Scottish & Colonial Ltd v Australian Power & Gas Co Ltd

[2007] NSWSC 1307

CITATION:	Scottish & Colonial Ltd v Australian Power & Gas Co Ltd & Ors [2007] NSWSC 1307
HEARING DATE(S):	16/11/2007
JUDGMENT DATE :	16 November 2007
JURISDICTION:	Equity
JUDGMENT OF:	Bryson AJ at 1
DECISION:	(1) Order that the plaintiff pay the defendants’ costs of the proceedings on the Originating Process; (2) Order that the cross defendant pay the cross-claimants' costs of the proceedings on the Further Amended Cross-claim.
CATCHWORDS:	COSTS - costs in proceedings [2007] NSWSC 1266
LEGISLATION CITED:	Civil Procedure Act 2005 s 98 Trade Practices Act 1974 s 52
CASES CITED:	Advance Bank Australia v FAI Insurances Australia [1987] 9 NSWLR 464 Bulfin v Bebarfalds Ltd (1938) 38 S.R. (NSW) 423
PARTIES:	Scottish & Colonial Limited - Plaintiff Australian Power and Gas Company Limited - 1st Defendant/First Cross Claimant Richard Jonathan Poole - 2nd Defendant/Second Cross Claimant Ian Stuart McGregor - 3rd Defendant/3rd Cross Claimant Wayne Bellman - Cross Defendant
FILE NUMBER(S):	SC 5191/2007
COUNSEL:	P. Kulevski - Plaintiff W.G. Muddle SC - Defendants
SOLICITORS:	Chang, Pistilli & Simmons - Plaintiff Deacons Lawyers - Defendants

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

BRYSON AJ

16 NOVEMBER 2007

5191/07 SCOTTISH & COLONIAL LIMITED v AUSTRALIAN POWER & GAS COMPANY LIMITED & ORS

JUDGMENT

1 BRYSON AJ: These reasons relate to costs. The Originating Process was filed on 25 October 2007, the proceedings came on for final hearing a week later on 2 November at 2 p.m. and I then heard argument on the separate question, which I decided on 5 November 2007: [2007] NSWSC 1266. This decision led me to make an injunction restraining consideration of a resolution for removing the defendant directors from the Board by a general meeting called for 15 November 2007.

2 That left other claims in the litigation unconsidered; all claims in the Originating Process, and Claims 2 to 6 in the Further Amended Cross-claim. On 16 November I made consent orders dismissing the Originating Process and the remaining claims in the Cross-Claim. In form and in substance the defendants and cross-claimants have succeeded in both the Originating Process and the Cross-Claim. The ordinary course is that costs follow the event: see UCPR 42.1, but the Court has a wide discretionary power with respect to costs: see Civil Procedure Act 2005 s 98. I heard argument on whether I should depart from the ordinary course indicated by the rules.

3 It is correct that the merits of the claim in the Originating Process have not been ruled on. However the Originating Process and the claims in it lost most of their point when it was established that the meeting could not remove the defendant directors. What remained in dispute was whether the defendant directors had used resources of APG improperly, so that they should indemnify APG. This would involve no more than a few thousand dollars; APG under the control of the defendant directors raised an invoice for $5,719.58 on 13 November 2007, which has been paid. A dispute about a sum of that order should be resolved within APG, and if that had been the only issue an approach to the Equity Division could not be expected to succeed or to carry costs.

4 The plaintiff's claim was that the defendant directors were acting in excess of their powers in circulating information to shareholders in that they were acting in their own interests, which Advance Bank Australia v FAI Insurances Australia [1987] 9 NSWLR 464 shows is beyond their powers; their position was that they were acting in the course of their duty to inform shareholders, which they are required to do by the law associated with Bulfin v Bebarfalds Ltd (1938) 38 S.R. (NSW) 423. That issue has not been decided and I would not decide it to dispose of costs; nor was I asked to. Argument before me on costs related mainly to the undertaking which was under discussion when the litigation was commenced.

5 Mr Bellman requisitioned a general meeting on 15th October 2007, to be held on 15 November. He circulated notices to members on 15 or 16 October. On 19 October the plaintiff's solicitors demanded an undertaking by the defendant directors not to use the funds or resources of APG to seek to influence the outcome of the meeting, and an undertaking to immediately repay APG for any funds or resources which had been used to seek to influence the outcome of the meeting. On 23 October the defendant directors proffered an undertaking which did not comply with the demand. They proffered an undertaking to indemnify APG in respect of four classes of costs and expenses; the classes were quite wide and included expenses which if their case was upheld they were not required to bear. The undertaking was qualified because it only related to expenses from 18 October until the issues concerning the notice of meeting were concluded finally, and they reserved an opportunity to vary or withdraw it on 48 hours’ notice. In my view the undertaking was ample in the respect of the expenses it covered but inadequate because of these qualifications; it was reasonably open to debate, and it did not do what the plaintiff had asked for and stop APG’s resources being used. On 24 October the plaintiff's solicitors sought an undertaking in terms not markedly different from their original demand. They sought the undertaking by 5 p.m. on 24 October and threatened proceedings if it was not forthcoming. The defendant directors’ solicitors said, also on 24 October, that they were seeking instructions and would be in a position to respond by 5 p.m. on 25 October. One of the directors was overseas. The plaintiff's solicitors refused to alter their position and on 25 October they commenced proceedings.

6 The defendants’ counsel contended, in relation to costs, that commencing the proceedings had been unduly precipitate and that a further opportunity to give an undertaking should have been allowed.

7 The plaintiff and its solicitors did act precipitately on 24 and 25 October. They did so in a context where time available for action was very limited and, on the logic of their case, they needed to approach the Court very soon. I will not resolve the discretionary question as to costs by a close examination of the way in which the claim for an undertaking was handled by one side or the other.

8 The plaintiff's counsel pointed out that the question whether s 203D should have been complied with was first raised by me at the directions hearing on the afternoon of 1 November and did not appear in the defendant directors’ pleadings until a draft further amended cross-claim was produced about midday on 2 November. This document was filed in court when the hearing began at 2 p.m. on 2 November. Although it is called the Further Amended Cross-claim no earlier version of the cross-claim had actually been filed. Apparently the earlier Cross-claims had been circulated among the parties.

9 The plaintiff's counsel contended that the plaintiff was forced to commence proceedings to ensure compliance by the defendant directors with their duties in circumstances where they offered an unsatisfactory undertaking. I am not prepared to act on this basis; to do so would involve addressing and deciding the merits of the plaintiff's claim which I am not prepared to do on a costs issue.

10 Nor am I prepared to address the substance of another contention which related to the application of Trade Practices Act 1974 s 52 to Mr Bellman’s conduct.

11 In my mind the overwhelming discretionary consideration is that the general meeting could not remove any director from office in the circumstances; the issues raised by the plaintiff about the defendant directors’ conduct were of slight importance in view of this. The meeting was not worth having, the plaintiff’s claim was not worth bringing. The defendants succeeded. Nothing in these circumstances should lead me to depart from the usual outcome indicated by the rules of court.

12 My costs orders are:

(1) Order that the plaintiff pay the defendants’ costs of the proceedings on the Originating Process.

(2) Order that the cross defendant pay the cross-claimants' costs of the proceedings on the Further Amended Cross-claim.

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