McShelly Pty Ltd v VHS Holding Company Pty Ltd (No 2)

[2025] QSC 274

SUPREME COURT OF QUEENSLAND

CITATION:

McShelly Pty Ltd & anor v VHS Holding Company Pty Ltd & ors (No 2) [2025] QSC 274

PARTIES:

MCSHELLY PTY LTD ACN 639 163 483 AS TRUSTEE FOR THE MCSINGH FAMILY TRUST

(first plaintiff)

HARSHARAN SINGH

(second plaintiff)

v
VHS HOLDING COMPANY PTY LTD ACN 671 098 758

(first defendant)

VHS DOCTORS PTY LTD ACN 650 760 820 AS TRUSTEE FOR THE 3 WISE MONKEYS FIXED UNIT TRUST

(second defendant)

ANDREW JOHN CRONIN

(third defendant)

STEVEN JOHN SMITH

(fourth defendant)

AUSTRALIAN VETERANS CORPORATION PTY LTD ACN 676 624 258

(fifth defendant)

MELANIE JAYDE CRONIN (NEE FYFE)

(sixth defendant)

OXYGEN THIEF ENTERPRISES PTY LTD ACN 670 346 040

(seventh defendant)

AMANDA JANE SMITH

(eighth defendant)

PHANTOMEDICAL PTY LTD ACN 076 731 523 AS TRUSTEE FOR THE TARDIS DISCRETIONARY TRUST

(ninth defendant)

AMCC PROPERTY PTY LTD ACN 650 688 574 AS TRUSTEE FOR THE AMC PROPERTY TRUST

(tenth defendant)

FILE NO:

13161 of 2024

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

24 October 2025

DELIVERED AT:

Supreme Court at Brisbane

HEARING DATE:

On the papers. Plaintiffs’ submissions filed 26 September 2025. Second defendant’s submissions filed 2 October 2025.

JUDGE:

Muir J

ORDER:

The second defendant’s costs thrown away by the second amended claim filed 5 August 2025 be paid by the plaintiffs to be assessed and recoverable immediately.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INTERLOCUTORY PROCEEDINGS – GENERALLY – where the second defendant made a summary judgment application and strike out application against the plaintiffs’ amended claim – where the second defendant was unsuccessful in its summary judgment and strike out applications – where the second defendant was ordered to pay the plaintiffs’ costs of the summary judgment application –  where the plaintiffs then filed a second amended claim – where the amendments to the claim in effect granted the second defendant the relief which it had sought in the application for summary judgment – where the second defendant seeks an order that its costs thrown away be assessable immediately – where the second defendant is no longer taking an active role in the substantive proceeding – whether an order should be made that the second defendant’s costs thrown away be assessable immediately

Federal Court Rules 2011 (Cth) r 40.13

Uniform Civil Procedure (Fees) and Other Legislation Amendment Regulation (No. 2) 2024 (Qld) s 6, s 7
Uniform Civil Procedure Rules 1999 (Qld) r 5, r 386, r 692

AZW v State of Queensland (no. 2) [2025] QSC 179, considered

Bullock v The London General Omnibus Company [1907] 1 KB 264, cited

DGR Global Ltd v P.T. Limited as trustee of the Armour Energy Security Trust [2025] QSC 216, considered
Gould v Vaggelas (1985) 157 CLR 215, considered
McShelly Pty Ltd & anor v VHS Holding Company Pty Ltd & ors [2025] QSC 159, cited
Richmond v Ora Gold Ltd [2020] FCA 70, considered
Sanderson v Blyth Theatre Company [1903] 2 KB 533, considered
Watson v Kriticos (Costs Payable Forthwith) [2022] FCA 4, considered

COUNSEL:

P Travis for the plaintiffs
D J Ananian-Cooper for the second defendant

SOLICITORS:

Aitken Whyte Lawyers for the plaintiffs
Dentons Australia for the second defendant

Introduction

1. On 11 July 2025, I dismissed the second defendant’s application for summary judgment on paragraphs [F] and [G] of the plaintiffs’ amended claim dated 24 February 2025.[1] I also ordered that the second defendant pay the plaintiffs’ costs of the summary judgment application. Those costs can be assessed and are recoverable immediately.

   [1]       McShelly Pty Ltd & anor v VHS Holding Company Pty Ltd & ors [2025] QSC 159 at [73]-

   [76].

