Re Solutions Hired Pty Ltd (Costs Ruling)
[2025] VSC 171
•7 April 2025
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL COURT
CORPORATIONS LIST
S ECI 2024 05026
IN THE MATTER of SOLUTIONS HIRED PTY LTD (ACN 632 065 377)
BETWEEN:
| WILLIAMS EQUITY HOLDINGS PTY LTD (ACN 632 080 123) AS TRUSTEE FOR THE CORANGAMITE TRUST | Plaintiff |
| v | |
| WILKINSON ENTERPRISES AUSTRALIA PTY LTD (ACN 155 136 351) AS TRUSTEE FOR THE WILKINSON FAMILY TRUST & ORS (according to the attached Schedule) | Defendant |
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JUDGE: | Hetyey AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 7 March 2025, further material filed 14 March 2025 and 21 March 2025 |
DATE OF RULING: | 7 April 2025 |
CASE MAY BE CITED AS: | Re Solutions Hired Pty Ltd (Costs Ruling) |
MEDIUM NEUTRAL CITATION: | [2025] VSC 171 |
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CORPORATIONS – Part 5.4 of the Corporations Act 2001 (Cth) – s 461(1)(k) of the Corporations Act 2001 (Cth) – Application to wind up company on just and equitable ground – Alleged deadlock in management of company and irretrievable breakdown of relationship between shareholders – Where director defendant resigns prior to final hearing breaking deadlock.
COSTS – Proceeding resolved prior to final hearing – Court’s jurisdiction to award costs – s 24 of Supreme Court Act 1986 (Vic) – Circumstances in which Court will make costs order where no determination on the merits – Whether conduct of defendants unreasonable so as to warrant costs order in favour of plaintiff – Whether capitulation by defendants – Whether conduct of plaintiff in commencing proceeding unreasonable – Whether plaintiff entitled to indemnity costs – Special circumstances required – Relevant parties each acted unreasonably in commencing and defending proceeding – Where conduct inconsistent with overarching obligations under ss 20, 22, 25 and 26 of Civil Procedure Act 2010 (Vic) – Parties to bear own costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr B Carew | Colin Biggers & Paisley |
| For the First and Second Defendant | Mr J Petras | PCL Lawyers |
TABLE OF CONTENTS
Introduction
Background
Legislative provisions and legal principles
Submissions by the parties on costs
Supplementary evidence on costs
Plaintiff’s supplementary evidence
First and second defendants’ supplementary evidence
Plaintiff’s supplementary evidence in reply
Consideration
Conclusion
HIS HONOUR:
Introduction
By originating process dated 20 September 2024, Williams Equity Holdings Pty Ltd (as trustee for the Corangamite Trust) (‘plaintiff’) made an application under s 461(1)(k) of the Corporations Act 2001 (Cth) (‘Act’) for the just and equitable winding up of Solutions Hired Pty Ltd (‘company’). The essence of the application was an alleged deadlock in the management of the company and a breakdown in the relationship between its shareholders.
However, for reasons I will discuss, it is no longer necessary for the plaintiff’s application to be determined by the Court. The parties are in agreement that the matter should be brought to an end without a hearing on the merits but disagree on the appropriate order as to costs. The plaintiff seeks its costs from Wilkinson Enterprises Australia Pty Ltd (as trustee for the Wilkinson Family Trust) (‘first defendant’) and Mr Huw Wilkinson (‘second defendant’) on an indemnity basis, whereas the first and second defendant resist such an order and say there should be no order as to costs. To determine the question of costs it is necessary to set out the background and procedural history of the matter in some detail.
Background
The company was incorporated on 5 March 2019. An Australian Securities and Investments Commission (‘ASIC’) extract dated 19 September 2024 records Mr Andrew Williams and Mr Wilkinson as being the company’s directors. The plaintiff, in its capacity as a trustee company, holds 50,000 ordinary shares, or half of the company’s share capital. The first defendant holds the remaining shares in the company. Mr Williams is the sole director and shareholder of the plaintiff whereas Mr Wilkinson is a director of the first defendant. Mr Wilkinson is also a director and shareholder of Phasegen 7 Pty Ltd (‘Phasegen’).
