Jeruth Pty Ltd v Haybale Pty Ltd [2004] VSC 319

Supreme Court of Victoria|2004-08-30|Before: Redlich J

Costs orders where no adjudication of the merits - Consent orders as to winding up - Proceedings futile - Company assets sold before trial- Relevance of appointment of provisional liquidator - Whether irretrievable breakdown in conduct of company's affairs - Whether caused by misconduct of either party - Oppression - Substantial factual dispute - Availability of alternate remedy to winding up - Withdrawal from unit trust - No clear winner established - Reasonableness of each party's conduct.

IN THE MATTER of INNER CITY PROJECT MANAGEMENT PTY LTD (ACN 080 820 971)

INNER CITY PROJECT MANAGEMENT PTY LTD (CAN 080 820 971)

Consent orders are to be made in each of these proceedings. No trial of the merits has taken place. The plaintiff seeks orders that the defendants pay its costs of each proceeding on a party/party basis and the defendants seek similar orders against the plaintiff.

Costs orders where there has been no adjudication on the merits

A successful litigant is generally entitled to an award of costs. Oshlack v Richmond River Council[1]; Latoudis v Casey[2]. Where no hearing on the merits has taken place the criteria upon which costs are normally awarded, namely success or failure of the litigant, is absent and the appropriate order is generally that each party bear its own costs.[3] Australian Securities Commission v Aust-Home Investments Ltd[4]; Re Minister for Immigration & Ethnic Affairs: Ex parte Lai Qin[5].

Costs orders may be made where there has been no hearing on the merits and the action is discontinued due to compromise or events after issue of the proceedings which have rendered it otiose. They may also be ordered where some substantive relief is granted without opposition either because the claim is conceded or because events after the issue of proceedings have rendered further dispute futile.

If a supervening event or compromise so removes or modifies the issues in dispute that it cannot be said that one side has won, the Court should not attempt to assess the merits of the case. This is particularly so where the issues are complex or questions of credit are involved. If it is clear on the undisputed facts that one party would almost certainly have succeeded if the matter had been fully tried, the Court may make an order in favour of that party.[6]

Where it is not clearly discernible that a party would have won and it appears that both parties have acted reasonably in commencing and defending the proceedings until the litigation was compromised or became futile, the Court, would usually make no order as to costs. But where the Court concludes that a party has acted unreasonably prior to or during the course of the litigation the making of a costs order against it may be justified.[7]

It is not in doubt that a party may rely upon matters of undisputed fact disclosed by the pleadings, affidavits, discovered documents or interlocutory relief granted in the course of proceedings to establish that the party acted reasonably and would have succeeded had the matter been tried. Stokes v Director-General, Department of Community Services[8]; Australian Securities Commission v Aust-Home Investments Ltd[9]; Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd[10]. Such a course is appropriate where the hearing can be of relatively short compass and those matters that are not in dispute readily identified. The boundaries of such an inquiry must be strictly observed to ensure that an inappropriate use of Court resources does not occur.

It was accepted by the parties that the present applications are to be determined by reference to these principles.

In Gribbles Finkelstein J considered that there would be very few cases where the issues would be sufficiently clear to make an order for costs in favour of the party in the absence of the hearing.[11] Sackville J in Rizal v Minister for Immigration & Multicultural Affairs[12], after referring to the observations of McHugh J in Lai Qin suggested that a somewhat more flexible approach was required. Gillard J in Champagne View similarly doubted that "special circumstances" would need to be shown before an order for costs should be made.

The plaintiff and the second, third and fourth defendants, who for present purposes may loosely be described as the "joint venturers", entered into a joint venture to purchase real estate for the purpose of development as student accommodation. The joint venturers established a unit trust and acquired shares in the trustee in proportion to their investment in the unit trust. The trustee was the first named defendant in action no. 7161 (Haybale Pty Ltd).

