Re Munja Bakehouse Pty Ltd
[2024] NSWSC 17
•30 January 2024
Supreme Court
New South Wales
Medium Neutral Citation: In the matter of Munja Bakehouse Pty Ltd [2024] NSWSC 17 Hearing dates: Last costs submissions 24 January 2024 Date of orders: 30 January 2024 Decision date: 30 January 2024 Jurisdiction: Equity - Corporations List Before: Black J Decision: Orders as to winding up made. The parties’ costs of the winding up application be paid as costs in the winding up and there be no other order as to the costs of the proceedings.
Catchwords: CORPORATIONS – winding up – costs – where winding up of company ordered – where company wound up on the just and equitable ground – where parties originally sought other relief – where that relief not obtained – whether the court should otherwise order for the purposes of s 466(2) of the Corporations Act 2001 (Cth).
Legislation Cited: - Civil Procedure Act 2005 (NSW), s 98(1)
- Corporations Act 2001 (Cth), ss 466(2), 1335(2)
Cases Cited: - Ballam v Ferro (No 2) [2022] NSWSC 1358
- Bercich v Riverside Spares Pty Ltd [2019] NSWSC 1900
- Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266
- Commonwealth of Australia v Gretton [2008] NSWCA 117
- Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34
- Hooke v Bux Global Ltd (No 8) [2019] FCA 671
- Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11
- Re Crow Inn Pty Ltd [2020] NSWSC 601
Category: Costs Parties: Stephen Dionatos (First Plaintiff)
DSPEM Pty Ltd (ACN 626 606 693) as trustee for the Dionatos Trust (Second Plaintiff)
Peter Dionatos (Third Plaintiff)
Munja Bakehouse Pty Ltd (ACN 168 272 071) (First Defendant)
Smith Street Marrickville Pty Ltd (ACN 632 121 129) (Second Defendant)
Jamlyd Pty Ltd Limited (ACN 003 845 038) in its personal capacity and as trustee of the Alexander Family Trust (Third Defendant)
Harry Alexander (Fourth Defendant)
Sophia Alexander (Fifth Defendant)Representation: Counsel:
Solicitors:
D Parish (Plaintiffs)
A Ogborne (Third to Fifth Defendants)
Sanicki Lawyers (Plaintiffs)
Woolf Associates (Third to Fifth Defendants)
File Number(s): 2023/94788
Judgment
Background and submissions as to orders
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By my judgment delivered on 17 January 2024 ([2024] NSWSC 6), I observed that, unusually, both the Plaintiffs and the Defendants in these proceedings sought the same relief, namely that several Defendants (“Active Defendants”) purchase the shares in Munja Bakehouse Pty Ltd and Smith Street Marrickville Pty Ltd as their first preference and a winding up order as their second preference. I also observed at paragraphs [79]-[81] of that judgment that:
“I am satisfied that a winding up order should be made in respect of both companies, as was common ground if a buy-out order was not made, and the liquidator of Smith Street should be appointed as receiver of the Trust assets. Both parties submitted consents of liquidator, after the hearing had concluded, and I will adopt the Court’s usual practice of appointing the Plaintiffs’ nominee, Mr Free of Jirsch Sutherland, where there is no reason to take a different approach.
Where the court is otherwise minded to wind up a company on the just and equitable grounds, it will often postpone a winding up order to allow the parties an opportunity to negotiate a buy-out ... Here, a mediation between the parties was unsuccessful, and I had invited discussions between the parties in the course of the hearing, also without success. I will nonetheless stay the making of a winding up order and the appointment of a receiver for 14 days from the making of orders, to allow the parties a final opportunity to resolve their differences in a manner which will avoid the liquidation of the companies and the Trust.
I direct the parties to bring in agreed short minutes of order to give effect to this judgment, including as to costs, within 7 days or, if there is no agreement between them, their respect draft minutes of order and submissions not exceeding eight pages in Arial font 12, one and a half spacing, as to the differences between them.”
