Davis-Jacenko v Roxy's Bootcamp Pty Limited

CONSIDERATION

1. The principles that apply in determining whether or not a winding up order should be made on the just and equitable ground in s 461(1)(k) of the Corporations Act were summarised by me at [15] and [16] of the Earlier Judgment by reference to what was said in Deputy Commissioner of Taxation v A & S Services Pty Ltd [2017] FCA 437, by Davies J at [5] and in Australian Securities & Investments Commission v Austimber Pty Ltd [1999] FCA 566; (1999) 17 ACLC 893, by Merkel J at [5].
2. I have also been referred to the judgment in Re Hardy Bros Equipment Pty Ltd [2021] NSWSC 1693, where Black J at [6] set out a useful summary of the principles relevant to determining whether a company should be wound up on the just and equitable ground pursuant to s 461(1)(k) of the Corporations Act. I endorse his Honour's summary of those principles and their application to the present case.
3. None of those principles are in issue in this case.
4. Applying those principles, the conclusion that I reached in the Earlier Judgment at [18(1)] by reference to 13 matters was that there was a basis to: 1. consider that it would be highly likely that an order would be made to wind up the Company on the just and equitable ground; and 2. conclude that there was a justifiable lack of confidence in the conduct and management of the Company.
5. No submissions have been made on behalf of any of the parties before me to the effect that any of the matters set out at [18(1)] of the Earlier Judgment are the subject of contest between them.
6. It is abundantly clear to me that the present case remains one in which there has been a complete and irretrievable breakdown of the relationships between each of the principals of the Company, being Ms Davis-Jacenko, Mr Tleis and Mr Alaouie. Mr Alaouie appears to have conducted himself in the interests of Salameh Investments, a company with which he is associated and which is owned and controlled by his wife, Amani Salameh.
7. For these reasons, I am of the view that the Company should be wound up on the just and equitable basis.
8. I have before me evidence of the consent of the present provisional liquidators, Messrs Blundell and Cathro, to be appointed and to act as the joint and several liquidators of the Company.
9. In the present case there is no evidence of the advertising of the application to wind up the Company as required by s 465A(1)(c) of the Corporations Act or that notice of the application has been lodged with the Australian Securities and Investments Commission, as required by s 465A(1)(a) of the Corporations Act. Ms Davis-Jacenko seeks an order pursuant to s 467(3)(b) of the Corporations Act dispensing with any notices being given or steps being taken as required by the Corporations Act or by the rules of court.
10. I am satisfied that this is an appropriate case in which to dispense with these notice and advertising requirements.
11. The Reports on Company Activities and Property (ROCAP) that have been lodged with the provisional liquidators by each of Ms Davis-Jacenko and Mr Tleis have identified that the principal creditors of the Company are those who are parties to the proceedings before me, namely, Ms Davis-Jacenko, Mr Tleis and Yazbeck Law, the solicitors who are acting for each of Tleis Investments and Salameh Investments. I am satisfied that there is no realistic prospect of any creditor of the Company opposing the winding up application. The principal creditors identified in each ROCAP have already indicated their consent to that order. There is also nothing known about the extent (if any) that the Company owes liabilities to the Australian Taxation Office, as stated in the ROCAP lodged by Mr Tleis.
12. Accordingly, I do not consider that any substantive purpose could be achieved by compliance with the notice and advertising requirements in the present case: Carter v New Tel Ltd (2003) 44 ACSR 661; [2003] NSWSC 128, Austin J at [23]; In the matters of Seedz Investments Pty Ltd, Snap Fitness Double Bay Pty Ltd, Yelneh Industries Pty Ltd and Fitness Management Pty Ltd [2017] NSWSC 650, Gleeson JA at [17]-[19]; In the matter of A Twins Spare Parts Pty Ltd [2020] NSWSC 156, Gleeson J at [11].
13. In the circumstances, I also consider that this is an appropriate case in which I should make a declaration regarding the irretrievable breakdown of the relationship between the members of the Company, together with the orders for the winding up of the Company and the appointment of liquidators to the company.

Submissions

1. At the hearing before me, Ms Davis-Jacenko submitted that I ought to depart from the usual position as to costs and order that the two other shareholders of the Company, Tleis Investments and Salameh Investments, pay her costs on an indemnity basis.
2. In support of this position, oral submissions were made to the following effect: 1. Up until 28 June 2024 (when Tleis Investments and Salameh Investments indicated that they did not oppose the application to wind up the Company), Messrs Tleis and Alaouie had conducted themselves so as to generate the impression that they would, as a matter of course, oppose Ms Davis-Jacenko's application. 2. Messrs Tleis and Alaouie sought to avert the winding up of the Company in an effort to preserve their reputations. 3. In doing so, Messrs Tleis and Alaouie placed their own interests above the Company's interests.
3. In opposing the application for indemnity costs, it was submitted on behalf of Tleis Investments and Salameh Investments that costs should be dealt with by an order in accordance with s 466(2) of the Corporations Act, such that Ms Davis-Jacenko's ordinary costs will be paid out of the property of the Company. It was said that the opposition to the winding up application occurred in circumstances where Messrs Tleis and Alaouie considered that their interests and the Company's interests were aligned because proceeding with the prize draw and the awarding of prizes was in the best interests of the Company and their interests. It was said that, on the other hand, having a liquidator appointed to the Company was going to destroy any chance, and did destroy any chance, of the prize draw being conducted. For these reasons, it was submitted that taking this view did not mean that Tleis Investments and Salameh Investments have done something untoward or improper in conducting the proceedings in the way they have.

