Galanopoulos v Ali Moustafa (No 2)

[2010] VSC 418

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

No. 3877 of 2010

GALANIS (JOHN) GALANOPOULOS (WHO SUES BY HIS ADMINISTRATOR PURSUANT TO PART 5, DIVISION 3 AND 3A OF THE GUARDIANSHIP AND ADMINISTRATION ACT 1986, HELEN PAPANIKOLOPOULOS)	Plaintiff
V
ALI MOUSTAFA & ORS	Defendant

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JUDGE:	SIFRIS J
WHERE HELD:	Melbourne
DATE OF JUDGMENT:	13 September 2010
CASE MAY BE CITED AS:	Galanopoulos v Ali Moustafa & Ors (No 2)
MEDIUM NEUTRAL CITATION:	[2010] VSC 418

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COSTS – Deadlock – Company would up on just and equitable grounds – Shareholder opposing applications ordered to pay party and party costs – Any gap in costs to be costs in the winding up.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr L. Magowan	Schembri & Co Lawyers
For the Defendant	Mr A. Schlicht	Mohan Yildiz & Associates

HIS HONOUR:

1. On 20 August 2010 I made an order winding up AI Constructions Pty Limited (“the Company”).  I appointed Philip Newman and Clyde Peter White liquidators of the Company.

1. The plaintiff makes application for his costs of and incidental to the proceeding.  The plaintiff submits that the costs should not be the usual order namely that his costs be costs in the winding up.  It is contended that because the plaintiff succeeded in his principal remedy after a contested hearing costs should follow the event and be awarded against the first defendant rather than coming out of what is in effect the assets of the Company.  The plaintiff seeks such costs on an indemnity alternatively solicitor and client basis.

1. Needless to say the first defendant opposes any such order in relation to costs whether on an indemnity basis or otherwise.  He contends that the usual order should be made.

1. By its amended originating process the plaintiff sought final relief.  Various alternatives remedies were sought.  The plaintiff sought either a winding up of the Company on various bases or that his shares be purchased by the first defendant.  The first defendant opposed the application for winding up.  Although the first defendant offered to buy the plaintiff’s shares it is clear that such offer to be of any value would have required the resolution of substantial factual issues (and presumably some legal issues) before any valuation could be established.  This would have involved substantial further costs and delay in circumstances where the Company could not continue to function properly because of the deadlock.  An obvious deadlock was not sufficiently acknowledged by the first defendant.

1. The plaintiff has accordingly succeeded in his application despite strenuous opposition.  In my opinion the plaintiff should recover his costs.  The remaining question is whether the costs should be recovered in effect from the Company (of which he is a one half shareholder) or whether the first defendant should pay the plaintiff’s costs.   

1. The first defendant opposed the winding up and was unsuccessful.  Although no specific adverse findings were made the first defendant was still unsuccessful in defeating the plaintiff’s application.  It was always open to the first defendant to consent to the winding up.  So far as may be necessary for this application it may be noted that the first defendant failed to adequately explain the relevant transactions of the Company and was for some inexplicable and unexplained reason overseas during the period that a mediation was ordered.  Further the first defendant failed to respond adequately to legitimate and proper requests for information made by the plaintiff. 

1. It is also apparent from the material that the plaintiff repeatedly suggested that a liquidator be appointed to the Company.  As with many other requests this appears to have fallen on deaf ears. 

1. In all of the circumstances and in the exercise of my discretion I am of the opinion that the first defendant should pay the plaintiff’s costs including costs reserved.  In the final analysis the proceeding was the usual adversarial case, despite the consequence being the winding up of the Company.  There is no reason why costs should not follow the event.  However I am not prepared to order that such costs be paid on an indemnity or solicitor and client basis.  Although the first defendant has been unsuccessful and there are questions about his conduct, I am unable to find any of the extraordinary circumstances that would warrant costs on a higher scale.

1. However, to the extent that the plaintiff is out of pocket or unable to recover his costs from the first defendant, he should be entitled to recover such costs from the Company as costs in the winding up.  The plaintiff should not be out of pocket.  In the circumstances his actions were very much for the benefit of the Company and its stakeholders.  Accordingly any gap in the costs should be recovered.[1]

   [1]See the discussion by Young J in Fexuto Pty Ltd v Bosnjak Holdings Pty Ltd (No 3) 30 ACSR 20 at 25. However, unlike the facts in Fexuto, the application in this case was in essence for the benefit of the company.

1. Accordingly I order that the first defendant pay the plaintiff’s costs (including costs reserved) to be taxed as between party and party in the absence of agreement.  I will order further that to the extent that the plaintiff is unable to recover his costs from the first defendant and in respect of his costs over and above his party and party costs, that such costs be costs in the winding up.