Kendrick v Hoch
[2025] VSC 628
•3 October 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2023 02337
IN THE MATTER OF: DAIRY FARMERS OF VICTORIA CONSORTIUM PTY LTD (ACN 627 584 598)
BETWEEN:
| DEAN JAMES KENDRICK | Plaintiff |
| v | |
| DANIEL HOCH | First Defendant |
| and | |
| DAIRY FARMERS OF VICTORIA CONSORTIUM PTY LTD (ACN 627 584 598) | Second Defendant |
---
JUDGE: | GARDE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 3 October 2025 |
CASE MAY BE CITED AS: | Kendrick v Hoch & Anor |
MEDIUM NEUTRAL CITATION: | [2025] VSC 628 |
---
COSTS – Application for the award of costs on discontinuance – Whether the Court should award costs or otherwise order – Relevant principles – Supreme Court Act 1986 (Vic) s 24(1) – Northern Territory v Sangare [2019] 265 CLR 164; Soteriadis v Nillumbik Shire Council [2015] VSC 363; Merkon Constructions Pty Ltd v Residence Company Pty Ltd [2024] VSC 402, applied.
---
HIS HONOUR:
Introduction
On 12 June 2025, I made a consent order dismissing the proceeding. Any application for costs was to be determined on the papers. The first defendant seeks the costs of the proceeding on the standard basis. The plaintiff contends that no order for costs should be made.
Brief history of the proceeding
On 2 June 2023, the plaintiff filed an originating process under ss 232 and 233 of the Corporations Act 2001 (Cth) (‘Act’) seeking relief from oppression, unfair prejudice and unfair discrimination on the basis that he was a 50% shareholder and director of the second defendant (‘company’). In an affidavit filed on 2 June 2023, the plaintiff deposed that he had been excluded by the first defendant from the management of the company and had not received proper disclosure of its financial affairs. He listed 12 payments totalling $418,349.07 which he said the first defendant had paid to his personal bank account or the bank accounts of other entities which he controlled.
On 13 July 2023, Caporale JR ordered the company to make its books available for inspection and copying, for the first defendant to file an affidavit in response, and for the conduct of a mediation.
In his affidavit in response filed on 10 August 2023 (‘first defendant’s affidavit’), the first defendant denied that the plaintiff had been excluded from management of the company or access to the company’s financial information. He said that in 2017, he met the plaintiff and his wife and discussed the possibility of the plaintiff and his wife providing administrative services to the company in exchange for the issue of 120 shares to the plaintiff. The first defendant also deposed that the plaintiff separated from his wife in 2020 and suffered from mental health issues and depression. He said that the plaintiff was absent from the business for about six months. He said that the plaintiff on return demanded financial information which he provided, and became upset when the board of the company declined to permit his new partner to become involved in the company’s business.
The first defendant’s affidavit also deals with the payments made by the company. The first defendant deposed that the plaintiff was able to access the company’s financial documentation at any time and had access to bank records for two of the company’s accounts, its accounting software and the company’s accountant. He said that the company paid the plaintiff $26,761.10 from receipts in FY2019/2020, and that the plaintiff would often ring and ask for money. He said that the introduction of the Dairy Code of Conduct on 1 January 2020 (which became mandatory on 1 January 2021) legislated away the company’s business and its reason for existence. He said that the company then ceased to trade; had no assets and should be wound up.
On 18 January 2024, the plaintiff filed a draft and unsworn affidavit (‘draft affidavit’) responding to the first defendant’s affidavit in some detail and admitting or denying the facts stated in it. He listed the transactions and drawings for which he said he had received no explanation.
On 23 January 2024, a mediation was conducted but was unsuccessful.
On 24 January 2024, the first defendant made an open offer to settle the proceeding on the basis that the company be wound up under s 461(1)(k) of the Act on the just and equitable ground as its purpose had ended following reforms to the dairy industry. The offer was rejected by the plaintiff.
On 20 June 2024, the plaintiff’s solicitors filed a notice that they were ceasing to act.
On 2 July 2024, fresh solicitors retained by the plaintiff filed a notice of appearance.
On 22 November 2024, Caporale JR made trial directions listing the proceeding for trial commencing no earlier than November 2025 with an estimated duration of four days.
On 13 December 2024, the proceeding was fixed for trial on 10 November 2025.
On 12 June 2025, the proceeding was dismissed by consent with costs to be determined on the papers.
On 22 June 2025, the company was deregistered by ASIC under s 601AB of the Act.