The joint venturers entered into a deed of settlement for the purpose of establishing the unit trust, the units being issued to joint venturers in proportion to their investment in the joint venture and Haybale was appointed its trustee. The joint venturers also acquired the issued capital of the first defendant in Proceeding No. 7162 Inner City Project Management (ICPM) for the purpose of appointing it the manager of the student accommodation, shares in ICPM being issued in proportion to the joint venturers' investment in the unit trust.

In October 1997 pursuant to the joint venture Haybale in its capacity as trustee of the unit trust acquired a number of properties known as the "Bouverie Street Properties". Funds were borrowed by Haybale from Bank West, the said borrowings being guaranteed by unit holders, and where the unit holders were corporate, by the directors of the unit holders. Between 1998 and 2001 the Bouverie Street Properties were developed for student accommodation. Upon completion of the development ICPM conducted a student accommodation business at the Bouverie Street Properties, the realised profit being paid to Haybale in its capacity as trustee of the unit trust.

In October 2001 the joint venturers determined to acquire premises known as "Lincoln Square" with the purpose that it be developed for student accommodation. A line of credit was obtained from the National Australia Bank which was to be drawn down by way of a rolling bank bill facility. The line of credit was personally guaranteed by Mr Belleli, on behalf of the plaintiff and Mr Lim on behalf of the second-named defendant. Lincoln Square was purchased in the name of Haybale as trustee of the unit trust. Following the acquisition of Lincoln Square in February 2002 disagreements arose between Mr Belleli representing the plaintiff who held a 25% interest in the joint venture and Mr Lim representing the second defendant which held a 60% interest in the joint venture.

The second defendant had, at all material times, been the project manager of the Bouverie Street Properties.

Between February and September 2002 disagreements emerged between the joint venturers over a number of issues which were not resolved. There remains a dispute between the parties as to many of the events during this period.

In August 2002 Mr Belleli attended at the National Australia Bank and advised that he would not guarantee any further borrowings from the bank. In early September 2002 the plaintiff sought the appointment of a provisional liquidator of Haybale and ICPM and commenced proceedings to have Haybale and ICPM wound up on the ground that their affairs had been conducted oppressively against the plaintiff and that it was just and equitable that the company be wound up. The plaintiff joined the other joint venturers as defendants in each proceeding (the defendants). Following a contested hearing a provisional liquidator was appointed on 26 September 2002. As a consequence of the appointment of a provisional liquidator the National Australia Bank appointed receivers of Haybale and ICPM on 7 October 2002. The action taken by Mr Belleli on his guarantee may have also precipitated the appointment of the receiver by the bank. The receiver's solicitors warned the parties that unless the disputes between them were resolved assets of Haybale and ICPM would be realised. In November 2002 the plaintiff commenced the trustee proceedings pursuant to the Trustee Act 1958 in respect of the unit trust (the trustee proceeding).

On 17 December 2002 the Bouverie Street Properties were sold by the receiver including equipment owned by ICPM. It ceased to trade. Since the sale of the Bouverie Street Properties the only assets of the trust were some $600,000 being the balance of the proceeds of sale following repayment of the indebtedness to the National Australia Bank and Lincoln Square.

The parties were unable to agree as to the value of Lincoln Square and negotiations as to the sale of Lincoln Square by one joint venturer to another proved unsuccessful. The provisional liquidator was unwilling to sell Lincoln Square in the absence of consent by the parties.

The plaintiff contended that the business undertakings of the joint venture were at an end and that it was entitled to terminate the joint venture, the unit trust and the business of Haybale and ICPM, to have those companies wound up with a distribution of assets and have its interest in the joint venture vested in it.