2. On 5 August 2025, the plaintiffs filed a second amended claim which struck through paragraphs [F] and [G], in effect granting the relief which the second defendant had sought in its application for summary judgment. Under rr 386 and 692 of the Uniform Civil Procedure Rules 1999 (Qld), the second defendant is entitled to its costs thrown away by the plaintiffs’ amendments, but those costs are not assessed or payable until the proceeding ends – unless the court orders otherwise.

3. This is an application by the second defendant for the court to order “otherwise”. That is, the second defendant seeks an order that its costs thrown away be assessed and recoverable against the plaintiffs immediately.

4. The plaintiffs oppose such an order and submit that the appropriate order is for the costs thrown away to be reserved, or that there be no order as to costs (to allow for the usual position under rr 386 and 692 UCPR to operate).

   The substantive proceeding

5. The substantive proceeding concerns a dispute between three doctors and their corporate vehicles which were set up to establish and operate a medical practice in Ipswich. The causes of action alleged by the plaintiffs against each of the ten defendants are underpinned by allegations of unfair and oppressive exclusion of the second plaintiff by the third and fourth defendants.

6. The second defendant’s application for summary judgment was on the basis that the plaintiffs had no real prospects of success in obtaining the relief sought in paragraphs [F] and [G] of the amended claim. Those paragraphs concerned the appointment of a receiver or alternatively the winding up of the second defendant under s 233 of the Corporations Act 2001 (Cth). In refusing to grant summary judgment, I was satisfied that it was at least arguable that the Corporations Act confers a power to make orders over property held on trust by a corporate trustee, but I raised my concerns about the plaintiffs’ prospects of obtaining the relief sought in this case.[2]

   [2] Ibid at [75].

7. The plaintiffs obviously accepted the weakness in this part of their case as shortly after the summary judgment decision was delivered, they struck through this part of their amended claim. The outcome of those further amendments is that the second defendant is no longer an active participant in the proceeding. It remains a necessary party, however, as it has made a submitting appearance to take all necessary steps to give effect to any order transferring units or shares in it as sought in paragraph [E(d)] of the (now second) amended claim.

8. The plaintiffs’ arguments in opposition to an order for the costs thrown away by the amendments being payable immediately are built on notions of “purpose” and “prejudice”. 

   Purpose

9. The plaintiffs submit that the purpose of recent amendments to the UCPR are to ensure that parties should not “be distracted by satellite disputes concerning costs”.[3] 

   [3]       Plaintiffs’ submissions on the issue of any order for the second defendant’s costs thrown

   away, filed 26 September 2025 (CFI 47) at [4].

10. Rules 386 and 692 were amended by the Uniform Civil Procedure (Fees) and Other Legislation Amendment Regulation (No. 2) 2024 (Qld) to insert subsections (2) and (3) respectively.[4] The rules now provide:

    [4]       See Uniform Civil Procedure (Fees) and Other Legislation Amendment Regulation (No 2)

    2024 (Qld) ss 6, 7.

    “386 Costs

    (1)            The costs thrown away as a result of an amendment made under rule 378 are to be paid by the party making the amendment unless the court orders otherwise.

    (2)    However, unless the court orders otherwise or the parties otherwise agree, the costs mentioned in subrule (1) are not to be assessed, and are not recoverable, until the proceeding ends.

    …

    692   Amendment

    (1)     This rule does not apply to a party who amends a document because of another party’s amendment or default.

    (2)     A party who amends a document must pay the costs thrown away by the amendment, unless the court orders otherwise.

    (3)     However, unless the court orders otherwise or the parties otherwise agree, the costs mentioned in subrule (2) are not to be assessed, and are not recoverable, until the proceeding ends” (emphasis added).

11. The crux of the legislative changes is that the assessment and recoverability of costs thrown away by amendments are to be deferred until the proceeding ends. The single stated policy objective for these particular amendments is to “clarify when the costs referred to under rules 386 and 692 of the UCPR should be assessed and recovered”.[5]  It is reasonable to infer that in clarifying the timing of the assessment and recoverability of costs thrown away, broader policy considerations may have also included encouraging parties to make timely and appropriate amendments whilst recognising the prohibitive financial difficulties faced by some parties in being able to address and meet costs orders during the course of ongoing litigation.

    [5]       Explanatory notes to the Uniform Civil Procedure (Fees) and Other Legislation Amendment

    Regulation (No. 2) 2024 (Qld) at p 1.

