Entwisle v Minken Pty Ltd (Receivers and Managers Appointed) (in Liquidation) (No 2)
[2014] VSC 14
•5 February 2014
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. SCI 2013 of 01111
| TIMOTHY JOHN ENTWISLE & OTHERS | Plaintiffs |
| V | |
| MINKEN PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) & OTHERS | Defendants |
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JUDGE: | ELLIOTT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 5 February 2014 | |
DATE OF JUDGMENT: | 5 February 2014 | |
CASE MAY BE CITED AS: | ENTWISLE v MINKEN PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (IN LIQUIDATION) (No 2) | |
MEDIUM NEUTRAL CITATION: | [2014] VSC 14 | |
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COSTS – Indemnity costs – allegations made but not established - adverse findings – extent, nature and severity of findings – whether court should depart from the usual order as to costs – whether all defendants should be liable – Supreme Court Act 1986 (Vic), s 24; Supreme Court (General Civil Procedure) Rules 2005 (Vic), rr 63.02, 63.28; Corporations Act 2001 (Cth), s 1335(2).
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr D V Aghion | Kyard Business Law |
For the 1st to 4th Defendants | Mr P Fary | Russell Kennedy |
| For the 5th Defendant | Mr N A Frenkel | MGA Lawyers |
TABLE OF CONTENTS
A. Introduction
B. The court’s power and the relevant principles
C. Matters relied upon to support the claim for indemnity costs
D. Alleged false complaints of dishonesty and misconduct
D.1 Letter to the Australian Health Practitioners Registration Agency
D.2 Complaints of dishonesty against the plaintiffs’ legal practitioner
D.3 Repeated allegations of fraud, forgery, dishonesty and ethical breaches made by McGoldrick’s accountant
D.4 Allegations that the plaintiffs’ legal practitioner acted wrongfully by giving evidence in this proceeding
D.5 Allegation that Entwisle used a bank account to launder money tax free
D.6 Allegation that the loan by Line Accord was fraudulently backdated
E. Allegations of fraud and dishonesty allegedly without any evidentiary basis
E.1 Entwisle’s tax returns allegedly contained false claims
E.2 Purported distinction between a “sham” and a “fraud”
E.3 Allegation of a “sham” without inviting the court to make a finding
E.4 Allegation of abuse of process
F. Failure to comply with court orders
G. Mismanagement of the Companies
G.1 Failure to lodge tax returns
G.2 Alleged false evidence of McGoldrick in respect of filing tax returns for Minken
G.3 Fixed fee pursuant to agreement between Henton and Civileng
H. Changes in the defendants’ case
H.1 Status of the Dissolution Agreement
H.2 Alleged late application for a buy out as alternative relief
I. Alleged unsustainable contentions of fact
I.1 Selective application of terms of the Dissolution Agreement and surrounding documents
I.2 Contending Entwisle was bound to give up his interest in the Companies without any payment
J. Against whom should costs be ordered?
K. Conclusion
HIS HONOUR:
A.Introduction
The plaintiffs made an application to have 4 companies wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth) on the grounds that it was just and equitable to do so. The trial was heard for 4 days from 9 to 12 December 2013. Judgment was given orally on 19 December 2013 (“the Principal Judgment”). The Principal Judgment is now available generally.[1]
[1][2013] VSC 709. Defined terms used in the Principal Judgment will be used in this judgment.
The plaintiffs now seek indemnity costs against the defendants, being the 1st to 4th defendants, the Companies, and the 5th defendant, McGoldrick.
There were extensive and substantial issues between the parties. To understand these issues properly, reference should be made to the Principal Judgment.
The plaintiffs seek an order for indemnity costs of the proceeding. They seek an order jointly and severally against each of the defendants. Alternatively, they seek various alternatives in a cascading manner by which indemnities are sought from the Companies or McGoldrick (depending on the formulation), thereby allocating the primary responsibility for the costs of the other party(ies) respectively.