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The parties submitted orders which dealt with several matters in different terms, although it was not apparent that those differences were of substance and they were not addressed in the parties’ submissions. I will largely adopt the Active Defendants’ proposed submissions, where I have adopted that form as to the issues noted below. There is a difference between the parties as to the form of order which confers powers on the liquidator of Smith Street as receiver of assets of the relevant trusts, although it is not clear whether it raises any matter of substance. The Active Defendants adopted the form of order by Rees J in granting powers to a receiver over trust assets, in somewhat similar circumstances, in Re Crow Inn Pty Ltd [2020] NSWSC 601 at [64], by reference to powers which will be granted to a receiver of property of a corporation under s 420 of the Corporations Act 2001 (Cth) (“Act”). The Plaintiffs’ proposed orders instead referred the powers which would be granted to a liquidator under s 477 of Act. I propose to follow the form of orders made by Rees J in Crow Inn, given the similarity of the circumstances. I do not consider it necessary specifically to reserve liberty to apply in respect of the conduct of the receivership. The Active Defendants also propose that both the Amended Originating Process and the Amended Interlocutory Process should be dismissed, to the extent that orders have not been made in respect of them, and I will take that approach given the changes between the matters raised by the pleadings and the matters which went to hearing. The stay which I will order will extend to all orders made, including as to costs.
Costs
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The Plaintiffs also submit that the Active Defendants should pay their costs of the proceedings in respect of the winding up application and in respect of the Interlocutory Process. Mr Parish, who appears for the Plaintiffs, recognised that s 466(2) of the Act provides that a liquidator must, unless the Court orders otherwise, reimburse an applicant in winding up proceedings for its taxed costs out of the company’s property. In Hooke v Bux Global Ltd (No 8) [2019] FCA 671, Colvin J addressed the circumstances in which a different costs order could be made, having regard to the effect of an order under s 466 of the Act, including with respect to the priorities applicable under s 556(1)(b) of the Act. I also briefly addressed that question in Bercich v Riverside Spares Pty Ltd [2019] NSWSC 1900.
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Mr Parish also refers to the Court’s powers to make orders for costs under s 1335(2) of the Corporations Act and s 98(1) of the Civil Procedure Act 2005 (NSW) and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in that respect. Section 98 of the Civil Procedure Act confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially: Ballam v Ferro (No 2) [2022] NSWSC 1358 at [54]. Rule 42.1 of the UCPR in turn provides that:
“Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.”
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A successful party in proceedings has a “reasonable expectation” of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:
“… underlying both the general rule that costs follow the event, and the qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.”
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That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] and, in Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [7]–[14], McColl JA summarised the applicable principles as follows:
“Section 98 of the Civil Procedure Act 2005 (NSW) confers a wide discretion on the court with respect to costs. The general rule is that court costs follow the event unless the court makes some other order pursuant to the discretion conferred by Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.1.
As Beazley JA explained in Baker v Towle [(2008) 39 Fam LR 323; [2008] NSWCA 73 at [11] (Mathews AJA agreeing)], in most litigation, UCPR r 42.1 “operates in a straightforward way, ‘the event’ being readily identifiable as a judgment for the plaintiff or the defendant on the claim. In that sense, ‘the event’ to which the rule refers is the result of the proceedings, so that the party who succeeds on the claim before the court is awarded costs, unless the court, pursuant to the discretion conferred by r 42.1, makes ‘some other order’”.
Underlying both the general rule that costs follow the event, and qualifications to that rule, is the idea that costs should be paid in a way that is fair, having regard to what the court considers to be the responsibility of each party for the incurring of the costs.“
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Mr Parish submits that the Active Defendants should pay the Plaintiffs’ costs of defending the Interlocutory Application filed by the Active Defendants, on the basis that costs follow the event. I recognise that the Active Defendants were not successful in obtaining the primary relief that they sought in the interlocutory process or in obtaining a buy-out order on a narrower basis on which they sought it at the hearing. However, the order for which Mr Parish contends would not bring about a fair or just result between the parties, where the Plaintiffs had also advanced a broad oppression claim which they did not press at the hearing. While Mr Parish submits that the issues surrounding the oppression claim would have been ventilated in the proceedings in any case, although it seems to me that the issues relating to a just and equitable winding up were narrower in scope.