In pursuance of its claim that the companies should be wound up on the ground of oppression it contended that its director, Mr Belleli, in his capacity as a director of Haybale and ICPM had been wrongfully excluded from exercising any powers or authority in relation to the joint venture business, the unit trust and the business of Haybale and ICPM. It submitted that the conduct of the defendants was oppressive and unfair to it. It alleged that its director Mr Belleli had inter alia been deceived as to the business of the joint venture, the unit trust and the affairs of Haybale and ICPM. The plaintiff and Mr Belleli contended that Mr Lim and ICPM had misled them in relation to the suggested exemption of the student residential business from the operation of the Residential Tenancies Act 1997. It further alleged that Haybale and ICPM had failed to keep full and accurate financial records of the affairs of Haybale and ICPM and that Haybale and ICPM had created incorrect and false accounting records with the intent of deceiving the plaintiff and its director Mr Belleli. It further contended that Mr Lim as a director of ICPM and Haybale had improperly used his position to gain an advantage for himself and to cause detriment to ICPM and Haybale. In particular it was alleged that Mr Lim or the second defendant had improperly received payments to which they were not entitled, had received fees for services which had not been rendered and had wrongfully paid wages to certain workers. All of these allegations were denied by Mr Lim and the second defendant. During the application before me all of these allegations were for convenience described as the claim of oppression. Most of the interlocutory proceedings of which there were many during 2003 and early 2004 were concerned with this claim.

In early 2004 the liquidator, apparently having regard to deteriorating market conditions, sought the consent of all of the parties to a sale of Lincoln Square. That consent being forthcoming, the property was sold at public auction in late May 2004. Settlement of the sale took place on 18 August 2004.

In the week prior to the matter coming on before me, the provisional liquidator made a partial distribution in specie of the funds that he then held. The balance of those funds being approximately $200,000 plus the proceeds of sale of Lincoln Square constitute the remaining trust assets. Upon receipt of the purchase price the liquidator will be in a position to make a final distribution to the unit holders after deduction of his costs and expenses.

On 9 August 2004, the first day of the scheduled trial, the plaintiff advised that it was no longer seeking any relief under the Trustee Act nor was it wishing to proceed with the allegations of oppression. It was recognised by all parties that the outcome that the plaintiff was seeking in the various proceedings had been effected by means other than a Court order. They have now agreed that orders should be made by consent winding up Haybale Pty Ltd (Haybale), the first defendant in Proceeding No. 7161 of 2002 and Inner City Project Management Pty Ltd (ICPM), the first defendant in Proceeding No. 7162/2002 on the ground that it is just and equitable to do so. The trustee proceedings against Haybale (Proceedings No. 8162 of 2002) are to be dismissed. It was in this setting that the plaintiff and the defendants seek orders for costs against each other.

Do the Consent Orders establish that a party has won?

The plaintiff submits that it has effectively won the proceedings as it has succeeded in obtaining winding up orders and has succeeded in having the properties sold and the proceeds of the trust distributed.

The likely consequences of the appointment of a provisional liquidator was the appointment of a receiver by the bank. As the proceedings could not be expedited, the sale of the Bouverie Street Properties by the Receiver, the sale of Lincoln Square by the Provisional Liquidator and the winding up of Haybale and ICPM were also likely to occur. The fact that the commencement of the litigation may have precipitated the occurrence of these events thereby rendering the proceedings otiose does not, without more, establish a "winner". Neither party has capitulated or surrendered to the other. The litigation has become futile as a consequence of the disposition of the trust assets of Haybale and the cessation of business by ICPM. That it is just and equitable that they be wound up says nothing as to whether such orders would have been obtained had the supervening events not occurred. The dismissal of the trustee proceeding is similarly uninformative. The merit of each party's case cannot be discerned from the consent orders proposed. I thus turn to an examination of the conduct of the parties which was the subject of extensive submissions based upon the pleadings, affidavits, discovered documents and interlocutory proceedings.

Conduct of the parties before and during litigation

The plaintiff and the defendants each submit they acted reasonably prior to and in their conduct of the litigation and would almost certainly have succeeded if the matter had been tried in full.

The parties were permitted to file substantial outlines of argument supplemented by oral argument in support of these contentions. As a consequence of the extensive submissions it became evident that a substantial number of the events relied upon by the parties subsequent to the purchase of Lincoln Square were the subject of dispute. The chronology of events with which I was provided contained numerous entries which proved contentious. Even after the conclusion of oral argument I received further submissions concerning events set out in the chronology which were said to be contentious.

