Re Mu Meeting Point (No 2)
[2022] VSC 825
•23 December 2022 (given ex tempore, revised)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2021 04489
IN THE MATTER of MU MEETING POINT PTY LTD (ACN 626 004 288)
BETWEEN:
| MU MEETING POINT PTY LTD (ACN 626 004 288) | Plaintiff |
| v | |
| LIGHTHOUSE CORPORATION (CAPITAL) PTY LTD (ACN 123 511 624) | Defendant |
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JUDGE: | Hetyey AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 23 December 2022 |
DATE OF JUDGMENT: | 23 December 2022 (given ex tempore, revised) |
CASE MAY BE CITED AS: | Re Mu Meeting Point (No 2) |
MEDIUM NEUTRAL CITATION: | [2022] VSC 825 |
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CORPORATIONS – Corporations Act 2001 (Cth) – Part 5.4 – Insolvency – Statutory demand –Declaration by Court that demand not served – Where Court declined to make alternative declaration that issuing of statutory demand and accompanying affidavit and reliance on those documents in a winding up proceeding constitutes an abuse of process.
PRACTICE AND PROCEDURE – Costs – Where plaintiff not sole successful party – Apportionment of costs – Applicable principles – Firebird Global Master Fund II Ltd v Republic of Nauru (No.2) (2015) 327 ALR 192 considered.
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APPEARANCES: | Counsel | Solicitors |
For the Plaintiff | Mr N Elias | Danaher Moulton |
For the Defendant | Ms A Carruthers | Cogent Legal Services |
TABLE OF CONTENTS
Introduction............................................................................................................................................. 1
Background.............................................................................................................................................. 1
Relevant principles................................................................................................................................... 4
Submissions and analysis.......................................................................................................................... 5
Conclusion................................................................................................................................................ 8
HIS HONOUR:
Introduction
On 29 November 2022, the Court delivered its substantive judgment in the proceeding, confirming there would be a declaration that the defendant’s statutory demand was not served on the plaintiff, but otherwise dismissing the plaintiff’s application.[1] However, the parties are unable to agree on an appropriate order as to costs. The plaintiff seeks its costs of the application on a standard basis and submits that an apportionment of costs is inappropriate in the circumstances. Alternatively, if apportionment is appropriate, the plaintiff says it should be awarded a significant portion of its costs, namely 70%. By contrast, the defendant argues the plaintiff only succeeded in relation to the ground that it was not served with the statutory demand and so, in the exercise of its discretion, the Court should make an order that:
(a) the defendant pay the plaintiff one fifth of its costs, on a standard basis, excluding any disbursements relating to the filing fee, a financial report dated 10 March 2022, or any other disbursement not specifically and exclusively relating to the declaration of non-service; and
(b) the plaintiff pay the defendant four fifths of its costs, on a standard basis, to be taxed in default of agreement.
[1]Re Mu Meeting Point Pty Ltd [2022] VSC 728 (‘the substantive judgment’).
Alternatively, the defendant submits that the apportionment could be reflected as a percentage of the plaintiff’s overall costs. Further, and alternatively, the defendant suggests the parties should bear their own costs in the proceeding.
Background
The background and procedural history of the matter are set out in the substantive judgment and need not be repeated. For convenience, I adopt the definitions used in the substantive judgment. For present purposes, I note the following questions arose for determination in the proceeding:
(a) whether the statutory demand was served on the plaintiff:
(i) by post on or around 4 August 2021; or
(ii) informally by email on 4 October 2021 or 13 October 2021; or
(iii) when it was delivered to the plaintiff’s registered office on 8 November 2021, as part of the documents accompanying the defendant’s related winding up proceeding;[2]
[2]Lighthouse Corporation (Capital) Pty Ltd v Mu Meeting Point Pty Ltd, Supreme Court of Victoria, Proceeding S ECI 2021 04057.