Legal principles and consideration

1. Section 466(1) and (2) of the Corporations Act states: (1) The persons, other than the company itself or the liquidator of the company, on whose application any winding up order is made must, at their own cost, prosecute all proceedings in the winding up until a liquidator has been appointed under this Part. (2) The liquidator must, unless the court orders otherwise, reimburse the applicant out of the property of the company the taxed costs incurred by the applicant in any such proceedings.
2. I also have a broad discretion in respect of costs under s 98 of the Civil Procedure Act 2005 (NSW).
3. The Court of Appeal of this court recently reviewed and summarised the principles governing the discretion to award costs on an indemnity basis based on the conduct of a party in Cappello v HomeBuilding Pty Ltd [2023] NSWCA 109. In Cappello, Mitchelmore JA (with whom Simpson AJA and Meagher JA agreed) at [46]-[48] observed: [46] The Court has a discretion to award costs on an ordinary or indemnity basis. Usually costs will follow the event, unless the Court considers that some other order ought to be made: Civil Procedure Act 2005 (NSW), s 98; Uniform Civil Procedure Rules 2005 (NSW), r 42.1; Collier v Country Women's Association of New South Wales [2018] NSWCA 36 at [116] ("Collier"). [47] For an order of indemnity costs to be made, the conduct of the party against whom such costs are sought must usually exhibit some special or unusual feature: Collier at [117]. The focus is on the way the litigation was conducted: Mead v Watson [2005] NSWCA 133 at [8]-[9]. For example, the discretion may be enlivened where a party persists in what should have been seen to be a hopeless case, such as where the case was unduly prolonged by groundless contentions: Ferella at [36]; Liverpool City Council v Estephan (Executor and Administrator of the Estate of the late Jocelyn Estephan and Ors) [2009] NSWCA 161 at [93] ("Liverpool City Council"). It has also been said that indemnity costs may be awarded where the unsuccessful party's conduct was unreasonable or delinquent: Amirbeaggi v Matrix Group Co Pty Ltd [2021] NSWCA 21 at [18]. [48] The categories of circumstances in which the discretion may be exercised are not closed: Liverpool City Council at [93]. Ultimately, the question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on the ordinary basis: Liverpool City Council at [93].
4. Applying these principles, I do not consider that Ms Davis-Jacenko is entitled to payment of her costs on an indemnity basis. In my assessment, Tleis Investments and Salameh Investments opposed the application seeking the appointment of provisional liquidators to the Company in an attempt to protect their reputations and that of the Company because of the looming prize draw. There is a basis for them to have considered that this was in the best interests of the Company, as well as their own interests. Subsequently, upon the appointment of provisional liquidators to the Company, they have altered their position and consented to the appointment of a liquidator. This change of position is explicable because whatever reputational damage contemplated by Messrs Tleis and Alaouie was then done, especially when the prize draw did not take place. But it does not mean that they engaged in unreasonable conduct. Certainly, this was not "unreasonable conduct" in the context of the proceedings exhibiting some special or unusual feature or delinquency in the sense described in Cappello. The decision to reverse their position was not unreasonable, it was explicable and it was a forensic decision they were entitled to make.
5. I am not satisfied that the circumstances justify an award of indemnity costs in favour of Ms Davis-Jacenko. Accordingly, in my opinion the default position as dictated by 466(2) of the Corporations Act should apply.

ORDERS

1. For the reasons set out above, I propose to make the following orders: 1. Declare that the relationship between the members of the first defendant, Roxy's Bootcamp Pty Ltd ACN 674 872 872, has irretrievably broken down. 2. Order pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) that the first defendant, Roxy's Bootcamp Pty Ltd, be wound up. 3. Note the consent of Andrew Blundell and Simon Cathro of Cathro & Partners Pty Ltd to be appointed as liquidators of the first defendant, Roxy's Bootcamp Pty Ltd, dated 23 June 2024. 4. Order that Andrew Blundell and Simon Cathro of Cathro & Partners Pty Ltd be appointed as liquidators of the first defendant, Roxy's Bootcamp Pty Ltd. 5. Order that the plaintiff's costs are to be paid pursuant to s 466(2) of the Corporations Act 2001 (Cth).

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