Re Australian Style Investments Pty Ltd (No 2)
[2009] VSC 307
•30 July 2009
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No 5118 of 2009
No 5119 of 2009
COMMERCIAL COURT
CORPORATIONS LIST
RE AUSTRLIAN STYLE INVESTMENTS PTY LTD (ACN 109 510 198)
| BRISCONNECTIONS MANAGEMENT COMPANY LTD (as responsible entity for the BrisConnections Investment Trust and the BrisConnections Holding Trust) | Plaintiff |
| v | |
| AUSTRLIAN STYLE INVESTMENTS PTY LTD | Defendant |
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JUDGE: | ROBSON J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 May 2009 | |
DATE OF JUDGMENT: | 30 July 2009 | |
CASE MAY BE CITED AS: | Re Australian Style Investments Pty Ltd (No 2) | |
MEDIUM NEUTRAL CITATION: | [2009] VSC 307 | |
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COSTS – Plaintiff unsuccessful in applications to wind up the defendant and to set aside requests of plaintiff to hold meetings of unit holders in managed investment schemes – Plaintiff successful on a particular question that it raised in its unsuccessful winding up applications – Question whether option agreement between defendant and third party was a sham - Discretion of the court under r 63.04 to award costs relating to a particular question – Rule 63.04 not applied and costs awarded to the successful defendant – Costs referable to parties seeking and being granted leave to be heard under r 2.13 of the Supreme Court (Corporations) Rules 2003 - Rule 63.04 Supreme Court (General Civil Procedure) Rules 2005
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P D Crutchfield with Mr M D Rush | Corrs Chambers Westgarth |
| For the Defendant | Mr G T Bigmore QC with Mr S Rubenstein | Lander & Rogers |
Cases cited
Byrns v Davie [1991] 2 VR 568
GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3) [2008] VSC 296
Re Australian Style Investments Pty Ltd [2009] VSC 128
Ritter v Godfrey [1920] 2 KB 47
HIS HONOUR:
INTRODUCTION AND SUMMARY[1]
[1]In this judgment I have quoted from BrisConnections’ and ASI’s written submissions dated 19 May 2009 and 20 May 2009 respectively. I acknowledge my indebtedness to counsel for permitting me to quote from them.
On 6 April 2009, I dismissed BrisConnections applications in the meeting proceeding and the winding up proceeding.[2] ASI seeks an order that BrisConnections pay its costs in relation to both proceedings. BrisConnections submits that in relation to the question in the winding up proceeding concerning the validity of the purported put option agreement between ASI and Mr Williams, the Court should depart from the general rule that costs follow the event. BrisConnections contends that in respect of this question, BrisConnections should be awarded its costs (or alternatively, ASI should be deprived of its costs concerning this issue).
[2]Re Australian Style Investments Pty Ltd [2009] VSC 128.
BrisConnections also submits that BrisConnections should not be ordered to pay ASI its costs in relation to the intervention of those parties granted leave to intervene, including ASIC, which was joined as a party to the proceedings.
For the following reasons, I propose to order that BrisConnections pay the costs of ASI without any adjustments as sought be BrisConnections.
THE PUT OPTION ISSUE
The put option was raised in the winding up proceedings by BrisConnections. Initially, it was pleaded in BrisConnections points of claim of 11 March 2009 as a particular to BrisConnections’ allegation that it was just and equitable for ASI to be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 by reason of the lack of propriety in the management and conduct of the ASI’s affairs.[3] In substance, BrisConnections alleged that ASI used the put option to avoid its liability for the second instalment to the detriment of BrisConnections.[4]
[3]Para 32 (a) particulars (iii) of points of claim of 11 March 2009.
[4]The allegation was repeated in the amended points of claim of 13 March 2009 and the further amended points of claim of 24 March 2009.
The allegation was maintained, and added to, in the amended points of claim of 13 March 2009. The particulars further alleged that the put option was entered into in circumstances where ASI knew or ought to have known that Mr Williams was not himself capable of meeting the outstanding instalments.[5]
[5]Para 32 (a) particular (iii) of amended points of claim of 13 March 2009.
During the cross examination of Mr Williams on Monday 23 March 2009, counsel for BrisConnections put it to Mr Williams that the put option was not intended to be legally binding. On Tuesday 24 March 2009, BrisConnections was given leave to file and serve its second further amended points of claim which alleged, as a further particular of the alleged lack of propriety in the management and conduct of ASI’s affairs, that ASI purported to enter into a put option with Mr Williams in circumstances where neither party intended the agreement to be legally binding.[6]
[6]Para 34(a)(iv).