In his affidavit of 20 September 2024, Mr Williams deposes that the company entered into six contingent workforce contracts with Phasegen between April 2021 to February 2022. The contracts involved the company providing Phasegen with engineers and project management services in relation to the construction of a power station. It is Mr Williams’ evidence that Phasegen was invoiced by the company a total sum of $1,800,580.00 (inclusive of GST) for the work, however, Phasegen did not pay the invoices. In or around September 2022, the plaintiff obtained adjudication certificates under s 28Q of the Building and Construction Industry Security of Payment Act 2002 (Vic) (‘SOPA’) in respect of the underlying work (‘adjudicated debts’). Mr Williams also deposes to corresponding with Phasegen’s lawyers between April and August 2023 about the process and timing of payment of the adjudicated debts and the preparation of deeds of settlement. However, progress in relation to those matters apparently stalled while Phasegen’s lawyers sought further instructions (presumably from Mr Wilkinson).
The company then applied to the County Court of Victoria in August 2023 for orders pursuant to s 28R of the SOPA. The County Court ultimately made orders against Phasegen in the sum of $1,695,625.49 (‘judgment debt’). On or about 17 October 2023, the company served Phasegen with a statutory demand for payment of the amount the subject of the judgment debt. The demand went unanswered. However, the company did not take the next step of commencing winding up proceedings against Phasegen. The company’s position was that it may not have been permitted to commence winding up proceedings against Phasegen in circumstances where Phasegen shares a director with the company (Mr Wilkinson) who would not (or almost certainly would not) consent to the company commencing those proceedings. The plaintiff contended Mr Wilkinson had a fundamental conflict of interest in relation to both the company and Phasegen, in contravention of his duties and obligations as a director. Further, because of the company’s share structure and holdings, the plaintiff was unable to use its shareholding in the company to pass a resolution with the effect that the company commence winding up proceedings against Phasegen. The plaintiff contended these circumstances gave rise to a deadlock in the company. Mr Williams also deposed that the relationship between the plaintiff and the first defendant, and their respective directors (being himself and Mr Wilkinson), had become untenable.
Additionally, the company was said to owe money to contractors who provided benefits to the company and Phasegen. This was presumably a reference to the engineers supplied by the company to Phasegen. Mr Williams said that if the company was wound up, liquidators would be at liberty to pursue Phasegen and thereby improve the prospect of the company’s creditors receiving a distribution from the liquidation of the company.
The first and second defendants were separately served with the originating process and supporting material on 7 October 2024, and 30 September 2024 respectively. The matter was listed for first directions on 25 October 2024. The day prior, the plaintiff’s lawyers, Colin Biggers & Paisley, received an email from PCL Lawyers on behalf of the defendants noting they had not yet had an opportunity to take proper instructions and were not in a position to file a notice of appearance or appear at the hearing. They sought a two week adjournment. This was not agreed to, however, and the defendants were invited to comment on proposed timetabling orders. At the hearing, the plaintiff appeared through counsel, however, there was no appearance by the defendants. The Court made orders for the filing of affidavit material and submissions by the parties, the referral of the matter to mediation, and the listing of the matter for final hearing on 21 March 2025. Relevantly, the first and second defendants were required to file and serve any affidavits in opposition to the application by 22 November 2024. A sealed copy of the Court’s orders was emailed to PCL Lawyers by the plaintiff’s lawyers later that day.
