FEDERAL COURT OF AUSTRALIA
Ananda Marga Pracaraka Samgha Ltd v Tomar (No 3) [2012] FCA 184
Citation: Ananda Marga Pracaraka Samgha Ltd v Tomar (No 3) [2012] FCA 184 Parties: ANANDA MARGA PRACARAKA SAMGHA LTD (ACN 003 193 879), DEVENDHRAN VADIVELOO PILLAY and PRABANJAMURTHI PILLAI v SUNIL KUMAR SINGH TOMAR, CLAUDIA ALISTER, RICHARD PFEIFFER, TIWARI DAYASHANKAR, PAUL ALISTER, DIETER DAMBIEC, JAKE KARLYLE, LUKE DEACON, MIRAI DEACON, MICHAEL TOWSEY and DHARANDENDRAN PARTHY File number: VID 208 of 2010 Judge: DODDS-STREETON J Date of judgment: 5 March 2012 Catchwords: COSTS – Company limited by guarantee – Criteria for, and membership disputed – Whether company should be ordered prior to trial to pay costs of all parties to dispute – Where company has not actively participated and is not separately represented – Where individual plaintiffs impecunious – Whether leave should be granted nunc pro tunc under s 237 of Corporations Act 2001 (Cth) to bring the proceeding on behalf of the company Legislation: Corporations Act 2001 (Cth) s 236, 237, 242, 1335(2)
Federal Court of Australia Act 1976 (Cth) s 43(2)Cases cited: Ananda Marga Pracaraka Samgha Ltd v Tomar [2010] FCA 565 cited
Ananda Marga Pracaraka Samgha Ltd v Tomar (No 2) [2010] FCA 1342 discussed
Devereaux Holdings Pty Ltd v Parry Corp Ltd (1985) 9 ACLR 837 cited
Link Agricultural Pty Ltd v Shanahan (1998) 28 ACSR 498 cited
Pender v Lushington (1877) 6 Ch D 70 cited
Power v Ekstein (2010) 77 ACSR 302 cited
Scullion v Family Planning Association of Queensland (1985) 10 ACLR 249 cited
Sellar v Lastotav Pty Ltd [2008] FCA 1766 followed
Wood v Links Golf Tasmania Pty Ltd [2010] FCA 570 distinguishedDate of hearing: 2 March 2012 Date of last submissions: 2 March 2012 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 77 Counsel for the Plaintiffs: Mr C Gunst QC with Mr M Irving Solicitor for the Plaintiffs: Holding Redlich Counsel for the Defendants: Mr BE Walters SC with Mr TR Messel Solicitor for the Defendants: Moores Legal
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 208 of 2010
BETWEEN: ANANDA MARGA PRACARAKA SAMGHA LTD (ACN 003 193 879)
First PlaintiffDEVENDHRAN VADIVELOO PILLAY
Second PlaintiffPRABANJAMURTHI PILLAI
Third Plaintiff
AND: SUNIL KUMAR SINGH TOMAR
First DefendantCLAUDIA ALISTER
Second DefendantRICHARD PFEIFFER
Third DefendantTIWARI DAYASHANKAR
Fourth DefendantPAUL ALISTER
Fifth DefendantDIETER DAMBIEC
Sixth DefendantJAKE KARLYLE
Seventh DefendantLUKE DEACON
Eighth DefendantMIRAI DEACON
Ninth DefendantMICHAEL TOWSEY
Tenth DefendantDHARANDENDRAN PARTHY
Eleventh Defendant
JUDGE:
DODDS-STREETON J
DATE OF ORDER:
5 MARCH 2012
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The relief sought by the amended application dated 21 February 2012 be refused.
2.The second and third plaintiffs pay the defendants’ costs of the application.
