Udaipur Lake Pty Ltd v Michael Sklovsky Pty Ltd (Ruling)
[2019] VSC 114
•26 February 2019 (revised on 1 March 2019)
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
COMMERCIAL COURT
S ECI 2018 00011
| UDAIPUR LAKE PTY LTD (ACN 112 912 517) AND ANOR (ACCORDING TO THE ATTACHED SCHEDULE) | Applicants |
| v | |
| MICHAEL SKLOVSKY PTY LTD (ACN 005 417 327) AND ORS (ACCORDING TO THE ATTACHED SCHEDULE) | Respondents |
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JUDGE: | Kennedy J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 26 February 2019 |
DATE OF RULING: | 26 February 2019 (revised on 1 March 2019) |
CASE MAY BE CITED AS: | Udaipur Lake Pty Ltd v Michael Sklovsky Pty Ltd (Ruling) |
MEDIUM NEUTRAL CITATION: | [2019] VSC 114 |
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PRACTICE AND PROCEDURE - Costs – Respondents’ application to set aside valuation successful - Order in favour of the respondents on basis that costs should follow the event.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Ms M Harris | KCL Law |
| For the Respondents | Mr I Hristovski | Cornwall Stodart |
HER HONOUR:
This application follows the settlement of an oppression proceeding commenced on 17 January 2018.
Pursuant to a Term Sheet dated 7 March 2018 (Terms), the parties agreed to settle the proceeding on the basis that the second respondent would pay the first applicant (Udaipur Lake) a certain price for the transfer of its shares in the first respondent (MS Pty Ltd). The price was to be calculated by reference to a valuation of Udaipur Lake’s interest in MS Pty Ltd conducted in accordance with cls 10 to 18 of those Terms.
On 24 September 2018 a valuation was provided pursuant to the Terms by Mr John McGuiness (Valuation).
On 31 October 2018 the respondents filed submissions wherein they sought to challenge that Valuation.
By orders made on 1 November 2018, Elliott J fixed the question of the validity of the Valuation for trial on 3 December 2018.
On 1 November 2018 the applicants filed submissions entitled ‘Applicants’ Submissions in Opposition to the Setting Aside of the Valuation.’ They subsequently filed two further submissions in opposition (on 18 and 22 January 2019).
The matter was ultimately refixed for hearing on 31 January 2019.
In the Reasons of Judgment delivered on 19 February 2019 (Reasons), I determined that the Valuation ought to be set aside and remitted to Mr McGuiness. The parties were also invited to provide a form of order to give effect to those Reasons.
In the result, the parties have been able to reach substantial agreement as to the form of orders to be made, with the only substantial issue being that of costs.
For reasons that follow, I have determined that the applicants ought to pay the second to fourth respondents’ costs of the application to set aside the Valuation from 1 November 2018.
These reasons should also be read in conjunction with the Reasons already delivered.
Submissions of parties
The respondents sought an order that the applicants pay their costs of the application to set aside the Valuation from and including 1 November 2018 on the basis that costs should follow the event.
The applicants opposed such an order, and submitted that various other costs orders would be appropriate (including that each party bear their own costs).
There were a number of grounds advanced in support of the applicants’ submissions as follows:
(a) the respondents did not succeed on all three grounds;
(b) a complaint of lack of procedural fairness;
(c) that there ought to be some proportionate order made with reference to the issues in dispute;
(d) an alleged failure to minimise delay; and
(e) that there was conduct causing oppression given MS Pty Ltd had paid the respondents’ costs.
In oral submissions, Counsel advanced two further substantive matters that:
(a) cl 9 of the Terms provided that each party bear their own costs; and
(b) there was no evidence that the respondents had ever agreed for the matter to be remitted to Mr McGuiness.
Resolution
It is true that the respondents did not succeed on all three grounds and that, as highlighted by the applicants, they failed on ground 1. Further, there was some overlap between grounds 2 and 3.
However, ground 1 was a relatively confined narrow ground which did not warrant substantive time. I also consider that the matters raised in relation to grounds 2 and 3 were put succinctly and clearly, with the application determined in the one day allocated.
I further do not accept that there was any lack of procedural fairness, nor was any such complaint raised at the hearing. In accordance with common practice, the case was refined in oral submission. However, an examination of the respondents’ submissions filed at the outset, on 31 October 2018 (particularly at paragraph 13), clearly identified the essence of the complaints ultimately made.
