Doughty v Abboud

Judgment 1By Originating Process filed on 23 May 2014, the Plaintiffs, Eureka Multimedia Pty Ltd ("Eureka Multimedia") and Nodtronics Pty Ltd ("Nodtronics"), seek an order that David Ireland Productions Pty Ltd ("Company") be wound up under ss 459A, 459P, 461(1)(k), 462 and 472 of the Corporations Act 2001 (Cth). An alternative basis of the application, that the Company be wound up under s 461(1)(e) of the Corporations Act, was not pressed at the hearing. The Originating Process also sought an order that the Plaintiffs' costs of the proceedings be costs in the winding up of the Company. 2The First Plaintiff, Eureka Multimedia, is one of two shareholders in the Company and holds half of its issued shares. The Second Plaintiff, Nodtronics, claims to be a creditor of the Company although I will refer to a dispute as to its status as a creditor below. Eureka and Nodtronics are both controlled by Mr Anthony Alevras, one of the directors of the Company. The other shareholder in the Company is Aquapro Australia Pty Ltd ("Aquapro"), which holds half of its issued shares and is controlled by Mr David Ireland, the other director of the Company. 3The Originating Process was served on Mr Ireland and on Aquapro, but they were not joined as Defendants to the proceedings. I granted leave for Mr Ireland and Aquapro to be heard in opposition to the application under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), and granted leave for Mr Ireland to appear on behalf of Aquapro, notwithstanding that the requirements of r 7.2(2) of the Uniform Civil Procedure Rules 2005 (NSW) had not been satisfied in that respect. I drew Mr Ireland's attention to the fact that he might potentially be liable for an order for costs in respect of the application and he nonetheless elected to continue with his and Aquapro's opposition to the application. Claim for winding up on the just and equitable ground 4The Plaintiffs sought the winding up of the Company on the basis, first, that it was just and equitable that the Company be wound up due to a breakdown in the relationship between its principals, for the purposes of s 461(1)(k) of the Corporations Act. Section 462 sets out the classes of persons who may apply for a winding up order under s 461 which include a creditor of the company and a contributory. Eureka Multimedia, as a contributory of the Company, has standing to bring the winding up application. It is therefore not necessary to determine whether Nodtronics has such standing on the basis of its claim to be a creditor of the Company. 5Section 461(1)(k) of the Corporations Act permits the Court to make a winding up order where it is of the opinion that it is just and equitable that a company be wound up. In Thomas v Mackay Investments Pty Ltd (1996) 22 ACSR 294 at 300, Owen J observed that an order for winding up can be made where a personal relationship necessary for the continuation of the company's affairs had broken down, as follows: "Where there is a breakdown in a relationship of mutual trust and confidence which was the foundation of an understanding by which the operations of the company were to be governed the court can order that the company be wound up. These have become known as the quasi-partnership cases. The reference to partnership can be misleading. The company is just that, a corporate structure. It is not necessary to show that any partnership agreement or deed was entered into before the principle can be invoked." The terminology of "quasi-partnership" can be misleading and this issue can alternatively be approached by reference to whether the business required material cooperation and a level of trust: MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 at [71]; Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [77]-[79]. 6The Plaintiffs also referred to the summary of those principles by Barrett J (as his Honour then was) in Doughty v Abboud [2010] NSWSC 721 at [218]-[228] and to my summary of those principles in Re Amazon Pest Control Pty Ltd [2012] NSWSC 1568 at [17]-[19] as follows: "Although the circumstances in which such an order can be made are not closed or rigid, they include circumstances where a company was formed on the basis of a personal relationship involving mutual confidence and that confidence has broken down so that continuation of that association would be futile: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd [2001] NSWCA 97; (2001) 37 ACSR 672; Accurate Financial Consultants Pty Ltd v Koko Black Pty Ltd [2008] VSCA 86; (2008) 66 ACSR 325 at [119]; Nassar v Innovative Precasters Group Pty Ltd [2009] NSWSC 342; (2009) 71 ACSR 343 at [90], [96], [117]. Such an order may more readily be made where a company is in the nature of a quasi-partnership and there has been a loss of trust and confidence in respect of the entities: Ebrahimi v Westbourne Galleries Ltd [1973] AC 360. It has been suggested that the language of "quasi-partnership" can be misleading and this issue is better approached by reference to whether the Company is "a majority controlled business requiring material cooperation and a level of trust": MMAL Rentals Pty Ltd v Bruning [2004] NSWCA 451; (2004) 63 NSWLR 167 at [71]; Nassar v Innovative Precasters Group Pty Ltd above at [77]-[79]. ... A breakdown of relations