Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 3)

Smith v Starke, in the matter of Action Paintball Games Pty Ltd (in liq) (No 3) involved a dispute concerning the liability of certain individuals for unreasonable director-related transactions in relation to a company that had entered liquidation. The case was heard in the Federal Court of Australia. The plaintiffs, who were liquidators of the company, sought a declaration that certain payments made by the company to its directors were unreasonable director-related party transactions under the Corporations Act 2001. The defendants, the directors of the company, contested the claim.

The court had to determine whether the payments in question were unreasonable director-related party transactions. The court also needed to decide whether the plaintiffs were entitled to costs and, if so, who should bear the costs of the litigation. The court had to consider the general principle that costs follow the event, which means that the losing party generally bears the costs of the litigation. However, the court also had the discretion to award costs differently if it was just to do so, taking into account various factors, including the conduct of the parties and the outcome of the litigation.

The court found that the plaintiffs were successful in relation to some of the payments claimed to be unreasonable director-related transactions. The court also found that the November 2014 offer made by the plaintiffs was more favourable to the defendants than the ultimate outcome of the litigation. The court held that the defendants had accepted the risk of a less favourable outcome by not accepting the offer. Therefore, the court exercised its discretion to award costs in the plaintiffs' favour. The court held that the plaintiffs were entitled to interest on the amount awarded and to their costs of the proceeding.

The court made several orders, including that the defendants pay the plaintiffs the amount of $178,521.58, interest in the sum of $38,572.89, and the plaintiffs' costs of the proceeding. The court held that the orders should be entered in accordance with Rule 39.32 of the Federal Court Rules 2011.