Mr Patrick Smith, solicitor at Colin Biggers & Paisley, deposes to trying to speak to his counterpart at the offices of PCL Lawyers on 8 November 2024 and 13 November 2024 without success. He emailed PCL Lawyers on 13 November 2024 enquiring as to whether they continued to act and whether they proposed to file a notice of appearance. The first and second defendants did not file any affidavit material by 22 November 2024 in compliance with the Court’s orders, or at all. Colin Biggers & Paisley sent emails to the first and second defendants directly on 25 November 2024 seeking confirmation as to whether they had engaged solicitors to act in the proceeding and details of when their affidavit material would be filed. The email also warned that in the absence of a satisfactory response, the plaintiff would apply to urgently relist the matter and reserved the right to seek costs on an indemnity basis. This elicited an email from Mr Wilkinson dated 26 November 2024 confirming that PCL Lawyers were retained to act and that all future correspondence should be directed to them. The same day, Colin Biggers & Paisley wrote to PCL Lawyers attaching proposed consent orders and seeking confirmation that PCL Lawyers were acting for the first and second defendants and would file the necessary appearance. PCL Lawyers responded by email later that day stating they were still in the process of obtaining instructions, that a notice of appearance would be filed in due course, and that they did not know whether their clients would be filing any evidence, but sought an extension for the time of filing such evidence until 20 December 2024. Colin Biggers & Paisley then wrote to the Court seeking to have the matter listed for mention. The matter was ultimately listed for mention on 18 February 2025, which was subsequently adjourned to 7 March 2025 at the request of the parties.
On 17 February 2025, Colin Biggers & Paisley received by email a letter from PCL Lawyers with a number of attachments (’17 February letter’). The letter is instructive:
1. We refer to the above matter and confirm we now act for Wilkinson Enterprises Australia Pty Ltd ACN 155 136 351 as trustee for the Wilkinson Family Trust and Huw Christopher Wilkinson, the First and Second Defendants, respectively.
2. Please find enclosed, for your attention, the following documents in respect of Solutions Hired Pty Ltd ACN 632 065 377:
(a) copy of the Notification by Officeholder of Resignation or Retirement (Form 370), lodged on 28 January 2025 and formally accepted by the Australian Securities & Investments Commission (ASIC) on 11 February 2025; and
(b) ASIC Current Company Extract, dated 17 February 2025, confirming Mr Huw Christopher Wilkinson is no longer named as a director or company secretary.
3. We are instructed that prior to the lodgement of the Form 370 that Mr Wilkinson had attempted to resign as an officeholder from Solutions Hired Pty Ltd on several occasions, which Mr Andrew Williams, the other director, was aware of.
4. We are instructed Mr Wilkinson formally ceased to act as a director on 28 January 2025, and as such, should your client wish to proceed with the winding up of Solutions Hired Pty Ltd, it is at liberty to do so; however, in our view it no longer requires a court order for same. Accordingly, the proceeding against the First and Second Defendants ought to be dismissed without orders as to costs.
5. Please confirm by no later than 3.00pm today your client's instructions to dismiss the proceedings with no order as to costs, so that the parties can avoid the unnecessary incursion of fees for appearing at the mention listed at 11.00am tomorrow.
Mr Wilkinson’s Form 370 notification by officeholder of resignation or retirement (‘Form 370 resignation’) attached to the 17 February letter was not included in the parties’ affidavit material but was tendered by the plaintiff at the hearing on 7 March 2025. It was signed by Mr Wilkinson on 30 November 2024, stamped by ASIC on 11 February 2025 and refers to the date of the cessation of Mr Wilkinson’s directorship as being 27 August 2020 – more than four years prior. It was also accompanied by a letter from Mr Wilkinson dated 7 February 2025 to ASIC in the following terms:
To whom it may concern,
My resignation letter dated 27th August 2020 states that “I formally resign from my positions as Founder”, [sic] I was resigning from all office holdings within that company that I was nominated on ASIC for, including Director and/or Secretary, and any related shareholdings that I may have had.
The ASIC extract for the company dated 17 February 2025 shows that the Form 370 resignation was processed with an effective date of 28 January 2025.
Since the 17 February letter, the parties’ solicitors have exchanged further correspondence in relation to proposed orders to bring about the resolution of the proceeding, including on the question of costs. On 24 February 2025, the first and second defendants filed a notice of appearance in the proceeding but did not apparently inform the plaintiff until 6 March 2025. Although it is the subject of the proceeding, no appearance has been entered for the company given it plays no active role in the matter.
