BETWEEN : LAURA CONSTANTINA BRICKHILL AS TRUSTEE FOR THE TLAJ TRUST

THOMAS JAMES McARTHUR AS TRUSTEE OF THE McARTHUR FAMILY TRUST

Costs - Proceedings dismissed because declaratory relief would have no practical utility - Turns on own facts

Supreme Court Act 1935 (WA), s 37

The plaintiff pay the defendants' cost of the hearing on 5 April 2013

The first defendant pay the plaintiff's costs of the action

There be no order as to costs as between the plaintiff and the second defendant

1 MARTIN CJ: On 5 April 2013, I ordered that these proceedings be dismissed, for reasons which I delivered ex tempore. In essence, the proceedings were dismissed because declaratory relief was sought in circumstances in which the grant of that relief would have no practical utility or legal consequence and that, insofar as the plaintiff might amend her claim to seek damages for breach of contract, that claim was unarguable, because there had in fact been no breach, but only a threatened breach.

2 Following the dismissal of the proceedings, by consent, orders were made for the exchange of written submissions with respect to the costs of the proceedings, and that those issues be determined on the papers without further hearing. Written submissions have been exchanged by the parties in accordance with those directions. These reasons record the orders which will be made with respect to the costs of the proceedings, and the reasons for those orders.

3 At the time these proceedings were commenced, the plaintiff was a director of Tom McArthur Pty Ltd (the company). The plaintiff claimed that the first defendants had threatened to breach a shareholders' agreement by taking steps to remove her as a director of the company and to instead appoint the first defendant in her place. The plaintiff claimed that the second defendants had also threatened to breach the covenant to observe all the terms of the shareholders' agreement contained in a deed poll into which they had entered. The proceedings were issued as a consequence of the issue of a notice of meeting of shareholders to be convened for the purpose of considering the removal of the plaintiff as a director and the appointment of the firstnamed second defendant as a director in her place.

4 By way of relief, the plaintiff sought orders for permanent and interlocutory injunctions to the effect that the defendants be restrained from taking any steps to remove her as a director of the company or voting in favour of the resolutions to be put to shareholders meetings and for a declaration that the issue of the notice of meeting by the first defendant constituted a breach of the shareholders' agreement.

5 The plaintiff brought an interlocutory application for an injunction to restrain the motions foreshadowed in the notice of meeting being put to the meeting of shareholders. An injunction to that effect was granted by consent. As the orders were made by consent, there was no occasion for the court to form a view as to the issues that would have arisen if the application for an injunction had been contested. However, it is clear that from the face of the materials filed in support of the interlocutory injunction that the plaintiff's contention to the effect that her removal as a director would have been a breach of the shareholders' agreement was strongly arguable.

6 Directions were made dispensing with pleadings and discovery, and establishing a procedural timetable to enable the matter to be tried expeditiously. The matter was listed for trial on 18 April 2013. However, on or about 19 March 2013 the plaintiff resigned as a director, and another director was appointed in her place. It is common ground that the appointment of the plaintiff's replacement took place in accordance with the terms of the shareholders' agreement.

7 When the matter came before me on 5 April 2013, the plaintiff contended that the proceedings had continuing utility. I rejected that contention. Resolution of those issues occupied almost the entirety of the hearing on that day. In accordance with the usual rule of practice, the defendants should have their costs of the hearing on that day in any event, to be taxed if not agreed.

8 The question remains as to the appropriate disposition of the costs of the action. It is trite to observe that orders as to costs are in the discretion of the court, although that discretion will generally be exercised on the basis that orders are made in favour of the successful party (see Supreme Court Act 1935 (WA), s 37(1); Rules of the Supreme Court 1971 (WA), O 66 r 1). Of course, it is difficult to apply that general rule of practice in cases such as this, where there has been no determination of success, by reason of events which have intervened since the commencement of the proceedings. In such cases, unless an assessment of the merits of the respective positions of the parties can be readily made, or it is clear that one party has been substantially successful, there will generally be no order as to costs: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 625 (McHugh J).

9 In this case, the plaintiff contends that she was substantially successful in achieving her objective of preventing her removal from office in breach of the shareholders' agreement, and that the defendants' failure to participate in mandatory dispute resolution processes required under the shareholders' agreement is also relevant to the exercise of the discretion with respect to costs.

10 On the other hand, the defendants contend that it was the plaintiff's actions, in voluntarily resigning as a director, which rendered the proceedings otiose, and that the defendants should therefore have the costs of the action.

11 In my view, the plaintiff's submissions are to be preferred. This is one of those cases in which the court is in a position to make an assessment that 'one party was almost certain to have succeeded if the matter had been fully tried': Ex parte Lai Quin (625). The shareholders' agreement is clear and unequivocal. The resolutions which were to be put to the shareholders' meeting would, if passed, have constituted a breach of that agreement. It is difficult, if not impossible, to see any basis for a contrary contention, and as far as I am aware, no plausible legal justification for the course proposed has ever been advanced by or on behalf of the defendants.

12 It is also significant to note that although the plaintiff resigned from her position as a director, she was replaced by a person nominated in accordance with the provisions of the shareholders' agreement. Therefore, as a matter of substance, the plaintiff succeeded in her objective of ensuring compliance with the provisions of the shareholders' agreement.

13 However, there is a basis for distinguishing between the defendants. The notice of meeting of shareholders was given by the first defendant. The evidence does not establish that the second defendants were instrumental in that course. For that reason, it seems to me that the proper orders are that the first defendant should pay the plaintiff's costs of the action to be taxed if not agreed, and that there be no order with respect to the costs of the proceedings as between the plaintiff and the second defendants.

1. the plaintiff pay the defendants' costs of the hearing on 5 April 2013 to be taxed if not agreed;
2. the first defendant pay the plaintiff's costs of the action to be taxed if not agreed;
3. there be no order with respect to the costs of the action as between the plaintiff and the second defendants.