Sell v Taylor
[2019] FCA 572
•23 April 2019
FEDERAL COURT OF AUSTRALIA
Sell v Taylor [2019] FCA 572
File number(s): VID 158 of 2019 Judge(s): O'BRYAN J Catchwords COSTS – discontinuance – whether costs order should be made – where defendants would have obtained summary judgment Date of judgment: 23 April 2019 Legislation: Corporations Act 2001 (Cth) s 175
Federal Court of Australia Act 1976 (Cth) s 43
Cases cited: Harvey Norman Holdings Limited v Fels (2002) ATPR 41-852; [2002] FCA 13
Price v Powers [2005] WASC 154
Re Motasea Pty Ltd (2014) 97 ACSR 589; [2014] NSWSC 69
Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112; [2010] FCAFC 16
Date of hearing: 23 April 2019 Registry: Victoria Division: General Division National Practice Area: Commercial and Corporations Sub Area: Corporations and Corporate Insolvency Category: Catchwords Number of paragraphs: 19 Counsel for the Plaintiff: Ms S McColl Solicitor for the Plaintiff: Aitken Partners Counsel for the Defendants: Mr S Clement Solicitor for the Defendants: M + K Lawyers ORDERS
VID 158 of 2019 BETWEEN: TIMOTHY EDWARD SELL
Plaintiff
AND: SCOTT TAYLOR
First Defendant
BOYD KEVIN HOOPER
Second Defendant
KIRK SMITH
Third Defendant
JUDGE:
O'BRYAN J
DATE OF ORDER:
23 APRIL 2019
THE COURT ORDERS THAT:
1.The plaintiff has leave to file a notice of discontinuance of the whole of the proceeding.
2.The plaintiff pay the defendants’ costs of the proceeding.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
O’BRYAN J:
The plaintiff, Timothy Edward Sell, commenced this proceeding by filing an originating process and statement of claim on 22 February 2019. Mr Sell also filed an interlocutory application seeking summary judgment against the defendants together with an affidavit of Mr Sell. At that time, Mr Sell was self-represented.
On 21 March 2019, the defendants, Messrs Taylor, Hooper and Smith, filed a defence.
At the first case management hearing on 22 March 2019, the defendants informed the Court that they proposed to file an application for summary judgment in favour of the defendants on the basis that Mr Sell was not a proper plaintiff to the claims sought to be made in the statement of claim. At that case management hearing, I encouraged Mr Sell to seek legal advice about the proceeding and orders were made for the hearing of the opposing summary judgment applications today.
On 9 April 2019, the defendants filed the foreshadowed application for summary judgment and a supporting affidavit of Robert Glavas. On 18 April 2019, the defendants filed an outline of submissions in support of the summary judgment application.
Also on 18 April 2019, a Notice of Acting was filed on behalf of Mr Sell, giving notice that Mr Sell had appointed Sandra McColl of Aitken Partners to represent him in the proceeding.
At the hearing on 23 April 2019, Mr Sell was represented by Ms McColl and the defendants were represented by Mr Clement of Counsel. Ms McColl informed the Court that she had instructions from Mr Sell to discontinue the whole of the proceedings. Ms McColl also acknowledged that, pursuant to Rule 26.12(7) of the Federal Court Rules, ordinarily the party who files a notice of discontinuance is liable to pay the costs of each other party to the proceeding in relation to the claim.
Understandably, the defendants did not oppose the discontinuance of the proceeding but otherwise made no submission in respect of the proposed discontinuance.
Under Rule 26.12(2), a party may file a notice of discontinuance without the leave of the Court or the other parties’ consent at any time before pleadings have closed. In accordance with Rule 16.12(1), pleadings closed in this proceeding on 4 April 2019 being the date by which any reply was due to be filed. As the consent of the defendants had not been sought, the discontinuance requires the leave of the Court. The discontinuance was not opposed by the defendants and I therefore give the plaintiff leave to file a notice of discontinuance pursuant to Rule 26.12(2)(c).
When discontinuance is by leave of the Court, costs are in the discretion of the Court, exercising the power under s 43 of the Federal Court of Australia Act 1976 (Cth). As observed by the Full Court in Rickus v Motor Trades Association of Australia Superannuation Fund Pty Ltd (2010) 265 ALR 112; [2010] FCAFC 16 (at [116]):
A party who discontinues a proceeding without the leave of the Court becomes liable to pay the costs of the other party or parties unless, in cases where the consent of the other parties is relevant, that consent provides otherwise. This is the effect of O 22 r 3 of the Federal Court Rules. That rule reflects a more general policy of the law to the effect that a party should always be permitted to discontinue its proceedings but, in the modern setting, should usually have to pay the costs of the other parties occasioned by the bringing of the proceedings and their subsequent abandonment.