Legislative provisions and legal principles
Section 24 of the Supreme Court Act 1986 (Vic) 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’. It follows that the Court has a wide discretion in relation to costs.[1] Although not designed to control 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 their costs (i.e., costs follow the event).[2] However, where a proceeding ends without a final hearing, the following guiding principles have application in resolving the question of costs:
(a)the rule that costs will follow the event does not apply in circumstances when there has been no hearing on the merits[3] and it is commonly appropriate for the court to make no order as to costs.[4] That is because the court is deprived of the factor that usually determines whether or how it will make a costs order, namely the success of one of the parties (being the ‘event’);[5]
(b)in such a situation, it will rarely, if ever, be appropriate for a court considering the costs of the proceeding to determine for itself the case on the merits or to determine the outcome of a hypothetical trial;[6]
(c)the court may, however, determine whether the applicant acted reasonably in commencing the proceeding and whether the respondent acted reasonably in defending it.[7] Regard may also be had to the conduct of a respondent prior to the commencement of the proceeding where such conduct may have precipitated the litigation.[8] In some cases, the court may be in a position to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action;[9]
(d)where it appears that both parties have acted reasonably in commencing and defending the proceeding and their conduct has continued to be reasonable until the point at which the litigation settled or its further prosecution became futile, the proper exercise of the court’s cost discretion typically means no order as to costs will be made;[10]
(e)however, in rare cases, costs may be awarded where the court is confident that, although both parties have acted reasonably, one party was almost certain to have succeeded if the matter had been fully tried;[11]
(f)there is a distinction between cases in which one party, after litigating for some time, effectively capitulates or surrenders to the other (often justifying an award of costs to the successful party), and cases where some supervening event or settlement removes or modifies the subject of the dispute such that, although it could not be said that one side has won, no issue remains between the parties except that of costs (in which case, there may be no clear reason to award costs in favour of either party);[12] and
(g)whilst each case depends upon its own circumstances, as a general proposition, if there is no other material before the court other than the pleadings, it would be extremely difficult for a court to make any order other than each party bear its own costs.[13]
[1]See also s 65C of the Civil Procedure Act 2010 (Vic).
[2]See Towercom Pty Ltd v Fahour (No 4) [2013] VSC 585, [6] (Derham AsJ); Ritter v Godfrey [1920] 2 KB 47, 52 (Atkin LJ); Donald Campbell & Co Ltd v Pollak [1927] AC 732, 809 (Viscount Cave LC); Milne v Attorney-General (Tas) (1956) 95 CLR 460, 477 (Dixon CJ, McTiernan, Williams, Fullagar and Taylor JJ); Oshlack v Richmond River Council (1998) 193 CLR 72 (Brennan CJ, Gaudron, McHugh, Gummow and Kirby JJ).
[3]Lake Burrendong State Park Trust v Thompson [2011] NSWSC 1554 (Hallen AsJ).
[4]Franpina Developments Pty Ltd v John Anthony Arena Pty Ltd [2022] NSWSC 57, [20] (Darke J) (‘Franpina Developments’). See also G E Dal Pont, Law of Costs (LexisNexis Australia, 5th ed, 2021), 523-24 [14.69] (‘Law of Costs’).
[5]Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622, 624 (McHugh J) (‘Re Minister for Immigration and Ethnic Affairs’); Franpina Developments, [20].
[6]Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194, 201 (Hill J) (‘ASIC v Aust-Home’); Clark v ING Life Limited [2007] FCA 1960 [16] (Rares J); Elevate Brandpartners Ltd v Hammond (No 4) [2020] FCA 421, [20] (Stewart J).
[7]ASIC v Aust-Home, 201. See also Law of Costs, 524 [14.71].
[8]Ibid.
[9]Re Minister for Immigration and Ethnic Affairs, 624, citing ASIC v Aust-Home, 201.
[10]Re Minister for Immigration and Ethnic Affairs, 625, applied in Mi-Ok Pty Ltd v The Owners of Strata Plan No 56059 [2006] NSWSC 573, [6] (Barrett J) and Re Telegraph Point Sports & Recreation Club Limited [2020] NSWSC 616, [3], [13] (Black J).
[11]Re Minister for Immigration and Ethnic Affairs, 625; One Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548, [7] (Burchett J); Balanggarra Aboriginal Corporation v State of Western Australia [2018] FCA 1538, [71]-[73] (Barker J).