The oppression allegations which, as counsel said during the course of argument had generated the greatest heat in this litigation, have not been pursued by the Plaintiff. All of the allegations were denied by the Defendants.

A large part of the affidavit material filed in these proceedings has been devoted to the allegations of oppression. By the conclusion of the oral argument, it had been acknowledged on both sides that I could form no judgment about the allegations of oppression and could make no determination as to whether it was reasonable or not for the allegations to have been made or defended.

The evidence demonstrated that there had been a breakdown in relations between the unit holders concerning the conduct of the business. The plaintiff submitted it was incapable of resolution other than by formal dissolution of the venture.

It is unnecessary to recite authority in support of the proposition that it is just and equitable that a company be wound up if the petitioner has justifiably lost confidence in those who control the company on account of their breach of statutory contractual or fiduciary duties in conducting the company's affairs.

The Court will have regard to any serious disregard of a general intention or common understanding amongst the members as to how the company's affairs were to be conducted. F H Callaway (as he then was) stated that:

"In the present context the proper question is whether in fact there was a relevant and sufficiently fundamental general intention with respect to the manner in which the company's affairs should be conducted, whether or not that general intention can best be described by reference to a partnership analogy. Subject to the Act and to the general law, any common understanding may be considered - but it must be proved by adequate and relevant evidence ..."[13]

Lack of confidence in the conduct and management of the company's affairs lies at the foundation of applications for winding up on the just and equitable ground. Loch v John Blackwood Ltd[14]; Deputy Commissioner of Taxation of the Commonwealth of Australia v Casualife Furniture International Pty Ltd[15]. In the latter case Hansen J in a most helpful judgment referred both to the principles and relevant authorities which bear upon the grounds upon which the plaintiff here relied. These principles were not in issue.

In Casualife Furniture International Pty Ltd Hansen J referred to the following passage from the judgment of Megarry J in Fildes Bros Ltd, Re[16]:

"The question whether it is just and equitable to wind up the company is one which must be answered on the facts which exist at the time of the hearing. If on the facts existing when the petition was presented it was then just and equitable to wind up the company, but subsequently it has ceased to be so, I do not think a winding up order should be made ... no doubt if there were cogent reasons for complaint at the time when the petition was presented, but they afterwards melted away, there may be consequences in relation to costs; but a winding up order under this head must be based on subsisting facts and not on past history."[17]

As Mr Meagher Q.C. who with Mr Watts appeared for the plaintiff properly acknowledged, though the substratum of the company's affairs had disappeared thus justifying an order that the companies be wound up, this was not the ground upon which proceedings were commenced. The entitlement of the plaintiff to costs must depend upon a finding that the plaintiff was likely to succeed on the basis of the circumstances which existed at the time it initiated proceedings for winding up.

The plaintiff's contention was that the members of each of the companies were unable to cooperate in the conduct of their affairs. It was said that Mr Belleli on behalf of the plaintiff and Mr Lim on behalf of the second defendant could not agree as to whether Lincoln Square should be conducted as a student accommodation business by the unit trust upon the completion of the development. There was clearly a dispute between the parties as to what agreement, if any, had been reached about Lincoln Square prior to its acquisition. I was taken to excerpts from affidavits and to various contemporaneous documents said to support a particular party's argument. It was submitted by the Plaintiff that I should not view the joint venturers' circumstances as analogous to a partnership.

In substance the plaintiff claimed that no decision had been made about this development and that it did not accept the view expressed by the majority of the joint venturers after the acquisition of Lincoln Square that they should conduct a student accommodation business similar to the Bouverie Street Properties after the development was completed. The defendants contended that the joint venturers had agreed on a course of conduct and that it was the plaintiff who was solely responsible for disrupting the friendly relationship which was expected to prevail between members of the company.