B.The court’s power and the relevant principles
Section 24(1) of the Supreme Court Act 1986 (Vic) provides:
Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent costs are to be paid.
Rule 63.02 of the Supreme Court (General Civil Procedure) Rules 2005 (Vic) provides:
The power and discretion of the Court as to costs under s 24 of the Act shall be exercised subject to and in accordance with this Order.
Rule 63.28 of the Supreme Court Rules provides:
Subject to this Part, costs in a proceeding which are to be taxed shall be taxed on–
(a) a standard basis;[2]
(b)an indemnity basis;[3] or
(c)such other basis as the Court may direct.
[2]See r 63.30.
[3]See r 63.30.1.
For completeness, I also note s 1335(2) of the Corporations Act 2001 (Cth) provides costs of any proceeding under that Act are to be borne by such party as the court directs.
The court has a broad discretion in relation to the question of costs, which discretion must be exercised judicially. Generally speaking, the usual order for costs at the end of a trial is for the costs to be awarded to the successful party or parties on a standard basis. In Ugly Tribe Co Pty Ltd v Sikola,[4] Harper J non-exhaustively set out categories of circumstances in which a court may depart from the usual costs order. Relevant for the purposes of this case, those categories included:
(1)The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(2)The making of an irrelevant allegation of fraud.
(3)Conduct which causes loss of time to the court and to the other parties.
(4)The commencement or continuation of proceedings in wilful disregard of known facts or clearly established law.
(5)The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.
[4][2001] VSC 189, [7].
Before considering the matters raised, it is important to keep in mind the nature of the proceeding and the form of the relief sought. Amongst other things, the plaintiffs were seeking to have the court exercise its discretion in relation to relief sought on “just and equitable grounds”. In such circumstances, there are plainly many potential relevant factors that might be put before the court. This is not a case where there are specific elements of a cause of action that may be readily identified, with the consequence that evidence that does not go to those elements being readily identifiable as plainly irrelevant. In a case such as this, reasonable minds may differ as to what might or might not be considered relevant for the purposes of resisting an application to wind up a company.
Further, in this case the credit of the principal witness for the plaintiffs and the principal witness for the defendants were clearly in issue. Potentially, a large number of matters were to be determined based upon whose account of particular events was accepted. In some cases, this might give rise to matters being raised appropriately which, in a vast majority of commercial disputes, might be considered to be inappropriate.
Lastly, in approaching the issues raised, I refer to the observations of the Court of Appeal in Luxmore Pty Ltd v Hydedale Pty Ltd.[5] Having considered the matters put before the court in argument today and in the written submissions filed with the court, I will now provide reasons on the question of costs.
[5](2008) 20 VR 481, 484 [12].
C.Matters relied upon to support the claim for indemnity costs
There is no dispute between the parties that the costs should follow the event and that at least some of the defendants ought to pay the plaintiffs’ costs. Before addressing the form of order sought, I will consider the basis upon which the plaintiffs’ costs ought to be ordered.
No less than 18 separate matters have been identified by the plaintiffs as being relevant to the issue of whether or not indemnity costs ought to be awarded against the defendants. I will group these matters in accordance with the way in which they were categorised by counsel for the plaintiffs.
D.Alleged false complaints of dishonesty and misconduct
D.1 Letter to the Australian Health Practitioners Registration Agency
In paragraph 72 of the Principal Judgment, reference was made to a letter sent by McGoldrick making serious accusations concerning Entwisle on both a professional and personal basis. As already noted, it was accepted by McGoldrick’s counsel that the making of such allegations in the context of a commercial dispute was “plainly disgraceful”.
Accordingly, the inappropriateness of the making of the allegations is not in dispute. However, the fact that such matters were before the court is relied upon by the plaintiffs to justify a departure from the usual position as to costs.
The only reason that the relevant letter was before the court was because the plaintiffs chose to tender the letter. This was done under the strenuous objection of counsel for the defendants, which objection was unsuccessful. Had it not been for the course adopted by the plaintiffs, the matters the subject of the letter would not have been before the court for the purposes of the trial.
