Michael Wilson & Partners Ltd v Cronan

This proceeding sat within a much larger and older commercial conflict. MWP said it had been wronged by Robert Nicholls, David Slater and John Emmott, had become a judgment creditor of Nicholls and Slater, and had then funded aspects of the administration of their bankrupt estates. It alleged that insolvency practitioners involved in those estates had agreed that MWP’s funding would be repaid from future assets and realisations ahead of unsecured creditors.

MWP then sued four Australian insolvency practitioners. Against Cronan and Van Der Velde, it alleged failures in the administration of the Nicholls estate. Against Porter and Moretti, it alleged failures in the administration of the Slater estate. The pleaded causes of action, as summarised by the court, included negligence, breaches of equitable and common law duties, breaches of duties under the Bankruptcy Act, breach of contract, and a broader allegation of wrongful and fraudulent conspiracy and collusion to injure MWP.

That is the commercial backdrop. But the judgment at [2025] FCA 1588 did not finally decide whether those allegations were made out. Instead, the respondents brought an interlocutory application asking the Federal Court to step in and control the proceeding itself. That shifted the focus from the merits of the pleaded claims to the conduct of the litigation, the role of MWP’s solicitor, earlier unpaid costs, and whether the court should require security for costs and impose limits on future related proceedings.

The judgment gives a broad overview of MWP’s claims. For the Nicholls estate, MWP alleged that before 16 February 2015 it agreed with Cronan and Van Der Velde that they would accept appointment as trustees, MWP would fund part of their fees and disbursements, and that the funding would be repaid from future assets and realisations before any distribution to unsecured creditors. MWP also alleged that the funding would be treated as an administration expense for the purposes of section 109 of the Bankruptcy Act. It then alleged that the trustees failed properly to administer the estate and were negligent, breached duties and breached contract.

For the Slater estate, MWP alleged a similar structure. It said it agreed with UK trustee Julie Palmer that she would accept appointment and that MWP would fund part of her fees and disbursements. It also alleged that before 16 August 2016 it agreed with Porter and Moretti, as local representatives in Australia, that MWP would fund part of their fees and disbursements and be repaid from future assets and realisations before unsecured creditors. MWP alleged that Porter and Moretti later failed properly to administer the estate and acted negligently, in breach of duties and in breach of contract.

The judgment also records a pleaded allegation that the respondents had wrongfully and fraudulently conspired and colluded with Emmott to injure MWP and cause it to incur large costs. The court noted that allegations made by Mr Wilson on behalf of MWP against the respondents’ legal representatives were strenuously denied, and that the way those allegations were cast was central to much of the interlocutory application.

So the underlying dispute involved alleged funding arrangements, repayment priority, insolvency administration, and serious accusations about conduct. But the application before Goodman J was narrower and more immediate. The respondents wanted the court to manage the litigation risk created by the way the case was being run.

The central question was not whether MWP would ultimately win its substantive claims. The question was whether the court should make protective and case-management orders because of the conduct of the proceeding and the litigation history between the parties.

The catchwords show that the court considered two main procedural tools. First, the court considered its implied jurisdiction to restrain a solicitor from acting. The conduct identified in the catchwords included tendentious correspondence to the court, intemperate communications with other solicitors, affidavits containing scandalous allegations and irrelevant material, conduct in court falling short of expected standards, and including legally represented respondents in communications.

Second, the court considered section 37AO of the Federal Court of Australia Act 1976 (Cth), which deals with vexatious proceedings. The catchwords state that the court held MWP had engaged in vexatious proceedings. But the court still had to decide what relief should follow from that finding. The respondents had sought dismissal or a stay, payment of earlier costs, security for costs, and a broader order preventing future related proceedings without leave.

The court also separately considered security for costs. The extract states that MWP was resident in the British Virgin Islands, there was no evidence of assets in Australia, and MWP had failed to pay costs assessed under previous orders of the Federal Court and the High Court in favour of Porter and Moretti. Those facts made security for costs and payment of earlier costs a live issue.

Goodman J made targeted interlocutory orders. The court restrained Mr Michael Earl Wilson from acting for MWP in this proceeding. The court also restrained him from acting for MWP in any proceeding in the Federal Court, whether in MWP’s name or in the name of any other person, against Mr Porter or Mr Moretti and relating to or in any way connected with the bankrupt estate of Mr David Slater, unless leave of the court was first obtained.

The judgment is important for what it did not do as well as what it did. The catchwords state that the court held MWP had engaged in vexatious proceedings, but a vexatious proceedings order was not made because a lesser order would suffice. The court therefore did not make the broadest form of future filing restraint sought. It also did not dismiss the present proceeding. Instead, it chose narrower controls directed at the solicitor’s role and future related proceedings involving Porter and Moretti and the Slater estate.

