In the matter of Yowie Group Ltd (No 2)

Category: Procedural rulings

Parties: Keybridge Capital Ltd (Plaintiff/Applicant)
Nicholas Francis John Bolton (First Respondent)
John Dean Patton (Second Respondent)
Andrew Kenneth Ranger (Third Respondent)
Diesel Adam Schwarze (Fourth Respondent)
Daniel Leon Agocs (Fifth Respondent)

Representation: Counsel:
D Krochmalik / D Monteith (Plaintiff/Applicant)
A Broadfoot KC (First Respondent)
M R Davis (Second Respondent)
J Georgas (Solicitor) (Third Respondent)
B Koch (Fourth and Fifth Respondents)
Solicitors:
Mills Oakley (Plaintiff/Applicant)
Goldsmiths Lawyers (First Respondent)
Corrs Chambers Westgarth (Second Respondent)
Colin Biggers & Paisley (Third Respondent)
Bridges Lawyers (Fourth and Fifth Respondents)

File Number(s): 2025/213618 (004)

JUDGMENT

Background

1. By Originating Process filed on 4 June 2025, the Plaintiff, Keybridge Capital Ltd (“KCL”) sought relief in respect of several issues relating to a general meeting of the Defendant, Yowie Group Limited (“YGL”) convened under s 249F of the Corporations Act 2001 (Cth) (“Act”). I delivered my judgment in respect of that application on 20 June 2025 (Re Yowie Group Ltd [2025] NSWSC 648) (“Primary Judgment”) and KCL was substantially successful in its claim. The Court of Appeal dismissed an appeal from my orders in its decision in Yowie Group Ltd and Bolton v Keybridge Capital Ltd (No 2) [2025] NSWCA 167.

2. In the Primary Judgment, I reviewed the events which gave rise to the proceedings, including KCL’s initial application for access to YGL’s register of members under s 173 of the Act (Primary Judgment [14]); KCL’s further request for access to that register on 9 May 2025 and YGL’s announcement of a proposed takeover bid for KCL (Primary Judgment [16]); misleading information provided by YGL to the Australian Securities Exchange (“ASX”) on 19 May 2025 that it had not been made aware that a person or persons holding more than 50% of its ordinary shares intended to call, or requested the directors to call, a general meeting to appoint or remove directors of YGL (Primary Judgment [20]); and a directors’ meeting held on 2 June 2025 at which YGL’s directors discussed a postponement and change of venue of the meeting called by KCL to vote on resolutions to replace the current directors of YGL (“YGL 249F Meeting”) (Primary Judgment [26]).

3. The question of the personal interest of the former directors of YGL (“Former YGL Directors”) in matters connected with the proceedings was also addressed at the primary hearing. There was there no contest that Mr Bolton was then employed as YGL’s Managing Director and Chief Executive Officer and was paid a substantial annual salary. Mr Patton was employed as YGL’s Executive Chair and was also paid a substantial annual salary, although less than Mr Bolton. Mr Ranger was employed as an executive director of YGL and was also paid a substantial annual salary. Messrs Agocs and Schwarze were remunerated, in lesser amounts, as directors of YGL. The parties there recognised that, under cl 17.1 of YGL’s constitution, the appointment of a Managing Director or Executive Director of YGL would automatically terminate if they ceased for any reason to be a director of YGL, and there was and could have been no contest as to that consequence.

4. I observed (Primary Judgment [64]), in dealing with the position of one of the Former YGL Directors, Mr Ranger, that:

“It is plain that, first, Mr Ranger has a personal interest in seeking to resist his removal as director of YGL, where that would put at risk his future remuneration from his executive role with YGL; and it is also plain that he would likely face a significant conflict of duty and interest in chairing the meeting, between his duties to YGL as to the conduct of that meeting and his personal interest in retaining his position and remuneration, which would be acute in respect of questions such as the eligibility of KCL to vote, where it would likely vote in a manner that was plainly adverse to his personal interests.”

5. I also noted (Primary Judgment [79]) that KCL there contended that, as I noted above:

“each of YGL’s executive directors also had a material personal interest in such a decision [to adjourn the proposed meeting] where, under cl 17.1 of YGL’s constitution, each executive director would lose his executive role upon being removed as a YGL director.”