[12]One. Tel Ltd v Commissioner of Taxation (2000) 101 FCR 548, 553 [6] (Burchett J); FCA US LLC v Mahindra Automotive Australia Pty Ltd [2021] FCA 1091, [35] (Halley J).
[13]Champagne View Pty Ltd v Shearwater Resort Management Pty Ltd [2000] VSC 214, [47] (Gillard J). See also Hyder Consulting (Victoria) Pty Ltd v CGU Insurance Ltd [2003] VSC 223 (Mandie J); Ringwood Plus Pty Ltd v Commissioner of State Revenue [2004] VSC 494, [19] (Hollingworth J); Nichols v NFS Agribusiness Pty Ltd [2018] NSWCA 84, [2] (Basten JA).
Where an award of costs is made, it is usually ordered on a standard basis unless there are special or unusual features warranting an order for costs on an indemnity basis.[14] Such circumstances include where:
(a)a proceeding was commenced or continued in disregard of known facts or clearly established law;[15]
(b)the bringing of the proceeding and the pursuit of it was high-handed[16] or unnecessary;[17]
(c)there is unreasonable conduct causing unnecessary costs to be incurred;[18] or
(d)a party, properly advised, knew or should have known that it had no chance of success but persisted with its claim (in other words, the proceeding was brought on the basis that the case advanced was hopeless).[19]
[14]See Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 (Sheppard J) (‘Colgate-Palmolive’); Ugly Tribe Co Pty Ltd v Sikola [2001] VSC 189 (Harper J); Yap v Lee [2019] VSC 743 (McDonald J).
[15]See J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers (WA Branch) (No 2) (1993) 46 IR 301 (French J, as his Honour then was) (‘J-Corp’).
[16]See AGC Ltd v De Jager [1984] VR 483, 502 (Tadgell J); Heike Jindra & Ors v Tech-Rentals Pty Ltd & Anor (No 2) [2000] VSC 132 [3], [9] (Warren J, as her Honour then was) (‘Heike Jindra’).
[17]Heike Jindra, [3], [9].
[18]Ballam v Ferro (No 2) [2022] NSWSC 1358, [68] (Hallen J), citing Vector Corrosion Technologies Ltd v E-Chem Technologies Ltd [2022] FCA 519, [38] (Jagot J).
[19]See Colgate-Palmolive, 231; J-Corp, 303; Banksia Securities Ltd v Insurance House Pty Ltd (Costs) [2020] VSC 234, [15] (J Dixon J); Winslow Constructors Pty Ltd v Head, Transport for Victoria (Costs) (2021) 64 VR 200, 204 (Riordan J).
Submissions by the parties on costs
In the present case, each side maintained that the other had acted unreasonably in connection with the proceeding. The reasonableness of each party is relevant to not only the question of whether the Court should exercise its discretion to make a costs order in the absence of a final hearing on the merits but also the measure of any costs order; specifically whether costs should be ordered on a standard basis or an indemnity basis.
At the mention on 7 March 2025, the plaintiff principally submitted that:
(a)as a consequence of the 17 February letter, the litigation landscape had fundamentally changed;
(b)the purpose of the proceeding was to obtain a winding up order to deal with the alleged deadlock between the parties, however, as a consequence of Mr Wilkinson’s Form 370 resignation as director of the company, there is no longer a deadlock on the board of the company and the company is now able to enforce its rights against Phasegen;
(c)accordingly, the plaintiff has obtained an outcome which resolves the central dispute which caused the proceeding to be issued and the proceeding no longer serves a purpose (a fact acknowledged in the 17 February letter);
(d)Mr Wilkinson’s resignation as director amounts to a capitulation several months after the proceeding had commenced;
(e)despite the fact that ASIC treated Mr Wilkinson’s resignation as effective from 28 January 2025, it may be inferred from the Form 370 resignation and its accompanying 7 February 2025 letter to ASIC that Mr Wilkinson believed he had already resigned, or had attempted to resign, as early as 27 August 2020. The first and second defendants acted unreasonably in not informing the plaintiff of those matters prior to the 17 February letter. Their failure to do so necessitated the commencement of the proceeding;
(f)given the first and second defendant’s unreasonableness and subsequent capitulation, there is a legitimate basis for the Court to make a costs order;
(g)costs should be awarded against the first and second defendants on an indemnity basis because of their unreasonableness in failing to retain solicitors in a timely manner and to engage with the proceeding after its service. This conduct constitutes a failure to comply with the overarching obligation found in s 20 of the Civil Procedure Act 2010 (Vic) (‘CPA’) to cooperate with the parties to a civil proceeding; and
(h)indemnity costs are also warranted because the first and second defendant failed to advise the plaintiff that Mr Wilkinson no longer wished to remain as a director of the company at any time prior to the 17 February letter. Until receipt of that correspondence, the plaintiff was under a mistaken assumption that Mr Wilkinson wanted to remain as a director. Such high-handed conduct amounts to a failure to comply with the overarching obligation not to mislead or deceive in respect of a civil proceeding, pursuant to s 21 of the CPA.