or loss of confidence between a company's members may also support a winding up on the just and equitable ground where it frustrates the commercially sensible operations of the company in accordance with the incorporator's expectations and any loss of confidence is justified: Tomanovic v Argyle HQ Pty Ltd [2010] NSWSC 152 at [49]-[51], on appeal as Tomanovic v Global Mortgage Equity Corporation Pty Ltd [2011] NSWCA 104; (2011) ACSR 121. The Court may make a winding up order under s 461(1)(k) of the Corporations Act in circumstances that do not amount to oppression, although a person who is themselves responsible for the breakdown of the relationship is less likely to be afforded relief: Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd above; Nassar v Innovative Precasters Group Pty Ltd above at [90], [96], [117]. A winding up order in these circumstances is not "lightly made" and must be "just and equitable not just for the applicant, but for all": Re G Jeffrey (Mens Store) Pty Ltd (1984) 9 ACLR 193; Byrne v AJ Byrne Pty Ltd [2012] NSWSC 667 at [81]." 7In Re Amazon Pest Control above at [22], I also noted that the Court may withhold a winding up order where a plaintiff lacks clean hands or has himself or herself been the primary contributor to the breakdown of the relationship but also observed that: "... even if a lack of clean hands were established, it is not an absolute bar to a winding up order because, as Santow J pointed out in Ruut v Head above at 162, otherwise neither party could obtain a winding up order where both were at fault. In Duc v PTS Australian Distributor Pty Ltd [2005] NSWSC 98 at [17], Barrett J referred to Ruut v Head and noted that the respective contributions to the breakdown should be assessed in determining what is just and equitable; and observed that a degree of fault on the part of the applicant in that case, viewed in the context of the fault of the other shareholder, should not deter the Court from making an order for winding up so as to address the deadlock in the Company's affairs." 8It is also necessary to have regard to s 467(4) of the Corporations Act which provides that: "(4) Where the application is made by members as contributories on the ground that it is just and equitable that the company should be wound up or that the directors have acted in a manner that appears to be unfair or unjust to other members, the Court, if it is of the opinion that: (a) the applicants are entitled to relief either by winding up the company or by some other means; and (b) in the absence of any other remedy it would be just and equitable that the company should be wound up; must make a winding up order unless it is also of the opinion that some other remedy is available to the applicants and that they are acting unreasonably in seeking to have the company wound up instead of pursuing that other remedy." This section requires the Court to make a winding up order in that situation, unless it is of the opinion that some other remedy is available to the Plaintiffs and they are acting unreasonably in seeking to have the Company wound up instead of pursuing that other remedy. The evidence as to the Company's affairs 9The Plaintiffs rely on two affidavits sworn by Mr Alevras filed in the application, and Mr Alevras was cross-examined by Mr Ireland. The Plaintiffs also tendered several documents, including extracts of an earlier affidavit filed by Mr Ireland, which was admissible as admissions against the interests of Aquapro and Mr Ireland. 10Although there is some dispute between Mr Alevras and Mr Ireland as to the terms on which the Company was incorporated, it is at least common ground that there was at that time a broad division of responsibility between Mr Ireland and Mr Alevras, such that Mr Ireland was to undertake filming, editing and marketing of wildlife films produced by the Company and Mr Alevras was to be largely responsible for management and administration of the Company's affairs (Alevras 23.5.14 [11]). The Plaintiffs also point out, and I accept, that it was apparent that the operation of the Company depended on the cooperation of Mr Alevras and Mr Ireland, to allow their respective responsibilities to be performed in a cooperative way. I am satisfied that the Company was established on the basis of a relationship of trust and with an understanding as to how it was to be governed, in a manner consistent with a "quasi partnership" arrangement, in the language of Thomas v Mackay Investments above. 11Mr Alevras' evidence in his first affidavit dated 23 May 2014 was that: "Nodtronics funded all of [the Company's] activity from its incorporation onwards, being a total of approximately $1.43m (Nodtronics Advances). Nodtronics has to date received a total of $1.05m from [the Company] (DIP Payments) as repayment of its funding loan to [the Company]. Those funds represent the entire income of [the Company]. [The Company] still owes Nodtronics the sum of $381,651.85, being the difference between the Nodtronics Advances and the DIP Payments." As at 20 March 2007, Mr Alevras had advised Mr Ireland of an amount of $51,070.40 owing by the Company to Nodtronics. As at 10 April 2008, Mr Alevras had advised of an amount owing of $299,836.35. Mr Alevras' evidence is that Mr Ireland agreed to the manner in which the Company was to be financially structured, where income received from sales would pass through the Company's bank account and then be "expensed out to pay down the loan from Nodtronics" and Mr Ireland arranged for approved invoices related to costs incurred with the relevant products to be paid by Nodtronics on the Company's behalf. Mr Alevras annexed a schedule of the relevant advances and payments to his affidavit evidence, which he says he prepared from his review of the Company's bank statement and a ledger record maintained by the bookkeeper for Nodtronics and exported from Nodtronics' accounting package in raw spreadsheet file format. 12Mr Alevras' evidence is that he closed the Company's bank account in June 2011, in circumstances that there had been no activity for over 6 months and that he understood that no further amounts were then expected to be received by the Company. It appears that one subsequent payment was made by a distributor in respect of the Company's films after the closure of that account, which was paid to Nodtronics and, on Mr Alevras' evidence, applied in reduction of the amount claimed to be owing by the Company to Nodtronics. Mr Alevras' evidence in cross-examination was that the process over the last 10 years had been that income from the sale of films were banked to Nodtronics initially by transfer from the Company's account, presumably in the payment of the amounts claimed to have been advanced by Nodtronics and that the same occurred, with the omission of the earlier transfer step after the Company's bank account was closed (T19). Mr Alevras' evidence in cross-examination was also that, when the business was established, the understanding was that Nodtronics would fund the costs involved in creating the relevant films and any income collected from the sale of those films would, after receipt by the Company, be paid to Nodtronics to offset that cost (T24). 13A tax return for the Company for the 2013 year, signed by Mr Alevras on 28 April 2014, left blank the information as to current assets, total assets, trade creditors and current liabilities and also recorded the Company's income as nil, its total expenses as $412 and its total loss as $412 for that financial year. Mr Ireland put a suggested inconsistency between Nodtronics' claim to be a creditor and that tax return to Mr Alevras in cross-examination, and sought Mr Alevras' comment on the correctness of the position stated in the tax return. Mr Alevras sought to distinguish the tax return as reflecting the bank statements of the Company and the loan schedule maintained by Nodtronics in a manner which did not make clear whether he maintained the tax return was correct or incorrect (T21). Mr Alevras' evidence in this regard was difficult to follow and did not clarify the position, although I offered a further opportunity to Mr Alevras to clarify it, and no attempt was made further to clarify it in reexamination. 14A balance sheet for the Company as at 30 June 2013 records current liabilities for the year ended 30 June 2012 of $14,436.08 and for the year ended 30 June 2013 of $14,006.08 and total liabilities in those years of the same amount, with net assets in substantially the same amount. Those financial statements were unaudited and unsigned, but were plainly inconsistent with the Plaintiffs' claim that a substantial loan was owed by the Company to Nodtronics. The Plaintiffs also did not tender any other financial accounts of the Company in earlier years, and I may properly infer that such accounts would not have assisted them. Mr d'Arville, who appeared for the Plaintiffs, accepted that no evidence was led of any document lodged with a public authority such as the Australian Tax Office which refers to the existence of the debt on which Nodtronics relies. There is also, importantly, no evidence as to the terms of that debt. 15Mr Ireland relied on his affidavit dated 15 September 2014 which was largely not in admissible form. Mr d'Arville sensibly did not object to that affidavit in circumstances that Mr Ireland was not legally represented in the proceedings. Mr Ireland accepted in that affidavit that Nodtronics had "invested" over a million dollars to fund films produced by the Company in the period 2002-2009, although he contended that no loan agreement was ever entered into between Nodtronics and the Company and that Nodtronics was an investor in the Company and not a creditor of it. That submission finds some support in the absence of reference to such a loan in the financial statements and tax returns to which I have referred above. However, it does have the fundamental difficulty that the admitted funding of that size was not reflected by the issue of corresponding equity to Nodtronics and that, absent an equity investment, such funds are likely to have been advanced as a loan. That position is also reflected in the contemporaneous information provided by Mr Alevras to Mr Ireland to which I have referred above. 