In the matter of The Gosford Pty Ltd

[2021] NSWSC 628

Supreme Court

New South Wales

Medium Neutral Citation:

In the matter of The Gosford Pty Ltd [2021] NSWSC 628

Hearing dates:

On the papers

Date of orders:

3 June 2021

Decision date:

03 June 2021

Jurisdiction:

Equity - Corporations List

Before:

Williams J

Decision:

See orders at [11].

Catchwords:

COSTS — proceedings resolved by consent orders made against first defendant after first defendant capitulated to plaintiff’s claims — no substantive order made against second defendant — plaintiff sought costs orders against both defendants — general rule that costs follow the event — where no determination on merits but capitulation by first defendant — where the plaintiff is a member of the first defendant company — whether appropriate to make a costs order against the second defendant who is the sole director of the first defendant company

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Corporations Act 2001 (Cth), ss 233(1)(j), 247A, 247B

Cases Cited:

Re Minister for Immigration and Ethnic Affairs, ex parte Lai Qin (1997) 186 CLR 622

Category:

Costs

Parties:

Margaret Edith Snell as executor of the estate of the late Keith Eddy Snell (Plaintiff)
The Gosford Pty Limited (ACN 630 253 557) (First Defendant)
Gregory John Walker (Second Defendant)

Representation:

Counsel:
Ms S Clemmett (Plaintiff)
Mr J T Johnson (Defendants)

Solicitors:
Chamberlains Law Firm (Plaintiff)
Beazley Lawyers (Defendants)

File Number(s):

2021/62428

Publication restriction:

N/A

Judgment

1. In these proceedings commenced on 4 March 2021, the plaintiff sought an order under s 233(1)(j) of the Corporations Act 2001 (Cth) requiring the defendants to produce certain documents concerning specified transactions and activities of the first defendant company, and an order under s 247A of that Act authorising her to inspect specified books and records of the first defendant company. The second defendant is the sole director of the first defendant.

2. On 14 April 2021, an order was made by consent under s 247A of the Corporations Act covering substantially all of the documents in respect of which the plaintiff’s originating process sought orders under ss 233(1)(j) and 247A. That order required the books and records to be made available for the plaintiff’s inspection by 4pm on 15 April 2021.

3. The plaintiff then filed an interlocutory process seeking further orders on the basis that the first defendant had not permitted her to inspect all of the books and records the subject of the consent order. That interlocutory process was resolved by a further order made by consent under s 247B of the Corporations Act on 3 May 2021 requiring the first defendant to take further steps to facilitate the plaintiff’s inspection of the books and records covered by the earlier consent order.

4. The 3 May consent order was made following negotiations between the parties during the hearing of the interlocutory process after the defendants requested an adjournment of the hearing to put a proposal to the plaintiff. It was implicit in the manner in which that adjournment was requested that the defendants acknowledged that the scope of the books and records made available for the plaintiff’s inspection on 15 April 2021 had not complied with the earlier consent order, or at least that the plaintiff had not had a proper opportunity on 15 April 2021 to inspect all of those books and records.

5. The consent orders made on 3 May 2021 expressly noted that they disposed of the plaintiff’s claims for relief under s 247A of the Corporations Act and the plaintiff’s claims for relief in the interlocutory process, save in relation to costs. The plaintiff and the defendants agree that costs are the only issue outstanding in the proceedings. It will be necessary to make an order dismissing the claims under s 233(1)(j) of the Corporations Act in order to formally dispose of those claims.

6. The plaintiff now seeks an order that the first and second defendants pay her costs of the proceedings, including the interlocutory process.

7. The defendants submit that each party should pay their own costs in circumstances where the relief granted involved an exercise of the Court’s discretion and there has been no determination of the plaintiffs’ claims on their merits, relying on Re Minister for Immigration and Ethnic Affairs, ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6.

8. The plaintiff submits that a costs order should be made in her favour because the defendants capitulated to the plaintiff’s claims for authorisation to inspect the books and records and, further or alternatively, it was necessary for the plaintiff to bring the proceedings in order to inspect those books and records because her requests for access to the records since 15 September 2020 had been met with silence. The defendants do not dispute that those requests were made.

9. I accept the plaintiff’s submission that the first defendant has capitulated to her claim for access to its books and records. That capitulation effectively occurred in two stages on 14 April and on 3 May 2021. In those circumstances, it is appropriate in my opinion that the discretion under s 98 of the Civil Procedure Act 2005 (NSW) should be exercised in accordance with the general rule that costs follow the event and the first defendant should therefore be ordered to pay the plaintiff’s costs of the proceedings. It is not to the point that the consent orders made under ss 247A and 247B of the Corporations Act involved an exercise of the Court’s discretion. There was nothing to preclude the first defendant from permitting the plaintiff to access the relevant books and records before proceedings were commenced.

10. As I have noted above, the plaintiff seeks a costs order against both defendants. I do not consider that this is appropriate in circumstances where the plaintiff has succeeded in obtaining relief against the first defendant under s 247A of the Corporations Act and has not pursued her alternative claim under s 233(1)(j) against both defendants. I acknowledge that the second defendant is the sole director of the first defendant and is therefore responsible for the first defendant’s initial resistance to the orders sought by the plaintiff. I also note the plaintiff’s submission that her equity in the first defendant will be diminished by the amount of any costs that it is ordered to pay to the plaintiff. However, these are not sound reasons to make a costs order against the second defendant, in my opinion. To do so on those grounds would be to encourage plaintiffs to join company directors to proceedings where the only relief actively pursued is against the company and the directors are parties merely because the plaintiff has them in their sights as costs targets. The second defendant does not seek any costs order against the plaintiff and the appropriate order is therefore that the second defendant pay his own costs of the proceedings.

11. For those reasons, I make the following notation and orders:

1. Note that the plaintiff’s inspection of the first defendant’s books and records the subject of orders 1 to 3 made by consent on 3 May 2021 has occurred.

2. Prayers 2 and 3 of the originating process filed on 4 March 2021 are dismissed.

3. Order that the first defendant pay the plaintiff’s costs of the proceedings.

4. Order that the second defendant pay his own costs of the proceedings.

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Decision last updated: 03 June 2021