12. There has been little discernable judicial consideration of these recent amendments.  And to date, it appears that there are no decisions where the court has determined it appropriate to depart from the usual position that costs thrown away are only recoverable once the proceeding ends.[6] In DGR Global Ltd v P.T. Limited as trustee of the Armour Energy Security Trust [2025] QSC 216, the third to sixth defendants sought an order under r 692(3) that costs thrown away be assessable immediately. No specific reasons were advanced to support such an order and the court could “see no good reason to interfere with the default operation of the rules.”[7] In reaching this conclusion, Hindman J usefully identified the following non-exhaustive list of circumstances where a court may be persuaded to order “otherwise” under r 692(3):[8]

    (a)the costs thrown away are readily identifiable;

    (b)the assessment of costs thrown away is likely to be straightforward and would not distract the parties from the progress of the substantive proceeding;

    (c)the receipt of costs thrown away by the receiving party may be essential for that party to continue to fund the litigation;

    (d)there is some risk that delayed payment of costs thrown away might ultimately result in non-payment.

    [6]       See, eg, AZW v State of Queensland (no. 2) [2025] QSC 179 at [17] (Smith J); DGR Global

    Ltd v P.T. Limited as trustee of the Armour Energy Security Trust [2025] QSC 216 at [16]

    (Hindman J).

    [7]       DGR Global Ltd v PT Limited as trustee of the Armour Energy Security Trust [2025] QSC

    216 at [16] (Hindman J).

    [8] Ibid at [15].

13. Further examples as to other matters which might be relevant to the exercise of the discretion to order costs thrown away immediately can be gleaned from the cases considering r 40.13 of the Federal Court Rules 2011 (Cth). That rule provides as follows:

“40.13 Taxation of costs awarded on an interlocutory application

If an order for costs is made on an interlocutory application, the party in whose
favour the order is made must not tax those costs until the proceeding in which
the order is made is finished.

Note: The Court may order that costs of an interlocutory application be taxed immediately.”

1. This rule of course extends beyond the position encapsulated in rr 386(2) and 692(3) of the UCPR, as it applies to all interlocutory applications, not just to costs thrown away. But in the absence of case law considering the exercise of the discretion under rr 386(2) and 692(3), the principles governing the discretion to order the costs of an interlocutory application to be “taxed immediately” under the Federal Court Rules do provide some guidance. Those principles were relevantly summarised by Perram J in Watson v Kriticos (Costs Payable Forthwith) [2022] FCA 4 as follows:[9]

   [9]       At [6]-[7].

“As a general proposition, the discretion should be exercised in favour of a party who establishes that the demands of justice require a departure from the ordinary rule embodied in r 40.13. Always to be borne in mind, however, are the twin policy considerations underpinning r 40.13: first, that it is generally undesirable that the parties should be exposed to multiple taxation processes during the life of one proceeding; and second and relatedly, that during the balance of the litigation, costs orders may be made in the opposite direction which will normally be capable of being set-off against earlier costs orders.

The exercise of the discretion may be justified in a number of circumstances, including where:

(a)   the final determination of the proceeding is far away;

(b)  a party has been required to incur significant costs over and above those which it would have incurred had the opposing party acted in handling the proceeding with competence and diligence;

(c)   following a successful amendment application, a case is essentially a new proceeding;

(d)  a discrete issue has been resolved; or

(e)   there is some reason to think that interlocutory disputation is draining the ability of one side to conduct the litigation” (emphasis added, citations omitted).

1. Similarly, in Richmond v Ora Gold Ltd [2020] FCA 70, Colvin J considered the factors relevant to the exercise of the discretion to include matters such as unreasonable conduct in the bringing of the application, the capacity of a costs order to stultify proceedings, whether costs thrown away could be more accurately assessed after the determination of the substantive proceeding, whether a party will not have the benefit of a costs award for a substantial period of time, and whether the interlocutory application concludes a discrete aspect of the proceedings.[10]

   [10] At [33].

   Prejudice

2. The plaintiffs submit “that they face the risk of real prejudice if costs are not reserved until the end of the proceeding” (emphasis in original).[11] This prejudice is said to arise on the present facts because the second defendant is one of the entities involved in the quasi-partnership and allegedly a vehicle through which the defendants engaged in oppressive conduct against the plaintiffs. If the plaintiffs succeed, they apprehend seeking a Sanderson order at the conclusion of the proceeding that the third to tenth defendants pay the second defendant’s costs thrown away, not the plaintiffs.[12] The plaintiffs submit that the factors relevant to that application would be more appropriately assessed at the conclusion of the proceeding.