16The Company is no longer undertaking the activities for which it was incorporated and Mr Alevras' evidence is that the Company has effectively ceased to trade (Alevras 23.5.14 [26]-[30], Ex A2, pp 112-121). Mr Ireland did not contest that evidence. The dispute as to access to the general ledger recording dealings between the Company and Nodtronics 17There is a substantial dispute between Mr Ireland and the Plaintiffs as to access to financial information concerning the Company. The Plaintiffs submit that the relevant information has been provided by Mr Alevras, although that proposition requires some qualification. Mr Alevras' evidence is, and I accept, that a significant amount of financial information of the Company has been provided to Mr Ireland by Mr Alevras or the Plaintiffs' solicitors since about December 2012 and a substantial amount of that information is in evidence. In particular, the Company's financial statements for the year ended 30 June 2012 are in evidence (Ex A1, pp 185-191) and have previously been provided to Mr Ireland, although its financial statements for the years ended 30 June 2002 - 2011 were not in evidence; certain "loan schedules" are in evidence (Ex A2, pp 84-91, Ex A1, pp 193-200) and have previously been provided to Mr Ireland; Business Activity Statements of the Company are in evidence and have previously been provided to Mr Ireland; and bank statements of the Company are in evidence and have also previously been provided to Mr Ireland. 18A significant part of the dispute between the Plaintiffs and Mr Ireland, so far as the Plaintiffs' application for the winding up of the Company is concerned, appears to relate to Mr Ireland's claim for access to general ledgers recording the Company's activities. Mr Alevras initially took the position in his affidavit evidence that the Company did not maintain general ledgers and that proposition seems to have been, strictly, correct. However, Nodtronics maintained a ledger which recorded transactions with the Company in its accounting system, and it does not seem to me that the Plaintiffs could have been under any doubt that Mr Ireland was seeking access to that information. The Plaintiffs' advisers responded, from time to time, to requests by Mr Ireland for access to the ledger maintained by Nodtronics as to its transactions with the Company by asserting that it was Nodtronics' property. 19Mr Alevras' evidence was that that ledger was maintained by his bookkeeper to record monies paid by Nodtronics on behalf of the Company for expenses incurred by the Company and amounts repaid by the Company in reduction of its loan from Nodtronics and that from time to time he exported that ledger into spreadsheet format and then removed "any entries which had been erroneously included and were not in respect of monies paid by Nodtronics on [the Company's] behalf". He did not further describe the criteria which were applied to determine which entries were in error or identify the particular entries which had been excluded in his affidavit evidence. He indicated that he provided copies of the loan schedule, edited in that manner and with further "formatting changes" made by him, to Mr Ireland on at least March 2007, April 2008, November 2012 and October 2013 and several versions of that document were in evidence. The difficulty with that course is, obviously enough, that Mr Ireland had no opportunity, on receipt of those documents, to test their accuracy against the underlying ledgers from which they had been created, which had not been provided to him. That ledger, without such amendments, was first provided and exhibited to Mr Alevras' affidavit dated 10 September 2014, a little more than a week prior to the hearing of these proceedings. As Mr d'Arville substantially accepted in submissions, it was unfortunate that the Plaintiffs took the somewhat inconsistent positions that, on the one hand, Mr Alevras would take responsibility for the Company's administration and Nodtronics should maintain a ledger of its transactions with the Company on its accounting system and, on the other, that the ledger was its property so as to deprive the other director of the Company of access to that ledger. The breakdown of the parties' relationship 20It is plain that the relationship between Mr Alevras and Mr Ireland has broken down and that they can no longer work together. The breakdown of that relationship between Mr Alevras and Mr Ireland is evident from several matters. On the one hand, Mr Ireland has alleged that Mr Alevras has failed properly to administer the Company's financial affairs, has failed properly to file tax returns and has misappropriated funds and payments due to the Company after he closed the Company's bank account. Those allegations are denied by Mr Alevras. 21Mr Ireland's evidence in his affidavit dated 12 August 2014, which he did not read but parts of which were tendered by the Plaintiffs as admissions (Ex A3) was also that: "My trust in Tony Alevras has completely broken down because of the following, his failure to supply any copies of the [company] tax returns/EOY financials during the entire period of the company's trading from 2002 - 2009 and because of his failure to supply financial information including sales information ... and banking income of my films into his own bank account and his refusal to re-open the [Company] bank account and his continued failure to supply copies of the [Company] general ledgers." 