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The Active Defendants in turn sought an order that the Plaintiffs pay half of their costs of the proceedings prior to 13 December 2023 and submitted that the Court should otherwise make no order as to the costs of the proceedings. Mr Ogborne, who appears for the Active Defendants, submits that both the Plaintiffs and the Active Defendants succeeded in their claims, at least in respect of the orders that both sought that the Companies be wound up on the just and equitable ground, and that the Active Defendants had also sought and obtained relief extending to the appointment of any liquidator appointed to Smith Street as receiver of trust assets. He also points out that, up to the point of the hearing, the Plaintiffs had opposed an order that the companies be wound up on the just and equitable ground and had instead pressed an oppression claim, in which evidence in wide scope had been led. I have also had regard to Mr Ogborne’s submissions as to the history of the proceedings, although it is not apparent to me that those submissions support the order sought that the Plaintiffs pay half of the costs of the Active Defendants prior to 13 December 2023, if any order for costs were to be made in their favour.
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For the reasons set out above, I am not persuaded that an order for costs should be made in favour of either party in respect of the wider claims that both parties pursued and then abandoned or did not succeed in.
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Mr Parish also submits that the Court should otherwise order under s 466(2) of the Act so as to avoid a result that the Plaintiffs would bear a share of the costs of the winding up. He submits that a winding up order could have been made at an earlier point in the hearing, had the Active Defendants not maintained a claim that a buy-out order could be made under s 467(1) of the Act, and that part of the hearing turned on the availability of a buy-out order and the value of the assets of the relevant companies. While there is force in that submission, it neglects that fact that a winding up order could also have been made at an earlier point, well before the matter reached a hearing, had the Plaintiffs not pressed their claim to other relief on the basis of oppression. It cannot be said that one party succeeded, as against the other, in respect of obtaining a winding up order where all parties accepted that it should be made if a buy-out order was not made. I am also not persuaded that there is reason otherwise to order for the purposes of s 466(2) of the Act, where the parties sought but did not obtain other relief and all parties ultimately sought a winding up order if a buy-out order was not made.
Orders
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For these reasons, I make the following orders:
The First Defendant, Munja Bakehouse Pty Ltd, be wound up pursuant to s 461(1)(k) of the Corporations Act 2001 (Cth).
The Second Defendant, Smith Street Marrickville Pty Ltd, be wound up pursuant to s 461(1)(k) of the Corporations Act.
Mr Steward Free of Jirsch Sutherland be appointed as liquidator of the First Defendant and the Second Defendant.
Mr Steward Free, as liquidator of the Second Defendant, be appointed, without security, as the receiver and manager (“Receiver”) of all of the assets, property and undertakings (“Assets”) of the Second Defendant as the trustee of the 30Smith Unit Trust (“Trust”).
The requirement for the Receiver to file security under rule 26.3 of the Uniform Civil Procedure Rules 2005 (NSW) be dispensed with.
As receiver and manager of the Trust, the Receiver have, with respect to the Assets, the powers conferred by s 420 of the Corporations Act (other than those in subsections 420(2)(s), (t), (u) and (w)) as if the references in that section to “property of the corporation” were references to the Assets, including, without limitation, the power to do all things necessary or convenient, including to carry on the business of the Second Defendant and/or to sell and convert into cash any of the Assets, so as to facilitate the realisation of the Assets, the payment of the obligations of the Second Defendant as trustee of the Trust and the distribution of the net proceeds to the unit holders of the Trust in the winding up of the Second Defendant.
Order that the reasonable costs, expenses and remuneration incurred by the Receiver in acting as receiver and manager of the Assets of the Trust be paid from the Assets of the Trust.
Order that the Amended Originating Process filed in Court on 13 December 2023 and the Amended Interlocutory Process filed in Court on 13 December 2023 otherwise be dismissed.
The costs of the Plaintiffs and the Third to Fifth Defendants of the winding up proceedings, as agreed or as assessed, be paid as costs of the winding up pursuant to s 466(2) of the Corporations Act.
These orders be stayed to 4pm on 13 February 2024.
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Decision last updated: 31 January 2024
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