(iv) whether the plaintiff was duly served with the statutory demand at any time;
(b) whether pursuant to s 459H of the Corporations Act 2001 (Cth) (‘the Corporations Act’), there is a genuine dispute as to the existence of the debt to which the demand relates;
(c) whether substantial injustice will be caused unless the demand is set aside pursuant to s 459J(1)(a) of the Corporations Act; and
(d) whether the demand and accompanying affidavit and any reliance upon those documents in any winding up proceeding amounts to an abuse of process.
On the question of service, I regarded the plaintiff’s evidence to be detailed, compelling, and cogent.[3] I held that the most likely inference permitted by the evidence was that the demand was not delivered to the plaintiff’s registered office on or around 4 August 2021[4] and, on the balance of probabilities, the plaintiff had successfully negated the presumption of service arising from s 29(1) of the Acts Interpretation Act 1901 (Cth) (‘the Acts Interpretation Act’).[5] I also determined that the defendant had not established effective informal service at any of the times contended.[6] At the same time, I summarily rejected the plaintiff’s contention that the demand should be set aside on the basis that it was not served upon the plaintiff until service of documents in the winding up proceeding (which included the statutory demand) because service of those documents could not constitute service of the demand.[7] In the result, I was satisfied a declaration should be made under s 36 of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’) and r 23.05 of the Supreme Court (General Civil Procedure) Rules2015 (Vic) (‘Rules’) that the plaintiff was not duly served the statutory demand on 4 August 2021, or at all.
[3]Substantive judgment [59]–[60].
[4]Ibid [60].
[5]Ibid [60].
[6]Ibid [69]–[73].
[7]Substantive judgment [76].
The consequence of that declaration was discussed at paras 86 to 89 of the substantive judgment. In short:
(a) the defendant is unable to rely upon the statutory presumption of insolvency found in s 459C(2)(a) of the Corporations Act for the purpose of the winding up proceeding; and
(b) the Court does not have jurisdiction to determine the proceeding under s 459G of the Corporations Act because this provision only enables a company to apply to the Court to set aside a statutory demand that has been served on a company. Even if the finding as to non-service was wrong, there was still a lack of jurisdiction to determine the application to the extent it is made under s 459G because the application would not have been initiated until after the expiration of the requisite 21 day statutory period. Consequently, the questions pertaining to genuine dispute under s 459H and defect in the demand causing substantial injustice under s 459J could not be determined.
As to the abuse of process question, after extensively reviewing the material relied upon by the parties, I determined that whilst it was clear the underlying debt was genuinely disputed by the plaintiff,[8] this was insufficient to establish abuse of process in the circumstances.[9]
[8]Ibid [131]–[139].
[9]Ibid [140]–[145].
Relevant principles
Section 24 of the Supreme Court Act relevantly provides that ‘the costs of and incidental to all matters in the Court … is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid’. Further, r 63.04 of the Rules allows the Court to make an order for costs in relation to a particular question or a particular part of the proceeding. Accordingly, the Court is entitled to examine the realities of the case and will attempt to do ‘substantial justice’ as between the parties on matters of costs.[10]
[10]Chen v Chan [2009] VSCA 233, [10] (Maxwell P, Redlich JA and Forrest AJA) (‘Chen v Chan’) citing Spotless Group Ltd v Premier Building and Consulting Pty Ltd [2008] VSCA 115, [14] (Redlich JA).
It is therefore uncontroversial that the Court has a wide discretion in relation to costs.[11] It is also clear that the discretion is unconfined and unfettered, but must still be exercised judicially upon facts connected with the litigation and not by reference to irrelevant or extraneous considerations.[12] Although not designed to fetter the exercise of the Court’s discretion, there is a general rule that in the absence of good reason to the contrary, a successful litigant should recover its costs.[13]
[11]See also s 65C of the Civil Procedure Act 2010 (Vic); Farid Assaf, Assaf’s Winding Up in Insolvency (LexisNexis, 3rd ed, 2021) [10.101] citing Re Mailrite Pty Ltd (1985) 9 ACLR 863, 867–8 (Master Lee); Re Great Barrier Reef Flying Boats Pty Ltd (1982) 6 ACLR 820, 822 (Thomas J); Morepine Pty Ltd v Crush Pacific Industries Pty Ltd (1996) 20 ACSR 41, 44 (Young J).
