failed to produce the books and records throughout 2023 it was necessary for him to commence these proceedings. In short, he submits his conduct was reasonable and theirs was not. Their unreasonableness was the denial of his access to the books to which he was entitled at common law. He submits he was being excluded from access to those records deliberately. On this basis, Robert submits that Eddy and Luisa should pay his costs of the proceedings.

Eddy and Luisa's perspective

23. Eddy and Luisa seek to place this Summons in the context of the broader litigation between the parties. They point out that the dispute began in mid-2023 when Eddy discovered certain CCTV footage of Robert removing large bundles of cash from the hotel concealed in polystyrene food boxes. This led to Eddy commencing proceedings seeking an Anton Pillar order against Robert. Eddy and Luisa submit that Robert brought the present proceedings in retaliation for Eddy’s proceedings, noting that those proceedings are now being conducted by the receivers and managers on behalf of Gratory. Eddy and Luisa submit that Robert's motivation in bringing the present proceedings is to deflect attention from his mismanagement of the hotel by suggesting there was mismanagement by Eddy and Luisa of the affairs of the caravan park. Eddy and Luisa submit that Robert's motivation in bringing the proceedings for this collateral purpose is supported by the following further facts and matters about these proceedings:

(1) these proceedings are brought against Eddy and Luisa personally and not against EPACT;

(2) the relief claimed in these proceedings went beyond Robert’s entitlements as a director of Gratory and EPACT, which is only a right to inspect books of the companies: See Corporations Act 2001 (Cth), s 198F. They submit that the law is clear that 198F applications should not be used as a substitute for discovery: Walden v Foodco Group Pty Ltd [2009] NSWSC 45 at 16

(3) Robert did not demonstrate any real or legitimate need for the documents he requested and his justifications for seeking the documents, (a) about the solvency of EPACT had a "a hollow ring to them," because he had been responsible for the threat to that solvency and (b) he had not raised any genuine concerns about his access to such documents until Eddy and Luisa commenced proceedings.

(4) Eddy and Luisa had concerns about Robert misusing this material for example by communicating about it with with Urban Stays.

(5) Eddy and Luisa ultimately provided all the requested material to Robert and Robert’s access problems with NewBook were his own fault and not that of Eddy and Luisa.

(6) Some of the documents Robert was seeking were so old and out of date that they could not have been useful for any current purpose of EPACT or Gratory.

(7) Eddy and Luisa gave Robert many opportunities to end this litigation, offering to discontinue proceedings several times in June and July 2024 based on each party bearing their own costs, and then again in November 2024.

(8) Robert was slow to react to the expansion of the receivership in September 2024 by dropping proceedings.

24. In short, Eddy and Luisa submit that Robert should not have commenced these proceedings, they were misconceived, and they should have been ended much earlier. Eddy and Luisa submit that in all circumstances no costs orders should be made but if one is made. But if a costs order is to be made, it should be made against Robert.

Robert’s reply

25. Robert rejects the submission that these proceedings were retaliatory in nature. He points out that in significant pre-litigation correspondence he had been making request for access to documents relating to the holiday park since February 2023 and that Eddy and Luisa later commenced their proceedings ex parte in July 2023
26. Robert submits it was appropriate to join Eddy and Luisa as they were officers of EPACT and Gratory, so they would become personally responsible for providing the documents, which they ultimately did.
27. Robert reiterates, in reply, the effect of Geneva Finance: that there is no need for him to demonstrate a "need" for the documents being sought but that he has a common law right to them. This is put in answer to the case brought against him that Eddy and Luisa make that he did not really need the documents.
28. Robert submits that no weight can be given to Eddy and Luisa’s submission they had a concern about giving Robert access to documents concerning Urban Stays, in part because the documents were provided, apparently without any requests for particular reassurances about how they would be used.

Consideration

29. The Court concludes from the course of exchanges of correspondence between these parties that Robert was justified in commencing these proceedings and that he acted reasonably in doing so did so, because he moved to litigation only after a substantial number of unanswered requests for documents through generally patient correspondence. The fact substantial number of the documents were produced, and the circumstances in which they were produced in response to the 20 December 2023 Summons, is some evidence that Eddy and Luisa acknowledged by their conduct that the documents, did relate to the business affairs of our Gratory and EPACT and that Robert was entitled access to them. Thus, it can be inferred that Robert had a recently high probability of at least some, perhaps limited, success in the proceedings.
30. The Court is not persuaded that these proceedings can be explained merely by Robert acting in retaliation. The requests for documents had been commenced before Eddy and Luisa commenced their proceedings and the genuine nature of the requests for documents reduces the force of any argument based on retaliation. Moreover, the hostility created by the other proceedings was not a reason for Eddy and Luisa not to comply with the law and respond to Robert’s requests for these documents before Robert commenced these proceedings. Had they responded quickly to the initial requests these proceedings would probably not have been necessary and their failure to so respond was unreasonable.
31. There is no basis for finding that Eddy and Luisa had a genuine concern about giving Robert access to documents concerning Urban Stays, as that was not clearly articulated as a prime concern in correspondence at the time as justifying the non-supply of the documents. Had it been a central issue it could have readily been solved by seeking binding undertakings for the placing of the documents with third parties for access by Robert. The Court will make a costs order in Robert’s favour.
32. But the Court will not order make a full order for costs of the proceedings against Eddy and Luisa. These were not substantial proceedings and Robert’s claim for costs should be very modest. Robert should only have costs relating to a period in respect of costs which have been occasioned by Eddy and Luisa's unreasonable conduct and limited by reference to the extra costs occasioned by these proceedings. Many of the costs incurred by Robert in these proceedings overlap entirely with his appearance and other proceedings and should not be separately charged for on his behalf.
33. Moreover, the Court assesses that Eddy and Luisa could not have responded to these requests for documents immediately and that Robert should only have the benefit of costs in respect of part of the pre-trial correspondence. Moreover, after the proceedings were commenced there was something of a procedural stand-off involving this costs application in which both parties behaved reasonably and took reasonable argumentative positions. The Court will therefore order the parties to bear their own costs of the contest about costs.
34. But the Court will order Eddy and Luisa to pay personally the plaintiff's cost of the pre-trial correspondence from July 2023 up to the commencement of proceedings on 20 December 2023 and in the proceedings but concluding on 30 November 2024. No preparation for the present costs arguments will be allowed to either party. As these costs should be modest, if there is disagreement agreement about their quantum the Court will make a specified gross sum costs order under Civil Procedure Act 2005 s98(4)(c) upon application by either party.
35. For these reasons the Court makes the following orders and directions:

(1) ORDERS that the defendants pay the plaintiff's costs of these proceedings on the ordinary basis in respect of pre-trial correspondence from 1 July 2023 up until no later than 30 November 2024 and both before and after that period the parties shall otherwise bear their own costs of these proceedings, including the costs of this costs application;

(2) NOTES that it is Court’s expectation that

(a) when any costs assessment takes place counsel and solicitors should not charge separately in these proceedings for any appearances in Court or other occasions in which counsel and solicitors represented Robert at the same time in other proceedings; and

(b) the overall costs of these proceedings should otherwise be modest given their subject matter and the proper application of Civil Procedure Act 2005 s 60.

(3) GRANTS liberty to the parties to apply to the chambers of Slattery J for a specified gross sum costs order under Civil Procedure Act 2005 s 98(4)(c) if they cannot agree about the quantum of costs.

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Amendments

18 February 2025 - Amendment to [7] to clarify second sentence.

Amendment to [23(3)] deleted unnecessary words

Amended [25] typographical error