Torc Solutions Pty Ltd v Unex Corporation doing business as Hytorc (No 2)

Torc Solutions Pty Ltd v Unex Corporation doing business as Hytorc (No 2) [2025] FCA 1648 is a post-judgment costs decision of the Federal Court. The underlying commercial claims had already been dismissed. The applicant company then went into voluntary liquidation, and the successful respondents sought to recover their costs in a practical way.

The court drew a clear line between two different forms of costs relief. It was prepared to make a lump sum costs order against the applicant company and allow security for costs already held in court to be paid out. But it was not prepared, on the material before it, to make related individuals and entities personally liable for the balance through a non-party costs order. That distinction is the main commercial significance of the case.

The dispute arose out of a commercial distribution relationship. Torc Solutions was established in 2016 to enter into a Distributor Agreement with Torc LLC. It later became a party to a Branded Product Distribution Agreement with Hytorc. That branded product agreement was entered into on 6 May 2021 and terminated on 1 March 2022.

The reasons say the broader dispute concerned the circumstances in which Hytorc announced the closure of Torc LLC and the way the earlier Distributor Agreement came to an end and was replaced by the Branded Product Distribution Agreement. In December 2022, Torc Solutions sued, alleging misleading and deceptive conduct, economic duress and unconscionable conduct.

The litigation was not straightforward. The trial was initially set down for March 2024. After an application to amend the statement of claim, it was adjourned and scheduled to resume in July 2024. It did not proceed then, and the hearing later resumed for four days in December 2024 and concluded over two hearing days in March 2025. On 12 September 2025, the court dismissed the applicant’s claims in the substantive judgment. Torc Solutions then went into voluntary liquidation and was being wound up.

That insolvency context set up the costs fight. The respondents had won, but the applicant company was now in liquidation. So the respondents sought a practical recovery outcome, including access to security for costs already held in court and an order that related non-parties pay the shortfall.

By interlocutory application dated 17 October 2025, the respondents sought two main forms of relief. First, they wanted a fixed lump sum costs order in an amount capable of satisfaction from funds held in the Court’s Litigants’ Fund as security for costs. Secondly, they wanted the balance of their costs paid by non-parties, including on an indemnity basis, with quantum to be fixed by a Registrar if not agreed.

The non-parties originally named were AEC Developers Pty Ltd and ACASE Pty Ltd, as shareholders of the applicant, Andrew Case, Adrian Case, Rowena Case and Michelle Case. Before the hearing, the application against Rowena Case and Michelle Case was abandoned. The remaining non-parties were joined for the purpose of the interlocutory application and opposed the costs orders sought against them.

The respondents argued that the applicant was impecunious and that, without a non-party costs order, they would be left unable to recover a significant part of their costs. They also argued that the applicant was the moving party in the litigation and that the non-parties had a sufficient connection to the proceeding because they were shareholders, controllers, funders and decision-makers behind the applicant company.

The respondents also relied on the way the case had been run. They pointed to multiple causes of action, some abandoned claims, several rounds of pleading amendments, an amendment shortly before trial that led to an adjournment, and reliance on an expert report on quantum that was ultimately ruled inadmissible. They said warning letters and settlement offers had put the non-parties on notice of the risks of continuing the litigation.

The central question was not whether the respondents had won the case. That had already been decided in the earlier merits judgment. The real issue was how far the court should go in helping the successful respondents recover their costs after the applicant company had gone into liquidation.

Under section 43 of the Federal Court of Australia Act 1976 (Cth), the court has power to make costs orders, including against non-parties. The reasons discuss the established authorities on non-party costs orders, including the idea that the ordinary rule is that costs are ordered against parties, not outsiders, but that justice may justify a different result where there is a sufficient connection between the non-party, the unsuccessful litigant and the litigation.

The court referred to the general category identified in Knight v FP Special Assets Ltd, namely circumstances where the litigating party is insolvent or a person of straw, the non-party has played an active part in the conduct of the litigation, and the non-party has an interest in the subject matter of the litigation. The court also referred to later authority emphasising that there is no rigid checklist and that the key question is whether the connection is sufficient and whether making the order would be fair in all the circumstances.

The reasons also address indemnity costs and lump sum costs. The ordinary rule is party and party costs, with indemnity costs requiring some special or unusual feature justifying departure from that rule. Lump sum costs orders are discretionary and are often used to avoid the delay, expense and aggravation of a detailed costs assessment. In this case, the court had to decide whether a lump sum order was appropriate and whether the stronger step of making non-parties liable was justified.

Several features of the case were important. First, the respondents made significant concessions. They conceded that the applicant’s claims were not baseless. They also conceded that the claims were not brought unreasonably and were not an abuse of process. Those concessions mattered because they undercut any suggestion that the litigation was obviously hopeless or improperly brought from the outset.

Secondly, the respondents accepted that it was not until February 2024, more than 12 months after the proceeding was commenced, that the applicant became unable to fund the proceeding itself. The evidence referred to by the court was that the applicant had about $630,000 in various bank accounts in December 2022 when the proceeding began. The court said this was not a case where non-parties chose to launch proceedings through an impecunious applicant from the start.