ASI, for its part, raised the put option in its defence to the winding up application in the amended points of claim of 13 March 2009.[7] ASI pleaded that it was at the time, able to transfer its units to Mr Williams before 15 April if it wished to do so and if it did, it would cease to have an anticipated liability to BrisConnections.[8] ASI made that plea in response to BrisConnections’ allegation that:
[7]Points of defence dated 15 March 2009 to amended points of claim of 13 March 2009.
[8]Para 5.13 and 5.14.
(1) ASI would be required to pay BrisConnections the second instalment on 29 April 2009 as part of BrisConnections’ allegation that ASI was insolvent and ought to be wound up;[9] and
(2) there was a lack of propriety in the management and conduct of ASI’s affairs and it was therefore just and equitable to wind up ASI.[10]
[9]Para 30-31 of the amended statement of claim of 13 March 2009 and 32-33 of the further amended statement of claim of 24 March 2009.
[10]Para 32 (a) of the amended statement of claim of 13 March 2009 and 34 (a) of the further amended statement of claim of 24 March 2009.
I found that the put option was a sham. In particular, I found that neither party intended it to be legally binding. Nevertheless, I found that entering into the option agreement did not by itself, or in combination with the other matters relied on by ASI to establish the lack of propriety in the management of ASI, constitute sufficient grounds for a winding up ASI on just and equitable grounds. The put option was one of some fifteen grounds relied on as particulars of the alleged lack of propriety in management.
As it was, I also found that BrisConnections was not a contingent creditor of ASI and had no standing to apply to wind up ASI on just and equitable grounds. In final addresses, ASI did not rely on the put option to meet the allegation of insolvency against ASI but focused on BrisConnections lack of standing to make the winding up application.
THE RELEVANT PRINCIPLES
The relevant rules of the Supreme Court (General Civil Procedure) Rules 2005 provide as follows.
63.02 General powers of Court
The power and discretion of the Court as to costs under section 24 of the Act shall be exercised subject to and in accordance with this Order.
63.04 Costs of question or part of proceeding
(1) The Court may make an order for costs in relation to a particular question in or a particular part of a proceeding.
(2) Where the Court makes an order under paragraph (1), the Court shall by order fix the proportion of the total costs of the proceeding which is attributable to the particular question in or the particular part of the proceeding.
In GT Corporation Pty Ltd v Amare Safety Pty Ltd (No 3),[11] I considered the relevant principles in the context of a successful plaintiff who had failed on several discrete issues. The cases discussed there establish that under these rules and s 24(1) of the Supreme Court Act 1986, the court may in its discretion deprive a successful defendant of some of its costs or even order that it pay some of the unsuccessful plaintiff’s costs.
[11][2008] VSC 296 at [31]-[50].
ASI relies on Ritter v Godfrey[12] where Atkin LJ said:
In the case of a wholly successful defendant, in my opinion, the judge must give the defendant his costs unless there is evidence that the defendant (1) brought about the litigation, or (2) has done something connected with the institution or the conduct of the suit calculated to occasion unnecessary litigation and expense, or (3) has done some wrongful act in the course of the transaction of which the plaintiff complains.[13]
[12][1920] 2 KB 47.
[13]Ibid 60.
In Byrns v Davie,[14] however, Gobbo J distinguished Ritter v Godfrey.[15] His findings are accurately and relevantly summarised in the head note. He held that:
[14][1991] 2 VR 568.
[15][1920] 2 KB 47.
(1) There can be an apportionment of costs according to issues against a defendant that is ultimately successful, even though such defendant fails on particular issues or in respect of particular parts of proceedings under both s 24 of the Supreme Court Act 1986 and O 63 of the Rules of the Supreme Court.
(2) An order may be made as to costs of part of a proceeding even if such part does not relate to a distinct issue in the action or a cause of action or a defence pleaded by any defendant.
(3) Successful defendants are not to be treated in a wholly different position to plaintiffs when deciding on an award of costs in cases where a party has only been partly successful.
(4) In these circumstances a single order, fixing what proportion of a party’s costs should be paid by another party, obviating cost orders or particular orders as to particular items of costs, may be made.
In the matter before Gobbo J the plaintiffs succeeded on matters which occupied 70 per cent of the hearing in time, and in respect of which the second and third defendants failed, but failed in the action on what was essentially a threshold matter, namely the construction of a covenant. The action concerned an alleged breach of a restrictive covenant. The second and third defendants pleaded in their defence that the plaintiff consented to the breach of covenant and also that there was little if any damage suffered by the plaintiff.