It was common ground that Mr Lim via the second defendant was responsible for carrying out the development of the joint venture properties and the second defendant as consultant to ICPM was also responsible for conducting the business at the Bouverie Street Properties. It was in this setting that it was submitted that the plaintiff and Mr Belleli had no right to interfere in the manner in which Mr Lim and the second defendant discharged their functions.

The defendants placed reliance upon a series of decisions to the effect that a Court is unlikely to grant relief where a deadlock is caused by the plaintiff's misconduct or where there is disagreement in relation to the value of the joint venturers' interests.[18]

A winding up order would not be just and equitable where the deadlock or breakdown in trust within the company has occurred as a consequence of the plaintiff's own misconduct.[19] This principle depends for its application upon a finding that the plaintiff's misconduct was causative of the breakdown in confidence upon which the proceedings were based. Lack of clean hands is regarded as a factor pointing against a winding up being ordered. Ruut & Charest Pty Ltd v Head, Yantan Pty Ltd & Weleri Pty Ltd[20]; Guerinoni[21]. To support such a ground the plaintiff's conduct need not be "misconduct" of the sort contemplated by Lord Cross of Chelsea in Ebrahima if the problems can be properly characterised as being of its own making. Re Kornblums[22]. These principles were not challenged.

The defendants submit that the difficulties faced by the joint venturers were a consequence of Mr Belleli resiling from the agreed purpose of the venture. The plaintiff contends that it was the defendants who were seeking to alter the direction of the venture. What facts would have been established at trial, is a matter of heated dispute.

An alternate remedy - withdrawal from unit trust

The defendants submitted that had the initial trial date not been lost because of protracted interlocutory proceedings associated with the plaintiff's oppression claim there would not have been a sale of all of the assets of the trust. The defendants argued that it was unreasonable for the plaintiff to have pursued litigation which put the whole of the joint venture in peril when it could have pursued contractual rights to obtain the unit trust entitlement. The defendants assert they had good prospects of having the proceedings dismissed.

The defendants' argument was based upon the premise that equitable relief would not be granted by the Court where a disgruntled minority interest holder could obtain a fair outcome through the pursuit of another remedy available to it. The defendants submit that the relief sought by the plaintiff was misconceived. They rely upon the proposition that where oppression occurs in a company which holds its assets on trust, no diminution in value of the plaintiff's share results. Where the trust deed provides a means for the unit trust holder to withdraw, the Court may refuse an order for winding up leaving the shareholder to equitable relief under the trust instrument.[23] The defendants submitted that the terms of the trust settlement enabled the plaintiff's interest in the unit trust to be valued and withdrawn from the joint venture and that it would not be just and equitable to wind up the companies.

In answer to this contention the plaintiff submitted that because of Mr Belleli's role as a director and the plaintiff's shareholding in the two companies, additional interests existed which also must be considered. It was submitted that as a director of both companies Mr Belleli had a legitimate interest and an obligation in determining how they conducted their affairs, that the plaintiff had an immediate interest in the business of ICPM, and that the guarantee which Mr Belleli had given to the financial institutions would have left him liable for the amount which had been drawn down had the plaintiff exercised its rights under the trust deed.

Diametrically opposed submissions were made before me as to the value of the business at the time the Bouverie Street Properties were sold and ICPM ceased to trade. Mr Brett Q.C. who appeared for the second, third and fourth defendants submitted that the business conducted by ICPM never had a value and was never treated by the parties as having any value. It had no lease over the Bouverie Street Properties and, having no interest in land, could not offer the business for sale. He submitted that the sale or value of the business was never the subject of any discussion between the parties who were concerned only with the sale of the freehold. He also submitted that the question of Mr Belleli's guarantee was never raised nor was it seen as an impediment to one party being able to buy out the other's interest.

In reply Mr Meagher took me to financial records in the Court Book to demonstrate that the business was producing revenue for the trust so that the shares of the plaintiff in ICPM had some value. He submitted that it was implicit in the negotiations between the parties that in buying out a joint venturer's interest, the valuation of the business and the guarantees given to the bank would have to be addressed.