6. I also addressed (Primary Judgment [74]) a statement of YGL’s directors’ purpose in postponing the relevant meeting in an ASX announcement made on 2 June 2025 and observed at [75]–[77] that:

“I will assume, without deciding, that these are some of the reasons for which YGL’s directors postponed the relevant meeting, although I find that there was an additional and substantial reason for doing so, not disclosed in that announcement. In accordance with the case law, I examine the objective commercial justification of the postponement, but only for the purpose of assessing the credibility of the directors’ assertions as to their purposes. The first dot point refers to an issue as to the validity of the meeting. I accept the directors may have held that concern, but a postponement of the meeting would not have resolved any question of its validity and that provided no rational basis to postpone the meeting. The second dot point refers to applications that had been made to the Takeovers panel by KCL and YGL, but there was no reason to think that those applications would not be decided by the time the meeting took place; or that the Takeovers Panel did not have adequate powers to deal with any interaction between the conduct of the meeting and the Panel proceedings; or that, if the proceedings before the Takeovers Panel were not determined and the Takeovers Panel did not seek to prevent the meeting going forward, then shareholders could readily take account of the fact of the applications to the Panel in casting their votes at the meeting. That matter also provided no rational basis to postpone the meeting. The third dot point relates to the suggested issues about the operation of cl 13.3 of YGL’s constitution. I accept the directors may have held that concern; but a postponement of the meeting would not have resolved that issue and that also provided no rational basis to postpone the meeting.

The fourth dot point plainly reflected an improper purpose on the part of YGL’s board, where it was not part of its proper role to prefer the interests of [Australian Style Group, a company associated with Mr Bolton (“ASG”)] in its attempt to replace the directors of KCL to KCL’s interests as a shareholder of YGL in its attempt to remove YGL’s directors, or to postpone the YGL 249F Meeting, as YGL’s directors plainly did, so as to allow ASG further time to remove KCL’s directors before that meeting took place.

I also find that KCL’s directors had a further and substantial improper purpose in postponing the YGL 249F Meeting which was not disclosed by that announcement. As I noted above, YGL’s directors plainly knew that YGL’s takeover bid for KCL was structured to seek to dilute KCL’s shareholding in YGL, if KCL shareholders accepted that bid; Mr Ranger accepted that he knew the offer operated in that way in cross-examination; and I comfortably draw the inference that YGL’s directors postponed the meeting so as to allow additional time for any such dilution to take place. To the extent that Mr Ranger did not accept that he held that purpose in cross-examination, I am not persuaded by his denial of that matter and I infer that no evidence that could have been led by the other directors or former directors of YGL who did not give evidence, including Mr Patton and Mr Bolton, would have assisted YGL in displacing that inference.”

7. I did not then determine the question whether the Former YGL Directors had a material personal interest in the decision to postpone the relevant meeting for the purposes of s 195 of the Act and had made that decision in contravention of that section, where it was not necessary to decide that question in order to determine the proceedings (Primary Judgment [79]). I observed (Primary Judgment [79]) that:

“Mr Emmett [for KCL] submits that each of YGL’s directors had a material personal interest in the decision to postpone and made that decision in contravention of s 195 of the Act. If I were to determine that question, I would need to do so on the basis that a contravention of that section is a serious matter, and in accordance with the approach set in Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 (“Briginshaw”) and s 140 of the Evidence Act 1995 (NSW). A difficult question would then arise as to the effect of such a contravention, where s 195(5) of the Act provides that a director’s contravention of s 195(1) “does not affect the validity of any resolution”. Mr Emmett points to a further question as to the effect of a contravention of s 195(1) if all of the directors of YGL have a material personal interest in the resolution and all votes cast were forbidden by that section, and that question was noted but not decided in Drillsearch Energy Limited v McKerlie [2009] NSWSC 517. I do not need to decide the question of a contravention of s 195 of the Act here where I have found that the postponement of the YGL 249F Meeting was not made for a proper purpose and was invalid for the reasons addressed above, and I should not decide this question where I do not need to do so. ...”

8. By paragraph [82] of the Primary Judgment, I made orders to give effect to my findings and indicated that I would hear the parties as to costs including as to any question of costs on a special basis and any third party costs order.

KCL’s third party costs application and affidavit evidence

9. By an Interlocutory Process filed on 24 June 2025, which joined each of the Former YGL Directors as respondents, KCL sought an order that each of them jointly and severally pay its costs of the proceedings and pay its costs of and ancillary to that application.

10. KCL reads the affidavit dated 24 June 2025 of its solicitor, Ms Reid, who identifies the respondents to the application and their role as directors of YGL and refers to the events which led to the commencement of the conduct of the proceedings. Ms Reid’s affidavit exhibited a letter dated 20 May 2025 from KCL’s solicitor to YGL’s solicitor (Ex A1, CB 184), which drew attention to the personal interest affecting YGL’s directors as follows:

“Your firm is advising [YGL] in relation to its refusal to produce its register to is majority shareholder, [KCL], who wishes and is entitled to replace [YGL’s] directors who are acting contrary to [KCL’s] interests. The concerns are self-evident as to issues arising under sections 181 and 182 of the Corporations Act, Advance Bank Australia v FAI Insurances Ltd (1987) 9 NSWLR 464 and Baringa Mining and Exploration Co Plc v North Flinders Mines Ltd 165 Commercial List Response 452.”

