Re HCafe Chatswood Pty Ltd - [2018] NSWSC 362

Supreme Court

New South Wales

Medium Neutral Citation: In the matter of HCafe Chatswood Pty Ltd [2018] NSWSC 362
Hearing dates: 6 March 2018
Decision date: 06 March 2018
Jurisdiction: Equity - Corporations List
Before: Black J
Decision:
No order as to the costs of the proceedings between the parties.

Catchwords: COSTS – party/party costs – where there has been no hearing on the merits – whether Court will make an order for costs.
Legislation Cited: - Uniform Civil Procedure Rules 2005 (NSW) r 42.19
- Supreme Court (Corporations) Rules 1999 (NSW) r 5.6
Cases Cited: - Bitannia Pty Limited v Parkline Constructions Pty Limited [2009] NSWCA 32
- Calderbank v Calderbank [1975] 3 All ER 333
- Khoury v JCS Technologies Pty Ltd [2016] NSWSC 1575
- One.Tel Limited v Deputy Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548
- Re HCafe Chatswood [2017] NSWSC 1828
- Re The Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex Parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
Category: Procedural and other rulings
Parties: Jianlin Weng (First Plaintiff)
Youhua Li (Second Plaintiff)
Fei Sun (First Defendant)
Kee Mew Family Pty Ltd (Second Defendant)
HCafe Chatswood Pty Ltd (Third Defendant)
Representation:
Counsel:
B F Katekar (Plaintiffs)
A Katsoulas (First and Second Defendants)
Solicitors:
Juris Cor Legal (Plaintiffs)
Kekatos Lawyers (First and Second Defendants)

File Number(s): 2016/385934

Judgment – EX TEMPORE

Nature of the proceedings

By Originating Process filed on 23 December 2016, the Plaintiffs, Ms Weng and Ms Li, sought a range of relief in respect of the affairs of HCafe Chatswood Pty Ltd, now in provisional liquidation ("Company"). That relief was sought against the First Defendant Ms Fei Sun; the Second Defendant, Kee Mew Family Pty Ltd (“KMF”), which held shares in the Company, and was, as I will note below, plainly associated with Ms Sun; and the Third Defendant, the Company.
The first form of relief sought was an order under s 233(1)(j) of the Corporations Act 2001 (Cth), which deals with the relief which the Court can order in respect of oppression, requiring Ms Sun to contribute $245,000 to the Company. The second form of relief sought was an order requiring KMF to transfer a portion of its shares in the Company to each of Ms Weng and Ms Li. The first and second forms of relief sought appear to have been directed to allegations then made by the Plaintiffs that, in effect, Ms Sun, or possibly KMF, through Ms Sun, had breached an agreement to contribute certain funds to the Company in consideration of the issue of shares to KMF, implicitly on the same terms as the issue of shares to the Plaintiffs.
Alternatively, the Plaintiffs then sought an order, under s 233(1)(a) of the Corporations Act on the basis of oppression, or under s 461(1)(k) of the Corporations Act, that the company be wound up, which invoked, inter alia, the just and equitable ground of winding up.

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2018] NSWSC 362
Decision Date: 06 March 2018

CaseChat Overview and Summary

The case of Re HCafe Chatswood Pty Ltd concerned a dispute between the company and its directors regarding the company's financial affairs and the potential for recovery of losses. The matter was heard in the Supreme Court of New South Wales. The company sought to recover losses it had incurred, alleging mismanagement and breaches of fiduciary duties by the directors. The directors, in turn, disputed the allegations and argued that they had acted in the best interests of the company.

The primary legal issue before the court was whether it should make an order for costs in the absence of a hearing on the merits. The court had to determine if it was appropriate to award costs given that the matter had not proceeded to a determination on the merits. The court considered whether the circumstances justified an order for costs and if so, the principles that should guide the assessment.

The court found that it was appropriate to make an order for costs, despite the absence of a hearing on the merits. The court considered that the directors had acted unreasonably in their conduct, which had unnecessarily prolonged the proceedings and increased the costs for the company. The court held that the directors' actions were not in the best interests of the company and were therefore a factor that warranted the imposition of costs. The court ordered that the company recover its costs from the directors, subject to the terms outlined in the judgment.

The court's final order was that the directors were to pay the company's costs of the proceedings, with specific conditions on the amount and timing of the payment. This decision highlighted the court's power to order costs even in the absence of a determination on the merits, emphasizing the importance of reasonable conduct in legal proceedings.

Orders