Moreover, the evidence given by McGoldrick in relation to his continued belief of matters raised in the letter was again put forward by the plaintiffs, rather than the defendants. Such matters were raised during cross-examination not only to attack McGoldrick’s credit, but also to seek to establish why the Companies ought to be wound up.
In circumstances where the defendants were at pains not to have the matters raised in the letter before the court, I propose to give little weight to the existence of the letter and its contents in determining the outcome of the present costs application.
D.2 Complaints of dishonesty against the plaintiffs’ legal practitioner
On 5 March 2013, McGoldrick made complaints concerning the conduct of the solicitor acting for the plaintiffs. Those allegations were extremely serious, including allegations of “deliberate dishonesty” on the part of the solicitor. The allegations related to matters pleaded in another proceeding.
On 5 April 2013, the Legal Services Commissioner responded. The response included noting that there were proceedings currently before this court. It was stated that in those circumstances there was no power in the Legal Services Commissioner to deal with the matters raised. The letter suggested that concerns about the conduct of the solicitor, and a previous solicitor, should be raised with the court. It also stated that, if the court made adverse findings in relation to either practitioner, then the matter could be referred back to the commissioner for further consideration.
Any issue about the conduct of the practitioners was not raised with the court at the trial of this proceeding. There has been no adjudication by the court as to whether or not the defences raised in the other proceeding are properly raised. That proceeding is still on foot.
In the circumstances, there has been no determination of the issues raised by McGoldrick in his letter of 5 March 2013. Whilst I do not suggest for a moment that there is any basis for the complaints, there is simply no determination one way or the other in relation to this matter. Accordingly, little weight can be given to the existence of the complaint in the consideration of whether or not an award for costs on an indemnity basis ought to be made.
D.3Repeated allegations of fraud, forgery, dishonesty and ethical breaches made by McGoldrick’s accountant
The plaintiffs contended that repeated allegations of fraud, forgery, dishonesty and unethical breaches were made by McGoldrick’s accountant “presumably on instruction”. It is correct that the correspondence referred to demonstrates that allegations of the nature alleged were made. Much of what is contained in the relevant correspondence relates to allegations concerning matters referred to in section D.6 below.[6]
[6]See pars 33 to 35 below.
The contents of the correspondence do not make out the submission that the allegations were made on the instructions of McGoldrick. In an email sent by the accountant on 29 April 2013, the accountant stated that his “opinions are independent of [McGoldrick]”. In the same email the accountant stated “I will stand behind what I have stated”. Further, in an email from McGoldrick’s then solicitor sent on 6 May 2013 to Entwisle’s solicitor, McGoldrick’s solicitor stated the following:
You should direct your questions to the author of the email [ie the accountant] to which you refer. I had no prior knowledge of the content of the email to which you refer.
In short, I cannot be satisfied on the evidence that the allegations made by the accountant were made with McGoldrick’s express instructions.
In any event, for the reasons set out in section D.6 below,[7] the substance of the allegations relates to transactions that have not been the subject of any findings of fact by the court in this proceeding. In those circumstances, there is no proper basis upon which the court could find that the matters raised by the accountant had no foundation.
D.4Allegations that the plaintiffs’ legal practitioner acted wrongfully by giving evidence in this proceeding
[7]Ibid.
This issue arises out of a letter sent by the solicitors for the defendants on 17 October 2013 in which it was alleged that r 13.4 of the Professional Conduct and Practice Rules 2005 (Vic) was being infringed. The allegations were made by reason of 2 affidavits sworn by the plaintiffs’ solicitor on 27 May 2013 and 30 August 2013.
The affidavit sworn on 27 May 2013 was not included in the final version of the court book agreed between the parties for the purposes of the trial. In those circumstances, whatever criticisms might have been made effectively became otiose at the time of the final hearing. The court is not privy to the reasons why the plaintiffs chose not to rely upon that affidavit at trial.