11. By a further letter dated 29 May 2025 (Ex A1, CB 225), KCL’s solicitors notified the Former YGL Directors of KCL’s concerns as to Messrs Patton’s and Bolton’s conduct in respect of previous shareholder meetings of KCL and also pointed to the issues arising from the use of YGL’s resources by YGL’s directors to advance their own interests as follows:

“[KCL] would prefer not to enter into further unnecessary and costly disputes in the process of taking the steps necessary to move resolutions to replace the board of its subsidiary, [YGL]. [KCL] holds some 58% of [YGL’s] shares directly (and the placement currently subject of application to the Takeovers Panel) and [KCL’s] deemed interest via other interposed entities is 81.17%. [KCL] has previously put [YGL’s] directors on notice as to the prohibition against using company resources to entrench their directorships, as well as their role as caretaker directors. We reiterate that notice to [YGL’s] directors.”

12. KCL also there sought confirmation that KCL would not take steps to adjourn the YGL 249F Meeting shortly before YGL took steps to do so. It seems to me that that correspondence was plainly sufficient to place the Former YGL Directors on notice of their personal interests, and little weight should be given to the absence of specific notice of a potential claim to a third party costs order in that situation.

13. I should also note that there is evidence that the Former YGL Directors were collectively involved in the conduct of the proceedings. Ms Reid also exhibits an affidavit dated 6 June 2025 of YGL’s then solicitor, Mr Matters (Ex A1, CB 233), which indicated that:

“[YGL’s] board continues to consider those issues and anticipate being in a position to file and serve affidavit material in response to the issues raised by [KCL] in this proceeding by Friday 13 June 2025.”

14. I should add that Mr Ranger’s evidence at the primary hearing, on which he relies in opposition to the third party costs order, was also that he was authorised to give his affidavit evidence in the proceedings on behalf of YGL; that authority can only have been conferred on him by the Former YGL Directors and none of them lead evidence contesting that they conferred that authority on him. I recognise, in that regard, that Mr Bolton was not permitted to read his affidavit evidence, given its lateness and his failure to comply with the Court’s directions for the service of such evidence.

15. KCL also reads an affidavit dated 4 July 2025 of Ms Mouyat, also a solicitor acting for it in the proceedings, which exhibits relevant documents.

16. Mr Patton reads several paragraphs of his affidavit dated 21 July 2025, but did not seek to read evidence establishing any right of indemnity against YGL in respect of any costs order that may be made against him. He refers to his participation in a meeting of YGL’s directors regarding the postponement and change of venue of the general meeting called by KCL, which is not a matter which, in itself, would support a third party costs order against him; and his evidence is that (Patton 21.07.25 [7]):

“Once these proceedings were commenced, I was not responsible for providing instructions to [YGL’s] solicitors. My fellow director, Andrew Ranger, provided those instructions without consultation with me.”

I note, however, that Mr Patton does not there deny his involvement in the Former YGL Directors’ decision to authorise the defence of the proceedings by YGL.

17. Mr Schwarze and Mr Agocs did not read the affidavit dated 23 July 2025 of their solicitor, Mr Calabria, which was directed to the question of whether they had any indemnity from YGL in respect of the costs of the proceedings.

The parties’ submissions

18. Mr Krochmalik, with whom Mr Monteith appears for KCL, points to the Court’s power to make costs orders against non-parties under s 98(1) of the Civil Procedure Act 2005 (NSW) (“CPA”) and Counsel also referred to the applicable case law.

19. In Knight v FP Special Assets Ltd (1992) 174 CLR 178 at 192–193; [1992] HCA 28 (“Knight v FP Special Assets”), Mason CJ and Deane J (with whom Gaudron J agreed at 205) observed that:

“For our part, we consider it appropriate to recognise a general category of case in which an order for costs should be made against a non-party … That category of case consists of circumstances where the party to the litigation is an insolvent person or man of straw, where the non-party has played an active part in the conduct of the litigation and where the non-party, or some person on whose behalf he or she is acting or by whom he or she has been appointed, has an interest in the subject of the litigation. Where the circumstances of a case fall within that category, an order for costs should be made against the non-party if the interests of justice require that it be made.”

20. In a separate judgment in Knight v FP Special Assets*,* Dawson J observed (at 202) that:

“The cases therefore establish a long-asserted jurisdiction to award costs in appropriate cases against a person who is not a party to the proceedings where that person is the effective litigant standing behind an actual party or where there has been a contempt or abuse of the process of the Court.”