22Mr Ireland's affidavit dated 15 September 2014, which he read in the proceedings, also made amply clear that there had been a breakdown in the relationship between the parties, with one passage headed "Tony Alevras destroys my trust in him", and that affidavit also asserted, inter alia, breach of directors duties by Mr Alevras in respect of the closure of the Company's bank account. The breakdown of the relationship between the parties was also amply demonstrated by the allegations put by Mr Ireland to Mr Alevras in cross-examination, although denied by Mr Alevras. 23Mr Alevras has in turn alleged that Mr Ireland has continued to make wildlife films using equipment purchased by or for the Company. Mr Alevras' evidence in reply is also that his relationship with Mr Ireland has been further damaged by the commencement of proceedings by Mr Ireland in the Local Court against him, bringing a claim of $10,000, in which judgment was entered in Mr Alevras' favour and costs ordered in his favour in the amount of $700 which have not been paid by Mr Ireland. There is also a dispute between Mr Alevras and Mr Ireland about whether the Company owns certain intellectual property rights. There is no evidence that would allow that dispute to be determined in this application, and it can be addressed by any liquidator which is appointed to the Company in due course. 24The extent of the deterioration of the relationship between the parties is well-illustrated by an exchange of correspondence in the period prior to the hearing. For a considerable time, and as late as August 2014, the Plaintiffs' solicitors have been seeking to persuade Mr Ireland that the basis of his opposition to the winding up application was not well-founded and that unnecessary costs would be avoided by his consent to the making of orders winding up the Company. As late as 29 August 2014, the Plaintiffs had invited Mr Ireland to consent to the making of orders winding up the Company and appointing a liquidator, on the basis that their costs of the proceedings would be costs in the winding up of the Company. They had also put Mr Ireland on notice that, if he did not accept that position, the Plaintiffs would incur additional costs in preparing evidence in reply in these proceedings and would seek their costs of the application, including on an indemnity basis. 25It appears that, as at late August 2014, Mr Ireland was prepared to agree to deregister the Company, but that there was a dispute as to the Plaintiffs' claim that Nodtronics was a creditor of the Company. Mr Ireland offered to attend a meeting with the solicitors for the Plaintiffs, but took exception to what he characterised as "threats" by a major law firm, presumably referring to the comments the Plaintiffs' solicitors had made as to the costs of the proceedings. In early September 2014, Mr Ireland continued to take issue as to the failure to supply him with copies of the general ledger (an issue to which I have referred above) and contended that: "... The [Company] financials and Tax returns and the General Ledgers, show no liabilities owed to Nodtronics and no loan agreement between [the Company] and Nodtronics and that [the Company] only has assets of approx $14,000." 26About a fortnight before the hearing, Mr Ireland offered to meet with Mr Alevras to "do a deal" and Mr Alevras responded that: "It is perhaps somewhat ironic that you want to discuss things with a possible liquidator at this stage, given that you had the opportunity to be actively involved in winding up the business and chose instead to become confrontational and force the situation to a costly, unnecessary and protracted legal resolution. Still, you have made the choice it seems, so you will have to accept the consequences." I read Mr Alevras' email as indicating no more than a contention that, because Mr Ireland had not accepted the earlier offers of a consensual winding up, he would have to "accept the consequences", being the risk of an adverse costs order against him in the proceedings. That proposition is consistent with the earlier correspondence sent by the Plaintiffs' solicitors to Mr Ireland in that respect. However, Mr Ireland responded to that email, in emails to Mr Alevras and his solicitor, contending that he and his family understood the words "accept the consequences" as "threatening and intimidating" and that he was "most concerned about the threats from Mr Alevras" (Ex A4) and in turn reported that matter to the police (Ex R2). In submissions before me, Mr Ireland also suggested that Mr Alevras' email involved an inappropriate threat or intimidation and indeed a threat of possible violence. These matters are not conducive to any continuing business relationship of the parties. Mr Ireland's position as to the winding up and conclusion as to winding up on the just and equitable ground 27Mr Ireland's Notice of Appearance indicated that his grounds of opposition to the winding up application included his contention that Mr Alevras had closed the Company's bank account in June 2011 without his knowledge or consent; that income from the sale of films since that date had been banked into the bank account of Nodtronics without Mr Ireland's permission; that Mr Alevras had failed to supply company records, ledgers, bank statements and DVD sale records to Mr Ireland and his accountant; and that Mr Ireland had lodged complaints with various regulatory authorities. 