3.The proceeding be listed for mention at 10.15am on 9 March 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL…
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Details
- Case
- [2012] FCA 184
- Decision Date
CaseChat Overview and Summary
Ananda Marga Pracaraka Samgha Ltd v Tomar (No 3) concerns a dispute about the membership of a company, Ananda Marga Pracaraka Samgha Ltd (AMPS), and the costs associated with litigation regarding the dispute. The plaintiffs, Devendhran Vadiveloo Pillay and Prabanjamurthi Pillai, sought leave under section 237 of the Corporations Act 2001 (Cth) to bring the proceeding on behalf of AMPS. The defendants, Tomar and Alister, opposed the application and sought an order for AMPS to pay the costs of all parties to the dispute. The primary issue for the court was whether AMPS should be ordered to pay the costs of all parties, given that it had not actively participated in the proceedings and was not separately represented. A further issue was whether leave should be granted under section 237 of the Act to bring the proceeding on behalf of AMPS, considering the plaintiffs' impecuniosity and the absence of any impartial assessment of the proposed costs order.
The court determined that several conditions under section 237(2) were not satisfied, including the requirement for the company to receive 14 days written notice of an intention to apply for leave, unless the court dispensed with that requirement. The court found that the application for leave was not necessary to commence or maintain the plaintiffs' case but was primarily directed at the power to make a costs order under section 242. The court also noted that while the plaintiffs were impecunious, relying on section 242 was unnecessary due to the other bases of the power to order costs. The court further held that an order for AMPS to pay the costs of all parties should not be made at that stage, as the plaintiffs did not identify any case in which a comparable order was made. The court found that the facts of the case at hand were significantly different from those in Wood, where the applicants were granted leave to bring a derivative action and the court ordered the company to meet the costs of running the action.
The court refused the relief sought by the amended application dated 21 February 2012. It ordered the second and third plaintiffs to pay the defendants' costs of the application and listed the proceeding for mention at 10.15 am on 9 March 2012.
The court determined that several conditions under section 237(2) were not satisfied, including the requirement for the company to receive 14 days written notice of an intention to apply for leave, unless the court dispensed with that requirement. The court found that the application for leave was not necessary to commence or maintain the plaintiffs' case but was primarily directed at the power to make a costs order under section 242. The court also noted that while the plaintiffs were impecunious, relying on section 242 was unnecessary due to the other bases of the power to order costs. The court further held that an order for AMPS to pay the costs of all parties should not be made at that stage, as the plaintiffs did not identify any case in which a comparable order was made. The court found that the facts of the case at hand were significantly different from those in Wood, where the applicants were granted leave to bring a derivative action and the court ordered the company to meet the costs of running the action.
The court refused the relief sought by the amended application dated 21 February 2012. It ordered the second and third plaintiffs to pay the defendants' costs of the application and listed the proceeding for mention at 10.15 am on 9 March 2012.
Orders
Orders of the court
1. The relief sought by the amended application dated 21 February 2012 be refused.
2. The second and third plaintiffs pay the defendants’ costs of the application.
3. The proceeding be listed for mention at 10.15am on 9 March 2012.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The application was opposed and the following were filed in opposition:(1)The affidavit of Murray Baird sworn 23 February 2012.(2)Written submissions dated 24 February 2012.BACKGROUND I refer to my reasons for judgment of 3 June 2010 (Ananda Marga Pracaraka Samgha Ltd v Tomar [2010] FCA 565) and 3 December 2010 (Ananda Marga Pracaraka Samgha Ltd v Tomar (No 2) [2010] FCA 1342) (“the December 2010 reasons”), in which the detailed history and background of the matter are set out. The proceeding was commenced by the plaintiffs in March 2010. As appears from the affidavits and other materials filed in the proceeding, the legal firm Holding Redlich was initially retained in March 2010 by Devendhran Vadiveloo Pillay, the second plaintiff, in order to provide advice about the validity of a notice for a general meeting of the company on 20 March 2010, at which it was resolved that Mr D Pillay and another director, the third plaintiff, Prabanjamurthi Pillai, (who, together with Ms Nayak and the first and second defendants, Mr Tomar and Ms Alister, comprised the board) should be removed as directors. Following that disputed meeting, on 26 March 2010, a further meeting of directors, attended by Messrs Pillai and Pillay, resolved