FEDERAL COURT OF AUSTRALIA Yara Australia Pty Ltd v Oswal [2010] FCA 1425 Citation: Yara Australia Pty Ltd v Oswal [2010] FCA 1425 Parties: YARA AUSTRALIA PTY LTD ACN 076 301 221 v PANKAJ OSWAL and BURRUP HOLDINGS LIMITED ACN 097 138 353 File number: WAD 258 of 2010 Judge: MCKERRACHER J Date of judgment: 17 December 2010 Catchwords: COSTS – declaratory relief not awarded Legislation: Corporations Act 2001 (Cth) ss 249H(1), 249L(3) Cases cited: Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 Date of last submissions: 14 October 2010 Place: Perth Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 15 Solicitor for the Applicant: D Benson of Clayton Utz Solicitor for the First Respondent: MC Hotchkin of Hotchkin Hanly IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 258 of 2010 BETWEEN: YARA AUSTRALIA PTY LTD ACN 076 301 221 Applicant AND: PANKAJ OSWAL First Respondent BURRUP HOLDINGS LIMITED ACN 097 138 353 Second Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 17 December 2010 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The first respondent is to pay the applicant's costs of the proceeding to be taxed or agreed. 2. The proceeding be otherwise dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using Federal Law Search on the Court's website. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION WAD 258 of 2010 BETWEEN: YARA AUSTRALIA PTY LTD ACN 076 301 221 Applicant AND: PANKAJ OSWAL First Respondent BURRUP HOLDINGS LIMITED ACN 097 138 353 Second Respondent JUDGE: MCKERRACHER J DATE: 17 december 2010 PLACE: PERTH REASONS FOR JUDGMENT INTRODUCTION 1 The applicant (Yara) filed and served an application urgently seeking a declaration that a Notice of Members meeting which had been dated and issued on 10 September 2010 was unlawful, invalid and of no force and effect. It sought an injunction restraining the Chairman and Managing Director (Mr Oswal) of the second Respondent (Burrup) and Burrup from convening the meeting. 2 Following the filing of the application on the afternoon of 15 September 2010, the matter was listed for hearing before me on the morning of 16 September 2010. At that hearing, an undertaking was given by counsel for the respondents to the effect that the proposed meeting would not be convened. On the strength of that undertaking, the parties agreed to make separate written submissions concerning any relief which should follow as a result of the undertaking being given. Primarily the issue for consideration was the question of costs. 3 On the one hand, the respondents contend that the proceeding issued by the applicant was wholly unnecessary and the applicant should bear the costs of the proceeding and pay the respondents' costs. On the other hand, the applicant contends that the respondents were wholly uncooperative in failing to give a clear undertaking before the need to issue proceedings arose. 4 The parties have been involved in a number of proceedings. It would seem that there are some communication difficulties. 5 The resources which have been devoted to determination of the questions of relief and costs, having regard to the fact that the objective of not convening the meeting has been achieved, have been fulsome to say the least. BACKGROUND The relief sought 6 The particular Notice proposed a motion which would change Burrup from a public company limited by shares to a proprietary company limited by shares. It was also to adopt a new and unspecified constitution and to recognise an unspecified shareholders deed. 7 Yara holds 35% of the ordinary share capital in Burrup. The motion was of genuine importance to Yara for several reasons, not least of which was that on conversion from a public to a private company, certain provisions of the Corporations Act 2001 (Cth) (CA) which apply to public companies would not apply to proprietary companies. (An example is the related party transaction provisions of Ch 2E CA). 8 It seems tolerably clear that the Notice given did not provide adequate notice of a general meeting as it provided only three days notice of the meeting rather than the 21 days minimum notice required by s 249H(1) CA, nor did it comply with the terms of the Burrup Constitution which requires a 28 day notice period. There had been no abridgement of time agreed by the members. There were other difficulties in that the Notice failed to satisfy s 249L(3) CA in that it would adopt a new constitution without providing or identifying the replacement constitution's terms. It is unnecessary, as indicated, to explore these issues in detail because of the undertaking. 9 I am prepared to assume for the purposes of these reasons that the applicant has succeeded in showing that the Notice did not conform with the requirements either of the CA or the Constitution of Burrup. No persuasive argument to the contrary has been advanced for the respondents. Arguments raised in correspondence exchanged prior to the proceedings were, in my view, not sustainable. A declaration 10 Yara contends that on the basis of the evidence adduced, it is appropriate for the Court to make a declaration consistent with that sought in the first paragraph to the Yara application. It is contended that a declaration is necessary because Mr Oswal has advanced the argument that the Notice given was valid and effective. As indicated, I accept that the Notice was not valid or effective. That, however, does not necessarily mean that a declaration should be granted. For the respondents it is argued that it is not appropriate to make a declaration 'without proper argument': Bass v Permanent Trustee Company Ltd (1999) 198 CLR 334 (at 355-356) is cited. In a rather non-specific way the respondents contend that it would be necessary to consider a full history of the matter before granting declaratory relief and, if necessary, to cross-examine the witnesses including the authors of communications exchanged prior to the issuing of proceedings. 11 What I do accept is that the declaratory relief which was sought is no longer necessary. As indicated below, I consider the applicant is entitled to its costs (but not on an indemnity basis) but the meeting date having passed, any declaration would serve no purpose and would not satisfy all of the well known requirements identified by Lockhart J in Aussie Airlines Pty Ltd v Australian Airlines Ltd (1996) 68 FCR 406 (at 414). Costs 12 The parties are at odds as to whether or not Mr Oswal made it satisfactorily clear that no reliance would be placed upon the Notice. It is unnecessary to go into all the detail of the correspondence. My impression from the correspondence is that, on the one hand, Yara was somewhat hard to please in terms of the demands and assurances made and sought. On the other hand, Mr Oswal was somewhat unhelpful and evasive on a matter which was of very clear importance and, in effect, simply invited Yara to issue proceedings. That non-conciliatory approach in the face of the clearly defective Notice was more instrumental in bringing about the issuing of the proceedings than was Yara's insistence on unequivocal undertakings. 13 Nevertheless, I do consider there is something in the submission made for Burrup that in a circumstance where there are only two shareholder parties and Yara always held the capacity to withhold its vote such that the motions foreshadowed in the Notice could not be passed, a more conciliatory approach from Yara might also have been beneficial and appropriate in the circumstances. For those reasons, costs sought by Yara on an indemnity basis will not be awarded. 14 Costs are sought by Yara against Mr Oswal but not against Burrup. It is appropriate in my view that Mr Oswal should bear the costs rather than the company. CONCLUSION 15 Despite the very detailed exchange of arguments, in my view, there was no reason to make the declarations sought but Yara is entitled to its costs to be taxed or agreed. The following orders will be made: 1. The first respondent is to pay the applicant's costs of the proceeding to be taxed or agreed. 2. The proceeding be otherwise dismissed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 17 December 2010