However, ordering costs against a discontinuing party is not automatic: Harvey Norman Holdings Limited v Fels (2002) ATPR 41-852 at [7] per Stone J; [2002] FCA 13.
In this case, I consider it appropriate to order the plaintiff to pay the defendants’ costs of the proceeding. The proceeding had no prospect of success and the defendants would have succeeded on their application for summary judgment in their favour. That is because Mr Sell is not the proper plaintiff for the claims made in the proceeding. The reasons for that conclusion can be stated briefly.
The claims concern the shareholdings and officeholdings of International Security Training Academy Pty Ltd (ISTA), which is not a party to the proceeding.
In respect of the claims concerning the shareholdings of ISTA, the ASIC company register records that there are presently two shareholders of ISTA: 50 shares are held by Kukusu Pty Ltd (Kukusu), which is owned and controlled by Mr Sell, and 50 shares are held by the third defendant, Mr Smith. It is common ground that Mr Smith acquired his shares by way of transfer from Kukusu on 16 June 2017. Mr Sell seeks an order setting aside the share transfer from Kukusu to Mr Smith and relief pursuant to s 175 of the Corporations Act 2001 (Cth) (Act) to correct the register of members.
Mr Sell has no standing to seek such relief. Mr Sell was not a party to the original transfer that he is seeking to have set aside. His only interest in the transaction is indirect, by virtue of his ownership of Kukusu. However, that indirect interest does not give him a cause of action. While a claim may be made under s 175 of the Act by a person aggrieved, the authorities show that such a person must have a personal equity in obtaining rectification of the share register: see Price v Powers [2005] WASC 154 at [98] per Le Miere J and Re Motasea Pty Ltd (2014) 97 ACSR 589 at [47] per Black J; [2014] NSWSC 69. Mr Sell does not have a personal equity as he does not claim to have any ownership interest in the disputed shares.
In respect of the claims concerning the officeholdings of ISTA, it is common ground that there are presently two directors of ISTA: Mr Sell and the first defendant, Mr Taylor. In the proceeding, Mr Sell seeks a declaration that Mr Taylor “is removed as a director of ISTA”, an order that Mr Taylor alter ISTA’s corporate register to record that he is not a director of ISTA, and a declaration that Mr Taylor has breached s 182 of the Act.
Again, Mr Sell does not have standing to obtain such relief. The statement of claim provides no legal basis for the Court to remove Mr Taylor as a director of ISTA. In relation to the alleged contravention of s 182 of the Act, s 1317J of the Act prescribes the persons who may apply for a declaration of contravention of a civil penalty provision (which includes s 182). Relevantly, the persons who may apply for a declaration are the Australian Securities and Investments Commission and the relevant corporation, in this case ISTA. Section 1317J(4) stipulates that no person may apply for a declaration of contravention unless permitted by s 1317J. A single director has no standing to bring an action under s 182 against another director (in the absence of leave being granted by the Court under Part 2F.1 of the Act).
It is also relevant to note earlier proceedings between some of the parties to this proceeding, in which Mr Sell was a defendant. On 17 September 2018, Mr Taylor and Mr Smith brought proceeding VID 1161 of 2018 in this Court against ISTA, Kukusu and Mr Sell. That proceeding was brought to reverse actions taken by Mr Sell that caused entries to be made in ASIC’s company register recording:
(a)that Mr Taylor had ceased to be a director of ISTA; and
(b)a transfer of the shares owned by Mr Smith to Kukusu.
On 13 December 2018, Justice Middleton made final orders in that proceeding requiring ISTA and Mr Sell do all things necessary to correct the ASIC register for ISTA to record that Mr Taylor is a director of ISTA and that Mr Smith owns 50 shares in ISTA.
The claims made by Mr Sell in this proceeding were legally misconceived. The defendants were put to the expense of preparing a defence and an application for summary judgment which would have succeeded. In the circumstances, it is appropriate that an order for costs be made in favour of the defendants.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Bryan. Associate:
Dated: 23 April 2019
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