28In the course of Mr Ireland's submissions, it became clear that Mr Ireland did not, in substance, oppose a winding up of the Company, although he contended that the Company should not be wound up until he was provided with financial documents which he requested and in particular with access to the Company's general ledgers. Mr Ireland accepted in submissions that, even if the debt that Nodtronics contended was owed to it by the Company did not exist, it was still the case that he had lost confidence in Mr Alevras, and there was no possibility that the Company could continue its business or properly investigate the matters which he had raised because it was hopelessly in deadlock where he and Mr Alevras were incapable of working together (T38). He contended, however, that he had a right to production of financial documents before the Court made a decision to wind up the Company, although he had taken no step whether by exercise of his rights as a director of the Company under the Corporations Act or by the issue of a notice to produce or subpoena in these proceedings to seek to require the production of such documents. Mr Ireland also confirmed in submissions that, once he had the general ledgers and documents relating to sales of DVDs by the Company to a discount retailer, he would be happy to have a liquidator appointed or the Company deregistered. The former now appears to have been addressed in the evidence and the latter seems to me a matter that is, first, not properly a precondition to a winding up on the just and equitable ground, if it were otherwise appropriate, and secondly a matter that could properly be addressed by a liquidator. 29I noted above that I am satisfied that the Company was established in an atmosphere of trust and on the basis of an understanding as to the parties' responsibilities and its governance which was consistent with a "quasi partnership" arrangement, in the language of Thomas v Mackay Investments above. It is plain that the relationship between the parties has broken down, the Company has in fact ceased to trade and the continuance of the parties' association would be futile. The evidence involves reciprocal allegations, arising from the application of the Company's funds to repay the loans claimed to have been made by Nodtronics on the one hand and the use of Company equipment by Mr Ireland for his personal activities on the other. The evidence does not permit a determination of the validity of those allegations, and it is not possible to reach a finding whether Mr Alevras or Mr Ireland or both have contributed to the present position. I am satisfied that it is just and equitable that the Company be wound up for these reasons, not least because the appointment of a liquidator to it may permit investigation of the respective parties' allegations against the other, at least if that liquidator is properly funded. Claim for winding up on the basis of insolvency 30The Plaintiffs also seek to wind up the Company on the basis that it is insolvent for the purposes of s 459A of the Corporations Act. Section 459P of the Corporations Act provides that the persons who can apply for a company to be wound up in insolvency under s 459A of the Corporations Act on the basis of insolvency include a creditor and a contributory. As I noted above, Eureka Multimedia is a contributory of the Company with standing to bring the winding up application on this basis. If it had been necessary to do so, I would have held that leave should be granted to Eureka Multimedia to bring the winding up application, in its capacity as contributory, for the purposes of s 459P(2) of the Corporations Act. There is an issue whether Nodtronics has such standing on the basis of its claim to be a creditor of the Company. I have referred above to the evidence in that regard, but do not consider it necessary to reach a determination of that matter on any final basis. 31Mr Ireland's Notice of Appearance indicated that his grounds of opposition to the winding up included that the Company's financial statements for the year ended 30 June 2013 showed no liabilities or debts and assets and equity of $14,024.26 and had been signed by Mr Alevras, the principal of the other shareholder in the Company; that the Company's accountant had confirmed to Mr Ireland, by email dated 30 June 2014, that the Company had assets and equity of $14,024.46 "and no liabilities known" to that accountant; and that: "Based on the fact that [the Company] has only asset/equity of $14,024.46 and has no liabilities, there is no reason for winding the [C]ompany up and appointing a liquidator. However, I am willing to agree that [the Company] be deregistered and its assets of $14,024.46 be divided between the shareholders." In submissions, Mr Ireland contested the existence of the debt that Nodtronics claimed to be owed by the Company and pointed to an email from the external accountant to the Plaintiffs which indicated that he could not verify who created the loan schedule on which the Plaintiffs rely. The Plaintiffs respond, and I accept, that that was not a surprising statement where the external accountant's role was to prepare the end-of-year financial statements and he was not responsible for maintaining the ledger maintained by Nodtronics in respect of its dealing with the Company. 