Argus Group Pty Ltd v Litigation Lending Services Ltd (No 2) - [2015] SASC 20

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
ARGUS GROUP PTY LTD v LITIGATION LENDING SERVICES LTD (No 2)
[2015] SASC 20
Judgment of The Honourable Justice Gray
19 February 2015
CORPORATIONS - LEGAL CAPACITY AND RELATIONS WITH OUTSIDERS - EXTERNAL LITIGATION PROCEDURE - APPEARANCE IN COURT BY COMPANY AND REPRESENTATION
CORPORATIONS - MEMBERSHIP, RIGHTS AND REMEDIES - MEMBERS' REMEDIES AND INTERNAL DISPUTES - PROCEEDINGS ON BEHALF OF COMPANY BY MEMBER
Application for costs pursuant to section 242 of the Corporations Act 2001 (Cth). At the time of trial, the plaintiffs held a minority interest in the first defendant, Litigation Lending Services Ltd, a litigation funding company. They also commenced proceedings against the second to fourth defendants, who were directors and shareholders in Litigation Lending, and the fifth defendant, JustKapital Litigation Pty Ltd, a litigation funding company. The dispute arose out of JustKapital’s attempt to take control of Litigation Lending. JustKapital, by its cross-action, brought an action against Litigation Lending for, inter alia, breach of contract. The plaintiffs’ claim against the second to fourth defendants was that, inter alia, they engaged in oppressive conduct and breaches of their directors duties by impermissibly dealing with JustKapital. At the outset of the proceedings the plaintiffs had obtained injunctive relief against the defendants. Litigation Lending was unrepresented and the plaintiffs sought and were granted leave to represent Litigation Lending pursuant to section 237 of the Corporations Act. During the plaintiffs’ opening they reached compromises with the defendants on favourable terms. The plaintiffs applied to recover the balance of their costs from Litigation Lending. The application was not opposed.
Whether the proceedings were brought by the plaintiffs in good faith for the benefit of Litigation Lending. Whether it is appropriate for the plaintiffs to recover their costs from Litigation Lending.
Held (granting the application):
1. The plaintiffs were awarded injunctive relief and given leave to represent Litigation Lending on the basis that, inter alia, they had a prima facie case against the second to fifth defendants, there was a serious question to be tried and the proceedings had been brought in good faith for the benefit of Litigation Lending.
2. The compromises entered into with the second to fifth defendants were approved by the Court on the basis that they were in the interests of Litigation Lending. Under the terms of those compromises the plaintiffs obtained substantially all of the relief sought.
3. This was a complex, expedited commercial matter. Voluminous material was before the court. The proceedings were fit for senior counsel and it was also appropriate for the plaintiffs to retain junior counsel. A review of the invoices rendered to the plaintiffs by their lawyers discloses that the fees charged were appropriate.
4. In these circumstances it is appropriate that the plaintiffs be indemnified by Litigation Lending for the balance of their costs and disbursements.
Corporations Act 2001 (Cth) s 237 and s 242, referred to.
Farrow v Registrar Of Building Societies [1991] 2 VR 589; Wood v Links Golf Tasmania Pty…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2015] SASC 20
Decision Date: 19 February 2015

CaseChat Overview and Summary

The plaintiffs, Argus Group Pty Ltd, sought an order to recover the balance of their costs and disbursements from Litigation Lending Services Ltd, following a successful application for leave to represent the company in proceedings brought against several defendants. The application was not opposed. The primary legal issue was whether the plaintiffs were entitled to an indemnity order for the balance of their costs and disbursements from Litigation Lending, pursuant to section 242 of the Corporations Act 2001 (Cth).

The court examined the principles governing costs orders in cases where a shareholder brings proceedings on behalf of a company. The court noted that while the financial status of the plaintiffs was relevant, it was not determinative of whether they were entitled to indemnity costs. The key consideration was whether the proceedings were bona fide to protect the company and whether the company would benefit from the success of the proceedings. In this case, the plaintiffs had successfully obtained injunctive relief and other relief against the second to fourth defendants, and Litigation Lending had clearly benefited from the outcome.

The court concluded that the plaintiffs' proceedings were bona fide and for the benefit of Litigation Lending. It further noted that the plaintiffs had already recovered some of their costs from the second to fourth defendants and JustKapital Litigation Pty Ltd. Therefore, the court found that the plaintiffs were entitled to an indemnity order for the balance of their costs and disbursements from Litigation Lending.

The court allowed the application for costs and ordered that Litigation Lending indemnify Argus Group Pty Ltd for the balance of their costs and disbursements, the sum of $171,757.73.

Orders

Orders of the court

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Background

Background to the litigation

This is an application for costs pursuant to section 242 of the Corporations Act 2001 (Cth).Background At the time of trial, the plaintiffs held a minority interest in the first defendant, Litigation Lending Services Ltd, a litigation funding company. The second to fourth defendants were directors and shareholders of the first defendant. The fifth defendant, JustKapital Litigation Pty Ltd, is a litigation funding company which had attempted to take control of Litigation Lending. The plaintiffs commenced proceedings in this Court primarily to prevent JustKapital from taking control of Litigation Lending. The plaintiffs also alleged breaches of fiduciary and directors duties by the second to fourth defendants. JustKapital filed a cross-claim against Litigation Lending alleging, inter alia, breach of contract. Following a contested hearing before a Judge of this Court, the plaintiffs were granted injunctive relief. The matter proceeded to trial and I granted the plaintiffs leave to represent Litigation Lending pursuant to section 237 of the Corporations Act.[1] [1] Argus Group Pty Ltd v Litigation Lending Services Ltd [2014] SASC 181. In the course of the plaintiffs’ opening submissions, the plaintiffs and JustKapital reached a compromise. The terms of the compromise relevantly included the cessation of all proceedings involving JustKapital and the payment by JustKapital of $150,000.00 in respect of the plaintiffs’ costs. At a later stage during the opening, the plaintiffs reached a compromise with the second to fourth defendants. Under the terms of the compromise, the plaintiffs, in substance, obtained the relief they had sought against the second to fourth defendants and recovered $50,000.00 in respect of their costs. The plaintiffs sought an order to recover the balance of their costs and disbursements, the sum of $171,757.73, on an indemnity basis from Litigation Lending. The application was not opposed.The Application Section 242 of the Corporations Act provides as follows:Power of the Court to make costs ordersThe Court may at any time make any orders it considers appropriate about the costs of the following persons in relation to proceedings brought or intervened in with leave under section 237 or an application for leave under that section:(a) the person who applied for or was granted leave;(b) the company;(c) any other party to the proceedings or application.An order under this section may require indemnification for costs. In Farrow v Registrar of Building Societies, Marks J set out the position of a shareholder seeking to recover costs in respect of a claim brought for the benefit of the company under common law in the following terms:[2]While I think that [the plaintiffs’] financial status is capable of relevance, it is not correct that an order will not be made unless it appears that the plaintiffs are destitute or otherwise so financially handicapped that the case otherwise could not continue. If the proceeding is bona fide to protect the [company] and the [company] will receive the benefit of success, there is no good reason why the expenses should be met out of the private resources of one or more shareholders. In principle, for the reasons given by Lord Denning in Wallersteiner, no distinction should be made if they fail.[Emphasis added.][2] Farrow v Registrar Of Building Societies [1991] 2 VR 589, 595.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

GRAY J

In these circumstances, the plaintiffs are to be indemnified by Litigation Lending for the balance of their costs and disbursements.Conclusion I allow the application for costs.

Ratio Decidendi

Legal Principle Established

Established by: GRAY J

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