First defendant’s costs submissions
The first defendant submitted that:
(a) he should have the costs of the proceeding on the standard basis;
(b) the starting position was that the plaintiff who discontinued a proceeding should pay the defendant’s costs subject to a contrary order;
(c) the burden was on the plaintiff to show that a contrary order should be made;
(d) it was impracticable to assess the eventual prospects of success and the court should not try a hypothetical action between the parties to determine the question of costs;
(e) the plaintiff discontinued the proceeding without explanation and without settlement or success in the proceeding;
(f) the plaintiff has not had his shares purchased or paid out by anyone;
(g) the first and second defendants have acted in an appropriate manner throughout the proceeding;
(h) they have not conducted the proceeding in such a way as to warrant the court exercising its discretion as to costs in an unfavourable way; and
(i) the first defendant offered to wind up the company but this was rejected by the plaintiff.
Plaintiff’s costs submissions
The plaintiff submitted that:
(a) the plaintiff sought to discontinue the proceeding only after the defendants provided their opposing material, information and documentation;
(b) the plaintiff achieved some success through the orders of Caporale JR on 13 July 2023;
(c) the decision by the plaintiff to discontinue was made promptly after it became clear that continuation would be disproportionate to any potential recovery;
(d) after the order of Caporale JR on 22 November 2024 no substantive steps were undertaken by the plaintiff which would have caused the defendants to incur costs;
(e) the plaintiff’s solicitors communicated promptly regarding their proposal for dismissal with costs reserved;
(f) the plaintiff sought to avoid unnecessary litigation and costs with a change of solicitors and review by the new solicitors of the merits and commerciality of the proceeding;
(g) a key consideration in the plaintiff’s decision to discontinue was the assessment that the costs of continuing the proceeding would be disproportionate to any relief realistically recoverable from either defendant; and
(h) the plaintiff’s conduct of the proceeding was reasonable, cooperative and proportional and consistent with his overarching responsibilities under the Civil Procedure Act 2010 (Vic) (‘CP Act’).
First defendant’s reply submissions
In reply, the first defendant submitted that:
(a) the plaintiff must show a substantial reason why costs should not follow the event, and has failed to do so;
(b) the plaintiff made a forensic decision to discontinue when faced with the potential of a pyrrhic victory where the costs incurred would exceed what might be awarded;
(c) the discontinuance came after several failed attempts to resolve the proceeding; and
(d) the plaintiff has not provided any material to show that the costs incurred by the first defendant were disproportionate.
General principles as to costs
The relevant principles as to costs are well established. The court has a broad discretionary power to make orders as to costs.[1] The court’s discretion is unfettered but is exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[2] Although costs are in the discretion of the court the ordinary rule is that, in the absence of sound reasons to the contrary, a successful litigant should receive his or her costs.[3] The purpose of an order for costs is to compensate the successful party and not to punish the unsuccessful party.[4]
[1]Supreme Court Act 1986 (Vic) s 24(1); Civil Procedure Act 2010 (Vic) s 65C; Supreme Court (General Civil Procedure) Rules 2025 (Vic) O 63.
[2]Latoudis v Casey (1990) HCA 59 [26]; (1990) 170 CLR 534, 557 (Dawson J) (‘Latoudis’); Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72, 86 [34] (Gaudron and Gummow JJ).
[3]Milne v Attorney-General for the State of Tasmania [1956] HCA 48; (1956) 95 CLR 460, 477 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ).
[4]Latoudis 562-563 (Toohey J), 567 (McHugh J).
A guiding principle by which the discretion as to costs is to be exercised – indeed ‘one of the most, if not the most, important principle’ is that the successful party is generally entitled to his or her costs by way of indemnity against the expense of litigation that should not, in justice, have been visited upon that party. The application of that principle may be modified or displaced where there is conduct on the part of the successful party in relation to the conduct of the litigation that would justify a different outcome.[5]
[5]Northern Territory v Sangare [2019] 265 CLR 164, 173 [25] (High Court of Australia) (citations omitted).
