In the matter of Mobius Distilling Pty Ltd (in liq)
[2025] NSWSC 649
•20 June 2025
|
New South Wales |
Case Name: | In the matter of Mobius Distilling Pty Ltd (in liq) (No 2) |
Medium Neutral Citation: | [2025] NSWSC 649 |
Hearing Date(s): | Last submissions as to orders and costs 17 June 2025 |
Date of Orders: | 20 June 2025 |
Decision Date: | 20 June 2025 |
Jurisdiction: | Equity - Corporations List |
Before: | Black J |
Decision: | Orders made; Defendant to pay costs of the proceedings on an ordinary basis to specified date and thereafter on an indemnity basis |
Catchwords: | OPPRESSION – Members’ rights and remedies – whether oppression established – terms of buy-out order available where company in liquidation |
Legislation Cited: | - Civil Procedure Act 2005 (NSW) s 98 |
Cases Cited: | - Alora Davies Developments 104 Pty Ltd (in liq) v Raphael [2024] NSWSC 735 |
Category: | Costs |
Parties: | Alexander David Hardie (First Plaintiff) |
Representation: | Counsel: |
File Number(s): | 2023/281174 |
JUDGMENT
The matters in issue
By my principal judgment delivered on 28 May 2025 (Re Mobius Distilling Pty Ltd (in liq) [2025] NSWSC 539) (“Principal Judgment”), I held that the Defendant, Mr Crossley, should be ordered to buy out the Plaintiffs’ shares in Mobius Distilling Pty Ltd (in liq) (“Mobius”) for the amount of $350,000. I directed the parties to bring in agreed short minutes of order to give effect to the Principal Judgment, including as to costs, and, in the event of disagreement, their respective draft orders and submissions as to the differences between them. The parties did not agree as to the form of orders to be made or as to costs and this judgment addresses those questions.
Form of orders
Mr Atkin, who appeared for the Plaintiffs, rightly submitted that the Plaintiffs’ proposed order 1, which provided for Mr Crossley to purchase the Plaintiffs’ shares in Mobius for the amount of $350,000 reflected the Court’s reasons for judgment and that the Plaintiffs’ proposed orders 2 – 4 provided a mechanism to give effect to that purchase. The Plaintiffs’ proposed order 4 provided that the purchase price be paid within 28 days of the making of the orders.
In response, Mr Cleary, who appears for Mr Crossley, refers to the buy-out order made at first instance in Re Scientific Management Associates Pty Ltd [2019] NSWSC 1643 and to the successful appeal in Snell v Glatis [2020] NSWCA 78 (“Snell v Glatis”) and submits that the buy-out order was then overturned on appeal. He refers to Basten JA’s observation in that case that the buy-out order, which required a payment in the order of $66 million, should only have been made if the primary judge was satisfied that Mr Snell could comply with it within the time frame specified; and the proper order in the case was for the company to be wound up and its substantial assets realised if the buy-out did not proceed. It seems to me that a submission that I should make such an order is not open to Mr Crossley here, given the findings that I reached in the principal judgment. I there held that Mr Crossley should buy the Plaintiffs’ shares in Mobius (which is now in liquidation) at a specified price; and it would be inconsistent with that holding, and nonsensical, now to order that, if he does not do so, a company that is already in liquidation be placed in liquidation.
Even if that submission were now open to Mr Crossley, I would not accept it on its merits. First, the factual situation here is entirely distinct from that in Snell v Glatis, where there are no assets left in Mobius that could be realised for the shareholders’ benefit in a winding up, because a company associated with Mr Crossley has acquired its business in the circumstances set out in my judgment; by contrast, the winding up in Snell v Glatis allowed its substantial real property assets to be realised for the benefit of its shareholders. Second, the approach that I have made is consistent with the case law, including recent English case law, to which I referred in the primary judgment. Third, I am satisfied Mr Crossley can comply with that order, and within a somewhat longer time frame specified, where it was plain that a buy-out order was here sought by the Plaintiffs; the amount which Mr Crossley has been ordered to pay out the Plaintiffs’ shares is at the low end of the range of valuations that were debated between the parties; and Mr Crossley led no evidence at the hearing to establish that he lacked the capacity to comply with a buy-out order within a reasonable time, if one was made. I am entitled to draw the inference, and I draw the inference, that no evidence which he could have led would have assisted him in showing that he could not comply with such an order within that reasonable time: Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418–419; Zaccardi v Caunt [2008] NSWCA 202 at [27].