The significance of the appointment of a provisional liquidator

The plaintiff submitted that there could be no merit in any of the defendants' principle arguments otherwise they would have been raised at the contested hearing when the provisional liquidator was appointed.

It submitted that its success in having a provisional liquidator appointed, the reasons expressed by the Master for making such an order, and the abandonment of an appeal against the order were all matters I should take into account in concluding that the plaintiff acted reasonably and was likely to have succeeded in these proceedings had there been a trial on the merits.

The Court has a wide discretion as to whether or not to appoint a provisional liquidator once a winding up application has been filed. As in the present case the objective of such an appointment is to preserve the assets of the company and maintain the status quo pending the outcome of the winding up application.[24]

The significance of the appointment of a provisional liquidator was discussed in C_onstantinidis v JGL Trading Pty Ltd_[25]. The order is interlocutory in nature and is generally made when the Court considers it likely that a winding up order will in due course be made. McLennan Holdings Pty Ltd, Re[26]; Emanuele v Australian Securities Commission[27]. In this case the Master clearly considered that a prima facie case existed as revealed by the orders he pronounced. The use that I may make of the fact that interlocutory relief has been granted was stated by Hill J in Australian Securities Commission v Aust-Home Investments Ltd in these terms:

"Where interlocutory relief has been granted, that fact carries no implication as to the ultimate merits of the case but does ordinarily suggest that the Court granting interlocutory relief has accepted or found that there is an arguable issue to be tried between the parties and that the balance of convenience favours the grant of that relief." [28]

The fact that the Master made such an order and that an appeal was not pressed against the order demonstrates that it was both arguable and reasonable for the plaintiff to commence the winding up proceedings but it cannot support the inference that the plaintiff was likely to succeed following a hearing on the merits.

Prior to the commencement of proceedings no suggestion was made by any party that the provisions of the trust deed be utilised to enable the plaintiff to withdraw from the joint venture. It was conceded in the defendants' outline of submission that the clause in the trust deed permitting a unit holder to withdraw from the venture was ambiguous. As the matter was not fully argued before me I make only the observation that the submission raised by the defendants involves difficult legal considerations which it would not be appropriate to determine in an application such as this.

It was submitted on the plaintiff's behalf that negotiations pursued by the parties prior to the commencement of proceedings including the possibility that all of the assets of the unit trust be auctioned, demonstrated that the joint venture had been brought to an end and that a fair outcome for the plaintiff could not be achieved by it withdrawing from the unit trust. In answer the defendants submitted that they wished the joint venture to continue and that it was only as a consequence of the plaintiff's conduct that a sale of assets was contemplated.

The defendants rely upon what is described as a Calderbank Offer of Compromise made by them in a letter dated 9 February 2004 the material part of which says:

"1. The property at 139 Bouverie Street, Carlton should be placed on the open market for public sale by auction. The sale will be conducted by the provisional liquidator as soon as practicable and the provisional liquidator will select the necessary agent and solicitors. Any party to the proceedings will be free to bid for the property. The net sale proceeds will be paid to the provisional liquidator. 2. The two companies and the two trusts shall be wound (sic) up as soon as practicable. The winding up of the companies shall be in both cases a member's voluntary winding up. 3. The windings up of the companies and the trusts will be conducted on the basis that the assets of the companies and trusts are limited to the assets now under control of the provisional liquidator. Any existing claim that any funds or intellectual property or other assets should be recovered by either company or trust shall be withdrawn, and no such claim will be made in the future. 4. The funds remaining after the sale of 139 Bouverie Street and payment of all of the costs and disbursements of the provisional and final liquidations shall be divided between the four unit-holders in accordance with their unit holding. 5. Each party will bear its or his or her own costs of the proceedings and of the windings up of the companies and trusts. No further costs orders shall be sought and no existing costs or other order will be pursued. 6. All parties would provide mutual releases from all liabilities and obligations associated in any way with the companies or the trusts or their affairs."