21. In FPM Constructions v Council of the City of Blue Mountains [2005] NSWCA 340 at [210] (“FPM”), Basten JA referred to Knight and observed that:

“… It is clear that the categories of case which may attract the exercise of the power [to make a third party costs order] are by no means closed, nor should they be. Nevertheless, the requirements of justice should not be allowed to expand an exception to the general rule, so as to undermine the rule itself. What is significant from a survey of the cases in which orders have been made against non-parties is that they tend to satisfy at least some, if not a majority, of the following criteria:

(a) the unsuccessful party to the proceedings was the moving party and not the defendant;

(b) the source of funds for the litigation was the non-party or its principal;

(c) the conduct of the litigation was unreasonable or improper;

(d) the non-party, or its principal, had an interest (not necessarily financial) which was equal to or greater than that of the party or, if financial, was a substantial interest, and

(e) the unsuccessful party was insolvent or could otherwise be described as a person of straw.”

22. I also recognise that these factors should not be treated as a form of statutory test for making a third party costs order. Basten J there observed (at [214]):

“The criteria identified in Knight v FP Special Assets should not ultimately be treated as separate and independent factors. Each requires an evaluative assessment of factors which will clearly tend to interact. Nor should it be forgotten that the power is only to be exercised in exceptional cases. In many cases involving individuals in the superior courts the parties may lack the resources to meet the costs of the litigation if unsuccessful. Similarly, there will frequently be a non-party, be it a company officer or solicitor, who will be active in the conduct of the litigation and who will obtain some direct or indirect financial benefit from its success. The fact that it is entirely proper for legal practitioners to runs cases on a speculative basis, so long as satisfied that they have reasonable prospects of success, demonstrates that care must be taken not to apply the criteria mechanically. Careful attention is required to the conduct of the party said to be involved in the litigation and the nature of the “interest” in its outcome or subject-matter.”

23. Counsel also drew attention to the Court of Appeal’s decision in Yu v Cao (2015) 91 NSWLR 190; [2015] NSWCA 276. McColl J there noted (at [136]) the Court’s discretion under s 98 of the CPA was unfettered but should be exercised judicially in accordance with general legal principles relating to the law of costs, and that:

“An order for costs may be made against a non-party if, in the circumstances of the case, the interests of justice require that it be made.”

24. Her Honour there referred (at [142])ff to Symphony Group PLC v Hodgson [1994] QB 179, where the successful plaintiff sought orders for costs against a third party, after it succeeded in obtaining injunctive relief against the defendant, and Balcombe LJ observed that it would exceptional for an order for the payment of costs to be made against a non-party, where that non-party could have been joined as party to the original proceedings and, even if there was good reason for not joining the non-party, the claimant should warn the non-party at the earliest opportunity the possibility that costs may be sought against him. Her Honour also noted (at [151]) that:

“Absence of timely notice of a non-party costs order has also been a significant factor militating against the making of non-party costs orders in order cases.”

25. It seems to me that KCL could not here have practically joined the Former YGL Directors as party to the proceedings, because it would have been required it to seek leave to bring derivative proceedings against them, on behalf of YGL and such an application would have delayed the determination of the proceedings to an extent that would have deprived them of any practical utility. I have referred above to the correspondence from KCL’s solicitors here that took issue with the Former YGL Directors’ conduct which seems to me to limit the significance of a failure to give an explicit warning of an intent to seek a third party costs order here.

26. Mr Krochmalik also drew attention to PM Works Pty Ltd v Management Services Australia Pty Ltd trading as Peak Performance PM [2018] NSWCA 168 at [22]–[39]. Leeming JA (with whom McColl and Basten JJA agreed) there reviewed (at [26]ff) the case law including Knight v FP Special Assets and the earlier decisions to which the High Court there referred. His Honour there emphasised that third party costs orders were the exception rather than the rule; and observed (at [36]) that it would ordinarily not be sufficient to warrant a third party costs order that the unsuccessful party was the moving party in the litigation, the source of funds for the litigation was the non-party or its principal and the unsuccessful party was insolvent or could otherwise be described as a person of straw since, if a third party costs order were ordinarily made in that situation, the jurisdiction would lose its “exceptional” character. Leeming JA also there emphasised (at [39]) the need to avoid the third party cost rule “swallowing up” the general rule, by too readily making such an order. It seems to me that the exceptional circumstances of this matter raise no risk of eroding the exceptional character of such an order.

27. Importantly, in Mistrina Pty Ltd v Australian Consulting Engineers Pty Ltd [2020] NSWSC 633 (“Mistrina”), Hammerschlag J (as the Chief Judge in Equity then was) reviewed the relevant case law and emphasised that the factors there specified are not to be treated as separate and independent factors and that an evaluative assessment of all of those factors should be made. His Honour also emphasised (at [25]) that:

“The discretion is at large. In determining whether to exercise its discretion to make such an order, the court will have regard to all the relevant circumstances. If those circumstances warrant making the order because it is just to do so, giving it the description exceptional does not add much. The description exceptional is not some additional criterion.”