BrisConnections contends that the issue of the “put option agreement” was first raised by ASI in its defence, formed part of the affidavit evidence of Mr Bolton and oral evidence of Mr Williams, and consequently became the subject of extensive cross examination and submissions by BrisConnections. BrisConnections submits that ultimately, on this question, I made a finding adverse to ASI, deciding that the put option was a sham.[16] It submits that the issue was a “discrete issue” as that phrase is used in the authorities. It contends that despite BrisConnections’ applications being dismissed, the court should exercise its discretion and adjust any adverse costs order to be made against BrisConnections by taking into account the court’s findings on the put option agreement.
[16][242].
I accept that whether or not the put option was a sham was a discrete issue that took some time to address. On the other hand, the put option was originally raised by BrisConnections as a particular of the alleged lack of propriety in the management and conduct of ASI. Further, BrisConnections first raised the issue that the option was a sham during the hearing. It was not part of ASI’s positive case that the option agreement was not a sham. Rather, ASI merely denied the allegation made by BrisConnections. In my view this is a relevant distinction to the position in Byrns v Davie.[17] Further, the allegation by BrisConnections did not advance its claim. Even if it had standing to bring the winding up application on just and equitable grounds, which it did not, I found that the fact that the option was a sham did not warrant the winding up.
[17][1991] 2 VR 568.
ASI was subject to a strenuous attack by BrisConnections. BrisConnections made a raft of allegations alleging lack of propriety in the management and control of ASI when it was not entitled to bring an application to wind up ASI on the just and equitable ground, or at all. The winding up applications were aggressive tactics, particularly where BrisConnections’ real complaint was the validity of the motions put forward by ASI, which held some 20 per cent of the units.
In my discretion, after considering all the matters put to me by BrisConnections, I decline to make an order under r 63.04 on the issue of whether or not the option was a sham.
INTERVENERS
BrisConnections submits that any of ASI’s costs attributable to the intervention of Deutsche Bank AG, Thiess Infrastructure Nominees Pty Ltd and John Holland Infrastructure Pty Ltd, Macquarie Capital Advisers Ltd and Macquarie Financial Holdings Ltd, State of Queensland, Wonate One Pty Ltd and ASIC should not be borne by BrisConnections. BrisConnections contends that this is particularly so in relation to:
(1) ASI’s failed attempt to join Macquarie Capital Advisers Ltd and Macquarie Financial Holdings Ltd to the proceedings;
(2) the intervention by ASIC which came after I delivered my findings on 2 April 2009, and in circumstances where I said in my judgment:[18]
“[n]one of the matters ASIC alleges relate to the issues canvassed ... save on the alleged misleading and deceptive conduct by ASI. Even if the allegations of ASIC are made out, they would not alter my reasons”; and
(3)Wonate One Pty Ltd, whose proceeding was dismissed with no order as to costs.[19]
[18][247].
[19][248].
ASI contends that Thiess Infrastructure Nominees Pty Ltd, John Holland Infrastructure Pty Ltd, Macquarie Capital Advisers Ltd, Macquarie Financial Holdings Ltd and the State of Queensland essentially supported BrisConnections. ASI submits that Wonate supported ASI’s call for a meeting and ASIC submitted that BrisConnections had engaged in misleading and deceptive conduct.
ASI also contends that BrisConnections commenced the proceedings in List E of the Commercial Court. ASI submits that Rule 2.13 of the Supreme Court (Corporations) Rules 2003 provides that certain persons are able to seek leave to be heard in such proceedings. It says that it is a natural consequence of the commencement of such proceedings that a person may seek to intervene. It contends that BrisConnections must be taken to have accepted this as a possibility upon commencing the meeting proceedings. ASI submits that such circumstances should not interfere with the general principle that a successful party be awarded costs.
ASI says that ASIC intervened because of alleged misleading and deceptive conduct, including statements by BrisConnections to unit holders in response to the requisitioning of the meetings by ASI. ASI contends that BrisConnections’ own conduct brought about the ASIC intervention and ASI should not be deprived of costs in respect of that intervention. ASI submits that the same is true for the intervention by Wonate One Pty Ltd. It says that Wonate One intervened because of its concern that BrisConnections was not acting in the best interests of the unit holders, a concern shared by ASI.
I accept the substance of these submissions.
Accordingly, I propose to order that the plaintiff pay the costs of the defendant of and incidental to matters no 5118 and 5119 of 2009, including all reserved costs, with such costs to be taxed on a party and party basis in default of agreement.
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