It was submitted on behalf of the defendants that the defendants should have their costs from the date of this letter as the plaintiff had not obtained a judgment more favourable than that contained in the offer. The defendants' proposal in relation to the only asset of the trust which then remained was that it be placed on the open market for public sale which was, it submitted, precisely what the provisional liquidator subsequently did.

In reply to this offer the plaintiff responded that the offer was substantially the same as a proposal which had been put by the plaintiff at the beginning of proceedings. This was a reference to an offer made by the plaintiff on 22 August 2002 in which the plaintiff had proposed amongst a number of alternatives that Lincoln Square be put up for public auction.

The defendants' submissions should be rejected for a number of reasons. It is clear from the material which is not in dispute that there had been protracted negotiations between the parties concerning a possible sale of the property on the open market or its acquisition by one or other of the parties. It is unnecessary to recite the history of these negotiations particularly as some aspects of it appear to be in dispute. It is sufficient to observe that the plaintiff had been proposing the sale of Lincoln Square by public auction for some time prior to the defendants' offer. Furthermore, paragraphs 3 and 6 of the offer contained conditions which sought a release and a withdrawal of certain claims arising from the oppression allegations. The consent orders proposed do not meet these conditions. The defendant submitted that I should infer the conditions raised by paragraphs 3 and 6 were of no concern to the plaintiff as evidenced by its written reply to the offer and would have been resolved had the question of costs been agreed to. Such an inference cannot be drawn within the confines of the present application.

I do not consider that the terms of the defendant's offer were at least as favourable as the outcome of these proceedings. Having regard to all the circumstances of which I have been made aware, its rejection was not unreasonable.[29]

I have dealt with the substantial matters in dispute which the parties addressed in their submissions. The nature and the extent of the controversy prevents me from making any determination on the merits that either party would clearly have been successful. The earnest submissions made on behalf of each party that there are sufficient undisputed facts to establish that they would have succeeded has not been made out. Whether the plaintiff should have pursued other equitable relief raises an interesting question of law but it cannot be resolved without a determination of critical facts which are very much in issue.

The allegations of oppression raised by the plaintiff created a substantial impediment to the resolution of the dispute. These serious allegations and the consequential loss of trust between the parties went both to the ground of oppression and whether it was just and equitable for the companies to be wound up. As the merits remain unknown, fairness dictates that neither party should be required to bear the costs of the other in relation to these issues which occupied so much of the litigation and which may have proved decisive in determining whether it was just and equitable to make winding up orders.

Those facts which are not in dispute satisfy me that it was reasonable of the plaintiff to have commenced proceedings and reasonable of the defendants to have resisted them. On those facts upon which I can rely I am unable to draw any distinction between the reasonableness of the actions taken by either of the parties either before or during the course of the litigation. There exists no sound basis upon which I could conclude that one party should be rewarded for its reasonable action and the other party suffer a detriment in costs.

The order most commonly made where there has been no adjudication of the merits should be made in the present case. The appropriate order is that each party bear its own costs. I will hear the parties further as to the form of the consent orders I should make.

[1] [1998] HCA 11; (1998) 193 CLR 72 per McHugh J at 96.

[3] Dal Pont, Associate Professor G.E (2003) Law of Costs, Chatswood, NSW, LexisNexis Butterworths at [14.56] and the cases referred to therein.

[5] [1997] HCA 6; (1997) 186 CLR 622 per McHugh J at 624.