[12]See Innes-Irons v Forrest [2017] VSC 10, [5] (Derham AsJ); Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585, [6] (Derham AsJ) (‘Towercom’); Latoudis v Casey (1990) 170 CLR 534, 537; Oshlack v Richmond River Council (1998) 193 CLR 72, 86 (Gaudron and Gummow JJ) (‘Oshlack’).
[13]Towercom, [7]; Ritter v Godfrey [1920] 2 KB 47, 5; Donald Campbell & Co Ltd v Pollak [1927] AC 732, 809; Milne v Attorney-General (Tas) (1956) 95 CLR 460, 477; Oshlack, 86.
Where there are a multiplicity of issues in a case and the parties achieve mixed success on those issues, the Court is entitled to adopt a pragmatic approach, taking into consideration the success (or lack of success) of the parties on an issues basis and awarding the successful party a proportion of its costs.[14] Such an apportionment is done by way of impression and evaluation rather than arithmetical precision.[15]
[14]Chen v Chan, [10]. This approach was recently followed in Lendlease Engineering Pty Ltd v Owners Corporation No 1 (Costs) [2021] VSC 471, [21] (Forbes J).
[15]Chen v Chan, [10] citing Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5] (Chernov and Ashley JJA and Mandie AJA).
In Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) (‘Firebird’),[16] the High Court held that:
In any event, the preferable approach in this case is the one usually taken, that costs should follow the outcome of the appeal. This is not a case where it may be said that the event of success is contestable, by reference to how separate issues have been determined. There are no special circumstances to warrant a departure from the general rule, and good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like. [17]
[16](2015) 327 ALR 192.
[17]Ibid [6].
As O’Meara J recently observed in Malone v La Playa Nominees Pty Ltd (No 2),[18] whilst it is unusual to apportion costs, an apportionment may be ordered if it is fair and reasonable to do so and the High Court did not suggest otherwise in Firebird.[19] His Honour further explained that in Firebird, the ‘event’ sought ‘was relatively defined and so costs might have been thought to have followed on a conventional basis; even when, in that instance, the appellant enjoyed only narrow success in order to obtain it.’[20]
[18][2022] VSC 106.
[19]Ibid [9].
[20]Ibid.
Submissions and analysis
I turn then to the appropriate disposition on the question of costs.
I do not accept the plaintiff’s contention that it was the sole successful party. To adopt the High Court’s language in Firebird, the event of the plaintiff’s success is contestable, by reference to how separate issues have been determined. It is apparent that the parties have each enjoyed a measure of success, although I accept the plaintiff’s success also has wider implications for the winding up proceeding.
The plaintiff successfully negatived the statutory presumption resulting from s 29(1) of the Acts Interpretation Act, resisted the defendant’s arguments about effective informal service of the demand, and obtained a declaration of non-service of the demand. The declaration of non-service means the defendant is unable to rely upon the demand and the statutory presumption of insolvency under s 459C(2)(a) of the Corporations Act for the purpose of the winding up proceeding. This was clearly the intended purpose of the plaintiff in seeking that relief. But, it also failed to obtain a ‘freestanding’ declaration that the demand, its accompanying affidavit, and any reliance on those documents by the defendant, in any proceedings brought to wind up the plaintiff, amounts to an abuse of process. Had such a declaration been granted, it would have operated to prevent the future service of, and reliance upon, the statutory demand. That is far broader than the effect of the relief obtained by the plaintiff by way of a declaration of non-service of the demand. Although the plaintiff suggests the Court’s unwillingness to find abuse of process did not alter the outcome, I do not accept that reflects the true position. Further, by successfully resisting the abuse of process allegation, the defendant obtained some practical success.