In relation to the affidavit sworn 30 August 2013, that was included in the court book and relied upon at trial. However, substantial sections of that affidavit were not relied upon by the plaintiffs. As a result of the more limited evidence led by means of the affidavit sworn by the plaintiffs’ solicitor on 30 August 2013, the solicitor was not required for cross-examination.
The complaint made in the letter dated 17 October 2013 was that the affidavits referred to went “well beyond what is considered an appropriate affidavit from a solicitor proving certain formal matters”. It was said, by reason of this, that r 13.4 was contravened. Given that there was no cross-examination in relation to the evidence relied upon at trial, it must be assumed that the complaint was not in relation to the matters ultimately put before the court. In those circumstances, this issue seems to be of little moment.
D.5 Allegation that Entwisle used a bank account to launder money tax free
In an affidavit sworn 12 May 2013, McGoldrick alleged that Entwisle had used the Henton no.2 bank account[8] to “launder” money tax free. This affidavit was not relied upon at trial, and was not contained in a court book in its final form. It was not the subject of any evidence or submissions at trial.
[8]For the relevance of this bank account, see Principal Judgment, [58].
Although the fact that moneys were paid into the Henton no.2 bank account was referred to, the appropriateness or otherwise of this being done by Entwisle was not the subject of any finding. It must be said that the means by which the moneys were paid into that account was by a method which, at least prima facie, appeared to be somewhat unorthodox. It might be that this was the basis upon which McGoldrick made the allegation that he did. In any event, given it was not a material issue in the trial of this proceeding, and no determination has been made in relation to it, I do not propose to give it any significant weight.
D.6 Allegation that the loan by Line Accord was fraudulently backdated
Also in the affidavit of 12 May 2013, McGoldrick made allegations to the effect that Entwisle fraudulently backdated a loan agreement in a sham transaction. This was a matter that was pursued at trial.[9]
[9]Principal Judgment, [70]-[71].
In determining whether or not it was appropriate to wind up the Companies, the court refrained from making any determination about whether or not the transaction referred to was a sham. In part, this was because there were critical witnesses who were not before the court in this proceeding.[10]
[10]Principal Judgment, [70].
It was not in dispute that the documents relevant to the loan transaction in question were backdated. Entwisle frankly admitted that the documents were not signed on 1 February 2005 as dated, but were signed in 2006. The issue between the parties was whether or not such conduct was legitimate and proper. As the court has formed no view on this issue, it is not appropriate to take this into account for the purposes of determining whether or not an award for indemnity costs ought to be made.
E.Allegations of fraud and dishonesty allegedly without any evidentiary basis
E.1 Entwisle’s tax returns allegedly contained false claims
The facts underlying this issue are that Entwisle claimed a tax deduction with respect to rent in relation to the Smythesdale Property and the Brassi East Property in his tax returns, including the returns for the financial years 2007, 2008, 2009 and 2010. An issue arose on the evidence by reason that Entwisle admitted that he had not paid any rent in relation to either of those properties in the relevant years. Entwisle’s credit was sought to be attacked on the basis that it was improper to make a claim for a deduction when the amounts had not been paid.
Ultimately, no determination was made by the court on this issue as all the relevant facts were not before the court. However, a principal reason why the relevant facts were not before the court was because Entwisle was unable to give direct answers in relation to the basis upon which his tax returns were prepared. In those circumstances, the court is not able to form any view about whether or not the attack was properly made. In those circumstances, this factor is to be given little weight.
E.2 Purported distinction between a “sham” and a “fraud”
During the course of the trial, counsel for the defendants made submissions in relation to what he said was a distinction between allegations being put in cross-examination concerning a sham on the one hand, and allegations that might be made in relation to a fraud on the other hand. This involved submissions from opposing counsel and also some discussion with the bench. The matter was dealt with relatively briefly, and then the trial proceeded.
