Stone v Glendyc Pty Ltd
[2003] WASC 80 (S)
STONE & ANOR -v- GLENDYC PTY LTD & ORS [2003] WASC 80 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2003] WASC 80 (S) | |
| Case No: | CIV:2400/2001 | 10-14 FEBRUARY & 17-19 FEBRUARY & 3 JUNE 2003 | |
| Coram: | TEMPLEMAN J | 23/04/03 | |
| 24/07/03 | |||
| 11 | Judgment Part: | 1 of 1 | |
| Result: | No order as to first defendant's costs Plaintiffs pay second and third defendants' costs less one fifth of plaintiffs' costs Plaintiffs pay fourth defendants' costs | ||
| B | |||
| PDF Version |
| Parties: | ERROL DALE STONE ROBYN TERESA STONE GLENDYC PTY LTD (ACN 008 758 110) DONALD THOMAS STONE PHYLLIS YVONNE STONE NOEL RAYMOND STONE SHAUNA FRANCES STONE |
Catchwords: | Costs Plaintiffs partially successful against some defendants One defendant wholly successful Proportion of costs awarded Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 232, s 233 |
Case References: | Commissioner of Australian Federal Police v Razzi (1991) 30 FCR 64 Permanent building Society v Wheeler (No 2) (1993) 10 WAR 569 Stone & Anor v Glendyc Pty Ltd & Ors (2003) WASC 80 Wenpac Pty Ltd v Allied Westralian Finance Ltd & Ors (1993) 123 FLR 1 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 24 JULY 2003 FILE NO/S : CIV 2400 of 2001 BETWEEN : ERROL DALE STONE
- First Plaintiff
ROBYN TERESA STONE
Second Plaintiff
AND
GLENDYC PTY LTD (ACN 008 758 110)
First Defendant
DONALD THOMAS STONE
Second Defendant
PHYLLIS YVONNE STONE
Third Defendant
NOEL RAYMOND STONE
SHAUNA FRANCES STONE
Fourth Defendants
(Page 2)
Catchwords:
Costs - Plaintiffs partially successful against some defendants - One defendant wholly successful - Proportion of costs awarded - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 232, s 233
Result:
No order as to first defendant's costs
Plaintiffs pay second and third defendants' costs less one fifth of plaintiffs' costs
Plaintiffs pay fourth defendants' costs
Category: B
Representation:
Counsel:
First Plaintiff : Dr J T Schoombee & Mr O D Feinauer
Second Plaintiff : Dr J T Schoombee & Mr O D Feinauer
First Defendant : Mr J C Curthoys
Second Defendant : Mr J C Curthoys
Third Defendant : Mr J C Curthoys
Fourth Defendants : Mr N R Cogin
Solicitors:
First Plaintiff : Feinauer & Associates
Second Plaintiff : Feinauer & Associates
First Defendant : Michael Whyte & Co
Second Defendant : Michael Whyte & Co
Third Defendant : Michael Whyte & Co
Fourth Defendants : Bowen Buchbinder Vilensky
(Page 3)
Case(s) referred to in judgment(s):
Commissioner of Australian Federal Police v Razzi (1991) 30 FCR 64
Permanent building Society v Wheeler (No 2) (1993) 10 WAR 569
Stone & Anor v Glendyc Pty Ltd & Ors (2003) WASC 80
Wenpac Pty Ltd v Allied Westralian Finance Ltd & Ors (1993) 123 FLR 1
Case(s) also cited:
Nil
(Page 4)
1 TEMPLEMAN J: In concluding my reasons in Stone & Anor v Glendyc Pty Ltd & Ors (2003) WASC 80, I directed counsel to confer for the purpose of formulating an appropriate order to give effect to those reasons.
2 This they did, but were unable to reach agreement. The matter was then re-listed for further argument, on 3 June 2003. I then heard submissions in relation to three matters:
1. Correction of an error in my reasons.
2. The form of the orders.
3. Costs.
- I deal with each in turn.
Correction of an error
3 The reasons published on 24 April 2003 contained, in what was then par 295, an implied criticism of counsel for the plaintiff, arising from my perception that he had filed submissions late and without leave. Following publication of my reasons, counsel very properly pointed out that I had been mistaken in my perception. Counsel therefore expressed justifiable concern about my remarks.
4 At the hearing on 3 June, I acknowledged my mistake and apologised to counsel. He was content that I should recall my judgment, delete par 295 and renumber the remaining paragraphs. This I have done, with the result that the reasons now end at par 317. The Supreme Court database contains the corrected version.
5 I took the opportunity also to correct an error in par 290, where the reference to Noel in the penultimate line was obviously intended to be a reference to Errol.
6 I mention these matters now, in case there are any copies of the original reasons in circulation. Counsel is entitled to have the record corrected.
The form of the orders
7 It is common ground that there should be an order in the following terms:
(Page 5)
- "The first defendant be restrained from entering into the agreement to sell the property known as Keoringle, located at Avon Location 23642 and Avon Location 23652, in accordance with the draft agreement a copy of which is attached to these orders and marked with the letter A."
- I accordingly make that order.
8 The plaintiffs then seek an order that upon Errol undertaking to pay $80,000 to Mr and Mrs Stone by annual instalments to 2009, Mr and Mrs Stone transfer their A and B class shares in Glendyc to Errol, within seven days.
9 I had said in my reasons that I would not make such an order. However, I considered it appropriate to hear argument directed specifically to this point, given that in closing addresses at trial, counsel could not be expected to deal with every possible outcome, depending on findings of fact yet to be made.
10 The plaintiffs sought orders on two bases: under s 232 of the Corporations Law and in the equitable jurisdiction.
11 As to s 232, counsel submitted that an order of the kind proposed, flowed from my finding that Mr Stone had acted oppressively towards Errol by seeking to impose on him a sale of Keoringle on terms that were unfair. In these circumstances, counsel submitted, it would be appropriate to permit Errol to buy out the minority shareholders, thereby eliminating their ability to exercise any further control over his destiny.
12 Counsel submitted that it would be deleterious to the parties to leave the matter open. He posed the question: "Say … Errol … were to pay $80,000 to his father tomorrow, what happens to the A and B class shares? They would still remain in limbo for an indefinite period of time."
13 The answer to this question, in my view, is that Mr Stone would not be obliged to accept $80,000 from Errol. There was never any contractual agreement between them to that effect.
14 In par 179 of my reasons, I accepted Mr Stone's evidence about his meeting with Errol in about May 2000, at East Fremantle. It was then that Mr Stone told Errol he required a further payment of $100,000,over a ten year period, in exchange for the A and B class shares. But this was on condition that Errol honoured the option in the 1998 lease of Keoringle,
(Page 6)
- and agreed to it being sold to Noel. The proceeds of sale were to be paid to Errol.
15 I found that Errol agreed, although his evidence was that this imposed only a moral obligation on him to make the further payments: he denied the existence of any legally enforceable agreement.
16 In any event, the agreement was far too vague to have any contractual force: nothing was agreed about the terms on which Keoringle was to be sold.
17 In these circumstances, I see no justification for ordering Mr and Mrs Stone simply to transfer their A and B Shares to Errol in return for $80,000. I consider that Mr Stone is entitled to retain control of Glendyc – and hence Keoringle. And that, in essence, is the basis on which Errol accepted his C class shares.
18 If Mr Stone's conduct had been deliberately oppressive, I might have taken a different view. But Mr Stone acted in what he perceived to be the best interests of Errol and Noel.
19 In my conclusions, I said in what is now par (313):
"I am not prepared to order Mr and Mrs Stone to transfer the A and B class shares in Glendyc to Errol. Although the 1998 lease is now expired, I think Mr Stone is entitled to retain control of Glendyc unless Errol binds himself to making payments amounting to $80,000, by 2009."
20 This was said in the light of Errol's steadfast refusal to acknowledge any obligation to pay more than $100,000 to acquire the controlling shares in Glendyc: see par 179 of my reasons.
21 Had I thought, when considering my judgment, that Errol would change his position as he now has, I would have said then, as I do now, that although I would not order Mr and Mrs Stone to transfer their A and B class shares to Errol, if they agreed to do so, Errol would be obliged to pay $80,000, or some other amount, determined by reference to his parents' ongoing living expenses.
22 So far as the equitable jurisdiction is concerned, counsel's submissions face the insuperable difficulty that I dismissed Errol's equitable claim.
(Page 7)
23 In par 229 of my reasons, I said I was not persuaded that Errol relied on Mr Stone's promise that he would ultimately become the owner of Glendyc to the extent necessary to give rise to an estoppel. I went on in par 230 to say that if I was wrong in that view, I did not think Errol's reliance on Mr Stone's promise was detrimental.
24 I then continued in par 231-2 to say that if Errol had some claim in equity to the A and B class shares, I thought that equity could be satisfied by Errol receiving the value of Keoringle, less the amount of a reasonable contribution to the ongoing living expenses of his parents.
25 In my view, it would be quite inconsistent with those conclusions to now order Mr and Mrs Stone to transfer the A and B class shares to Errol. I therefore decline to grant any relief other than the injunction to which I have referred above.
Costs
26 It appears to be common ground between the parties that costs should follow the event. There is, however, a divergence of views as to the significance of my conclusions.
27 Errol contends that he succeeded in his oppression case and should therefore be awarded the costs of the entire proceedings. Indeed, had I made an order requiring Mr and Mrs Stone to transfer their A and B class shares to Errol on his undertaking to pay $80,000, he would have sought indemnity costs from the date of an offer to that effect made pursuant to O 24A of the Rules of the Supreme Court.
28 Against that, Mr Stone says that Errol's claim was largely unsuccessful and that the oppression case succeeded on two narrow points which were matters of submission rather than evidence.
29 Noel and Shauna contend that they should have their costs because the claims against them were wholly unsuccessful.
30 In this litigation, Errol chose to pursue a number of discrete claims against Mr and Mrs Stone. He succeeded only on the oppression claim: and then only in part. That being so, I consider it would be quite inappropriate to award him the entire costs of the action. That view is consistent with O 60 r 2(a), as explained in Permanent building Society v Wheeler (No 2) (1993) 10 WAR 569, at 514-5.
(Page 8)
31 In all the circumstances, I have decided to adopt the approach taken by Wilcox J in Commissioner of Australian Federal Police v Razzi (1991) 30 FCR 64 at 69:
"In these days of extensive court delays and high legal costs the courts should use all proper means to encourage parties to consider carefully what matters they will put in issue in their litigation. If parties come to realise that they will not necessarily recover the whole of their costs, even though they have unsuccessfully raised a discrete issue, they are likely better to consider whether the raising of that issue is a justifiable course to take."
- I take the quotation from the judgment of Malcolm CJ in Wenpac Pty Ltd v Allied Westralian Finance Ltd & Ors (1993) 123 FLR 1 at 70, a case in which the learned Chief Justice took that approach.
32 My conclusion is, therefore that Errol's limited success should be reflected in an award to him of a proportion of his costs. I would limit that to a proportion of the costs of the trial itself because the basis on which I found oppression in Errol's failure really emerged only during the trial, albeit partially foreshadowed in correspondence.
33 If Errol had confined his claim to that upon which he succeeded, the proceedings would have been conducted on affidavit evidence which would have been largely uncontentious and would have occupied the Court for something under two days. As it was, the trial ran for 8½ days.
34 It would be virtually impossible to carry out a minute analysis of the trial so as to determine precisely how much time was taken up by each issue. But taking a broad view and having regard to the time which ought to have been taken I believe that the fair course would be to award Errol one-fifth of the costs of the trial, including getting up.
35 I therefore make the following orders as between the plaintiffs and the second and third defendants.
1. The second and third defendants' costs of the action are to be taxed – amount A.
2. The plaintiffs' costs of the trial (including getting up) are to be taxed – amount B.
3. The plaintiffs are to pay the second and third defendants in respect of costs, an amount which is A less one-fifth of B.
(Page 9)
36 I do not consider it appropriate to make any order of costs in relation to Glendyc, the first defendant. Apart from the fact that it has no assets other than Keoringle, it has not been a party in any real sense. The action has been fought between family members.
37 As to the fourth defendants, Noel and Shauna, counsel for Errol submitted that it would be inappropriate to consider questions of costs until I had ruled on the claim brought against them under s 233 of the Corporations Act. That claim is contained in par (5) which is on p 16 of the prayer for relief:
"(5) Further or in the alternative, relief against the First, Second and Third Defendants pursuant to s 232 and s 233 of the Corporations Law in respect of the conduct of the affairs of the First Defendant that is oppressive to and unfairly prejudicial to the First Plaintiff, and further to that, the making of orders in terms of (1), (2), and (4) above, the setting aside of any contract of sale or the disposal of any interest (other than the leases pleaded above) between the First and Fourth Defendants relating to Keoringle, a declaration that all legal and accounting costs incurred by the First Defendant in respect of the negotiations pleaded in par 16 and par 17 above, and the defence of this action, be borne jointly and severally by the Second and Fourth Defendants, or ordering that the First Defendant be wound up."
