Beales v WALROND - [2012] WASC 368

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: BEALES -v- WALROND [2012] WASC 368

CORAM: MASTER SANDERSON

HEARD: 7, 14, 16 & 21 AUGUST 2012

DELIVERED : 10 OCTOBER 2012

FILE NO/S: COR 108 of 2012

BETWEEN: MARTIN STEVEN BEALES
Plaintiff
AND
NIGEL PATRICK WALROND
FRANKLYN PATRICK LIBURD
Defendants

Catchwords:

Costs - Action settled without trial - Each party seeking costs from the other - Turns on own facts

Legislation:

Nil

Result:

Each party to bear their own costs

Category: B

Representation:

Counsel:

Plaintiff: Mr K Staffa
Defendants: Mr D J Jackson

Solicitors:

Plaintiff: O'Connor Partners
Defendants: Squire Sanders

Case(s) referred to in judgment(s):

Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302
Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

MASTER SANDERSON: On 9 July 2012 the plaintiff issued proceedings seeking to wind‑up the company under s 461(1)(k) of the Corporations Act 2001 (Cth). A week later the plaintiff issued interlocutory process seeking the appointment of a provisional liquidator and other relief. On 10 August 2012 administrators were appointed to the company by the defendants. On 13 August 2012 the plaintiff issued interlocutory proceedings seeking a declaration that the appointment of the administrators was invalid. All matters have now been resolved. There is a difference of opinion between the parties as to who should pay the costs. The plaintiff seeks his costs; the defendants seek their costs. These reasons deal with that issue.
There was no dispute between the parties as to the applicable legal principles. There has been no final or interlocutory hearing on the merits of the matter. The court will not now try hypothetical proceedings. The question then is whether one or other of the parties has acted so unreasonably that the other party should obtain the costs of the action: see Re The Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. Where there has been a marked difference in the reasonableness of the actions taken by the parties it may be that one party should be rewarded for its reasonable actions and the other party should suffer a detriment in costs: see Edwards Madigan Torzillo Briggs Pty Ltd v Gloria Stack [2003] NSWCA 302.
On behalf of the plaintiff it is said there are four principle reasons why costs should be awarded against the defendants. First the defendants opposed the application to wind‑up the company and to appoint a provisional liquidator but then took steps on 10 August 2012 which had the practical effect of the plaintiff succeeding in obtaining the outcomes he had sought by the applications.
Second the defendants sought directions from the court concerning the proceedings. The defendants did seek directions for the filing and answering of affidavits and then filed a number of affidavits which the plaintiff says resulted in him incurring substantial additional legal costs.
Thirdly the plaintiff says the defendants' actions in appointing administrators after they had opposed both the winding‑up application and the application to appoint a provisional liquidator not only amounted to a de facto concession of the plaintiff's claim but it was clearly designed to frustrate the plaintiff's efforts to obtain redress.
Finally and following on from the third point the plaintiff says there was no urgency which necessitated the defendants appointing administrators. It was done without notice to the plaintiff and if an appointment was urgent it could have been made as soon as proceedings were issued.
The defendants for their part seek their costs also on four grounds. First they refer to a letter of demand dated 5 June 2012 which they say was in improper terms. Allegations of dishonesty were made and there was a threat to take a complaint to ASIC. The plaintiff sought payment of $3 million for his one share in the company and an indemnity in relation to certain matters. The defendants say they had not acted dishonestly and at the very least to associate a demand for purchase of the share in correspondence where such an allegation was made was unreasonable.
Second the defendants say the proceedings were commenced after they did not agree to detailed and onerous demands as to payment and security when the timeframes put by the plaintiff were unreasonable.
Third the defendants say the application for winding‑up and the application for the appointment of a provisional liquidator were based on affidavits comprised in large part of material that was objectionable and inadmissible. They say much of the affidavit contents were argument put in scandalous terms.
Finally and tying in with the third point, the defendants say the plaintiff did not take reasonable steps to ensure the real issues in the action were clearly identified and properly understood by the parties. They say objectionable affidavits of the plaintiff totalled approximately 90 pages with a further 500 pages of attachments. The defendants say an application based on such a large volume of objectionable material obscures the issues in dispute and has not been commenced and pursued reasonably.
There are strengths and weaknesses in both arguments. So far as the plaintiff is concerned he was a director and shareholder of the company and he was concerned the defendants were not managing the company's affairs appropriately. He could not appoint administrators and his only option was to seek to wind‑up the company and have a liquidator appointed provisionally. To that extent he took the only option available to him.
It is however true the plaintiff's letters of demand were inflammatory and gave the defendants unrealistic timetables. When the application was filed it was accompanied by a volume of material which bordered on the oppressive. Because the matter has settled I have not been through the material in detail. But a sampling of the affidavit material matched with the defendants' complaints about its admissibility shows there is some justification for the defendants' complaints.
So far as the defendants are concerned it is true serious allegations were made against them by the plaintiff in correspondence and in the affidavit material once proceedings were filed. It is not difficult to understand the defendants did not want to concede the plaintiff's complaints and to file answering affidavits. It is also the case that the timeframes proposed by the plaintiff were short offering little scope for negotiation and perhaps compromise. Furthermore the appointment of the administrators was effected only after it became apparent significant demands were being made by the Australian Tax Office with dire consequences for the company.
Against that the appointment of the administrators effectively conceded what the plaintiff was claiming. While the administrators were appointed after pressure was applied by the Australian Tax Office the defendants were not unaware claims were likely to be made against the company. If the appointment of administrators was appropriate on 10 August 2012 it is reasonable to ask why the administrator was not appointed at the time the winding‑up application was made.
The position then is there are arguments in favour and against both sides. It is inappropriate for me to attempt to try the action and I do not propose to do so. I have considered the affidavit material of all parties only to a limited extent and for the purposes of framing these reasons. I express no view as to the likely outcome of any proceedings.
In the end I am satisfied the cost of this matter should lie where they fall. As outlined above there are arguments for and against each party's position. The arguments are finely balanced and I am not satisfied an order against either party would be appropriate.
Accordingly there will be no order as to costs. All orders for reserved costs will be vacated.