28. His Honour went on to find that, in that case, a third party costs order should be made against a litigation funder, where the funding of the proceedings was the litigation funder’s business and that funder funded the proceedings to serve its own commercial and financial ends rather than to facilitate access to justice in any abstract sense. His Honour also observed (at [39]) that:

“Justice dictates that the successful defendant against the impecunious plaintiffs funded by the commercial funder should not be left with an empty costs order against persons of straw”.

29. Mr Koch, who appeared for the Fourth and Fifth Respondents, Mr Schwarze and Mr Agocs, also referred to my summary of the applicable principle in Re H & H Funding Pty Ltd (in liq) (rec and mgr apptd) [2024] NSWSC 248 at [14]ff on which I have partly drawn for the summary above.

30. Mr Krochmalik also submitted, and I accept, that non-party costs orders may be made in an appropriate case against directors who act in their own interests in authorising the conduct of proceedings by a company. In Permark International Interiors Pty Ltd v Amoveo Pty Ltd [2013] VSC 563 at [27]-[28], Croft J referred to submissions addressing several earlier cases, generally where the company was a plaintiff in the proceedings, and to FPM. In a decision that is closer to the present facts, in Aura Energy Ltd v ASEAN Deep Value Fund (No 2) [2020] VSC 732 at [26], Delaney J referred to Charlesworth Nominees Pty Ltd v Charlesworth (2017) 54 VR 155; [2017] VSC 445, where Croft J considered an application by a trustee for judicial advice concerning its role in a proceeding brought by a beneficiary; held that the proceeding was, in substance, a dispute between the beneficiaries; and expressed the preliminary view that the costs of the trustee and of the beneficiary of the application for judicial advice should be borne by the two other directors of the trustee personally. His Honour also referred to Re Wave Capital Ltd (2003) 47 ACSR 418; [2003] FCA 969 at [32], where French J determined that, where the responsibility for an error rested with a company’s directors or company secretary personally:

“[I]t would be unfair and inappropriate for the newly raised capital of the company to be expended on this application and to the detriment, however minor, of the new shareholders. In the circumstances I propose to make an ancillary order that the costs of bringing this application not be paid out of company funds.”

Delany J there observed that he would have been minded to make a third party costs order against the directors of the plaintiff, in a situation that resembles aspects of these proceedings, but for the directors’ entitlement to an indemnity from the plaintiff. The directors did not here establish such an entitlement. These cases plainly illustrate the width of the Court’s judicial discretion as to costs and that it is not confined by the factors noted in FPM.

31. Mr Koch also referred to Popeye BidCo Pty Ltd v Intermediate Capital Asia Pacific 2008 GP Ltd (No 3) [2018] FCA 1597 as a case where a third party costs order was not made against directors, but it seems to me that that case did not involve either the lack of a corporate interest in YGL in the application or the promotion of the Former YGL Directors’ personal interests by defending the proceedings which is present here, as I find below.

32. Mr Krochmalik submits that YGL was, at the time it defended the proceedings, controlled by the Former YGL Directors who were acting in their own interests as each stood to be removed as directors of YGL if the YGL 249F Meeting went ahead. He recognised that Mr Bolton and Mr Patton each resigned on the morning of the trial but points out that they sought to remain involved in YGL’s operations in executive roles. Mr Krochmalik refers to aspects of YGL’s conduct prior to the commencement of the proceedings, but that conduct is relevant, as I will not below, only as background to the decision of the Former YGL Directors to authorise its defence of the proceedings and the conduct of that defence and not as a matter that would in itself support a third party costs order.

33. Mr Krochmalik also submits that:

“Put simply, the Former [YGL] Directors focused their efforts on deferring the s 249F meeting to advance their own interests and entrench their position by pursuing a takeover bid structured to dilute KCL’s shareholding. That (improper) conduct was directly connected with the subject matter of the litigation and made it necessary for KCL to bring these proceedings.”

34. I accept that submission is supported by the findings which I made in the Primary Judgment. However, I also treat that matter as not itself supporting a third party costs order, but as matter relevant to the Former YGL Directors’ authorising the defence of the proceedings. Mr Krochmalik also submits that, if the Court makes costs orders against the Former Directors, there should be no order as to costs as between KCL and YGL.