   [11]      Plaintiffs’ submissions on the issue of any order for the second defendant’s costs thrown

   away, filed 26 September 2025 (CFI 47) at [5].

   [12]      See generally Sanderson v Blyth Theatre Company [1903] 2 KB 533.

3. The plaintiffs also submit that the second defendant will not suffer any prejudice from the usual operation of the UCPR because the second defendant, as trustee of the unit trust in which the first plaintiff holds one-third of the units, is the owner of real property.

4. But these submissions lose force when considered in the present context of the plaintiffs having obtained an order for their summary judgment costs on a discrete issue that they have now abandoned. These costs are assessable and payable as against the second defendants immediately, and there is no suggestion that they will not be pursued, as the plaintiffs are entitled to do.

5. The plaintiffs also point to the potential costs thrown away to be awarded in their favour by virtue of the second defendant’s withdrawal of its defence to paragraph [E(d)] of the amended claim. But those costs are not connected to the costs associated with the claims now abandoned by the plaintiffs; and regardless, such costs are only potentially recoverable against the second defendant if the plaintiffs are ultimately successful at trial.  

   Exercise of the discretion 

6. The appropriate exercise of this court’s discretion as to costs thrown away needs to be determined in the context of the factual matrix underpinning the substantive dispute, and the second defendant’s now confined role in the ongoing proceeding.

7. The plaintiffs’ decision to abandon the substantive relief sought against the second defendant in paragraphs [F] and [G] of the amended claim is consistent with the philosophy of r 5 of the UCPR. It has led to the resolution of a discrete issue. But considerable costs from both sides, including the costs of pleadings and the summary judgment application, would have been avoided if the plaintiffs had made such an assessment earlier.

8. There ought to be good reason, dependent on the particular facts of the case, to depart from the usual position that costs thrown away because of an amendment are recoverable at the end of the proceeding. In the present circumstances, I am satisfied that the following four reasons justify such a departure.

9. First, the second defendant’s excusal from being an active participant in the proceeding, and the neutral position it has adopted in the future conduct of the proceeding (apart from abiding by the order of the court in terms of the relief sought in paragraph [E(d)] of the amended claim) essentially means that for it, the proceeding is at an “end” as contemplated by rr 386(2) and 692(3).

10. Second, there is no reason to conclude that an assessment of the costs of the summary judgment application (and associated costs thrown away by the subsequent amendments) would distract the parties or delay the proceeding in any material way. Rather, given the overlap in these costs, the better view is that resolution of the costs associated with such a discrete claim (and one that is no longer being ventilated in the proceeding) will facilitate the just and expeditious resolution of the real issues in dispute.

11. Third, it is not in the interests of justice for the second defendant to have to potentially pay the plaintiffs’ costs of the summary judgment application now, and then wait until the end of the substantive proceeding (of which they are no longer an active participant) to recover its costs of the plaintiffs’ abandonment of the exact claim which was under attack in the summary judgment application. Rather, the demands of justice warrant those costs being set-off against each other.

12. Fourth, I accept that a Sanderson order may be made where it is reasonable and proper for the plaintiffs to join a defendant who has failed, and where there is something in the conduct of the unsuccessful defendant that makes it appropriate to make the order.[13] But it is difficult to see how a Sanderson order would be obtained by the plaintiffs in this case. The further amendments to the claim saw the plaintiffs completely abandon a claim, as opposed to prosecute one. Further, an order that the costs thrown away are payable immediately does not necessarily foreclose the option of a Bullock order being made in the plaintiffs’ favour.[14] A Bullock order does not relieve a plaintiff of its liability to pay a costs order in favour of a defendant, but it permits the plaintiff to recover those costs as paid against any unsuccessful defendants. Although again, it is difficult to see how such an order would be appropriate in this case.

    [13]      Gould v Vaggelas (1985) 157 CLR 215 at 230 (Gibbs CJ); Sanderson v Blyth Theatre

    Company [1903] 2 KB 533 at 539.

    [14]      See generally Bullock v The London General Omnibus Company [1907] 1 KB 264.

    Order

13. I therefore order that the second defendant’s costs thrown away by the second amended claim filed 5 August 2025 be paid by the plaintiffs to be assessed and recoverable immediately.