In terms of proportionality, I do not consider that the inclusion of grounds 1 and 2 were unreasonable, nor that they led to any material lengthening of time.
In oral submission, Counsel made much of the Court Book, highlighting that it included a USB which contained extensive Excel Spreadsheets of financial documents. Complaint was also made about inadmissible parts of the Affidavit of Toby Lepoer Darvall sworn 20 December 2018.
I do not consider the Court Book to be excessive in this case. The financial material contained in the USB also appears to consist of material one would readily expect the applicants to be familiar with, and to be able to provide instructions about. The access to these financials should also be of assistance in the remittal process.
In relation to the affidavit, it is of relatively short compass. The parties were ultimately able to agree on objections made to parts of it, and I am unable to be satisfied that the respondents’ conduct in this respect was in any way unreasonable. To the contrary, the case was generally managed in a helpful and efficient way consistent way with the overarching purpose in the Civil Procedure Act 2010 (Vic).
I am further not satisfied that there was any relevant delay. To the contrary, I consider that the application was expedited, particularly given the intervention of the Christmas period.
Consistent with the orders of Elliott J of 1 November 2018, the Court was not called upon to resolve any issue as to any further act of oppression.
A particular matter highlighted was that the respondents’ costs had been paid by MS Pty Ltd (although the respondents’ Counsel was unable to confirm whether this was the case). However, even if this is the case, the issue before me is who should bear the costs of this application (rather than who has paid them to date).
In relation to the matters raised this morning, cl 9 of the Terms reads as follows:
9.The parties will each bear their own costs in relation to this litigation, the mediation and the negotiation and preparation of settlement agreements and related agreements.
I have considered the clause and the Terms as a whole. In my view, even presuming (in favour of the applicants) that the Court was bound to follow the terms of cl 9, it is not applicable to the current application.
First, I consider that, having regard to the context of cl 9, the reference to costs ‘in relation to this litigation’ is a reference to costs incurred up to the date of settlement (on 7 March 2018) which had already been incurred. Thus, the evident purpose of the Terms was to finalise or ‘settle’ the proceeding (as per the opening language) so as to avoid any future costs. There is nothing to suggest that the phrase was intended to deal with any (unknown) future costs in such circumstances. More particularly, if the phrase was intended to have the broad meaning alleged, it would have been unnecessary to make specific provision for the ‘mediation’, the ‘negotiation and preparation of settlement agreements’, and ‘related agreements.’
Secondly, cl 17 of the Terms makes specific provision for the costs of the valuer to be paid by the company, MS Pty Ltd. It was not suggested that the costs of the current application were covered by this clause. However, its existence tends to confirm that costs incurred after settlement were not intended to be covered by cl 9. Rather, absent specific provision, the matter is to be left to the Court.
I am fortified in the above views by the applicants’ own actions. Thus, the applicants sought and obtained costs orders against the respondents on 1 November 2018 in the current proceeding for breaches of the Terms (with no suggestion that each party ought bear their own costs). This is tantamount to an admission that cl 9 was not intended to cover costs incurred subsequent to entry into the Terms.
Turning then to the appropriate costs disposition, it is true that there is no evidence as to whether the respondents would have agreed to a remittal to Mr McGuiness. However, very little can be made of this in circumstances where the debate about this matter took very little Court time (and was dealt with in the closing stages of the hearing on 26 February 2019).
What is certain is that, from 1 November 2018, and thereafter, the applicants took an approach of opposing the setting aside of the valuation, which necessitated a full day in Court.
In circumstances where the valuation has been set aside, in the result, the applicants have been substantially unsuccessful. I therefore consider that the ordinary course ought to follow such that costs ought follow the event.
Conclusion
There will be an order that the applicants pay the second to fourth respondents’ costs of the application to set aside the Valuation on a standard basis from and including 1 November 2018.
SCHEDULE OF PARTIES
| UDAIPUR LAKE PTY LTD (ACN 112 912 517) | First Applicant |
| MICHAEL GREGORY WEIGALL SKLOVSKY | Second Applicant |
| v | |
| MICHAEL SKLOVSKY PTY LTD (ACN 005 417 327) | First Respondent |
| DARVALL GROUP PTY LTD (ACN 109 256 126) | Second Respondent |
| TOBY DARVALL | Third Respondent |
| JANE DARVALL | Fourth Respondent |
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