35. The First Respondent, Mr Bolton, filed a Notice of Appearance in respect of this application on the day of the hearing of the application and did not comply with the order made by the Court to provide a written outline of submissions. Mr Broadfoot, who appeared for him, made brief oral submissions. Mr Broadfoot submitted that the Court should not proceed on the basis that Mr Bolton has not sought to led evidence, where he had sought leave to read his late affidavit. I recognise that he had made that application, although he had not complied with any of the directions made by the Court as to that affidavit or submissions and he was not granted leave to rely on that late affidavit for the reasons set out in my earlier ex tempore judgment as to that matter. Mr Broadfoot also relied on Mr Patton’s evidence that Mr Ranger had provided the instructions as to the conduct of the proceedings and submitted that that demonstrated that other directors were “not involved”. That evidence did not establish that other directors, or indeed Mr Patton, did not participate in approving YGL’s defence of the proceedings and the suggestion that they were “not involved” is plainly inconsistent with the evidence previously led by YGL’s former solicitor, to which I have referred above.

36. Mr Broadfoot also submits that the Court should not infer “in the absence of clear evidence” that Mr Bolton caused YGL to conduct the litigation in a manner that favoured his own prohibited material personal interest over YGL’s interests, and that there is no evidence that he was involved in giving instructions that resulted in the approach that YGL adopted for the conduct of the proceedings. However, it is here plain that Mr Bolton, together with the other Former YGL Directors, authorised the defence of these proceedings by YGL in circumstances that he had a substantial interest in retaining his position as an executive of YGL (although he resigned as director on the morning of the hearing) and retaining the remuneration that he received in that capacity, and his advancing the defence of these proceedings and the associated prospect that ASG’s takeover bid for KCL would advance that personal interest. I return to that matter below.

37. In his written outline of submissions, the Second Respondent, Mr Patton, submitted that KCL was the moving party in the proceedings and “there is no suggestion that Mr Patton acted improperly in the course of the litigation” and that Mr Patton had “no involvement in conduct of the litigation”. I do not accept those submissions. Mr Patton plainly authorised YGL’s defence of the proceedings, in circumstances that (as I will find below) he had a substantial personal interest in doing so, although he then resigned as a director (but not an executive) of YGL on the morning of the hearing. The evidence does not establish that Mr Patton had “no involvement in the conduct of the litigation” where he does not lead evidence that he did not authorise the defence of the proceedings, prior to his resignation as a director of YGL. Mr Patton also submits that he did not stand to benefit from the prosecution of the proceedings; there could be no suggestion that his conduct before his resignation was “improper”; and he was not responsible for providing instructions to the solicitors in the proceedings. It seems to me that Mr Patton, together with Mr Bolton and the other Former YGL Directors, authorised the defence of these proceedings by YGL in circumstances that he also had a substantial interest in retaining his position as an executive of YGL (although he also resigned as director on the morning of the hearing) and retaining the remuneration that he received in that capacity, and his advancing the defence of these proceedings and the associated prospect of ASG’s takeover bid for KCL would advance that personal interest. Mr Patton thereby had a personal interest in the proceedings such that he did stand to benefit from their outcome. Whether or not one adopts the term “improper” in that context, the conduct of a director who joins with other directors, all of whom have personal interests in remaining in office, in authorising the defence of proceedings of this kind may be sufficient to support a third party costs order, where the costs of the defence of the proceedings would otherwise be imposed on YGL and its shareholders. I return to the question of Mr Patton’s personal interest in the defence of the proceedings below.

38. In oral submissions, Mr Davis submitted that KCL had relied on the Former YGL Directors’ conduct prior to the commencement of the proceedings for a third party costs order. I accept that KCL’s submissions directed attention to that conduct, which is relevant as background to the Former YGL’s Directors’ decision to authorise the defence of the proceedings, a matter which I address further below. Mr Davis also submits that findings have been made in the Primary Judgment which are binding in the costs application, which the Former YGL Directors are not in a position to disturb because of the summary nature of this application. I do not accept that submission, where the Former YGL Directors could have led evidence in this application as to the extent of their involvement in authorising the defence of the proceedings or their involvement in the proceedings generally. Mr Patton in fact led evidence that addressed aspects of those matters, and Mr Bolton sought to do so, but left it so late to do so that that evidence could not fairly be admitted.

39. Mr Davis also submitted that forensic decisions were made by Mr Patton as to what evidence to lead in response to the relief sought by KCL on the basis that he did not need to respond to an allegation that he had exercised his powers for an improper purpose” It seems to me that it was at all times clear that KCL contended that the Former YGL Directors had a personal interest in the subject matter of the proceedings, where KCL’s solicitors had previously drawn their attention to that matter by correspondence; and also contended that their involvement in steps prior to the proceedings and in the proceedings was directed to advancing their personal interests rather than any corporate interest of YGL in resisting a change of its directors. In these circumstances, Mr Patton could not be caught by surprise by the possibility that a third party costs order might be made against him on the basis that he and other Former YGL Directors had been personally interested and conflicted in authorising the defence of the proceedings; and, as I noted above, he and the other Former YGL Directors had the opportunity to lead evidence and make submissions in response.