Further, counsel was instructed that there were unsuccessful attempts by the plaintiff to engage with Mr Wilkinson about the payment of the judgment debt prior to the commencement of the proceeding.
Conversely, the first and second defendants essentially submitted that:
(a)there is no evidence of any correspondence between the parties immediately prior to the commencement of the proceeding;
(b)the proceedings were brought without any prior notice, in circumstances where Mr Wilkinson had previously indicated he was going to resign as director;
(c)the plaintiff did not ultimately obtain the relief sought in the originating process, namely the winding up of the company. Instead, the parties have agreed that it is appropriate for the proceeding to be dismissed without the need for any order by the Court;
(d)properly construed, the resignation of Mr Wilkinson was not a capitulation, but rather a supervening event in the proceeding; and
(e)in the circumstances, the proceeding should be dismissed with no order as to costs.
At the conclusion of the mention, the Court made orders for the filing of supplementary affidavit material by the parties in relation to a number of matters including: whether Mr Wilkinson had communicated his intention to resign, or his understanding that he had already resigned, prior to the commencement of the proceeding; whether the plaintiff had attempted to engage with Mr Wilkinson to deal with the judgment debt and the purported deadlock prior to the commencement of the proceeding; and whether any notice was given to the first and second defendants immediately prior to the filing of the proceeding.
Supplementary evidence on costs
Plaintiff’s supplementary evidence
In his second affidavit affirmed on 14 March 2025, Mr Williams repeats a number of matters he had already deposed to concerning the invoices issued to Phasegen, the adjudicated debts and the judgment debt. However, he confirms that prior to initiating this proceeding to wind up the company, ‘no separate demand was issued’. This was apparently because:
…it was evident to [him] that Phasegen, together with its shareholders and directors, including…Mr Wilkinson [who was also a mutual director of the company]…were unwilling to engage with or respond to the demands for payment of either the Adjudicated Debts or the Judgment Debts owed by Phasegen [the company].
He considers that the first and second defendants’ lack of engagement with the proceeding following service was consistent with his prior experience in pursuing the adjudicated debts. He believes the first and second defendants were already on notice of the judgment debt, the recovery of which was apparently the ultimate purpose of this proceeding.
Mr Williams further deposes that following service of the proceeding, the first and second defendants gave no indication that this proceeding was unnecessary because Phasegen was in a position to pay the underlying debts or because Mr Wilkinson was willing to resign as a director. He says that Mr Wilkinson’s resignation as a director was only conveyed in the 17 February letter. However, Mr Williams recalls that during a telephone call on 17 August 2020, and in a subsequent email to him that day, Mr Wilkinson expressed a desire to retire from a company called Solutions Soft Pty Ltd, but did not specifically make mention of the company the subject of this proceeding. Further, Mr Williams refers to an email dated 10 March 2021 (‘10 March 2021 email’), in which Mr Wilkinson purportedly stated that he was prepared to remain as a silent partner and wished to appoint a nominee to represent his interests. However, he never acted on these representations. As a consequence of Mr Wilkinson’s lack of communication, Mr Williams had no reason to believe he wished to resign or had made any effective attempt to resign at any earlier point.