that the board authorise its solicitors to institute legal proceedings to challenge the validity of the notice, the conduct of the meeting on 20 March 2010 and the membership of a number of persons who participated in it, on the basis that they had not been validly admitted to membership. Holding Redlich received a total of $25,000 from the company, which remains in its trust account. The defendants alleged that the second and third plaintiffs and a number of their supporters were not members of the company, as they were not in good standing with the relevant Ananda Marga religious authority as allegedly required on a proper construction of the constitution. While the plaintiffs and defendants agree that Mr Tomar and Ms Alister are members of the company, the identity of all other members of the company is a matter of dispute. At the interlocutory hearing on 31 March 2010, when the defendants objected to the inclusion of the company as a plaintiff and to the expenditure of company funds to support the litigation, the second and third plaintiffs undertook not to deal with the company’s funds other than in the ordinary course of business, and their counsel informed the court that company funds had not been and would not be applied to the payment of Holding Redlich’s fees (as I noted at [14] of the December 2010 reasons). As Mr Shaw of Holding Redlich deposed, Holding Redlich did not initially require full payment for its services from the second and third plaintiffs and did not press for payment from the company. When the litigation became more complex, however, Holding Redlich required and received a contribution of $100,000 from the second and third plaintiffs towards the legal fees. Holding Redlich has billed the second and third plaintiffs in a total sum of $438,087.17 for fees and disbursements to date, and Mr Shaw estimates the fees and disbursements of the second and third plaintiffs alone, for a six week trial, at a further $550,000, to which (under the orders sought) the costs of the first and second defendants would have to be added.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
While I am satisfied that there is a serious question to be tried, s 237(2)(e) of the Act requires the company to receive at least 14 days written notice of an intention to apply for leave under s 237(1) (unless the court dispenses with that requirement) to give it an opportunity to respond. In the present case, the company is not separately represented and a very substantial order for costs is sought against it, yet the court does not have the benefit of any impartial submissions or assessment by a party independent of the members in dispute, of the proposed costs order.Conclusion on application for leave A number of conditions in s 237(2) (most importantly, s 237(2)(c)) were not satisfied. The application for leave pursuant to s 237 was not necessary to commence or maintain the second and third plaintiffs’ case, but was principally directed at the power to make a costs order under s 242. The impediment which has now arisen to the second and third plaintiffs’ continued prosecution of their claims is their impecuniosity. In my view, however, reliance on s 242 was unnecessary, given the other bases of the power to order costs. Whether costs should be awarded on another basis Section 43(2) of the Federal Court of Australia Act 1976 (Cth) provides:Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge. Section 1335(2) of the Act provides:The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs. While the above provisions confer, independently of s 242, a broad power and discretion to order costs, in my opinion, for the reasons stated above in relation to the second and third plaintiffs’ s 237 argument, an order that the company pay the individual plaintiffs and defendants’ costs of the proceeding should not, at this stage, be made. The second and third plaintiffs did not identify any case in which an order comparable to that sought in this case was made. While they relied particularly on Finkelstein J’s decision in Wood, the facts of Wood were very different from those of the present case. In Wood, the applicants, who were former officers of the company, had been granted leave to commence an action in its name against a director and his company, for alleged misappropriation of the company’s opportunity in breach of duty. The proceeding was thus in relation to an alleged wrong for which the company was the proper plaintiff and, if successful, would result in the recovery of corporate assets. The applicants in Wood had already been granted leave pursuant to s 237 of the Act and Finkelstein J, in such circumstances, ordered the company to meet the fair and reasonable costs of running the derivative action. His Honour noted that the discretion in s 242 was unconfined and doubted (contrary to Barrett J’s views in Roach v Winnote Pty Ltd (2006) 57 ACSR 138 and Sub Rosa Holdings Pty Ltd v Salsa Sudada Production Pty Ltd [2006] NSWSC 916) that there was a general approach requiring persons granted leave to bring a derivative action to bear, in the first instance, in whole or in part, the company’s costs of the proceeding (at [7]-[9]).
Ratio Decidendi
Legal Principle Established
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