The court further ordered that within 21 days MWP provide security for the respondents’ costs of the proceeding in the sum of $225,000 by paying that amount into court, and pay to the third and fourth respondents $74,984 due under earlier orders of the Federal Court and the High Court of Australia. The proceeding was stayed pending provision of both amounts.

The respondents’ amended interlocutory application was otherwise dismissed. MWP was ordered to pay the respondents’ costs of that application, with those costs to be quantified on a lump sum basis by a registrar acting as referee under a timetable to be set by the registrar.

One of the clearest practical themes in the judgment is that courts look closely at how a case is documented and communicated. The catchwords identify several categories of conduct that concerned the court: tendentious correspondence to the court, intemperate communications with other solicitors, affidavits containing scandalous allegations and irrelevant material, conduct in court falling short of expected professional standards, and including legally represented respondents in communications.

For a business owner, those points are not just lawyer etiquette. They affect cost, timing, credibility and the court’s confidence in the party’s case management. If affidavits are overloaded with irrelevant material or accusations that go beyond what is necessary and supportable, the court may see the proceeding as being used in a way that burdens the administration of justice. If correspondence becomes inflammatory or undisciplined, it can undermine the party’s position even before the merits are tested.

The judgment also shows the importance of prior litigation history. The respondents relied not only on what was happening in this proceeding, but also on earlier costs orders that remained unpaid. Once a party has a history of repeated disputes, procedural defaults or unpaid costs, those matters can shape how the court manages the next case.

Businesses should therefore think about litigation conduct as part of risk management. That means checking that allegations are necessary and supportable, keeping affidavits focused on relevant facts, ensuring represented parties are contacted through proper channels, and monitoring whether the tone of the case is helping or harming the commercial objective.

The security for costs aspect of the decision is especially important for overseas businesses and companies with limited Australian assets. The extract states that MWP was resident in the British Virgin Islands and there was no evidence of assets in Australia. It also states that MWP had failed to pay costs assessed under previous orders of the Federal Court and the High Court in favour of Porter and Moretti.

Those facts supported two practical outcomes. First, MWP was ordered to pay the earlier costs amount of $74,984. Second, it was ordered to provide $225,000 security for the respondents’ costs by paying that amount into court. The proceeding was then stayed until both amounts were provided.

For businesses, this is a concrete reminder that adverse costs exposure does not sit in a separate box from the merits of the case. If your company is based overseas, has no obvious Australian assets, or has not paid earlier costs orders, the other side may seek security for costs and a stay. That can create immediate cash flow pressure and may force a strategic rethink.

If your business is considering litigation in Australia, especially repeated or related litigation, ask early whether security for costs is likely. If the answer may be yes, plan for it. Waiting until the order is made can leave the business scrambling to fund the case or facing a stay that shifts leverage to the other side.

This case should be read as a litigation conduct decision with real commercial consequences. It does not tell businesses that funding arrangements with insolvency practitioners are invalid, or that MWP’s underlying claims necessarily lacked merit. What it does show is that a court may intervene strongly where the conduct of the proceeding itself becomes a problem.

There are several practical reading points. First, if your business is relying on a claimed priority right to repayment from an insolvency administration, make sure the arrangement is clearly documented and that your legal theory is carefully framed. Second, if your dispute has a long history across multiple proceedings, assume the court will look at that history when deciding procedural applications. Third, if your business has been ordered to pay costs in earlier matters, treat those orders as urgent and strategic, not administrative. Fourth, supervise your legal team closely enough to understand the tone, evidence and procedural posture of the case.

Most importantly, remember that courts can choose targeted remedies. Here, the court did not make the broadest order available even after holding that MWP had engaged in vexatious proceedings. Instead, it made narrower restraint orders, required payment of earlier costs, ordered security for costs, and stayed the proceeding until those financial conditions were met. That is a useful reminder that procedural outcomes can be calibrated, but still severe.

Was this a final win for the respondents? Not on the underlying commercial claims. It was a significant interlocutory win on procedure, representation and costs protection.

Did the court ban MWP from ever suing again? No. The court made a narrower order requiring leave before Mr Michael Earl Wilson could act for MWP in certain future Federal Court proceedings against Porter or Moretti connected with the Slater estate.

Does a finding of vexatious proceedings always lead to the broadest possible order? No. This case shows the court may decide that a lesser order is enough.

Why does this matter to a business that is not a law firm? Because the same procedural risks apply to any company in litigation. Poor conduct, unpaid costs and weak process discipline can trigger orders that affect cash flow, timing and legal representation.