First and second defendants’ supplementary evidence
In his affidavit affirmed on 14 March 2025, Mr Wilkinson exhibits a series of letters he says he sent to Mr Williams on 27 August 2020 variously stating that he resigned from his position as ‘[f]ounder of, and…relinquished all shareholdings in’: the company, Solutions Managed Pty Ltd, Solutions Soft Pty Ltd, Solutions Equities Pty Ltd and Solutions Energy APAC Pty Ltd (’27 August 2020 letters’). In an email sent from Mr Wilkinson to Mr Williams that same day (’27 August 2020 email’), Mr Wilkinson relevantly stated:
The situation between us at this point is no longer amicable as I am left with no choice but to resign from Solutions Soft Pty Ltd, Solutions Hired Pty Ltd, Solutions Managed Pty Ltd, Solutions Energy Asia Pacific Pty Ltd and Solutions Equities Pty Ltd (emphasis added).
In the email, Mr Wilkinson gave 120 days’ notice in writing of his intention to resign from the role as director of the company so that an alternative director could be appointed.
Mr Wilkinson says he participated in telephone and Zoom meetings with Mr Williams in August and November 2020 and February 2021 in relation to the appointment of a substitute director. He sent Mr Williams the 10 March 2021 email apparently reiterating his previous sentiment that he no longer wished to be part of the company. He says the last time he saw or spoke to Mr Williams was at a Christmas event in December 2021.
In relation to the circumstances of the Form 370 resignation lodged by Mr Wilkinson on 30 November 2024, he says this:
… I did not inform my solicitors, PCL Lawyers, of the status of my ASIC lodgements or that I had in fact filed those materials. Nor did I seek to inform [Mr Williams] or his legal representatives in this proceeding as I was concerned that [Mr Williams] may attempt to meddle with my steps to resign and remove myself as an officeholder as [Mr Williams] had, persistently over the preceding four plus years, intentionally impeded, or otherwise failed, neglected and/or refused to facilitate my exit and resignation as officeholder and shareholder from Solutions Hired Pty Ltd.
Mr Wilkinson says that despite his various attempts to contact Mr Williams, Mr Williams did not respond to his emails or initiate contact in relation to his resignation as a director of the company. He says that Mr Williams did not warn him of impending proceedings in the event he did not actively remove himself as a director.
While Mr Wilkinson was aware of the first return of the matter on 25 October 2024, he says he did not instruct solicitors to act for him because he believed his resignation as director of the company and his forfeiture of his 50% shareholding in the company had already been effected by the company and by Mr Williams, ‘such that there [was] no necessity to respond to [the] Supreme Court proceeding.’
Plaintiff’s supplementary evidence in reply
In the third affidavit of Mr Williams sworn on 21 March 2025, Mr Williams says that until he read Mr Wilkinson’s affidavit of 14 March 2025, he ‘had never received and was unaware of’ the letters and emails purportedly addressed and sent to him on 27 August 2020.
Consideration
In determining whether to exercise the Court’s jurisdiction to award costs in the absence of a final hearing on the merits, it is necessary to examine the conduct of each of the plaintiff and the first and second defendant.
The first and second defendant’s lack of responsiveness and delay in filing an appearance approximately four months after service is entirely unsatisfactory. The reason for the delay given by Mr Wilkinson (i.e., there was no need to respond to the proceeding because he believed he had resigned as a director) is misguided. Further, the stated explanation only partly explains the delay. The fact that Mr Wilkinson lodged the Form 370 resignation on 30 November 2024 suggests he would have realised by that time that his prior attempt at resignation had been ineffective. And yet, the first and second defendants only filed an appearance on 24 February 2025 and notified the plaintiff of that fact on 6 March 2025 - more than three months later. In my view, the first and second defendants have fallen short of meeting their overarching obligations: to cooperate in the conduct of the proceeding, as required by s 20 of the CPA; and to act promptly and minimise delay, as required by s 25 of the CPA.