32Having regard to the evidence to which I have referred in paragraph 13-14 above, I am not satisfied that a debt is presently due and payable by the Company to Nodtronics - although I also do not reach any finding to the contrary - or that the Company is presently insolvent. This is not, however, reason to decline to make an order winding up the Company, where it is not presently undertaking any business and given the breakdown of the relationship between its shareholders and directors to which I have referred above. Formal requirements for a winding up 33There is evidence of service of the winding up application on the Company, Mr Ireland and Aquapro, although it may strictly have been unnecessary to prove service on Mr Ireland and Aquapro where they had appeared to oppose the application. There is also evidence of a current company search of the Company. The application for winding up the Company had not been published, but I am satisfied that I should dispense with the requirement for publication where there appears little likelihood that the interests of third party creditors will be affected by the application: Kozlowski v JSBG Developments Pty Ltd [2010] NSWSC 1022 at [15] - [16]. Orders and Costs 34The Plaintiffs sought, in submissions, an order that Mr Ireland pay their costs of the Originating Process, although that order was not sought in the Originating Process. The Plaintiffs pointed out that they had sought Mr Ireland's consent to the winding up of the Company from at least 16 December 2013 and that correspondence in that regard had continued to August and September 2014, but that Mr Ireland had continued to refuse to agree to the winding up. They submitted that it was unreasonable for Mr Ireland not to agree to a voluntary winding up of the Company and continue his opposition to the winding up and that he, rather than the Company's creditors (who may, in truth, only be Nodtronics if its debt is established), should bear the responsibility for the costs of the process. I have referred to some of the correspondence in that respect above. It is by no means clear to me that Mr Ireland's position was unreasonable, at least prior to 10 September 2014, where Mr Alevras had until that time resisted Mr Ireland's request for access to the ledgers recording the dealings between the Company and Nodtronics on the basis that those ledger records were the property of Nodtronics. 35It is in any event important to recognise that Mr Ireland and Aquapro were not parties to these proceedings, because the Plaintiffs did not join them as Defendants. That approach allowed the Plaintiffs the advantage that, not having joined Mr Ireland and Aquapro as Defendants, they were less likely to be ordered to pay their costs if they were unsuccessful in the application: Re Pan Pharmaceuticals Ltd; Selim v McGrath [2004] NSWSC 129; (2004) 48 ACSR 681 at [20]; Re HIH Casualty and General Insurance Ltd [2006] NSWSC 6. Mr Ireland and Aquapro were instead given leave to be heard without becoming parties to them under r 2.13 of the Supreme Court (Corporations) Rules. The usual principle that costs follow the event, which would apply as between parties to the proceedings, does not apply to a person who is heard under that rule. Instead, that rule provides that, if the Court considers that the attendance of a person to whom leave has been granted under r 2.13(1) has resulted in additional costs for any party, or the corporation, which should be borne by the person to whom leave was granted, the Court may direct that the person pay those costs. In Re Pan Pharmaceuticals Ltd; Selim v McGrath above at [20], Barrett J observed that the effect of that rule was that a person who is granted leave to be heard without becoming party chooses a course that involves a limited costs exposure to it. In Grocon Constructors Pty Ltd v Kimberley Securities Ltd [2009] NSWSC 691 at [6], Barrett J summarised the effect of that rule as being that: "A person who elects to participate in proceedings on the r 2.13 basis is not susceptible to a costs order in the ordinary course. Such a person could be ordered to pay costs only in the special circumstances (and to the limited extent) referred to in r 2.13(2) or by reference to the general principles concerning the award of costs against non parties .... It is for this reason that an award of costs in favour of such a person is exceptional." 36It seems to me that the attendance of Mr Ireland and Aquapro in the proceedings has resulted in additional costs for the Plaintiffs, so far as it extended the length of the hearing before me by at least the time taken by the cross-examination of Mr Alevras, the submissions of Mr Ireland and Mr d'Arville's response to them. Nonetheless, I am not satisfied that Mr Ireland's role in the application warrants the exercise of the Court's discretion to order costs against him or Aquapro, particularly where Mr Ireland's opposition to the application seems to have been prompted, in substantial part, by the Plaintiffs' refusal over a lengthy period to allow him access to the ledgers maintained by Nodtronics recording transactions with the Company, a position which was only abandoned by the Plaintiffs shortly before the hearing. 37For these reasons, the only orders that I make are: