Sprintex Limited [No 3]
[2025] WASC 59
•5 MARCH 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: SPRINTEX LIMITED [No 3] [2025] WASC 59
CORAM: LUNDBERG J
HEARD: 27 FEBRUARY 2025
DELIVERED : 5 MARCH 2025
FILE NO/S: COR 178 of 2024
EX PARTE
SPRINTEX LIMITED
Plaintiff
Catchwords:
Corporations - Interlocutory application for costs orders to be made following determination of the plaintiff's application for curative orders under s 1322(4) of the Corporations Act 2001 (Cth) - Whether proper notice of application given to former company secretary of the plaintiff - Whether Court has power to order costs against non-parties - Basis upon which costs should be imposed - Apportionment or allocation of those costs between non-parties - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 254E, s 708A, s 1322, s 1335
Rules of the Supreme Court 1971 (WA), O 66 r 1
Supreme Court Act 1935 (WA), s 37
Result:
Costs orders made
Category: B
Representation:
Counsel:
| Plaintiff | : | M F Holler |
Solicitors:
| Plaintiff | : | Steinepreis Paganin |
Case(s) referred to in decision(s):
Bischof v Adams (1992) 2 VR 198
Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807
Frigger v Lean [2012] WASCA 66
Hardingham v RP Data Pty Limited (Third Party Costs) [2023] FCA 480
Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd [2014] VSC 567
Huntingdale Village Pty Ltd (receivers and managers appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352
In the matter of Bonlac Foods Limited [2001] VSC 75
J & M Jankar Pty Ltd v Dellmain Pty Ltd [2009] NSWSC 766
Kaur v Sikh Gurdwara Perth (Inc) [No 2] [2018] WASC 99
Knight v FP Special Asset Ltd [1992] HCA 28; (1992) 174 CLR 178
Latoudis v Casey (1990) 170 CLR 534
Life Combat Sports Pty Ltd v World Institute of Martial Arts Pty Ltd [2025] WASC 21 (S)
M C Wholesaling Pty Ltd v Zheng and Linfang [2024] VSCA 248
Re Sprintex Ltd; Ex parte Sprintex Ltd [2022] WASC 188
Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418
Sprintex Limited [No 2] [2025] WASC 15
Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396
Table of Contents
A. Introduction
B. The plaintiff's interlocutory process
C. Evidence
Previous findings
Affidavit evidence of the directors
D. Plaintiff's submissions
E. Issues to be addressed
F. Disposition of the first issue - procedural fairness
G. Disposition of the second issue - the power to award costs against a non-party
H. Disposition of the third issue - the principles on which a costs award may be made against a non-party
Relevant principles
Application to the facts
I. Disposition of the fourth issue - quantum and apportionment
J. Conclusion and orders
LUNDBERG J:
A. Introduction
On 18 November 2024, the Court made the urgent curative orders sought by the plaintiff company,[1] pursuant to s 254E and s 1322(4) of the Corporations Act 2001 (Cth).[2] Those orders were necessary in light of the plaintiff's failures to comply with requirements of the legislation.
[1] The orders made were substantially in accordance with the orders sought by the plaintiff in its application dated 13 November 2024 (which I will refer to as the Initial Application, to distinguish it from the interlocutory process which has since been filed.).
[2] All references in these reasons to statutory provisions are to provisions of the Corporations Act, unless indicated otherwise.
In particular, the plaintiff failed to lodge its annual reports for the financial years ended 30 June 2023 and 30 June 2024 with ASIC within the timeframe required under ch 2M and s 319(3)(a). Further, the plaintiff offered for sale shares in the company over the period from 1 February 2024 to 10 July 2024, on 13 occasions, and in doing so it issued notices under s 708(5)(e) which stated that the plaintiff had complied with ch 2M, when it had not. Further, on 11 occasions between 8 September 2023 and 22 December 2023, the plaintiff failed to issue valid notices pursuant to s 708A(5)(e) or prospectuses under s 708A(11), prior to the issue of fully paid ordinary shares in the plaintiff.
At the hearing, I reserved any orders as to costs, rather than make the usual order that there be no order as to costs.
On 21 January 2025, I published reasons for making the curative orders on the application, and also made orders as to costs and provided reasons for making those orders. See Sprintex Limited [No 2] [2025] WASC 15 at [74] - [104] as to the curative orders, and at [105] - [126] as to the costs orders.
As to costs, the view I formed, given the distinctive features of the case, was that an order should be made that the costs of the application should not be met out of company funds, and liberty to apply should be granted to the plaintiff and each of the officers of the plaintiff who held office at the time of the contraventions.
To facilitate the liberty to apply order, I ordered that the plaintiff serve a copy of the orders and the Court's reasons for decision on the directors of the plaintiff and on Mr van Uffelen. I am satisfied on the affidavit evidence, which I have referred to below, that the necessary documents were served on these interested parties.
The persons who held office at the relevant time were Mr Apedaile (a director and the executive chairman), Mr Upton (the managing director and chief executive officer) and Mr Chen (a non-executive director), who comprised the board of directors during the relevant period. Additionally, there is Mr van Uffelen, who was the company secretary during the relevant period, but whose employment has since been terminated.
These reasons concern the final costs orders to be made in this proceeding, consequent upon the plaintiff's filing of an interlocutory process dated 10 February 2025 (Interlocutory Application), pursuant to the liberty to apply granted on 21 January 2025.
B. The plaintiff's interlocutory process
The liberty to apply granted by order 2 of the above orders was exercised by the plaintiff through the filing of the Interlocutory Application, although counsel for the plaintiff sought final orders which were different, but not in any material respects.
The plaintiff seeks orders to have approximately ¾ of the legal costs apportioned to Mr van Uffelen and his private company, jointly and severally, with the balance being paid equally by the directors of the company. The costs incurred by the plaintiff in relation to the proceeding total $55,666.60, inclusive of GST. That includes the solicitor's costs and counsel's fees.
Additionally, the Interlocutory Application foreshadowed that the plaintiff would seek an order that Mr van Uffelen and his private company pay the costs of this application, jointly and severally.
A concise outline of submissions was filed by the plaintiff on 10 February 2025, with a more detailed supplementary outline filed on 26 February 2025.
The plaintiff also filed several affidavits in support of the orders. I have reviewed the affidavits of the three directors, each of which was affirmed on 8 February 2025. Additionally, four service or procedural compliance affidavits have been filed. There are two affidavits affirmed by Ms Isabella Pieta Sienna Mitchell on 10 and 24 February 2025,[3] and two service affidavits sworn by Mr Thomas Leonard O'Donnell on 13 February 2025.
[3] Which I will refer to as the First Mitchell Affidavit and Second Mitchell Affidavit.
In addition to the initial affidavit evidence, I received a redacted copy of the invoice issued by the plaintiff's solicitors together with a supporting spreadsheet of the fees incurred, and a further affidavit following the hearing deposing to the costs incurred in relation to the Interlocutory Application.[4]
[4] Affidavit of Ms Mitchell sworn 4 March 2025 (Third Mitchell Affidavit).
C. Evidence
Previous findings
I will incorporate by reference into these reasons the findings and conclusions which are set out in my earlier reasons, at [74] - [104] and at [105] - [126] in particular. Some of those matters bear repetition:
1.The obligation to ensure the plaintiff's annual reports were lodged by the required time, and the impact of a failure to do so on the accuracy of cleansing notices issued under s 708A(5)(e), were matters within the scope of Mr van Uffelen's duties. He was the company secretary and chief financial officer over the relevant period.[5]
[5] Sprintex Limited [No 2] [74(1)].
2.Further, the plaintiff's compliance with its statutory obligations in relation to the issue of shares generally were matters within the scope of Mr van Uffelen's duties.[6] The officer within the plaintiff responsible for issuing cleansing notices was the company secretary, Mr van Uffelen.[7]
3.The contraventions in respect of which the plaintiff sought curative orders were all matters in respect of which Mr van Uffelen was best placed to provide an explanation to the Court.[8]
4.I accept that Mr Apedaile did not have any personal involvement in the share issues or the issuing of cleaning notices. I have no reason to doubt that Mr Apedaile queried Mr van Uffelen on a number of occasions as to whether he had validly issued the shares, including these particular shares, and received an affirmative response.[9]
5.I find that Mr Apedaile was aware of the previous failures on the part of Mr van Uffelen to comply with the legislative requirements, at both Sprintex Limited and Nanoveu Ltd. I note Mr Apedaile took a more active role in the compliance obligations of the plaintiff after the hearing before the Court in April 2022.[10]
6.The Court was informed by the plaintiff in April 2022 that a protocol for the issue of securities would be prepared, taking into account the instances of non-compliance by the plaintiff with the secondary sale provisions. Yet, no such protocol was established (until recently).[11]
7.I accepted that, as a result of inadvertence on the part of the company, the required cleansing notices were not lodged. The failure was not due to any deliberate act or reckless disregard. Once the issue was appreciated by the plaintiff's solicitors, all parties concerned appear to have acted rather promptly to resolve the issue through the filing of the Initial Application.[12]
8.The failures were inadvertent and not deliberate. I concluded that there was an absence of evidence demonstrating dishonesty in this case and I found the conduct of the plaintiff and its officers had not occasioned any substantial injustice, and was not likely to.[13]
Affidavit evidence of the directors
[6] Sprintex Limited [No 2] [74(2)].
[7] Sprintex Limited [No 2] [91].
[8] Sprintex Limited [No 2] [74(3)].
[9] Sprintex Limited [No 2] [74(5)].
[10] Sprintex Limited [No 2] [74(6)].
[11] Sprintex Limited [No 2] [74(7)].
[12] Sprintex Limited [No 2] [96].
[13] Sprintex Limited [No 2] [103].
In contrast to the approach adopted by Mr van Uffelen, each of Mr Apedaile, Mr Chen and Mr Upton have sworn comprehensive affidavits in relation to the Interlocutory Application. It is convenient to set out a summary of the matters deposed to in their affidavits, although only to the extent it is necessary to determine the issues arising on this application.
Each of the directors has deposed that they are engaged by the plaintiff on a contractual basis. Their respective agreements with the plaintiff include obligations regarding the management and responsibility of corporate governance obligations of the plaintiff.
Importantly, each of the directors recognise that they could and should have done better in ensuring appropriate protocols were in place after this Court determined the earlier application in March 2022. I refer to Hill J's reasons in Re Sprintex Ltd; Ex parte Sprintex Ltd [2022] WASC 188.
Each of the directors has also accepted partial responsibility for the plaintiff's contraventions of the Corporations Act, as detailed in the Initial Application heard on 18 November 2024, by placing reliance on Mr van Uffelen despite his previous compliance failures. On my assessment, their responsibility extends further than this, and is not limited merely to a misplaced reliance on the company secretary. The directors ought to have separately and independently ensured that the absent protocols, identified and discussed during the hearing before Hill J in 2022, were put in place.
Further, the directors of the plaintiff have agreed between themselves to cover the outstanding amount of the costs of the proceedings, after offsetting the fees which are claimed by Mr van Uffelen against the plaintiff. I identified the issue of the outstanding fees in my earlier reasons:[14]
[120]In the face of the foregoing, and despite a request to do so from the plaintiff's executive chairman, the company secretary and chief financial officer of the plaintiff refused to provide an affidavit explaining to the Court the full circumstances of the present contraventions, except on the condition that his outstanding fees (or part of them) be paid by the plaintiff. That request was refused by the plaintiff. I should record Mr Apedaile's sworn statement that the plaintiff disputes the fees allegedly outstanding to Mr van Uffelen.
[121]The refusal by the plaintiff to pay those disputed fees, as a condition attached to the provision of an affidavit, was understandable. That condition should not have been imposed. Given the broader circumstances, in which numerous instances of non-compliance have occurred across two listed companies, this Court would naturally expect that an officer in the position of this company secretary ought be prepared to provide appropriate assistance to ensure the Court is fully apprised of relevant information to consider the curative orders which are sought, whether or not his fees have been paid. The two matters should not be elided. The broader interests of the company and its shareholders lean heavily in favour of officers of the company (including former officers) giving appropriate focus to their statutory and fiduciary duties, in my respectful view
[14] Sprintex Limited [No 2].
It now appears from the First Mitchell Affidavit filed in support of the interlocutory process that, on 31 January 2025, the plaintiff served a letter on Mr van Uffelen (the Demand Letter) asserting that he had breached his obligations under the engagement agreement he entered with the plaintiff (the Engagement Agreement).[15] I am in no position to make any final findings in relation to the allegations of breach of duty in this regard. For context, I will set out the two breaches specified in the Demand Letter.
[15] First Mitchell Affidavit [13] and [14], and Attachment IPSM-03.
First, it is asserted that Mr van Uffelen failed to ensure the legal requirements with ASIC and other regulators were met. The Demand Letter relied on paragraph 1(j) of Item 2 of the Services and Fee Sheet annexed to the Engagement Agreement. The Demand Letter asserted that he lodging incorrect cleansing notices pursuant to s 708A(5)(e) of the Corporations Act (Cleansing Notices) for share issues during the period between 5 February 2024 and 10 July 2024 (inclusive). The Demand Letter also alleged that he failed to lodge Cleansing Notices for share issues during the period between 8 September 2023 and 22 December 2023 (inclusive).
Second, it is asserted that Mr van Uffelen failed to oversee and lodge ASX notices and filings. The Demand Letter relied on paragraph 1(k) of Item 2 of the Services and Fee Sheet annexed to the Engagement Agreement). In particular, the Demand Letter asserted that Mr van Uffelen had failed to lodge Cleansing Notices for share issues during the period between 8 September 2023 and 22 December 2023 (inclusive).
The Demand Letter requested that Mr van Uffelen agree to offset the fees claimed by the plaintiff against the costs of the application brought by the plaintiff pursuant to s 1322(4) of the Corporations Act. A deadline was set in the letter, as 5 February 2024. The plaintiff made it clear that, absent a response by this deadline, it would apply to the Court to seek orders in respect to the payment of the costs.
Not having heard substantively from Mr van Uffelen, the plaintiff proceeded to file the Interlocutory Application.
D. Plaintiff's submissions
The approach proposed by the plaintiff has been outlined above. In essence, the plaintiff submits that the Court should exercise its broad discretion under s 37 of the Supreme Court Act 1935 (WA) to order that the costs of the Initial Application and hearing be paid out of the fees which are owed to Mr van Uffelen and his private company, with the amount outstanding to be covered by the directors amongst themselves.
The approach proposed by the plaintiff is borne largely out of pragmatism. Given the modest amounts at issue in this phase of the proceedings, it is understandable the company has explored an approach which might resolve a number of issues facing the business.
Further, the plaintiff submits that the Court should exercise its broad discretion under s 37 to order that the costs of the Interlocutory Application be paid by Mr van Uffelen and his private company on the basis that Mr van Uffelen's refusal to co-operate has resulted in the plaintiff needing to make the Interlocutory Application.
E. Issues to be addressed
The resolution of the Interlocutory Application requires the Court, in my view, to address the following matters.
First, it is necessary to consider whether the Court can move to determine the Interlocutory Application in the absence of Mr van Uffelen, from a procedural fairness perspective.
Second, it is necessary for the Court to be satisfied it has the power to make an award of costs against the non-parties in this case.
Third, the Court must address whether there is a principled basis for making any costs order in this particular case, against the relevant non-parties.
Fourth, the Court must be satisfied there is a proper basis for the exercise of the power to make costs orders in a particular amount, which also involves an assessment of the apportionment of those costs.
I will turn to address these issues in sequence.
F. Disposition of the first issue - procedural fairness
The former company secretary of the plaintiff did not appear at the hearing and has made no submissions in relation to the Interlocutory Application, and not sought to file any responsive evidence. Nor did he seek an adjournment of the matter.
I am comfortably satisfied on the affidavit evidence that Mr van Uffelen had ample notice of this application and of this hearing, having been served with the court papers by the plaintiff's solicitors. It is apparent that he has chosen not to take an active role in opposing the application, having indicated to the plaintiff's solicitors that he will not be attending the hearing and will be 'commencing recovery action against Sprintex in the Small Claims Tribunal for the $39k owed' to him.[16]
[16] Second Mitchell Affidavit, pages 14 and 15. As an aside, I note the Small Claims Tribunal no longer exists.
Indeed, as recently as the day before the hearing, Mr van Uffelen was in contact with the plaintiff's solicitors by email, in terms which demonstrate he was aware of the hearing and of the substance of the application which had been filed by the plaintiff.
In the circumstances, I am satisfied it is appropriate to determine the Interlocutory Application in the absence of the former company secretary.
G. Disposition of the second issue - the power to award costs against a non-party
As to the power of the Court to award costs against a non-party, I do not regard this as a contentious point.
The Court has a wide discretion to award costs, pursuant to the power in s 37 of the Supreme Court Act 1935 (WA). The discretion regarding costs has been described as 'absolute, unconfined or unfettered although a discretion that must be exercised judicially, not arbitrarily or capriciously, or on grounds unconnected with the litigation'.[17]
[17] Frigger v Lean [2012] WASCA 66 [53] (Allanson J, Newnes and Murphy JJA).
Within the Corporations Act itself, there is a power to award costs, found in s 1335(2). That provision is not the source of the Court's jurisdiction to make costs orders, however. It is a supplemental grant of jurisdiction in addition to all such costs powers as Courts vested with jurisdiction under the Act already have.[18]
[18] J & M Jankar Pty Ltd v Dellmain Pty Ltd [2009] NSWSC 766 [152] (Slattery J).
The Corporations Act also vests this Court with power to make 'such consequential or ancillary orders as the Court thinks fit' when making curative orders pursuant to s 1322(4). That power is found in the chausette to s 1322(4). The terms of the power are broad, limited to being consequential or ancillary to the substantive orders made under the provision, and properly confined to the subject matter of the proceedings before the Court.
As to the award of costs against non-parties to a proceeding, the Court has undoubted power in this regard.[19] The categories of case in which such orders may be made are not closed. They include, but are not limited to, circumstances where the party to the litigation is an insolvent person or company, and also where the non-party has played an active role in the conduct of the litigation, and has an interest in the litigation.
H. Disposition of the third issue - the principles on which a costs award may be made against a non-party
[19] Knight v FP Special Asset Ltd [1992] HCA 28; (1992) 174 CLR 178, 193; and Huntingdale Village Pty Ltd (receivers and managers appointed) atf Huntingdale Village Unit Trust v Perpetual Nominees Ltd [2013] WASC 352 [19]; Kaur v Sikh Gurdwara Perth (Inc) [No 2] [2018] WASC 99 [7] (Le Miere J).
I therefore proceed on the basis the Court has power to order costs against the directors (and the former company secretary) of the plaintiff company. The third issue to then address is whether there is a principled basis for those individuals to be ordered to pay some, or all, of the costs of the proceedings.[20]
[20] G Dal Pont, Law of Costs, (5th ed, 2021) [22.17].
Before I address the circumstances of the present case, it is necessary to set out some general principles which have been developed in relation to the award of costs against non-parties.
Relevant principles
The jurisdiction to award costs has sometimes been described as 'exceptional', but the weight of authority makes it clear, I think, that this means no more than outside the ordinary run of cases.[21] So much was emphasized by Dixon J in the Supreme Court of Victoria in Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd.[22] In that case, Dixon J analysed in some detail the principles applicable to the award of costs against a non-party. His Honour held as follows:
[249]This is an exceptional jurisdiction in that a non-party costs order will only be made where the interests of justice justify a departure from the general rule that only parties to proceedings may be subject to costs orders. In most cases, it will be prima facie unjust to award costs against a non-party and as a matter of discretion the circumstances in which an order will be made are confined. Confinement has been expressed using a variety of epithets to the effect that the jurisdiction is exceptional, but exceptional in this context may mean no more than outside the ordinary run of cases.
[250]The factors identified in the cases as relevant to the exercise of the discretion include –
(a)The non-party's connection both with the proceeding and with the incurrence of the costs. As Gobbo J explained in Bischof v Adams, this involves an inquiry into the connection between both the non-party and the proceeding, which is a necessary but not a sufficient condition for the exercise of the discretion, and the causal connection between the non-party and the costs. A non-party will not ordinarily be held liable for costs that would have been incurred without the non-party's involvement. That connection must be real and direct.
(b)Whether the non-party could have been joined as a party to the proceedings. A costs order against a non-party who could have been joined will only be made in exceptional circumstances, because of the failure of the party seeking the costs order to have afforded to the non-party the protections conferred by rules of court. Similarly, whether the non-party was warned that costs might be sought against it may be relevant.
(c)Whether the conduct of the non-party was unnecessary or unreasonable. Plainly, improper conduct may influence the discretion but proof of a want of good faith or of improper conduct is not a necessary condition for exercise of the jurisdiction.
(d)Whether the party that would ordinarily be liable for costs can meet a costs order and, possibly, the reasons for any inability to do so. This in turn may raise the question of whether security for costs was, or ought to have been sought at an early stage in the proceeding.
[21] See the authorities identified by Thawley J in Hardingham v RP Data Pty Limited (Third Party Costs) [2023] FCA 480 [21].
[22] Hudspeth v Scholastic Cleaning and Consultancy Services Pty Ltd [2014] VSC 567.
I respectfully adopt the above statements of principle.
Dixon J made reference to the earlier decision of the Supreme Court of Victoria in Bischof v Adams.[23] In that earlier authority, Gobbo J identified two factors to be assessed in the determination of costs orders against non-parties. His Honour held:[24]
The most convenient course is, in my view, to look at both factors in considering the connection between the proceedings and the non-party, namely, the connection between the non-party and the proceedings and secondly, the causal connection between the non-party and the costs.
I have concluded that, without limiting myself to these two matters, I should take both factors into account in any exercise of discretion. the connection must be real and direct and it must be material to the issue of costs. The mere fact that a person may benefit from the litigation will not, without more, suffice.
There are other matters that need to be taken into account. Thus, it would invariably be unjust to make an order against a non-party without affording that person a proper hearing. That should include an opportunity to resist evidence already received in the proceedings.
[23] Bischof v Adams (1992) 2 VR 198.
[24] Bischof v Adams (205) (Gobbo J).
The factors identified by Gobbo J have been applied on numerous occasions since. I refer in particular to Warren J's analysis in In the matter of Bonlac Foods Limited,[25] the decision of Le Miere J in Kaur v Sikh Gurdwara Perth (Inc) [No 2],[26] and the recent decision of the Court of Appeal of Victoria in M C Wholesaling Pty Ltd v Zheng andLinfang.[27] I will have regard to these factors in my assessment of this matter.
Application to the facts
[25] In the matter of Bonlac Foods Limited [2001] VSC 75 .
[26] Kaur v Sikh Gurdwara Perth (Inc) [No 2] [11] (Le Miere J).
[27] M C Wholesaling Pty Ltd v Zheng andLinfang [2024] VSCA 248 [133] (Lyons JA).
The three directors have accepted that orders should be made against them.
As to the former company secretary, I have not heard from him in relation to the costs issue. As earlier noted, the plaintiff moves for an order that Mr van Uffelen pay the bulk of the plaintiff's costs of the Initial Application, in light of the findings made by the Court in its earlier reasons.
As I have noted above, the power of the Court to make orders against non-parties is undoubtedly broad, and the categories in which such orders will be made are not closed. Even so, the circumstances of the present case stand apart from the decided cases in which non-party costs orders have been made, whether they be the cases cited by counsel for the plaintiff or the authorities of which I am otherwise aware.[28]
[28] A large number of authorities have been collected by Professor Dal Pont in his work, Law of Costs, at [22.34] - [22.75].
I therefore have not been able to identify an analogous circumstance to the present in which costs have been awarded against officers of a company. It is necessary to explain this point a little further by characterising the circumstances of this proceeding. In particular, having regard to the decided cases, there are aspects of the present matter which, at least to some extent, point against the orders being made.
First, the present litigation has not been funded by the non-parties in question, nor do they have an interest in the proceedings in the sense described in the authorities. The proceedings have not been used as a vehicle by the directors for any improper purpose, nor has the corporate veil been deployed as a shield to protect the officers from the consequences of the litigation.
Second, it cannot be said, in my view, that the non-parties were the 'real party' to the proceeding, or the instigator of the litigation as such.[29] The proper and real party in the proceeding was the plaintiff company.
[29] Knight v FP Special Asset Ltd (193) (Mason CJ and Deane J).
Third, and importantly, the present proceeding was not an adversarial form of litigation, as such, but rather a necessary application for the plaintiff to have brought once the contraventions of the legislation became apparent to it. In essence, the plaintiff had no option but to file the Initial Application once it became clear curative orders were required.
What, then, would the principled basis be for making costs orders against these non-parties? This question may be answered by reference to the following considerations, consistent with the authorities identified above.
First, I accept the non-parties have a close connection to the proceedings. The evidence led in relation to the Initial Application concerned the acts or omissions of the former company secretary and the directors of the company, directly concerning the affairs of the plaintiff company, as to the preparation and lodging of annual reports and the process by which it issued shares.
Second, I accept there is a causal connection between the conduct of the non-parties and the costs incurred by the plaintiff. The conduct on the part of the former company secretary and the directors may be characterised as the catalyst for the commencement of the proceedings, in the sense that the contraventions by the company required that the application for curative orders be brought by the plaintiff.
The conduct, in the case of the directors, is not focussed upon the decision to commence the proceedings (and the former company secretary had no role to play in that decision, in any event). The conduct which is germane to the costs question occurred anterior to the proceedings, not at the time the proceedings were commenced or during the course of the proceedings, but there is nonetheless a causal connection to the proceedings.
Third, as the controlling mind of the plaintiff, the directors were responsible for instigating the proceedings, in the sense that they instructed solicitors to commence the application. It was proper for them to do so, of course. Nonetheless, the directors caused the proceedings to be filed.
Fourth, given the nature of proceedings under s 1322(4) of the Corporations Act, the non-parties were not joined to the proceedings. However, the directors were naturally well aware the proceedings had been instituted, having instructed solicitors to commence the proceedings and, in the case of Mr Apedaile, having sworn affidavits for the purposes of the proceedings. Mr van Uffelen was also well aware the proceedings were underway, but chose not to participate.
Fifth, prior to the hearing on 18 November 2024, at least so far as the Court is aware, the non-parties were not expressly warned that costs orders may be made against them, but it seems to me the nature of these proceedings is such that the absence of a direct and express warning in this regard is not a significant factor. Such a warning would not have avoided the application, or changed the way the proceedings were conducted.
Sixth, and more generally, the nature of the proceedings before the Court is an important consideration in assessing whether these non-parties should be ordered to pay the costs of those proceedings. This was an application for curative orders under s 1322(4) of the Corporations Act, arising from contraventions of the legislation which required curial intervention. There is a public interest aspect attached to such applications, and to the powers afforded to the Court by that provision, as explained by French CJ in Weinstock v Beck:[30]
Corporations, in contemporary Australian society, serve the purposes of enterprises, large and small, owned and operated by men and women, some of whom are sophisticated, knowledgeable and well-advised on matters of corporate governance and some, perhaps many, of whom are not. Section 1322(4) and related provisions reflect a long-standing legislative recognition that mistakes will happen in corporate governance and that it is not in the public interest that the validity of decisions made in relation to corporations be unduly vulnerable to innocent errors which may be corrected without substantial injustice to third parties. In accordance with its evident purpose, s 1322(4)(a) is to be construed broadly and applied pragmatically, principally by reference to considerations of substance rather than those of form.
[30] Weinstock v Beck [2013] HCA 14; (2013) 251 CLR 396 [39] (French CJ).
The public interest associated with the power in s 1322(4) of the Corporations Act has several facets. One aspect of the public interest is the protection of the shareholders of the company. In the circumstances described by the terms of s 1322(4), the legislature has considered it appropriate for shareholders to be protected from the consequences of mistakes in corporate governance. A concomitant of that protection is that, typically, the Court will make no order as to costs of the proceeding and so the funds of the company will be deployed to pay the legal costs incurred in bringing the application to the Court for the curative orders.
However, where the proceedings are unusual, and have the types of distinctive features which arose in the present case, the public interest in the protection of shareholders will not also require that the usual costs order be made. Indeed, it has been the position for many years, at least since Re Wave Capital Ltd,[31] that an order may be made that the costs of the application should not be met out of company funds and, correlatively, the officers of the company involved in the contravention are at risk of having to meet those costs.
[31] Re Wave Capital Ltd [2003] FCA 969; (2003) 47 ACSR 418.
In these unusual cases, there is a public interest in precluding shareholder funds being deployed to pay the legal costs associated with the application for curative orders, and in directing that those who manage the company be responsible for those costs. In this sense, in the context of proceedings under s 1322(4) which have the distinctive features which emerged in this case, there will be a real connection between the conduct of the officers and the necessity for the commencement and prosecution of the proceedings. As earlier noted, the conduct need not focus upon the decision to commence the proceedings, much less whether that decision was improper or lacked good faith (noting that impropriety and a lack of good faith are not prerequisites in any event to the making of a non-party costs order).[32]
[32] Dymocks Franchise Systems (NSW) Pty Ltd v Todd [2004] 1 WLR 2807 [33] (Lord Brown of Eaton-under-Heywood, delivering the opinion of the Privy Council).
The conduct which is germane to the costs question in such cases will generally have occurred anterior to the proceedings, not at the time the proceedings were commenced or during the course of the proceedings. It is this conduct which must have, and in the present case does have, the necessary connection with the proceedings and a causal connection to the institution of the proceedings.
The distinctive features of this case mean it would not be unjust to order that these non-parties pay the costs of the proceeding, in that their conduct was such that it inevitably led to the need to bring the application under s 1322. Each of the non-parties was aware that the company had been required to bring a similar application in 2022, which was heard by Hill J, and it may safely be inferred they were aware that a repetition of that conduct would again lead to the bringing of a fresh application to the Court for further curative orders.
Seventh, the Court must recognise the well-established rule that an order for the payment of costs by one party is compensatory in nature, and is not for the purpose of punishment.[33] For example, costs generally follow the event because such an order is intended, at least to the extent that the costs incurred were not unreasonable or unreasonably incurred, as compensation (and vindication) for the successful action or application.[34] Thus, an order that the directors and former company secretary pay the costs of the proceeding cannot be imposed as a means of punishing them for the conduct in question.
[33] Latoudis v Casey (1990) 170 CLR 534, 543 (Mason CJ).
[34] Life Combat Sports Pty Ltd v World Institute of Martial Arts Pty Ltd [2025] WASC 21 (S) [24] (Strk J).
On analysis, I do not consider that an award of costs against these individuals would infringe this principle. I say that because any such costs orders should properly be seen as a means of compensating the plaintiff company in circumstances in which the Court has expressly found (and ordered) that the company's funds should not be deployed to pay for the proceedings.
I therefore consider there is a principled basis here to make an award of costs against the former company secretary and the directors of the plaintiff company. In my view, the appropriate exercise of the costs discretion in this case is to order that the directors and the former company secretary bear the legal costs incurred by the plaintiff in commencing and prosecuting the Initial Application.
Disposition of the fourth issue - quantum and apportionment
The final issue to address is that of quantum and apportionment. This is not a precise science. The Court must do its best to achieve practical justice in the case, acting as a matter of impression.
As to the quantum, I consider it is appropriate that the whole of the costs incurred by the plaintiff be borne by the non-parties, such that no shortfall is borne by the company. That is, the costs should be awarded on a full indemnity basis. In this way, the effect of the order will be to properly compensate the plaintiff for the costs that it has incurred.
On the materials before the Court, there is a basis to find (and I do find) that the quantum of costs incurred by the plaintiff, for the purposes of commencing and prosecuting the Initial Application, was $55,666.60, inclusive of GST.[35] I am satisfied the costs incurred by the plaintiff's solicitors and by counsel, having regard to the evidence of those costs produced to the Court, and from my management of the proceedings and my own observations of the conduct of the hearing in November 2024, were reasonably incurred.
[35] First Mitchell Affidavit [23], the marked-up invoice from Steinepreis Paganin identified as Invoice 96385, and the spreadsheet prepared by Steinepreis Paganin. The amount claimed includes GST and was clarified by counsel during the hearing on 27 February 2025 to include certain additional work undertaken on 12 November 2024.
As to the relative apportionment of those costs among the non-parties, the findings I have made justify an order that the former company secretary bear the most significant portion of the costs.
The quantum of the costs to be paid by Mr van Uffelen, on the plaintiff's approach, is that the costs be assessed in a pragmatic manner, by reference to the amount Mr van Uffelen claims he is owed in respect of his fees for the services he provided to the company. The amount which is outstanding in fees, as alleged by Mr van Uffelen, is $39,245.16.[36]
[36] Affidavit of Mr Apedaile affirmed 8 February 2025 [28] – [29], and Attachment SJA-05.
I am not satisfied that this is a principled basis upon which to ground a costs order against Mr van Uffelen. In my view, the circumstance which has arisen (by which Mr van Uffelen says that he is owed fees by the plaintiff) does not have the necessary connection to the question before the Court. That quantum simply bears no relation to the relative contribution made by Mr van Uffelen to the factual circumstances which led to the plaintiff company being required to bring the Initial Application.
Approaching the matter in this way would involve an exercise of the costs discretion based upon considerations which are irrelevant or extraneous to the proceedings. That would not be a judicial exercise of the discretion, in my view.
Rather, the amount to be ordered should reflect the parties' roles in the company relative to the contraventions in question. The Court has found that plaintiff's compliance with its statutory obligations in relation to the lodgement of annual reports and the issue of shares generally were matters within the scope of Mr van Uffelen's duties, and he was responsible for issuing cleansing notices. These matters are the core non-compliances which precipitated the filing of the Initial Application. On my assessment, the former company secretary, who was also the chief financial officer at the time, and held both roles in 2022, ought bear 70% of the costs of the Initial Application.[37]
[37] As it happens, the difference in the amount which would be payable by Mr van Uffelen when calculated in this way, relative to the amount which would be payable on the approach proposed by the plaintiff (using the outstanding fees as the basis for calculation), is marginal.
The order should also confirm that both Mr van Uffelen and his corporate vehicle, through which his corporate secretarial services were provided to the plaintiff, are jointly and severally liable.
As to the directors, I do not discern there to be a relative difference of responsibility as between them, insofar as is relevant to these proceedings. The director non-parties have not suggested any difference of responsibility as between themselves. I would therefore order that the director non-parties be jointly and severally liable for the balance of the costs, being the remaining 30%.
J. Conclusion and orders
For the foregoing reasons, and pursuant to s 37 of the Supreme Court Act 1935 (WA), O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA), and the consequential and ancillary power in s 1322(4) of the Corporations Act, the following orders should be made:
1.Further to order 1 of the orders made on 21 January 2025, the Court assesses, on an indemnity basis, the plaintiff's costs of the proceedings, excluding the costs of the interlocutory process dated 10 February 2025, in the sum of $55,666.60 including GST.
2.The plaintiff's costs of the proceedings as assessed in order 1 above are to be paid by the identified non-parties in the following manner:
(a)Michael Scott van Uffelen and Black Tourmaline Pty Ltd ATF Black Tourmaline Consulting are jointly and severally liable to pay to the plaintiff the sum of $39,000 (being an amount which is approximately 70% of the plaintiff's costs of the proceeding as assessed in order 1 above), such amount to be paid within 21 days of the date of this order; and
(b)Steven James Apedaile, Jude Benedict Upton and Li Chen are jointly and severally liable to pay to the plaintiff the sum of $16,666.60, being the balance of the plaintiff's costs of the proceeding as assessed in order 1 above, such amount to be paid within 21 days of the date of this order.
As to the costs of the Interlocutory Application itself, I also consider those costs should be assessed on an indemnity basis, given the findings in the Court's earlier reasons. However, I consider the final assessment of those costs and their apportionment should be held over for further determination by the Court, with the plaintiff and the identified non-parties having liberty to apply. I will order accordingly.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
LM
Associate to the Honourable Justice Lundberg
5 MARCH 2025
1
11
3