In Soteriadis v Nillumbik Shire Council, Derham AsJ summarised the principles and factors that apply to the award of costs where a party has discontinued a proceeding in the following terms:
(a)The rule does not give rise to a presumption that costs will be ordered against the discontinuing party;
(b)However, the rule does create a starting position for the plaintiff or discontinuing party to pay the defendant's costs, subject to a contrary order;
(c) The contrary order itself involves a discretionary decision to be exercised judicially. If there is to be a departure from the starting position, it should be done in a particularised, and principled way. The Court is required to make such order as it thinks just in the particular circumstances of the case;
(d)The burden is on the party who seeks to persuade the Court that a contrary order should be made. If facts are to be relied upon to found the Court making a different order, the plaintiff will bear the onus of proving the relevant facts;
(e)All the relevant circumstances, and not just the fact of discontinuance, should be considered. This may include a consideration of the whole of the proceedings. Generally the discretion will be exercised on the basis of the objective circumstances established on the evidence and not involve the subjective considerations of one party;
(f)A relevant consideration is whether the plaintiff acted reasonably in commencing the proceedings and whether the defendant acted reasonably in defending them. It might also be appropriate for the Court to consider the conduct of the defendant prior to the commencement of the proceedings where such conduct may have precipitated the litigation;
(g)Generally there must be some proper justification, sound positive ground, or a good reason, for departing from the starting position. The reasons for the discontinuance can bear heavily on the exercise of the discretion as to costs, so for example, it may be appropriate to make a contrary order:
i.Where the proceedings have been rendered unnecessary by circumstances beyond the plaintiff's control;
ii.Where the plaintiff achieved practical success in the proceedings;
iii.Where costs have been significantly increased by the unreasonable conduct of the defendant;
(h)Where the proceedings are discontinued prior to any hearing on the merits, usually it will be impracticable to assess the eventual prospects of success in the action and the Court cannot try a hypothetical action between the parties to determine the question of costs;
(i)There is a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event, or settlement, so removes, or modifies, the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case, there will commonly be lacking any basis for an exercise of the court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case that usually creates problems, since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs; and
(j)Where the proceedings are discontinued after interlocutory relief has been granted, the Court may take into account the fact that that interlocutory relief has been granted;[6]
[6][2015] VSC 363, [12].
These principles and factors were followed and applied by M Osborne J in Merkon Constructions Pty Ltd v Residence Company Pty Ltd.[7]
[7][2024] VSC 402, [28].
The principles and factors stated in these authorities are helpful in exercising the Court’s discretion as to costs following a discontinuance.
Success in the proceeding
On 2 June 2023, the plaintiff filed an oppression proceeding under ss 232 and 233 of the Corporations Act seeking declaratory relief, access to book and records, accounts, the purchase of his shares, indemnification against debts and guarantees, damages and interest with the winding up of the company as an alternative remedy. On 12 June 2025, the proceeding was dismissed by consent having effectively been discontinued by the plaintiff. Apart from the order of Caporale JR on 13 July 2023, none of the principal relief sought by the plaintiff was obtained. The first defendant was very substantially, if not wholly, successful in the proceeding. This is the starting point for consideration of the award of costs and attracts the important principle that a successful party is generally entitled to his or her costs.
The plaintiff contends that he was successful to the extent of the order of Caporale JR on 13 July 2023 to the effect that the second defendant make its books available for inspection and copying. To this contention, the first defendant responds in the first defendant’s affidavit that the plaintiff was always able to access the company’s financial documents and had access to two of the company’s bank accounts, as well as to the company’s accountancy package and the company’s accountant. I am not able to resolve the conflict between the parties as to access to bank records, and accounts with one party seeking access to records and accounts and the other party deposing that the first party has always had access. It is impractical to assess the prospects of success on this issue or to conduct a hypothetical or mini-trial on this issue.
First defendant’s conduct
Review of the court file shows that the first defendant conducted the proceeding sensibly and reasonably. He was not profligate, and did not unnecessarily incur costs. There was nothing about his conduct of the proceeding which reflects adversely on him. The plaintiff does not suggest otherwise.
On 24 January 2024, the day after the mediation failed, the first defendant openly offered to wind up the company because its purpose had failed due to dairy industry reform. He sought to do this under the just and equitable ground in s 461(1)(k) of the Act which did not ascribe fault to either party. It is not obvious why this offer was not taken further by the plaintiff. He achieved no better outcome through discontinuance of the proceeding well over a year later.
I conclude that there is nothing about the first defendant’s conduct that would lead a court to depart from an order to the effect that costs should follow the event.
Plaintiff’s conduct
I accept that the plaintiff’s conduct in the proceeding was reasonable, co-operative, proportional and consistent with his overarching responsibilities under the Act, as was that of the first defendant.
I also accept that the plaintiff’s decision to discontinue the proceeding was made on the basis of his assessment that the cost of continuing the proceeding would be disproportionate to any relief realistically recoverable from the defendants. This had been the case for some time. The plaintiff’s decision to discontinue the proceeding was sensible, realistic and ended the ongoing expenditure of legal costs.
Conclusion
As the High Court has said, an important, if not the most important principle in the exercise of the court’s discretion as to costs is that the successful party is generally entitled to the costs of the proceeding. In the present case, there is nothing adverse to the first defendant that would displace this principle. Both parties have acted appropriately. It would have been better if the plaintiff had accepted or followed up on the first defendant’s open offer made on 24 January 2024 following the mediation to wind up the company so ending the litigation more than a year earlier.
I will order that the first defendant’s costs of the proceeding be taxed by the Costs Court on the standard basis and when taxed paid by the plaintiff.
---
0
5
0