[2025] VSC 171
General information, not legal advice.
Supreme Court of Victoria
2025-04-07
Hetyey AsJ
Original judgment source is linked above.
CORPORATIONS - Part 5.4 of the Corporations Act 2001 (Cth) - s 461(1)(k) of the Corporations Act 2001 (Cth) - Application to wind up company on just and equitable ground - Alleged deadlock in management of company and irretrievable breakdown of relationship between shareholders - Where director defendant resigns prior to final hearing breaking deadlock.
COSTS - Proceeding resolved prior to final hearing - Court's jurisdiction to award costs - s 24 of Supreme Court Act 1986 (Vic) - Circumstances in which Court will make costs order where no determination on the merits - Whether conduct of defendants unreasonable so as to warrant costs order in favour of plaintiff - Whether capitulation by defendants - Whether conduct of plaintiff in commencing proceeding unreasonable - Whether plaintiff entitled to indemnity costs - Special circumstances required - Relevant parties each acted unreasonably in commencing and defending proceeding - Where conduct inconsistent with overarching obligations under ss 20, 22, 25 and 26 of Civil Procedure Act 2010 (Vic) - Parties to bear own costs.
(a) copy of the Notification by Officeholder of Resignation or Retirement (Form 370), lodged on 28 January 2025 and formally accepted by the Australian Securities & Investments Commission (ASIC) on 11 February 2025; and > > (b) ASIC Current Company Extract, dated 17 February 2025, confirming Mr Huw Christopher Wilkinson is no longer named as a director or company secretary.
To whom it may concern,
My resignation letter dated 27th August 2020 states that "I formally resign from my positions as Founder", [sic] I was resigning from all office holdings within that company that I was nominated on ASIC for, including Director and/or Secretary, and any related shareholdings that I may have had.
(a) the rule that costs will follow the event does not apply in circumstances when there has been no hearing on the merits[3] and it is commonly appropriate for the court to make no order as to costs.[4] That is because the court is deprived of the factor that usually determines whether or how it will make a costs order, namely the success of one of the parties (being the 'event');[5]
(b) in such a situation, it will rarely, if ever, be appropriate for a court considering the costs of the proceeding to determine for itself the case on the merits or to determine the outcome of a hypothetical trial;[6]
(c) the court may, however, determine whether the applicant acted reasonably in commencing the proceeding and whether the respondent acted reasonably in defending it.[7] Regard may also be had to the conduct of a respondent prior to the commencement of the proceeding where such conduct may have precipitated the litigation.[8] In some cases, the court may be in a position to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action;[9]
(d) where it appears that both parties have acted reasonably in commencing and defending the proceeding and their conduct has continued to be reasonable until the point at which the litigation settled or its further prosecution became futile, the proper exercise of the court's cost discretion typically means no order as to costs will be made;[10]
(e) however, in rare cases, costs may be awarded where the court is confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried;[11]
(f) there is a distinction between cases in which one party, after litigating for some time, effectively capitulates or surrenders to the other (often justifying an award of costs to the successful party), and cases where some supervening event or settlement removes or modifies the subject of the dispute such that, although it could not be said that one side has won, no issue remains between the parties except that of costs (in which case, there may be no clear reason to award costs in favour of either party);[12] and
(g) whilst each case depends upon its own circumstances, as a general proposition, if there is no other material before the court other than the pleadings, it would be extremely difficult for a court to make any order other than each party bear its own costs.[13]
(a) a proceeding was commenced or continued in disregard of known facts or clearly established law;[15]
(b) the bringing of the proceeding and the pursuit of it was high-handed[16] or unnecessary;[17]
(c) there is unreasonable conduct causing unnecessary costs to be incurred;[18] or
(d) a party, properly advised, knew or should have known that it had no chance of success but persisted with its claim (in other words, the proceeding was brought on the basis that the case advanced was hopeless).[19]