[7] Hood v Cullen (1885) 6 NSWLR 22; Siequert v Lawrence [1885] VicLawRp 11; (1885) 11 VLR 47; Scott v Tuff-Kote (Australia) (Pty Ltd [1975] 1 NSWLR 537; Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VicRp 38; [1984] VR 469; Australian Securities Commission v Aust-Home Investments Ltd supra Footnote 4; Australian Securities Commission v Berona Investments Pty Ltd (1995) 18 ACSR 772; Immigration & Ethnic Affairs Re Minister for: Ex parte Lai Qin supra Footnote 5; Reddy v Hughes (1996) 37 IPR 413; Protec Pty Ltd v Reconit & Sons Pty Ltd [1997] 265 FCA (17 April 1997); Gribbles Pathology Pty Ltd v Health Insurance Commission, Commonwealth of Australia & Grayson [1997] FCA 1414; (1997) 80 FCR 284 per Finkelstein J at 287; Mineralogy Pty Ltd v National Native Title Tribunal [1998] 1700 FCA, 23 December 1996; Acacia Resources Ltd v Delta Gold NL (No. 2) (1999) 33 ACSR 144; (2000) 18 ACLC 78; [1999] VSC 412 per Warren J at [13-14]; Qui v Minister for Immigration & Ethnic Affairs [1999] FCA 119; ONE.TEL Ltd v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548 per Burchett J at [6]; Hayden Theatres Pty Ltd v Penrith City Council (1998) 105 LGERA 230; Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214 per Gillard J at [43]; Barkworth Olive Groves Ltd v Carmody [2002] FCA 592; (2002) 49 ATR 661; Blackjack Executive Car Services Pty Ltd (in liq) v Koulax [2002] VSC 380; Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302; Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2003] VSC 223; Stunning Enterprises Pty Ltd v QIE Pty Ltd [2004] FCA 786.

[8] [2001] NSWSC 322 per Higgin J.

[11] Supra Footnote 7 and supra Footnote 3 at [14.60].

[13] Callaway, F.H. (1978) Winding up on the just and equitable ground, Sydney, Law Book Company at [38].

[17] Supra Footnote 15 [2004] VSC 157 per Hansen J at [466] and supra Footnote 16 at 927.

[18] Ebrahimi v Westbourne Galleries Ltd [1973] AC 360 per Lord Cross at 384; Wondoflex Textiles Ltd, Re [1951] VicLawRp 65; [1951] VLR 458; Belgiorno-Zegna v Exben Pty Ltd & Ors (2000) 35 ACSR 305, [2000] NSWSC 884; G Jeffrey (Men's Store) Pty Ltd, Re (1984) 9 ACLR 193; (1984) 2 ACLC 421; Keay, Andrew R. (ed.) (1984), McPherson: the law of company liquidation, (3rd Ed.) Sydney, LBC Information Services at 152-165.

[19] Ebrahimi supra Footnote 18; Kornblums Furnishings Ltd, Re (1981) 6 ACLR 456 at 466; Guerinoni v Argyle Concrete & Quarry Supplies Pty Ltd (1999) 34 ACSR 469, [2000] WASCA 170; Malos v Malos (2003) 44 ACSR 511, [2003] NSWSC 118.

[22] Supra Footnote 19 per Murphy J at 466.

[23] Surf Road Nominees v James [2004] NSWSC 61; Kizquari Pty Ltd v Prestoo Pty Ltd (1993) 10 ACSR 606 and 612-3; Poly Resins Pty Ltd, Re [1999] 1 QR 599 at 614; McEwan v Combined Coast Cranes Pty Ltd [2002] NSWSC 1227; (2002) 44 ACSR 244 at 250.

[24] Australian Corporations Law, Butterworth Vol. 2 at [5.4.0407].

[29] Ciccone v Ark [1999] VSC 122; MT Associates v Aqua-Max Pty Ltd [2000] VSC 163; Pearson v Williams [2002] VSC 30; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Black v Tomislav Lipova BHNF Maria Lipovac [1998] FCA 699; Jones v Bradley (No.2) [2003] NSWCA 258; Pirrotta v Citibank Ltd (1998) 72 SASR 259; Nolan v Nolan [2003] VSC 136.

(1998) 105 LGERA 230

At a glance

Court

Decision date

Before

Source

Judgment (98 paragraphs)

Parties

Cases Cited (11)