I consider this issue to be nothing more than respective counsel clarifying the basis upon which a case was being put for their respective benefit, and the benefit of the court. I do not consider it a basis upon which a court could properly determine that all the costs of the trial, or even part of those costs, ought to be awarded on an indemnity basis.
It is convenient to note at this point, as it is of some significance in the outcome of this costs application, that McGoldrick’s counsel emphasised during this exchange that it was not part of McGoldrick’s case to allege fraud against Entwisle. Although there were serious matters raised during Entwisle’s cross-examination, McGoldrick’s counsel repeatedly stated during the trial that he was not alleging fraud.
E.3 Allegation of a “sham” without inviting the court to make a finding
I refer to what is stated in section D.6 above.[11] As I have already noted, the court has not formed any view on whether or not the relevant transaction was in any way improper. However, in circumstances where the credit of Entwisle was clearly in issue, and the transaction in question involved the deliberate backdating of documents, it cannot be said that it was not proper to put such matters to Entwisle. In those circumstances, such matters should not adversely affect any discretion exercised in relation to the question of costs.
[11]See pars 33 to 35 above.
E.4 Allegation of abuse of process
As noted in the Principal Judgment,[12] the defendants contended that this proceeding was an abuse of process. Those submissions were rejected.
[12]At [159]-[161].
McGoldrick argues that the submission in relation to abuse of process was reasonably arguable. Whether or not the matter can be put this highly when regard is had to the other matters found by the court, I accept that there was certainly an evidentiary basis for such a submission being put. Entwisle conceded in cross-examination that, in commencing this proceeding, part of his motivation was to avoid the trial of the Other Proceedings.[13] Furthermore, the evidence and submissions in relation to this point were of narrow compass. Very little time was taken at trial on this issue and I do not consider this factor ought to justify an order for indemnity costs being made against any unsuccessful party.
[13]Principal Judgment, fn 8.
F. Failure to comply with court orders
The Principal Judgment referred to the fact that McGoldrick failed to comply with orders of the court made 30 May 2013.[14] The order in question concerned the production of documents. I have found that the failure to comply demonstrated that McGoldrick’s conduct was, at the very least, evidence of significant mismanagement. However, the simple fact is that the order was complied with (albeit late) well before trial. There was no suggestion that the delay in complying with the order, and the resulting delay in making the documents available for inspection, caused any prejudice to the conduct of the trial. For the purposes of this application, this matter seems to be of very little significance, if any.
G. Mismanagement of the Companies
[14]At [76]-[79].
G.1 Failure to lodge tax returns
The plaintiffs allege that because the Companies failed to lodge tax returns over a period of 5 years, this ought to found the basis for an award of indemnity costs. There are a number of matters which may be said in response to this.
First, and probably foremost, as noted in the Principal Judgment,[15] Entwisle was a director of each of the Companies for a significant period of time when there was a failure to lodge tax returns. In those circumstances, for the period he was a director Entwisle must also bear some substantial responsibility for this failure on behalf of each of the Companies.
[15]At [51].
Secondly, in relation to each of the Companies other than Minken, tax returns have now been filed. Although the evidence is not clear as to when this occurred, it was certainly well before the trial commenced.
Thirdly, the failure to lodge tax returns was one of the bases upon which the court determined the mismanagement of the Companies was such that it was appropriate for the Companies to be wound up. This was a matter put forward by the plaintiffs for the purpose of establishing that the substantive relief sought was appropriate. It cannot be said the failure to file returns in a timely manner was conduct that caused loss of time to the court or to other parties by reason of the fact that it occurred, or because it was the subject of evidence at the trial.
