Labraga v Pomfret [2005] NSWSC 1039

New South Wales Supreme Court

CITATION : Labraga v Pomfret [2005] NSWSC 1039

HEARING DATE(S) : 11/10/05

JUDGMENT DATE : 11 October 2005

JURISDICTION : Equity Division

JUDGMENT OF : Young CJ in Eq

DECISION : Order that company pay plaintiff's costs save that plaintiff pay costs of the first defendant on issue raised by plaintiff as to whether he had a charge.

CATCHWORDS : PROCEDURE [566]- Costs- Winding up proceedings- Just and equitable ground- Whether should depart from usual rule that costs come out of assets.

LEGISLATION CITED : Corporations Act 2001 (Cth), s 466

Julio Cesar Labraga (P) Philip Edward Pomfret (D1) PARTIES : Exception Holdings Pty Limited (D2) Exception Finance Pty Limited (D3)

FILE NUMBER(S) : SC 2063/05

M Ashhurst (P) COUNSEL : G K Burton SC (D1)

Cordato Partners (P) Dibbs Abbott Stillman (D1) SOLICITORS :

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION

YOUNG CJ in EQ

Tuesday 11 October 2005

2063/05 – LABRAGA v POMFRET JUDGMENT 1 HIS HONOUR: These proceedings were heard by me along with three other sets of proceedings between the same parties. I gave my most recent judgment on 29 September 2005 which dealt with whether there should be a winding up on the just and equitable ground. There has been a break-down in the relationship between the shareholders and directors of a small proprietary company. There was also an issue as to whether one of the directors who lent personal funds to the company had a charge to those funds. 2 So far as the first matter is concerned, I found that the only appropriate order was to wind up the company. 3 In a partnership suit where there is a breakdown between the partners, the general philosophy is that both parties are to bear the costs in the proportion of their holdings on both setting up the partnership, and then winding it up. I consider that a similar rule should apply when a company is wound up on the just and equitable ground, that is, ordinarily the cost of winding up should be borne by the interests of the company in proportion to their interests. In other words, the company should pay the costs and they should come out of the assets of the company. 4 Mr Ashhurst says in this case there was considerable resistance by Mr Pomfret to the winding up and this increased the costs. That is true to an extent but I do not consider that what happened unduly increased the costs or that any false issues were raised. 5 Into the mix must be put s 466 of the Corporations Act 2001 (Cth). That appears to show the policy of the legislature that unless the court otherwise orders, the petitioner's costs should come out of the assets. I think that is a strong indication that even in what I might call a two person company, s 466 has to apply and that it would be very much the exception rather than the rule that some additional or priority personal order as to costs would be made. 6 So far as the issue of the costs of the claim by Mr Labraga for a charge is concerned, he failed in that and he should pay the costs on that issue. 7 There has been a contest as to who should be the liquidator. In paragraph 100 of my judgment of 29 September 2005 I said that I would assume that the person to appoint as liquidator is Mr Ryan who has been the provisional liquidator and then I gave some reasons as to why I would be reluctant to do that. Mr Ryan has now given the court some further undertaking which, to use the words of Mr Dowdy, gives me comfort. 8 Mr Ryan's appointment is opposed and Mr Smith and Mr Pascoe have been put up as alternatives. Mr Ryan has already got some experience with this company. I do not know to what degree but it must be at least to some degree. 9 It is said that Mr Ryan does not have experience with selling mortgage books which would be the principal asset of this company. As Mr Dowdy points out, any wise liquidator who is deficient in a particular area - not that I am saying Mr Ryan is deficient in this area - would retain the appropriate expertise to advise him and it seems to me that in all the circumstances, especially in view of the comfort, it would be preferable to appoint Mr Ryan as the liquidator. 10 Accordingly, I will make the orders in the short minutes that Mr Burton provided, taking out the name of Mr Smith and inserting the name of Mr Ryan. I have initialled those short minutes and they will be placed with the papers. 11 The exhibits may be returned to be kept in the custody of Mr Breen of Dibbs Abbott Stillman and he will restore them to the court if there should be an appeal. 12 I make similar orders in matter 2466/05.