40. In his written outline of submissions, the Third Respondent, Mr Ranger, adopted Mr Patton’s submissions as to the relevant legal principles and submitted that, to the extent that Mr Ranger gave evidence on behalf of YGL, he did so as a director of YGL and with its full authority. That submission has two difficulties. The first is that KCL’s claim for a third party costs order is not directed to Mr Ranger’s conduct in giving evidence, but to the steps in which he was involved in authorising YGL’s defence of the proceedings; and the authority to which he refers is undermined by the fact that it is derived from the decision of the interested Former YGL Directors. Mr Ranger also submits that YGL was represented by responsible and experienced solicitors and counsel; but that provides no answer to the steps taken by the interested directors to authorise the defence of the proceedings in their own interests.

41. In oral submissions, Mr Georgas, who appeared for Mr Ranger, adopted the submissions made by Mr Broadfoot for Mr Bolton and Mr Davis for Mr Patton. He otherwise relied on Mr Ranger’s written submissions, and advanced the further submission (T25) that:

“If there was a continuity of conduct which was improper, then the evidence before the Court does not support a finding that that improper conduct was based upon some sort of personal interest of the respondents or, indeed, was done outside the scope of their authority as directors.”

42. In oral submissions, Mr Georgas fairly accepted (T26) that an inference would here be open, to the standard set by Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] HCA 34 and s 140 of the Evidence Act 1995 (NSW) that Mr Ranger had a material personal interest in the decision whether to defend proceedings in a manner that sought to preserve the remuneration that he received from YGL, but then retreated to the proposition that the Court did not have all the “background facts” to make that finding, and submitted that the Court would not be satisfied that such an inference could be made on this application.

43. Consistent with the view that I have expressed above in respect of Mr Bolton and Mr Patton, it seems to me that Mr Ranger also authorised the defence of these proceedings by YGL in circumstances that he also had a substantial interest in retaining his position as a director and executive of YGL and retaining the remuneration that he received in that capacity, and his advancing the defence of these proceedings and the associated prospect of ASG’s takeover bid for KCL would advance that personal interest. It is not necessary to decide any further question as to the scope of his authority in this application. Mr Ranger had the opportunity, in this application, to lead evidence to put any further background facts, beyond those found in the Primary Judgment, before the Court and did not do so. I return to the question of Mr Ranger’s personal interest in the defence if the proceedings below.

44. In his outline of submissions for Mr Schwarze and Mr Agocs, Mr Koch rightly recognises that KCL relied on Mr Schwarze’s and Mr Agocs’ interest in the subject of the litigation as supporting the “exceptional” order that is sought against them. Mr Koch submits that:

“It cannot be sensibly denied that, at least at some level, Mr Schwarze and Mr Agocs had a personal interest at stake insofar as the subject matter of the proceedings was a meeting at which would be propounded a resolution to remove them as directors. … However, that is the extent to which the question of personal interest can be taken and that is far from enough to impose the exceptional remedy of a third party costs order.

Relevantly, this Court did not decide the question as to whether the respondents had a material personal interest in the decision to postpone the relevant meeting. … The present summary procedure … is not an appropriate forum to reopen that question.”

45. I do not accept that submission. It is necessary to determine the question of the Former YGL Directors’ personal interest in the decision to authorise the defence of the proceedings where they put that matter in issue, at least to some extent, and it is relevant to the determination of the third party costs order. I do not accept that they have been deprived of a fair opportunity to lead evidence as to that matter, where they have had the opportunity to do so in this application.

46. In oral submissions, Mr Koch submitted that the Court would not make a finding as to whether the former YGL directors had a material personal interest in authorising the conduct of the proceedings for the purposes of s 195 of the Act, where that question was not addressed in KCL’s submissions. I accept that I need not determine the question whether that section was contravened, but the overlapping question whether the Former YGL Directors had a personal interest in authorising the defence of the proceedings, which might support a third party costs order, is squarely in issue in this application. Mr Koch in turn referred to the factors to which Basten JA referred in FPM, but I have noted above, and Hammerschlag J also emphasised in Mistrina, that those factors do not confine the exercise of the Court’s judicial discretion under s 98 of the CPA.

47. Mr Koch submitted that it was not established that Mr Schwarze or Mr Agocs had an interest which was equal to or greater than that of YGL in the proceeding. I do not accept that submission. As I have noted above, Mr Schwarze and Mr Agocs (and the other Former YGL Directors) had an interest in retaining their positions as directors of YGL and retaining the remuneration that they received in that capacity, and their advancing the prospects of success of ASG’s takeover bid for KCL and the defence of these proceedings would advance that interest; by contrast, no apparent corporate interest of YGL was served by seeking to delay or prevent its shareholders removing the Former YGL Directors and appointing new directors in accordance with the mechanism provided by the Act.

