Turner v Ulicorp Pty Ltd

CATCHWORDS : PROCEDURE - costs - application for winding up on the just and equitable ground - finding by court that grounds exist - court's discretion exercised in favour of deferring winding up for six months - upon resumption, winding up consented to - whether plaintiff should have costs

LEGISLATION CITED : Corporations Act 2001 (Cth), s.467(4) Uniform Civil Procedure Rules 2005, rule 42.1

CASES CITED : Turner v Ulicorp Pty Ltd [2007] NSWSC 206 Turner v Ulicorp Pty Ltd [2006] NSWSC 1445

PARTIES : Peter Turner - Plaintiff Ulicorp Pty Ltd - Defendant

COUNSEL : Mr C.R.C. Newlinds SC - Plaintiff Mr D.P. Robinson SC - Defendant

SOLICITORS : Gordon & Johnstone - Plaintiff Beswick Solicitors - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

6187/06 PETER TURNER v ULICORP PTY LTD JUDGMENT 1 I am dealing with the question of costs consequent upon the making of the following orders on 11 September 2007: "1. By consent I order that Ulicorp Pty Ltd AC 081 795 333 be wound up. 2. By consent I order that David John Frank Lombe and Peter George Yates of Level 3, 225 George Street, Sydney be appointed liquidators of Ulicorp Pty Ltd." 2 The proceedings were not as simple as the dispositive orders may imply. The plaintiff, a member of the defendant, made application for a winding up order on the just and equitable ground. He sought, in the first instance, the appointment of a provisional liquidator. That application was dismissed on 13 December 2006: see Turner v Ulicorp Pty Ltd [2006] NSWSC 1445. The originating process came before the court for final hearing on 9 March 2007 and was adjourned to 11 September 2007: see Turner v Ulicorp Pty Ltd [2007] NSWSC 206. It was when the matter came back on the lastmentioned date that the orders I have set out were made by consent. 3 The plaintiff says that the defendant (that is, the company in respect of which the winding up order was made on 11 September 2007) should be ordered to pay the plaintiff's costs of the proceedings. That, of course, is the order usually made where a plaintiff is successful in obtaining a winding up order. 4 The defendant's position is that the plaintiff should not have such an order and, indeed, that the plaintiff should be ordered to pay the defendant's costs - which is the outcome normally to be expected where a defendant company successfully resists an application for a winding up order. 5 Although the orders of 11 September 2007 were made by consent, I am satisfied that this is not a case to be approached, with respect to costs, on the basis that there has been no determination on the merits. This is because, in the reasons of 9 March 2007, I expressed the opinion that the grounds on which the plaintiff relied had been established, but decided (particularly in light of s.467(4) of the Corporations Act 2001 (Cth)) that the discretion to make a winding up order should not be exercised at that point. Having regard to an undertaking given by the plaintiff's co-shareholders to ensure that the defendant company would confine itself to a particular path in the interim, I took the view that further consideration of the question of remedy should be deferred. That was consistent with submissions made on behalf of the defendant - in essence, that there should be a winding up but that it should not be imposed at that point. 6 The ultimate disposition of the winding up application was deferred because the company's shareholders had already mapped out a course towards winding up of the company. As part of consensual resolution of proceedings in the Federal Court in 2005, the shareholders had entered into a deed by which it was agreed that any outstanding business of the company should be completed and that the company should be subjected to voluntary winding up with a named person as liquidator. When the matter was before me in March 2007, it was accepted on all hands that there remained only one element of outstanding business, being an uncompleted application to the Administrative Decisions Tribunal directed towards obtaining a refund of payroll tax. 7 When the matter came back before the court on 11 September 2007, the payroll tax issue had been resolved and the company had received a refund. It was accepted, at that point, that the company should become subject to winding up. The company, although prepared to submit to voluntary winding up as contemplated by the 2005 deed, consented to the making of a winding up order. By that time, however, there were reservations about the appointment as liquidator of the person named in the 2005 deed. In that respect, no party was willing to adopt the regime provided for in the 2005 deed. The shareholders had chosen a substitute person for appointment but that person had ceased to be qualified before the matter came back before the court. In those circumstances, the plaintiff tendered the consent of Mr Lombe and Mr Yates and the court, by consent, ordered that they be appointed. 