38 In his opening address, counsel for the plaintiffs explained the way in which the s 233 claim was put against Noel and Shauna:
"We have raised an additional cause of action against them in this sense, that where we claim relief under the Corporations Law, we've claimed remitted relief against them because we say that as they were the instigators of an important aspect – or two important aspects, that is, (indistinct) undervalue and the sale per se, and the court has a jurisdiction under s 233 of the Corporations Law to order any person from – or acquire (sic require) a person to do a specified act including payment of money, that's under s 233(1), so it can make an order against a person, 233(1) – or paragraph (j), requiring a person to do a specified act, we would say, and it's not limited to officers of the corporation, that given their involvement into meddling (sic intermeddling) in the affairs, at least Glendyc should not have to
(Page 10)
- pay the costs because of course if we win, we win against ourselves; we win against our own company.
It would be unfair and it would an appropriate exercise of the court's jurisdiction under s 233 to say, 'No, no, no, the true party or the true machinators should bear the costs, both of consulting with Michael White before and of course the cost of this litigation.'" (TS 319 - 320)
39 Counsel returned to that issue again in closing when he made the following submission:
"But I just make the point that the focus is really between Mr Don Stone, Glendyc the company and Errol as shareholder and Noel is, in that sense, an outsider. But of course we would say on the Corporations Law matter he clearly intermeddled in the affairs and it would really flow or be an adjunct of the interference with contractual relationships because the court can order any person to make a payment under s 233, and we would say that it is clearly a case that if somebody intermeddles in the affairs of the company, for instance gets the company to breach its obligations to a shareholder, then the court can make an adjustment and order that party to pay. In fact, your Honour, that often happens in practice with so-called de facto directors which are not an officer of the company in any sense but they are really the main culprits. Mr Noel Stone isn't in that position but that would be an analogous situation." (TS 1119)
40 Having concluded that I should grant only injunctive relief, and only against Glendyc (par 309 of my reasons) I regarded the balance of the s 233 claim against Noel and Shauna as sounding only in costs.
41 As I have already held, I do not think it appropriate to make any order of costs against Glendyc. Likewise, I do not consider it appropriate to order Noel and Shauna to pay legal and accounting costs incurred by Glendyc in respect of the negotiations for the sale of Keoringle. I take that view for similar reasons: the real protagonists were the family members.
42 Nor do I think it appropriate to make any order for costs against Noel and Shauna on the basis that Noel intermeddled in the affairs of Glendyc, as basis a form of de facto director. Not only is that not pleaded against him, but as counsel accepted in the extract from his closing address to which I have just referred, Noel was not in that position.
(Page 11)
43 It is true that Noel appears to have anticipated that Errol might bring a claim based on allegations of sale at an undervalue. I have in mind the document entitled "D T Stone Farming History and Succession" prepared by Shauna on 30 March 2001 which is at p 566 of the agreed bundle. That was a memorandum which Shauna wrote to a solicitor, in which she referred to Errol's legal advice that "there is an angle upon which a legal challenge in court could be taken". Shauna went on to refer to Noel's view that "Errol's legal "angle" may be "insufficient consideration to the shareholder …".
44 Despite that, I do not think it appropriate to fix Noel and Shauna with any liability for the oppressive conduct which I have found in Errol's favour. Noel and Errol were negotiating at arms' length. Noel had no control over Glendyc and he was perfectly entitled, as a third party purchaser, to endeavour to acquire Keoringle on the best terms he could.
45 The pleaded case against Noel and Shauna is not that they intermeddled in the affairs of Glendyc (which in my view they did not) but that they interfered in a contractual relationship between Errol and his father. That case failed in its entirety. I see no reason why costs should not follow the event.
46 I therefore order the plaintiffs to pay the fourth defendants' costs of the action, to be taxed.
47 I include in that order the reserved costs of the application before Pullin J to vary the undertakings given previously by the fourth defendants. I do so because I do not think it was necessary for Errol to have sought injunctive relief against Noel and Shauna. Further, I am satisfied that they did all they reasonably could to negotiate with Errol to settle, or extricate themselves from, the action.
0
4
0