Thirdly, the court accepted that Andrew and Adrian Case were both responsible for providing instructions and controlling the direction of the proceeding. They both gave evidence, agreed to be personally liable for the applicant’s legal costs to its solicitors, and through their entities contributed roughly equal amounts to fund those costs. Even so, the court said that where a company has a sole director, it is often easy to connect the conduct of the proceeding with that director, but that fact alone is not enough. Causing a company to issue or continue proceedings may still be consistent with a director’s duties to the company.

Fourthly, the court gave real weight to the Exclusivity claim. That claim was part of the case from the beginning and was settled on 9 July 2024 under a deed of settlement. The respondents acknowledged they had failed to provide adequate discovery in relation to that claim and only corrected the deficiency in late June 2024. The court inferred from the deed that the claim had some commercial value to the applicant and that its resolution also had value to the respondents. The court said the deed vindicated the applicant’s decision to commence and pursue the proceeding, at least in respect of that claim.

That point was especially important because the respondents argued, in substance, that the non-parties should have appreciated the risks of continuing the litigation. The court was not persuaded that fairness supported a non-party costs order from the commencement of the proceeding, from any point before the Exclusivity claim was resolved, or even after July 2024. By then, the trial had already commenced and most of the lay and expert evidence had been filed.

The court also noted that the remedy for exposure to costs from a claim brought by an impecunious applicant is security for costs. The respondents argued that the security obtained had been inadequate from the start. The court said their remedy was to seek further security. The availability of security for costs at earlier stages was a relevant consideration against making non-parties liable later.

The court made orders joining Andrew Case, Adrian Case, AEC Developers Pty Ltd and ACASE Pty Ltd to the proceeding for the purpose of the interlocutory application. It then ordered the applicant to pay a portion of the respondents’ costs fixed in the sum of AU$335,000. The court also ordered that AU$290,000 held in the Litigants’ Fund be paid to the respondents’ solicitors’ trust account in satisfaction of the applicant’s obligation under that lump sum costs order.

However, the application was otherwise dismissed. On the face of the orders and reasons available, that means the respondents did not obtain the non-party costs order they sought against the related individuals and entities. The judge said there were not sufficient factors to warrant a departure from the ordinary rule that the parties should bear the costs of the proceeding.

The reasons then move into indemnity costs, including reference to rule 25.14(2) of the Federal Court Rules 2011 (Cth), but the available text is truncated at that point. So while the catchwords show that the respondents sought payment of the balance of their costs by non-parties, including on an indemnity basis, the complete reasoning and any final position on indemnity costs should be checked in the full judgment.

For business owners, this case is best read as a costs architecture decision. It shows that a successful party can still obtain meaningful costs recovery against a losing company even if that company later goes into liquidation. A lump sum order can be made, and security for costs already paid into court can be released. That is commercially significant because it can avoid a long and expensive costs assessment process and give the successful party immediate access to at least part of its recovery.

At the same time, the case shows that courts do not automatically move from company liability to personal or related-entity liability. Directors, shareholders and associated entities may fund the case, control instructions and stand to benefit if the company wins, but that does not by itself make them liable for the other side’s costs. The court still asks whether the connection is sufficient and whether fairness justifies the order.

That fairness assessment can be influenced by practical litigation facts. Here, the applicant could fund the case when it started. The claims were conceded not to be baseless, unreasonable or abusive. One claim had enough substance to be settled after the respondents acknowledged deficient discovery. Those features made it harder to characterise the non-parties as having used an empty shell company to run an unfair or hopeless case.

For SMEs, the practical message is to manage costs risk from the beginning of a dispute. If your company is bringing a claim, think early about solvency, funding, security for costs, settlement strategy and who is actually directing the litigation. If you are defending a claim against an undercapitalised company, consider whether security for costs should be sought or increased rather than assuming a later non-party costs order will fill the gap.

The costs judgment was delivered on 19 December 2025. It followed the earlier merits judgment delivered on 12 September 2025. The reasons state that the proceeding was commenced in December 2022, that the Branded Product Distribution Agreement was entered into on 6 May 2021 and terminated on 1 March 2022, and that the Exclusivity claim was settled on 9 July 2024.

The court also ordered further written submissions by 13 February 2026 on the costs of the costs application itself. This page does not confirm whether any later order was made on that separate issue.

This page explains a Federal Court costs judgment: Torc Solutions Pty Ltd v Unex Corporation doing business as Hytorc (No 2) [2025] FCA 1648. It should be read together with the earlier merits judgment cited in the reasons as Torc Solutions Pty Ltd v Unex Corporation doing business as Hytorc [2025] FCA 1124 if you need the full story of the underlying commercial dispute and the court’s findings on the substantive causes of action.

The available reasons are incomplete in the indemnity costs section. Because of that, any statement about the final indemnity costs position should be checked against the complete judgment and any later orders dealing with the costs of the costs application.