G.2Alleged false evidence of McGoldrick in respect of filing tax returns for Minken
As noted in the Principal Judgment,[16] the evidence of McGoldrick in relation to the filing of tax returns was most unsatisfactory. That said, as the evidence was given by McGoldrick, the court cannot be certain that any “false” evidence was given. As also previously noted,[17] McGoldrick gave the relevant evidence in the terms of his belief, rather than direct evidence of his knowledge. At times, he also expressed uncertainty in relation to his belief. Whilst I do not expressly adopt the submission put on behalf of McGoldrick that he was “obviously mistaken” when giving this evidence, I am not satisfied the evidence before the court establishes that McGoldrick gave false evidence in this regard.[18]
[16]At [53]-[56], [60].
[17]Principal Judgment, [52]-[56].
[18]See Briginshaw v Briginshaw (1938) 60 CLR 336, 362.2.
G.3 Fixed fee pursuant to agreement between Henton and Civileng
In the Principal Judgment,[19] reference was made to an agreement pursuant to which it was said a company associated with McGoldrick, Civileng, was entitled to be paid $4.5 million plus GST, together with interest on that sum from the end of January 2012 at a rate of 15 per cent per annum. This agreement was entered into without the knowledge of the plaintiffs.
[19]At [32].
The court made no finding as to whether or not such an agreement was properly entered into at the time.
This may be a matter for the liquidators to consider in the event that Civileng ever seeks to enforce what it says it is entitled to pursuant to the agreement. Be that as it may, there is no basis on the evidence available from which the court could properly arrive at a conclusion that the conduct of McGoldrick in causing such an agreement to be entered into was improper. In short, there are too many facts that are not known to the court. In those circumstances, I do not consider this to be a relevant matter to consider on the question of costs.
H. Changes in the defendants’ case
H.1 Status of the Dissolution Agreement
It is contended on behalf of the plaintiffs that the case put on behalf of the defendants changed in relation to the Dissolution Agreement. Although it is correct to state that in another proceeding the issue of whether or not the Dissolution Agreement was binding was raised on the pleadings, that was not the position in this proceeding. At all times, the defendants contended in this proceeding that the Dissolution Agreement was binding. This position was expressly adopted as part of the basis upon which the defendants contended that the plaintiffs had no standing to commence this proceeding. In short, this submission is misconceived.
H.2 Alleged late application for a buy out as alternative relief
This aspect of the case was only a very minor issue. Strictly speaking, it is correct that a formal application to obtain alternate relief to have a buy out was made late. However, the opening written submissions filed by the defendants before trial[20] expressly refer to the fact that McGoldrick sought an opportunity to buy out Entwisle’s interests in the Companies in the event that the defendants were otherwise unsuccessful in resisting the claims made by the plaintiffs.
[20]Defendants’ opening submissions, par 8.
In summary, the issue was raised generally before the trial and was dealt with succinctly at trial. This factor is not a basis upon which to depart from the usual orders as to costs.
Alleged unsustainable contentions of fact
I.1Selective application of terms of the Dissolution Agreement and surrounding documents
In the Principal Judgment,[21] it was found that McGoldrick was selective in relation to his reliance on contents of documents relevant to his version of the Dissolution Agreement. That said, the court also made no findings as to what the actual terms of the Dissolution Agreement were. Moreover, it refrained from doing so given that there was critical evidence that was not before the court.
[21]At [102]-[109].
In these circumstances, it would be most unsafe for the court to exercise its discretion in favour of the plaintiffs to award indemnity costs in relation to an issue where critical evidence was not put before the court.
I.2Contending Entwisle was bound to give up his interest in the Companies without any payment
The plaintiffs written submissions contended that the following case was put by the defendants:
The contention that [Entwisle] was bound to give up his interest in the [C]ompanies pursuant to the terms of the [Dissolution Agreement], but that [McGoldrick] was not required to pay [Entwisle] any money unless [Entwisle] contributed to future expenses, which may or may not produce a profit share.
This summary of what was said to be contended by McGoldrick does not accurately reflect McGoldrick’s case. McGoldrick contended that Entwisle was not required to be paid in any event because certain pre-conditions had not been met.[22] In short, this submission is flawed in so far as it misstates McGoldrick’s case. In oral submissions, this position was effectively conceded by counsel for the plaintiffs.