48. In reply, Mr Krochmalik again emphasises that there are no fixed categories of cases where a non-party costs order is appropriate and that the overriding consideration is whether it is in the interests of justice to make that order. Mr Krochmalik in turn submits, in response to Mr Patton’s submissions, that:

“The reason why the interests of justice favour a costs order against [the Former YGL Directors] is not based on the manner in which the proceedings were conducted by YGL (at the behest of its then directors). Rather, as set out in chief, the compelling reason to make a third party costs order is based on the conduct of YGL in seeking to prevent or defeat [KCL] from exercising its statutory rights to hold a meeting of members, which conduct was plainly undertaken by [the Former YGL Directors] in their own interests (rather than the interests of the members as a whole). Each of the [Former YGL Directors] (including Mr Patton) had a personal interest in the subject matter of the litigation and they acted in their own interests (for an improper purpose) to preserve their control of YGL. It is principally the personal interest of the respondents in the subject matter of the litigation which justifies a non-party costs order.”

I again have regard to the Former YGL Directors’ authorisation of the defence of the proceedings, rather than to steps they took prior to the commencement of the proceedings, in determining whether an order for costs should be made against them in respect of the proceedings.

49. In oral submissions in reply, Mr Krochmalik also took up a question raised in an exchange between Mr Davis and the Court in oral submissions, and submitted that:

“the defence of the proceeding was the final step in the course of, or the continued embarkation of the directors acting improperly in their own interests, with reference to [the decision by YGL], infected by its directors’ personal interests to defend the proceedings altogether.”

Determination and orders

50. I have set out several findings which I reached in the Primary Judgment above, not because I treat any conduct of YGL or its directors prior to the commencement of the proceedings would as giving rise to a basis for a third party costs order, but because those matters are relevant to an assessment of the Former YGL Directors’ decision to authorise YGL’s defence of the proceedings. I have also referred above to my observations in the Primary Judgment as to the question of the personal interest of YGL’s directors in matters connected with the proceedings. It is now necessary to decide a related question, whether YGL’s directors had a personal interest in their decision to authorise the defence of the proceedings, since that is a matter that may warrant a third party costs order and they do not concede either that matter of that such an order should be made. It is not necessary to go further to decide whether the relevant matters would give rise to a contravention of s 195 of the Act.

51. I have referred above to the remuneration received by the Former YGL Directors and their interests in retaining their respective roles as directors and, in the case of Messrs Bolton and Patton, as executives of YGL after their resignation as directors of YGL. I have also referred above to YGL’s announcement of the postponement of the YGL 249F Meeting, to which I referred in the Primary Judgment, which made clear that the YGL’s board also knew of the meeting of KCL’s shareholders called by ASG on the same day as the YGL 249F Meeting to seek to remove the directors of KCL. It was plain enough, in the relevant circumstances, that a deferral of the YGL 249F Meeting would have increased the prospects of ASG effecting a change of control of KCL before a vote of YGL’s members could occur on the resolutions proposed for the YGL 249F Meeting, so as to increase their prospects of Messrs Bolton, Patton and Ranger retaining their executive positions and salaries in the middle term and Messrs Agocs and Schwarze containing to receive their directors’ fees in the middle term. It was also plain at the primary hearing that the Former YGL Directors knew that ASG’s takeover bid for KCL was structured to seek to dilute KCL’s shareholding in YGL, if KCL shareholders accepted that bid, and Mr Ranger accepted that he knew the offer operated in that way in cross-examination at that hearing.

52. In these circumstances, comfortably find that the Former YGL Directors were, at least, personally interested in the decision whether to defend the proceedings challenging the postponement of the YGL 249F Meeting, where that postponement would offer additional time for any such dilution to take place and maximise their prospects of retaining their executive positions, salaries and directors’ fees. It is not necessary to go further to find that they were consciously motivated by that purpose. I have not neglected the fact that Mr Bolton and Mr Patton resigned as directors of YGL on the morning that the primary proceedings were to be heard before me. That is not material to the findings where I have reached, where they had authorised YGL’s defence of the proceedings before they resigned, and their resignations did not displace the effects of that decision. It seems to me that the Former YGL Directors’ decision to authorise the defence of the proceedings was here infected by their personal interests and by conflict of interest, and that is sufficient basis to make a third party costs order against each of them, rather than leaving YGL and ultimately its shareholders to bear the costs of that unsuccessful defence.

53. For these reasons, I order that the Respondents to this costs application, the Former YGL Directors, jointly and severally, pay the costs of these proceedings and the costs of and ancillary to this costs application, as agreed or as assessed.

**********