Fraser v Chakravarti & Anor No. Scciv-00-1256
[2001] SASC 276
•15 August 2001
FRASER v CHAKRAVARTI
[2001] SASC 276
WILLIAMS J The parties each have applied for the costs associated with an application for interlocutory injunctions.
By application dated 13 December 2000 Mr and Mrs Fraser as directors and shareholders of State Apparel Pty Ltd sought urgent interlocutory relief by reason of a proposal by Mr Chakravarti that the plaintiffs be removed as directors of the company although they had a significant shareholding. The plaintiffs asked that an additional independent director be appointed and that the defendants be restrained for the time being from effecting any other alteration to the composition of the company’s board or its shareholding. The plaintiffs sought other orders to restrain Mr Chakravarti’s activities in the day to day running of the company. The plaintiffs also sought to institute a procedure whereby an independent report would be obtained as to the company’s solvency and financial viability.
The matter came before a Master on 14 December 2000 when the defendants gave undertakings in order to hold the position in the short term. On 21 and 22 December 2000 the parties came before me and I made an order for an investigating accountant to report by 26 January 2001 and I also made orders which would ensure that the investigator and the plaintiffs had proper access to information. My order restricted the management of the company. I adjourned the matter for mention on 8 January 2001 and then to 17 January 2001, 31 January 2001, 5 February 2001, and 30 March 2001. I was eventually informed that an administrator had been appointed to the company by reason of its financial situation. A liquidator was later appointed. The parties then each sought costs and I heard extended argument on 24 April 2001.
The plaintiffs claim that they are entitled to an order for costs on the basis that they had effectively “achieved their goals”; according to the plaintiffs the application was necessary to prevent them from being prematurely removed from office and in order to ascertain the true financial position of the company. There was a wider issue as to whether the plaintiffs could establish that the affairs of the company were being conducted by the defendants in an oppressive manner or unfairly prejudicial to the other members of the company. This issue eventually became moot in the circumstances.
The principles to be applied when the question at issue becomes moot were reviewed by Debelle J in Boscaini Investments Pty Ltd & Ors v Corporation of the City of Kensington & Norwood [1999] SASC 327 and then by me in Elmawey v Adelaide Islamic Society [2000] SASC 192.
Each side points to conduct on the part of the other which, standing alone, might provide the basis for an award of costs in that party’s favour. In my opinion the reality of the situation is that the relationship between the plaintiffs and Mr Chakravarti had entirely broken down. Although Mr Chakravarti foreshadowed certain action which led to the plaintiffs application, I assess his actions as being an attempt to bring matters to a head.
From the point when the action was instituted the actions of each party was in no sense unreasonable although there was an obvious breakdown in their relationship.
In their application for costs the defendants rely (inter alia) upon an offer to purchase the plaintiffs’ shares. I am not persuaded that the details of this are relevant except to demonstrate that the defendants were willing to negotiate in good faith.
It is true, when looked at narrowly, that the plaintiffs did substantially obtain the immediate relief which was sought. However, this was at the price of the usual undertaking as to damage and the defendants were most co-operative in working out suitable orders without causing embarrassment over the Christmas vacation. It is at least arguable that in the unfortunate situation in which the parties found themselves, the defendants acted in a way which would facilitate the ultimate resolution of the dispute. If the company had been able to continue to trade I would have made an order that the costs of the proceedings before me be costs in the cause; as the ultimate issue in the case has become moot I would only award costs if I could do so by applying the principles discussed in the cases abovementioned. It is not possible for me to form a clear view as to the ultimate merits of the case without a trial. The court might order a winding up of the company or it might order one party to buy out the other on terms to be fixed by the court. The plaintiffs were certainly justified in bringing their action but I am not able to say that the plaintiffs’ case was “more promising” than that of the defendants (cf Boscaini Investments par 17). In my view it is impracticable to make an assessment of the theoretical prospects of success if the parties had gone to trial. I consider also that the defendants acted reasonably in their response to the plaintiffs’ application. It is difficult to see how any costs order could now appropriately be made except that each of the parties bear his or her own costs. I am required to exercise a judicial discretion. Each case is dependent upon its own facts.
In my opinion justice will be served by making no order as to costs. (I note that the parties have agreed to share the cost of obtaining the report of the investigating accountant).
Upon each of the applications for costs I decline to make an order.
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