(a) as a consequence of the 17 February letter, the litigation landscape had fundamentally changed;
(b) the purpose of the proceeding was to obtain a winding up order to deal with the alleged deadlock between the parties, however, as a consequence of Mr Wilkinson's Form 370 resignation as director of the company, there is no longer a deadlock on the board of the company and the company is now able to enforce its rights against Phasegen;
(c) accordingly, the plaintiff has obtained an outcome which resolves the central dispute which caused the proceeding to be issued and the proceeding no longer serves a purpose (a fact acknowledged in the 17 February letter);
(d) Mr Wilkinson's resignation as director amounts to a capitulation several months after the proceeding had commenced;
(e) despite the fact that ASIC treated Mr Wilkinson's resignation as effective from 28 January 2025, it may be inferred from the Form 370 resignation and its accompanying 7 February 2025 letter to ASIC that Mr Wilkinson believed he had already resigned, or had attempted to resign, as early as 27 August 2020. The first and second defendants acted unreasonably in not informing the plaintiff of those matters prior to the 17 February letter. Their failure to do so necessitated the commencement of the proceeding;
(f) given the first and second defendant's unreasonableness and subsequent capitulation, there is a legitimate basis for the Court to make a costs order;
(g) costs should be awarded against the first and second defendants on an indemnity basis because of their unreasonableness in failing to retain solicitors in a timely manner and to engage with the proceeding after its service. This conduct constitutes a failure to comply with the overarching obligation found in s 20 of the Civil Procedure Act 2010 (Vic) ('CPA') to cooperate with the parties to a civil proceeding; and
(h) indemnity costs are also warranted because the first and second defendant failed to advise the plaintiff that Mr Wilkinson no longer wished to remain as a director of the company at any time prior to the 17 February letter. Until receipt of that correspondence, the plaintiff was under a mistaken assumption that Mr Wilkinson wanted to remain as a director. Such high-handed conduct amounts to a failure to comply with the overarching obligation not to mislead or deceive in respect of a civil proceeding, pursuant to s 21 of the CPA.
(a) there is no evidence of any correspondence between the parties immediately prior to the commencement of the proceeding;
(b) the proceedings were brought without any prior notice, in circumstances where Mr Wilkinson had previously indicated he was going to resign as director;
(c) the plaintiff did not ultimately obtain the relief sought in the originating process, namely the winding up of the company. Instead, the parties have agreed that it is appropriate for the proceeding to be dismissed without the need for any order by the Court;
(d) properly construed, the resignation of Mr Wilkinson was not a capitulation, but rather a supervening event in the proceeding; and
(e) in the circumstances, the proceeding should be dismissed with no order as to costs.
...it was evident to [him] that Phasegen, together with its shareholders and directors, including...Mr Wilkinson [who was also a mutual director of the company]...were unwilling to engage with or respond to the demands for payment of either the Adjudicated Debts or the Judgment Debts owed by Phasegen [the company].
First and second defendants' supplementary evidence
The situation between us at this point is no longer amicable as I am left with no choice but to resign from Solutions Soft Pty Ltd, Solutions Hired Pty Ltd, Solutions Managed Pty Ltd, Solutions Energy Asia Pacific Pty Ltd and Solutions Equities Pty Ltd (emphasis added).
... I did not inform my solicitors, PCL Lawyers, of the status of my ASIC lodgements or that I had in fact filed those materials. Nor did I seek to inform [Mr Williams] or his legal representatives in this proceeding as I was concerned that [Mr Williams] may attempt to meddle with my steps to resign and remove myself as an officeholder as [Mr Williams] had, persistently over the preceding four plus years, intentionally impeded, or otherwise failed, neglected and/or refused to facilitate my exit and resignation as officeholder and shareholder from Solutions Hired Pty Ltd.
WILLIAMS EQUITY HOLDINGS PTY LTD (ACN 632 080 123) AS TRUSTEE FOR THE CORANGAMITE TRUST
WILKINSON ENTERPRISES AUSTRALIA PTY LTD (ACN 155 136 351) AS TRUSTEE FOR THE WILKINSON FAMILY TRUST
[1] See also s 65C of the Civil Procedure Act 2010 (Vic).