Moreover, the first and second defendant ought to have immediately informed the plaintiff of the Form 370 resignation following its lodgement on 30 November 2024. Instead, it was only provided on 17 February 2025 - more than 11 weeks later. The failure to advise the plaintiff of the development is simply inexcusable. It is inconsistent with the overarching obligation in s 26 of the CPA to disclose the existence of documents that are critical to the resolution of the dispute. In addition, the failure by the first and second defendants to confirm Mr Wilkinson’s understanding of the true position of his directorship of the company (i.e., that he believed he had already resigned or, alternatively, that he intended to resign) from the time they were served with the originating process in late September and early October 2024 until the sending of the 17 February letter is incomprehensible. It is conduct that does not appear to conform with the overarching obligation to use reasonable endeavours to resolve the dispute pursuant to s 22 of the CPA. The reason proffered by Mr Wilkinson for the failure to do so (i.e., he was concerned Mr Williams would try to stymie his resignation) is unpersuasive. It was important information that would undoubtedly have resolved the dispute far earlier than was otherwise the case.
At the same time, Mr Williams’ evidence that he never received, and was unaware of, the 27 August 2020 letters and the 27 August 2020 email is difficult to reconcile with the written record. I note his evidence does not go so far as to say he has searched his email accounts and cannot find any record of the 27 August 2020 email having been received. Nor does he directly contest the authenticity of the letters and the email. He simply states they were ‘purportedly’ addressed and sent to him. The fact that the letter accompanying the Form 370 resignation refers to earlier correspondence from Mr Wilkinson to ASIC dated 27 August 2020 lends support to Mr Wilkinson’s evidence that he had sent Mr Williams the 27 August 2020 letters and email expressing his intention to relinquish his shareholding and to resign as director. It may be that Mr Williams is simply mistaken in his recollection. Further, I do not consider Mr Wilkinson resiled from this position in the 21 March 2021 email. That email apparently confirmed his decision to remove himself from a different company – Solutions Soft Pty Ltd.
Nevertheless, the existence of the 27 August 2020 letters and email undermine the entire foundation of the plaintiff’s application, namely that the company was deadlocked and there was an irretrievable breakdown in the relationship between its shareholders. On one view, the proceeding was unnecessary. The August 2020 correspondence also puts paid to the argument that the 17 February letter constitutes a capitulation by the first and second defendant.
Further, the plaintiff ought to have given prior notice of the proceeding to the first and second defendants. The failure to do so was not in accordance with its overarching obligation to use reasonable endeavours to resolve the dispute in accordance with s 22 of the CPA. Mr Williams’ explanation for not having done so (i.e., it was evident to him that Phasegen and Mr Wilkinson were unwilling to respond to demands for payment of the judgment debt) is beside the point. This was an application to wind up the company on the just and equitable ground. It was not a debt recovery proceeding. It is possible that had the plaintiff written to the first and second defendant identifying the nature of the alleged deadlock and breakdown in the relationship between the shareholders of the company prior to commencing the proceeding, the relevant defendants may have instructed lawyers earlier, Mr Wilkinson’s position in relation to the company may have been clarified and the proceeding may have been avoided. Instead, the plaintiff acted precipitously and initiated the proceeding without any engagement with the other side.
Conclusion
In my view, both sides have to varying degrees acted unreasonably and have occasioned unnecessary costs to be incurred. In the circumstances of the case, I decline to exercise my discretion to make a costs order on either a standard basis or an indemnity basis. Costs should lie where they fall.
SCHEDULE OF PARTIES
| S ECI 2024 05026 | |
| BETWEEN: | |
| WILLIAMS EQUITY HOLDINGS PTY LTD (ACN 632 080 123) AS TRUSTEE FOR THE CORANGAMITE TRUST | Plaintiff |
| - v - | |
| WILKINSON ENTERPRISES AUSTRALIA PTY LTD (ACN 155 136 351) AS TRUSTEE FOR THE WILKINSON FAMILY TRUST | First Defendant |
| HUW CHRISTOPHER WILKINSOM | Second Defendant |
| SOLUTIONS HIRED PTY LTD (ACN 629 973 020) | Third Defendant |
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