8 The position taken by the plaintiff with respect to costs is that he succeeded in establishing grounds for winding up and, ultimately, in having the court make a winding up order, even though the court, in its discretion, deferred making the order because of the parties' agreement for completion of outstanding matters. 9 The defendant's view of matters is that the real dispute was not about whether the company should be wound up but when winding up was to commence - in other words, whether, as the defendant submitted and the court accepted, there should be a delay until the agreement with respect to completion of unfinished business had been implemented. 10 There is some merit in both these contentions. The plaintiff succeeded on 9 March 2007 in making out a case for winding up. The defendant succeeded in making out a case for deferral of a winding up order. The parties thereafter implemented their agreement with respect to the company's unfinished business, with the result that, on the view taken by each, it was appropriate not only that the company be wound up but that the winding up be a court ordered winding up. By the time the matter came back before the court on 11 September 2007, the parties were no longer agreed on the choice of liquidator and that aspect was resolved in court by one party tendering the consent of Mr Lombe and Mr Yates and the other party, at that point, consenting to their appointment. 11 Two matters not referred to so far must now be mentioned. One is that the present proceedings were commenced some 18 months after the parties had entered into the 2005 deed. Against that stands the fact that one matter clearly contemplated by the deed - resolution of the payroll tax issue - took until some time between April and September 2007 to complete. 12 The second is that I found on 9 March 2007 that the consensual basis for voluntary winding up reflected in the 2005 deed had been undermined by the circumstance that, shortly before that deed was executed and unbeknowns to the plaintiff, the co-shareholders had caused some $180,000 to be paid by the company to them in a context that became highly controversial. This formed a large part of the case related to the just and equitable ground. 13 In view of the decision of 9 March 2007 and the orders ultimately made, I am satisfied that I should approach the question of costs on the footing that the plaintiff has prosecuted his claims to a successful conclusion in circumstances where there was a decision on the merits. The plaintiff is therefore entitled to his costs by virtue of rule 42.1 of the Uniform Civil Procedure Rules 2005 unless the court sees some good and proper reason to adopt the extraordinary course of depriving him of costs. Such a reason might exist if the plaintiff had commenced the proceedings unnecessarily, if the plaintiff's case although technically made out was somehow empty or unmeritorious or if the plaintiff had acted in some improper way. This is, of course, not an exhaustive list, but it does emphasise the point that some fault on the plaintiff's part must be shown if he is to be deprived of his costs. 14 I am not satisfied that any such fault has been shown. The consensual basis reflected in the 2005 proceedings was, as I have said, undermined by the plaintiff's later discovery of anterior and undisclosed withdrawal of money from the defendant by the co-shareholders. And the deed ultimately became unworkable because both parties had abandoned the proposal for appointment of the liquidator therein named. And while they had agreed upon a substitute appointee, that person became unqualified for appointment. There was, at that point, a significant gap in the previously agreed regime. 15 With the consensual basis both undermined and unworkable, it was not unreasonable for the plaintiff to persist as he did. The appropriate costs order is therefore: "Order that the defendant pay the plaintiff's costs of the proceedings." 16 It remains to consider separately the aspect involving the application for appointment of a provisional liquidator. The plaintiff was unsuccessful on that application on 13 December 2006 and it was ordered on that day that the costs of the interlocutory process be the defendant's costs in the cause. The effect of that order in light of the circumstance that the plaintiff has been awarded the costs of the action is that the award of costs to the plaintiff does not include the costs of the interlocutory process and the defendant is not entitled to its costs of the interlocutory process. The order of 13 December 2006 should stand. **********

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