FEDERAL COURT OF AUSTRALIA
Molnar v Good Mood Food Pty Ltd [2020] FCA 1242
File number: WAD 583 of 2019 Judgment of: JACKSON J Date of judgment: 27 August 2020 Catchwords: COSTS - consent orders made in favour of plaintiff without merits hearing - application for costs to be awarded on indemnity basis - whether parties' conduct of case was reasonable - whether position of defendant was reasonably arguable - where each party alleged that the other committed an abuse of process - not appropriate to make substantive findings regarding abuse of process in a costs decision - party-party costs awarded to plaintiff up to date of consent orders disposing of matter - no order as to costs of costs dispute Legislation: Corporations Act 2001 (Cth) ss 293, 315 Cases cited: Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195
Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681
Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622
Williams v Spautz (1992) 174 CLR 509
Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: Corporations and Corporate Insolvency Number of paragraphs: 35 Date of last submission/s: 19 June 2020 & 3 July 2020 (plaintiff)
26 June 2020 (defendant)Date of hearing: Determined on the papers Counsel for the Plaintiff: Mr MW Mistilis Solicitor for the Plaintiff: Hotchkin Hanly Lawyers Counsel for the Defendant: Mr JA Robertson Solicitor for the Defendant: Williams & Hughes ORDERS
WAD 583 of 2019 BETWEEN: BRYAN RAYMOND MOLNAR
Plaintiff
AND: GOOD MOOD FOOD PTY LTD (ACN 103 073 383)
Defendant
ORDER MADE BY:
JACKSON J
DATE OF ORDER:
27 AUGUST 2020
THE COURT ORDERS THAT:
1.The defendant must pay the plaintiff's costs of the proceeding up to and including 9 June 2020 on a party-party basis, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JACKSON J:
These reasons concern the costs of a proceeding that is one of a number of disputes arising out of a breakdown in the relationship between the two shareholders of the defendant, Good Mood Food Pty Ltd (GMF). Those shareholders are the plaintiff, Bryan Molnar, and David Philipsz. Mr Molnar holds approximately 30% of the shares in GMF and Mr Philipsz holds the remainder (the parties do not agree on the precise percentages, but nothing turns on that). It seems that GMF is under Mr Philipsz's control, as it appears from the evidence that he is the sole director of the company and that Mr Molnar's previous directorship was terminated in August 2014.
Mr Molnar commenced this proceeding to enforce a direction he gave to GMF under s 293(1) of the Corporations Act 2001 (Cth) to prepare an audited financial report and directors' report for the financial year ended 30 June 2018 and send them to all shareholders. GMF resisted the application and made…
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- Case
- [2020] FCA 1242
- Decision Date
CaseChat Overview and Summary
The court examined the proportionality of the parties' approach, noting the small size of the defendant company and the relatively minor nature of the financial dispute. The court was critical of the parties' lengthy and repetitive submissions, which failed to acknowledge the established principles regarding costs in resolved matters. The court emphasised that, in cases resolved without a trial, it is generally not appropriate for the court to make firm findings on disputed issues for the sole purpose of resolving the costs dispute.
The court concluded that the defendant must pay the plaintiff's costs up to and including 9 June 2020 on a party-party basis, to be assessed if not agreed. The court declined to make an order regarding the costs of the costs dispute itself, recognising the inappropriateness of delving into extensive evidence and resolving disputed questions of fact in this context.
Orders
Orders of the court
1. The defendant must pay the plaintiff's costs of the proceeding up to and including 9 June 2020 on a party-party basis, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Full text does not contain this section.
Ratio Decidendi
Legal Principle Established
In relation to the Calderbank letter, Mr Molnar submits that the orders the court ended up making by consent were more favourable to it than the orders proposed in the letter, because they provide for the reports to be produced by 10 August 2020 and in the manner required by the Act, in accordance with Mr Molnar's originating application. So, he says, it was not unreasonable for him not to accept the offer contained in the letter.Consideration The parties have both approached the dispute as to the costs of this proceeding in the wrong way. I say that for two reasons. First, there is a distinct lack of proportionality in each party's approach. GMF, the company at the centre of the dispute, is a small proprietary company. It operates a single café business. In recent years it has variously traded at a loss or barely broken even. According to a balance sheet dated 26 June 2020 which is in evidence, the company has negative shareholders' equity and a substantial deficit in working capital. The proceeding involves a dispute about the production of a financial report and a directors' report for a single year. The sticking point, according to one of the parties, was the likely $7,000 to $10,000 cost of producing that report. The surviving vestige of the dispute is not even about that; it is about the legal costs of arguing about that. In that context, the parties have each produced written submissions that are lengthy, repetitive, discursive and strident. The wider context of apparently acrimonious disputes between Mr Molnar and Mr Philipsz may explain that approach, but it does not justify it. Second, for all their length, the parties' submissions on costs have entirely failed to identify the well‑established principles which apply in situations of this kind. I will describe those principles shortly, but in broad terms they recognise that where a matter is resolved without a trial, it will not usually be possible or appropriate for the court to award costs on the basis of any firm determination as to who would have succeeded in the issues in dispute. The parties' respective submissions betray no awareness of those principles on the part of their respective solicitors. Instead, their submissions proceed on the basis that, the need for a trial having been avoided, the court should nevertheless make firm findings about all of the issues that would have been in dispute at trial, purely for the purposes of resolving the costs dispute. That approach is generally to be deprecated. In Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84; (2018) 97 NSWLR 681 at [8], Basten JA observed that:although it is possible to make an order for costs against one party if it can be shown that it has invited the litigation by its unreasonable behaviour, or has unreasonably pursued the litigation, such an order should only be made where that judgment is manifest by reference to known circumstances, not in dispute between the parties. If the question cannot be answered without reviewing large swathes of evidence and resolving, on a tentative basis, disputed questions of fact, the task should not be embarked upon.