[22]Principal Judgment, [108].
In any event, for reasons already discussed, in circumstances where there has been no findings as to the terms, or enforceability, of the Dissolution Agreement, it would be unsatisfactory to award indemnity costs on the basis that a party was wrong in relation to the position it advanced with respect to the Dissolution Agreement.
J. Against whom should costs be ordered?
The Companies appeared separately to McGoldrick on the hearing of the costs application.[23] Counsel for the Companies informed the court that while the liquidators had instructed him to oppose any order for costs on an indemnity basis, his instructions were to neither consent to nor oppose an order on the usual basis against the Companies.
[23]In the Principal Judgment, fn 19, I referred to the issue of a conflict of interest in all defendants having the same legal representatives.
Counsel for McGoldrick submitted no order for costs should be made against his client, but rather an order for costs on a standard basis should be made against the Companies.
The financial position in relation to the Companies is unknown. Although funds of Minken in the order of $1.38 million have been paid into court,[24] there is insufficient evidence before the court for it to form a view about whether the winding up of each of the Companies will result in any surplus.
[24]Principal Judgment, [27].
Although I was quite critical of McGoldrick in the Principal Judgment,[25] I do not think the position is such that an order should be made beyond the “usual order” (this is subject to what is said below[26]) as to costs against all defendants. The principal reason for this, which underlies much of the reasons above on the question of indemnity costs, is that there are many serious issues which have been left unresolved. It may be these issues will be resolved subsequently; it may be they will not. Whatever be the position, it would be preemptive to seek to determine which party or parties would be likely to be successful in any contest of the outstanding disputes.[27]
[25]See [45]-[79].
[26]See par 66 below.
[27]Cf Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, 201.5 (Hill J).
Further, rightly or wrongly, all defendants took an active role in seeking to oppose the relief sought by the plaintiffs. I also have no evidence as to which of the defendants bore the costs of defending this proceeding. Although a different course might have been taken if the Companies had obtained independent legal advice upon the joinder of McGoldrick on 30 May 2013, the court has no way of knowing what the Companies would have done with the benefit of such advice.
McGoldrick’s counsel submitted the usual order in cases involving the winding up of a company is that the costs are awarded against the company. There are numerous authorities in which orders were made contrary to what was submitted to be the usual order.[28] In any event, in this case McGoldrick was the sole director of each of the Companies. He took an active role in every aspect of the conduct of the defence. I can see no good reason why he should not bear the consequences of such an approach.
[28]See, for example: Galanopoulos v Moustafa (No 2) [2010] VSC 418 (Sifris J); Gordon v Express Gas Operations Pty Ltd (unreported, 1 June 2010) (Efthim AsJ); J & M Jankar Pty Ltd v Dellmain Pty Ltd [2009] NSWSC 766 (Slattery J); Cassegrain v CTK Engineering Pty Ltd (2005) 54 ACSR 249 (White J); Triulcio v Chase Property Investments Pty Ltd (No 2) [2004] NSWSC 399 (Gzell J); Disney Davidson Holdings Pty Ltd v Safetycare Australia Pty Ltd [1999] VSC 321 (Byrne J); Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) (1998) 30 ACSR 20 (Young J); Morgan v Morgan Insurance Brokers Ltd (1993) 11 ACLC 3126 (Millett J).
K. Conclusion
The approach taken by the court as reflected in the Principal Judgment was to not determine many of the issues between the parties in considering whether or not it was appropriate to wind up the Companies. Essentially, the court found that it was not necessary to enter into the fray of many of the disputes between the parties in order to arrive at a conclusion on the real issue before the court. In those circumstances, many of the issues raised by the plaintiffs to invite the court to make an order for indemnity costs remain at large.
For the reasons stated, the court will not depart from the usual order as to costs.
Costs will be awarded in favour of the plaintiffs against each of the defendants on a standard basis.
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