I also did not accept Mr Cleary’ s submission that several matters to which he refers are inconsistent with Mr Crossley’s capacity to fund a buy-out of the Plaintiffs’ shares. The fact that a corporate entity associated with Mr Crossley previously paid funds towards the purchase of the Company’s business does not assist him because, as I observed in the primary judgment, the corporate entity and Mr Crossley are different legal persons. The suggestion that Mr Crossley chose to rely on funds raised from Mr Blaxhall to implement that transaction does not indicate that he lacked capacity to do so from his own resources, although he may well have preferred not to realise assets in order to do so. The suggestion that Mr Crossley is “dependent” on funding from Mr Blaxhall was not established, although there was reference to funding provided by Mr Blaxhall in the course of the hearing. The suggestion that Mr Crossley was not repaid funds under the Sale Agreement (as defined in the Principal Judgment) also does not establish any lack of capacity to purchase the shares, where the valuation of shares in the Company had regard to its assets and liabilities, and Mr Crossley does not lead evidence to raise any factual basis for a lack of capacity to fund a purchase from other sources.
I will allow a “considerable period of time” (as Mr Cleary submits I should) of three calendar months for Mr Crossley’s compliance with the order that he purchase the Plaintiffs’ shares in Mobius, on terms that (as Mr Atkin submits) he should pay interest for the delay in doing so beyond 30 days. Although that is less than the time sought by Mr Crossley, common experience indicates that it should be sufficient time for Mr Crossley to realise funds by sale of real property assets or otherwise in order to comply with the order. I will not order a further hearing to investigate Mr Crossley’s financial position, which was not Mr Crossley’s preferred position in any case, where Mr Crossley had the opportunity to lead such evidence as he wished to as to this matter at the primary hearing. I allowed the parties an opportunity to submit draft orders as to the payment of interest. Mr Cleary, without leave, instead made further submissions in that regard and, in accordance with the well-established case law, I have had no regard to those submissions.
Costs
The applicable principles are well-established. Section 98 of the Civil Procedure Act 2005 (NSW) confers on the Court a wide discretion with respect to costs, and the Court has discretion to determine by whom, to whom and to what extent costs are to be paid; costs will ordinarily follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs, in accordance with r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). A successful party in proceedings has a “reasonable expectation” of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. The principle that costs should follow the event is the “guiding principle” with respect to costs, and the onus is on the losing party to establish the basis for a departure from the usual costs rule in UCPR r 42.1: Waterman v Gerling Australia Insurance Co Pty Ltd (No 2) [2005] NSWSC 1111 at [10]; Northern Territory v Sangare (2019) 265 CLR 164; [2019] HCA 25 at [24]-[25].
Mr Atkin submits that the Plaintiffs have been successful in the proceedings and that Mr Crossley should pay their costs of the proceedings. Mr Cleary rightly accepts that costs should follow the event where the Plaintiffs were successful.
Mr Cleary submits that the order for costs should be discounted by reason of “wasted” costs associated with the lay evidence led by Mr Hardie. I do not accept that the costs ordered in favour of the Plaintiffs should be discounted for the former issue where that matter will best be addressed by an assessor on an assessment. Mr Cleary also submits that the order for costs should be discounted, by reason of “wasted” costs of the expert evidence which Mr Hardie led but ultimately did not rely on in closing submissions. Mr Atkin responds that the Plaintiffs’ costs of the proceedings should not be discounted for that reason and he points, inter alia, to the fact that Mr Crossley relied upon aspects of the Plaintiffs’ expert evidence and, on that basis, I had regard to it in determining the ultimate purchase price to be paid by Mr Crossley to purchase the Plaintiffs’ shares in Mobius. I accept that no discount should be allowed on that basis where Mr Crossley ultimately relied on the expert evidence led by the Plaintiffs and the Court therefore had regard to it in determining the proceedings, so the costs of obtaining it were not “wasted”.