[2] See Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585, [6] (Derham AsJ); Ritter v Godfrey [1920] 2 KB 47, 52 (Atkin LJ); Donald Campbell & Co Ltd v Pollak [1927] AC 732, 809 (Viscount Cave LC); Milne v Attorney-General (Tas) [1956] HCA 48; (1956) 95 CLR 460, 477 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ); Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 (Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ).
[3] Lake Burrendong State Park Trust v Thompson [2011] NSWSC 1554 (Hallen AsJ).
[4] Franpina Developments Pty Ltd v John Anthony Arena Pty Ltd [2022] NSWSC 57, [20] (Darke J) ('Franpina Developments'). See also G E Dal Pont, Law of Costs (LexisNexis Australia, 5th ed, 2021), 523-24 [14.69] ('Law of Costs').
[5] Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 (McHugh J) ('Re Minister for Immigration and Ethnic Affairs'); Franpina Developments, [20].
[6] Australian Securities Commission v Aust-Home Investments Ltd [1993] FCA 585; (1993) 44 FCR 194, 201 (Hill J) ('ASIC v Aust-Home'); Clark v ING Life Limited [2007] FCA 1960 [16] (Rares J); Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421, [20] (Stewart J).
[7] ASIC v Aust-Home, 201. See also Law of Costs, 524 [14.71].
[9] Re Minister for Immigration and Ethnic Affairs, 624, citing ASIC v Aust-Home, 201.
[10] Re Minister for Immigration and Ethnic Affairs, 625, applied in Mi-Ok Pty Ltd v The Owners of Strata Plan No 56059 [2006] NSWSC 573, [6] (Barrett J) and Re Telegraph Point Sports & Recreation Club Limited [2020] NSWSC 616, [3], [13] (Black J).
[11] Re Minister for Immigration and Ethnic Affairs, 625; One Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, [7] (Burchett J); Balanggarra Aboriginal Corporation v State of Western Australia [2018] FCA 1538, [71]-[73] (Barker J).
[12] One. Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, 553 [6] (Burchett J); FCA US LLC v Mahindra Automotive Australia Pty Ltd [2021] FCA 1091, [35] (Halley J).
[13] Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214, [47] (Gillard J). See also Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2003] VSC 223 (Mandie J); Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494, [19] (Hollingworth J); Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84, [2] (Basten JA).
[14] See Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 (Sheppard J) ('Colgate-Palmolive'); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (Harper J); Yap v Lee [2019] VSC 743 (McDonald J).
[15] See J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) [1993] FCA 70; (1993) 46 IR 301 (French J, as his Honour then was) ('J-Corp').
[16] See AGC Ltd v De Jager [1984] VicRp 40; [1984] VR 483, 502 (Tadgell J); Heike Jindra & Ors v Tech-Rentals Pty Ltd & Anor (No 2) [2000] VSC 132 [3], [9] (Warren J, as her Honour then was) ('Heike Jindra').
[18] Ballam v Ferro (No 2) [2022] NSWSC 1358, [68] (Hallen J), citing Vector Corrosion Technologies Ltd v E-Chem Technologies Ltd [2022] FCA 519, [38] (Jagot J).
[19] See Colgate-Palmolive, 231; J-Corp, 303; Banksia Securities Ltd v Insurance House Pty Ltd (Costs) [2020] VSC 234, [15] (J Dixon J); Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs) [2021] VSC 74; (2021) 64 VR 200, 204 (Riordan J).
Plaintiff
WILKINSON ENTERPRISES AUSTRALIA PTY LTD
(1956) 95 CLR 460
(1998) 193 CLR 72
(1997) 186 CLR 622
(1993) 44 FCR 194
(2000) 101 FCR 548
(1993) 46 FCR 225
(1993) 46 IR 301
(2021) 64 VR 200