I agree with the defendant that given the gravity of the allegation of abuse of process, considerable time and expense was spent on the question. That is evident from the parties’ numerous affidavits and extensive submissions on the point. Almost half of the substantive judgment was devoted to that question. I do not accept the plaintiff’s contention that litigating the abuse of process issue did not materially extend the time required for the hearing of the application because the 15 December 2021 directions hearing and the 18 March 2022 hearing would have been required in any event. The time taken at, and in preparation for, the hearing of the matter would have been considerably abridged had the abuse of process issue not been pursued.
At the same time, the Court observed in the substantive judgment that the evidence of the defendant’s director, Mr Albert Jacobs, on the question of the assignment of rights under the sale of business contract (one aspect of the abuse of process point), had been piecemeal, inconsistent and somewhat confusing.[21] His late affidavit filed immediately prior to the hearing necessitated the parties filing supplementary material after its conclusion. It is difficult to ascertain with precision the degree to which this approach contributed to the parties’ overall costs on the abuse of process question, but I consider it had some effect. Further, as part of the abuse of process argument, the plaintiff was successful in overcoming arguments put forward by the defendant about the Court’s jurisdiction to make the declaration of abuse of process and whether it was necessary for the plaintiff to adduce evidence of solvency as a precondition for agitating abuse of process.
[21]Substantive judgment [139].
While the defendant says the argument about service of the demand could have been raised in the winding up proceeding, I found in the substantive judgment that it was open to the plaintiff to seek the declaration in a separate proceeding, even if it was unconventional to do so.[22] Further, given the winding up proceeding has essentially been held in abeyance, the defendant’s stated concern about costs and delay may be more theoretical than real.[23] I agree with the defendant’s observation, however, that the filing fee in the present application was a duplicated cost. Equally, because the plaintiff proceeded in a separate application, it was possible for the parties to avoid considerable costs on the question of solvency in the winding up proceeding.
[22]Ibid [85].
[23]Ibid [85].
I ultimately regard an apportionment of costs to be fair and reasonable in the circumstances. However, I do not consider that the defendant’s proposed apportionment formulation properly reflects the practical outcome of the case, or the plaintiff’s purpose in pursuing it, having regard to how the issues were argued and determined. Nor do I regard it to be especially practicable for the purpose of any taxation. Again, the defendant’s alternative argument that each of the parties should bear their own costs does not reflect the reality of the litigation, including the fact that the plaintiff has succeeded in preventing the defendant from relying on the statutory demand for the purpose of the statutory presumption of insolvency in the winding up proceeding.
Conclusion
In the exercise of the Court's discretion and in balancing all of the considerations referred to above, it is appropriate that the plaintiff be awarded 55% of its costs of the proceeding on a standard basis. Those costs will be taxed in default of agreement between the parties.
To give effect to the substantive judgment and these reasons, the following declaration and orders will be made:
(a) Pursuant to s 36 of the Supreme Court Act 1986 (Vic) and r 23.05 of the Supreme Court (General Civil Procedure) Rules2015 (Vic), the Court declares that the plaintiff was not duly served with the defendant’s undated statutory demand on or around 4 August 2021, or at all.
(b) The proceeding otherwise be dismissed.
(c) The defendant pay the plaintiff 55% of its costs of the proceeding on a standard basis, such costs to be taxed in default of agreement.
SCHEDULE OF PARTIES
| S ECI 2021 04489 | |
BETWEEN: | |
| MU MEETING POINT PTY LTD (ACN 626 004 288) | Plaintiff |
- v - | |
| LIGHTHOUSE CORPORATION (CAPITAL) PTY LTD (ACN 123 511 624) | Defendant |
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