Mr Atkin also submits that costs should be ordered in favour of the Plaintiffs on an indemnity basis from 18 March 2025, relying on a letter in accordance with the principles in Calderbank v Calderbank [1975] 3 All ER 333. The applicable principles were summarised by Ward J (as the President then was) in Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [2012] NSWSC 816 at [9]–[15] and I summarised them in ReAlsafe Security Products Pty Ltd (atf Alsafe Trust) (in liq) [2016] NSWSC 575 at [8] as follows:
“[T]he fact that a party ultimately achieves a worse result than he or she would have achieved if he or she had accepted a Calderbank offer does not itself establish that the other party should be awarded indemnity costs, unless it can be said that it was unreasonable for the first party not to accept that offer, so as to warrant a departure from the general rule as to costs: Nu Line Construction Group Pty Ltd v Fowler (aka Grippaudo) [above] at [9]–[15]; Perisher Blue Pty Ltd v Nair-Smith (No 2) [2015] NSWCA 268 at [14], [16] . In Lawrence v Gunner; Gunner v Lawrence [2015] NSWSC 1229 at [26], Stevenson J observed that:
If a Calderbank offer is made, but not accepted, the court’s discretion to make a special order is enlivened. The court’s discretion is an open one, but is commonly enlivened if (a) the party that made the offer achieves a better result than the amount offered, (b) the offer was a genuine offer of compromise, and (c) it was unreasonable of the offeree not to accept: for example Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [7] –[8].”
I recognise that a Calderbank offer will not justify an indemnity costs order unless its rejection was unreasonable: Ofria v Cameron (No 2) [2008] NSWCA 242 at [20]. I also addressed the applicable principles in Alora Davies Developments 104 Pty Ltd (in liq) v Raphael [2024] NSWSC 735 at [3]ff, to which Mr Atkin refers.
Here, by their letter dated 18 March 2025, the Plaintiffs had offered to settle their claims on the basis of a payment, inclusive of costs and interest, which was significantly less than the damages which they have received, particularly after adjusting for the legal costs which would have been compromised by that offer. That letter had also drawn attention to documents produced on subpoena which, it contended and the judgment has established, supported the Plaintiffs’ claim and identified other matters as to which the Plaintiffs were also successful at the hearing. Mr Atkin submits that Mr Crossley’s refusal of the offer of 18 March 2025 should be viewed as unreasonable and as warranting an order for indemnity costs. I accept that submission, having regard to matters raised in that letter, and the significant discounts that that offer represented to the Plaintiffs prospective recoveries in the proceedings, including as to costs if they succeeded. I also accept that Mr Crossley was then in a position to make a considered assessment of the prospects of the proceedings, where that offer was made after service of all the evidence and shortly before the commencement of the hearing, and that letter also allowed Mr Crossley a sufficient time within which to consider that offer. Mr Atkin also submits, and I also accept, that the potential disproportion between the costs of the proceedings, and the then future costs of the hearing, is also relevant in that regard.
Mr Cleary responds that I should not order indemnity costs for the whole of the proceedings, but the Plaintiffs did not seek such an order and I need not address that submission. Mr Cleary submits that I should not order indemnity costs from 18 March 2025, by reason of the Plaintiffs’ offer made on that date. He submits that the outcome in the matter is different from that offer, where the Mr Crossley’s acquisition of shares in Mobius held by the Plaintiffs “is not the same as simply paying over funds”. I do not accept that there is any substantive difference between the two, where that shares in Mobius are now likely valueless by reason that the business was transferred to a company associated with Mr Crossley in the manner set out in the principal judgment and Mobius is now in liquidation. I also do not accept Mr Cleary’s submission that Mr Hardie’s further lay evidence of 27 March 2025, or the joint expert report, or any further expert evidence, brought about any substantive change to the matters which were already apparent when the offer was made by the Plaintiffs and rejected by Mr Crossley.
Orders
For these reasons, I make the following orders:
1. The First Defendant purchase the shares owned by the First Plaintiff and Second Plaintiff in the Second Defendant for the amount of $350,000.00 (“Purchase Price”).
2. Within 14 days of the making of this Order, the Plaintiffs deliver up to the First Defendant a share transfer form duly executed by themselves transferring their shares to the First Defendant.
3. The First Defendant not register the share transfer until he has complied with order 4 below.
4. Subject to the Plaintiffs’ compliance with order 2 above, the First Defendant pay the Purchase Price (and any interest accrued in accordance with order 5 below) to the Plaintiffs by 4:00pm on 19 September 2025.
5. Interest is payable on the Purchase Price (or any unpaid amount thereof) pursuant to s 101(1) of the Civil Procedure Act 2005 (NSW) (“CPA”) such interest to be calculated for the purposes of s 101(2) at the prescribed rate as from the date of these orders.
6. Pursuant to s 101(3) of the CPA, interest is not payable on the Purchase Price if the amount is paid in full by 4:00pm on 18 July 2025.
5. The First Defendant pay the costs of the Plaintiffs of these proceedings, such costs to be calculated on an ordinary basis up to 18 March 2025, and on an indemnity basis after 18 March 2025, as agreed or as assessed.
**********
1
16
2