Ian Allan Byrne v A J Byrne Pty Limited

Judgment 1I delivered judgment in these proceedings on 19 June 2012 ([2012] NSWSC 667) ("Principal Judgment"). I held, in summary, that the Plaintiff, Mr Ian Byrne, had not established that orders should be made under s 233(1)(d) of the Corporations Act 2001 (Cth) requiring the remaining members of A.J. Byrne Pty Limited ("AJBPL") and Loka Pastoral Co Pty Limited ("Loka") to purchase his shares in those companies at a price equal to the market value of those shares as a whole without discount for the fact that his shareholding was a minority shareholding. I also held that Mr Byrne had not established that AJBPL and Loka should be wound up under s 233(1)(a) of the Corporations Act or s 461 of the Corporations Act. Mr Byrne was successful in one aspect of his claim, namely that I held that an allowance for the costs of liquidating relevant assets made by an accountant retained by the parties, Mr Willis, in valuing the shares was incorrect, where the relevant assets were not to be liquidated but instead to be retained. I noted that it would be open to the Defendants to revise the price of their offer to acquire Mr Byrne's shares to correct that error. 2The matter was listed before me for argument as to the form of orders and as to costs. There were differences between the parties as to the form of the orders that should be made. 3First, the Defendants contended that an order should be made that the proceedings be dismissed. Mr Byrne contended that the proper order was that there be judgment for the Defendants on paragraphs 14-18 inclusive of the Statement of Claim. Those paragraphs related to the matters which were determined in my judgment, namely the application for orders under s 233 and 461 of the Corporations Act for a buy out of Mr Byrne's shares in the companies or alternatively a winding up and the appointment of a liquidator to the companies. The other paragraphs of the Statement of Claim dealt with an application by Mr Byrne for the dissolution of a separate partnership between him and the Fourth, Fifth and Sixth Defendants known as "A.J. Byrne & Co" and consequential orders. That application was determined by Barrett J, who delivered judgment on 25 November 2011 ([2011] NSWSC 1437) declaring that that partnership was dissolved, ordering that the partnership business be wound up under the Court's direction, declaring the entitlements of the partners on a winding up of that partnership and appointing a receiver and manager of the partnership, and amending an earlier order made for a reference under r 20.22 of the Uniform Civil Procedure Rules 2005 (NSW) by expanding that reference. 4There was a difference between the parties as to whether any issues arising from the reference and the appointment of the receiver and manager of the partnership business may require determination by the Court. An affidavit dated 23 July 2012 of Mr Byrne's solicitor notes that the receivership of the partnership has not yet been completed; indicates her view that there are outstanding issues to be dealt with in respect of the reference and receivership, including an insurance claim being made by the partnership and proceeds from that claim, and that Mr Byrne remains entitled to a sum of money equivalent to his proper interest in the partnership; and notes that there is also a question presently before the referee as to the amount of an interim distribution to Mr Byrne from the partnership. Mr Byrne also pointed out that there may be a question as to whether the referee's report should be formally adopted by the Court. 5In these circumstances, I do not consider that it is appropriate to make an order dismissing the proceedings. I consider the preferable course is to make orders that address the specific matters which were heard before me, and adjourn the proceedings for a substantial period so that any remaining issues as to the reference and the appointment of the receivers can be resolved and the proceedings then dismissed. 6The second question as to the form of orders related to a revised offer made by the Fourth, Fifth and Sixth Defendants to purchase Mr Byrne's shares in AJBPL and Loka on 22 June 2012, which was intended to address the finding in paragraph 74 of the Principal Judgment that a deduction for the costs of asset sales was not properly made in valuing the shares in those companies. That offer has not been accepted by Mr Byrne but presently remains open. The Defendants' formulation of a note of that letter to be made by the Court refers to it being made "in the manner contemplated by paragraph [74] of the Principal Judgment". Mr Byrne accepted that the Court should note that letter together with a further email relating to the manner in which any payment for those shares would be made. The form of the note proposed by Mr Byrne does not contain the further statement as to whether that offer was in the manner contemplated by paragraph [74] of the Principal Judgment. In my view, the note of that offer should take the form for which Mr Byrne contends, since no dispute arose before me and there is no need for a determination by me of whether that offer conforms to paragraph [74] of the Principal Judgment. 7There remains a question as to the costs of the proceedings. Mr Byrne accepts that he should be ordered to pay the Defendants' costs of and incidental to paragraphs 14-18 inclusive of the Statement of Claim on a party/party basis. The Defendants contend that, apart from the costs of the reference ordered by Barrett J, Mr Byrne should be required to pay the Defendants' costs of and incidental to the proceedings on a party/party basis prior to 6 June 2011 inclusive and pay those costs on an indemnity basis from 7 June 2011. I consider that the orders for costs that I should make, at this stage, should be limited to the matters which were determined in the Principal Judgment, namely the matters addressed in paragraphs 14-18 inclusive of the Statement of Claim. If any unresolved issues as to costs arise out of the earlier judgment of Barrett J, they may be addressed at an appropriate time, in connection with any remaining issues in respect of the reference and the appointment of the receivers. 8It remains to address the question whether costs should be ordered against Mr Byrne on an indemnity basis. The Defendants point out that, on 7 June 2011, they had offered to purchase Mr Byrne's interest in the partnership and two companies for amounts, relevantly, of $93,296 for his shares in AJBPL and $592,598 in respect of his shares in Loka, in accordance with a valuation delivered by an accountant jointly retained by Mr Byrne and the Defendants to value their respective interests. Mr Byrne points out that the offer made on 7 June 2011 included a condition that Mr Byrne transfer his interest in a property which was not the subject of the proceedings, so the amount payable under that letter is not referable to the interests in the partnership and the companies alone, and that amount is less than the amount that he now expects to receive for his interest in the partnership and the companies. Mr Byrne commenced the proceedings on 23 June 2011 and, shortly thereafter, the Defendants advised him of their contention that the commencement of the proceedings was unreasonable in the circumstances. The Defendants confirmed their willingness to purchase the shares in the two companies by letter dated 10 February 2012. 9The Defendants contend that the offers made on 7 June 2011 and 10 February 2012 were "akin to offers of compromise" which were unreasonably rejected by Mr Byrne and that Mr Byrne acted unreasonably in commencing and continuing these proceedings where they did not, in the result, cause him to be offered any more for his shares than the amount offered on 7 June 2011 or 10 February 2012. 10I gratefully adopt Ward J's recent summary of the principles applicable to an award of indemnity costs arising from a Calderbank (Calderbank v Calderbank [1975] 3 All ER 333; 3 WLR 586) offer in Nu Line Construction Group Pty Ltd v Fowler [2012] NSWSC 816 at [9]-[14], where her Honour observed that: "[9] The rationale for the principles applied in relation to Calderbank offers was outlined in Commonwealth v Gretton [2008] NSWCA 117 by Beazley JA, her Honour noting (at [41]) that the public policy considerations underpinning the making of favourable costs orders where a Calderbank offer has been made (and not accepted) are the encouragement of settlement of disputes as soon as possible and the discouragement of wasteful and unreasonable behaviour by litigants. [10] The Court of Appeal in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 recently reiterated the public policy objectives of special costs orders in the context of offers of compromise. Basten JA (with whom McColl and Campbell JJA agreed) referred at [6] to the objects underlying the formal offer of compromise procedures under the then court rules that were identified in Maitland Hospital v Fisher (No 2) (1992) 27 NSWLR 721 at 724 as including: