Ellison, M.A. v Farkash, L.R.

[1992] FCA 939

q3-

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JUDGMENT NO. --•

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY) No G 852 of 1991

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MARGARET ANNE ELLISON,

JAMES HARRISON-SMITH and
ROGER PARRY PEARCE

First Applicants

AND LESLIE ROBERT FARKASA

First Respondent

AND DATAFUEL HOLDINGS PTY

LIMITED

Second Respondent

AND DATAFUEL PROPERTIES PTY

LIMITED

Third Respondent

10 DEC 1992 AND DATAFUEL CORPORATE PTY

LIMITED

Fourth Respondent

AND -

LIMITED

Fifth Respondent

AND DATAFUEL GROUP EXECUTIVE

SHARE PLAN PTY LIMITED	-
Sixth Respondent

an order that the company and a number of subsidiaries be wound	Datafuel Holdings Pty Ltd, returnable on 24 December 1991, for
up and for other relief. Interlocutory relief, although sought, was not pressed when the first respondent Leslie Robert Farkash, director and the majority shareholder of Datafuel, gave an undertaking to preserve the status quo in relation to the assets of the companies. The interlocutory relief sought had included an order that Farkash be restrained from moving to alter the composition of the boards of directors of the companies.
By an amended application on 15 June 1992, the applicants sought, alternatively to winding up, an order that ~arlCash buy out their shareholdings. Other issues were raised over the ownership of some shares in Datafuel as between the applicant ~arrikbn-smith

REASONS FOR JUDGMENT

m J SYDNEY

This matter commenced in this Court with an urgent application by the applicants as directors and minority shareholders of

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and Farkash, and a number of claims for money by .some one or more

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of the applicants from Datafuel. Most of the'se'other claims were partially raised in the initial statement..of cla'im in February -..- _ _

1992 and in the applicants' early affidavit evidence in this matter. In the events which have occurred, it is unlikely that

the moneylclaims -. will be heard. The share dispute is now being

heard by Justice Morling.

The applicants seek costs of the action to wind up Datafuel.	Having refused an offer by the applicants that he buy them out
of the company, by a requisition of 29 November 1991, Farkash had sought a company meeting to consider certain resolutions concerning the continuation of the company's affairs. The meeting was never held, this action being commenced instead. Farkash filed opposition to the winding up and other orders sought by the applicants.
The matter having proceeded through some directions hearings and other stages, on 15 July 1992 Farkash requisitioned a general meeting of Datafuel to pass a resolution that the company go into voluntary liquidation. The meeting was held on 17 August 1992. Farkash voted in favour of the resolution and it was passed. The applicants say that Farkash's opposition to their attempts to resolve the impasse between them in the conduct of the company caused the litigation, just as his voting for the resolution at the meeting on 17 August ended that aspect of the litigation. The applicants obtained what they sought and they say that costs should follow.
Farkash argues that the just order in this case is that the parties pay their own costs because the applicants have not succeeded in establishing an entitlement to the relief sought. He points to the fact that the amended application sought either the winding up or a buy out by him of the applicants' shares on one or mare of four grounds:

1.    That there was an agreement between the parties in June

1991 that Datafuel and subsidiaries would be wound up if

within a reasonable period of time a buy out was not agreed

upon. An of fer was made by the applicants in November 1991

but it was rejected.

Farkash denied this agreement and says that in any event a reasonable time had elapsed.

2.    That a resolution of Datafuel had been passed that the businesses of the companies be sold and their proceeds distributed pro-rata to the parties' shareholdings.

Farkash pointed to the failure to plead such a resolution in the statement of claim and the failure of the applicants to evidence the resolution.

3.   That Datafuel's affairs have since late 1991 been administered by Farkash oppressively, unfairly and prejudicially to the applicants and contrary to the interests of the members of the company as a whole.

These allegations were disputed by Farkash.

4.    That the resolutions proposed in Farkash's requisition of 29 November 1991 for a company meeting were similarly

adverse to the members of the company. .-

Farkash disputed these allegations as well.

In the presence of all his denials and disputations, Farkash says that his eventual agreement to voluntary liquidation was not a concession or admission of the applicants' claims. His contention is that he principally wished to continue and expand trading and that he wanted to purchase the applicants' shares as independently valued. He rejected their offer to purchase their shares in November 1991 because it was premature and a true valuation could not be completed until the end of January 1992. Meanwhile this action had commenced. In due course, in March 1992, he himself made an offer to purchase but it was rejected by the applicants. Negotiations and mediation failed to resolve the impasse and Farkash then decided that the relationship as joint shareholders could not continue. He says that his consent to voluntary liquidation was the consequence of the parties' inability to sever their relationship amicably.

Farkash submits that in order to award the applicants their costs, the Court would be required to determine on the evidence either that the applicants would have established their entitlement to the relief sought, or that the applicants will receive more in the liquidation than they would have received if Farkash's offer of March 1992 had been accepted. This would mean hearing the case or awaiting the results of the liquidation which Farkash says will obviously not now be done.

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I do not accept the submissions made on behalf of Farkash.

Although it is of course true that costs are within the discretion of the Court, the usual rule is that if a party	succeeds in achieving the result sought, costs will go with the
result. There is good reason for this rule. But to determine whether a party has succeeded in a claim does not involve determining that the facts alleged have been proved, especially when the case has been resolved by agreement or outside events. The question is whether the events which have occurred have
brought about the result or most of the result sought, basically for the reasons on which the original claim was based.
The discretion in disputed costs matters is often not capable of precise definition or decision. It will almost always be broadly based so that its exercise takes a fair overview of the facts, the proceedings and the result. In this case for example, the applicants dispute that Farkash ever really made a true offer to purchase their shares in March 1992 or that, if he did, it was at a fair price based on an independent valuation. There is even an apparent dispute as to what took place in the attempts at mediation, although they being confidential, I should not pass or base any conclusions on the parts of the process which the parties have revealed in the course of the argument on costs. Farkash says that the Court simply cannot determine such issues without hearing evidence and it is inappropriate to do so in this case.
The parties appear to be agreed that the applications for winding up orders against Datafuel and subsidiaries are now to be
Morling when the share dispute is determined is not clear and I dismissed. Whether that order is to be made now or by Justice
will permit further submissions on this subject if desired. I order that the applicants' costs of the application for the winding up orders be paid by Farkash. I reserve liberty to apply in writing within seven days for any further orders sought.