Laing & Simmons Corporation Pty Ltd v Sydney Property Auction Centre Pty Ltd [2005] NSWSC 734

New South Wales Supreme Court

CITATION : Laing & Simmons Corporation Pty Ltd v Sydney Property Auction Centre Pty Ltd [2005] NSWSC 734

HEARING DATE(S) : 21/07/05

JUDGMENT DATE : 21 July 2005

Equity Division JURISDICTION : Corporations List

JUDGMENT OF : Barrett J

DECISION : Order that the plaintiff's costs of the proceedings, assessed on the party and party basis, be paid by Pantlings & Co Pty Ltd.

CATCHWORDS : PRACTICE AND PROCEDURE - costs - application by shareholder for winding up order not pressed after appointment of voluntary administrator - question of costs unresolved - plaintiff shareholder seeks costs order against other shareholder - such order made despite no determination on merits of plaintiff's substantive claim

McDonald v Deputy Commissioner of Taxation (2005) 58 ATR 418 CASES CITED : Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

Laing & Simmons Corporation Pty Limited - Plaintiff PARTIES : Sydney Property Auction Centre Pty Limited - Defendant Pantlings & Co Pty Limited - Plaintiff's co-shareholder in Defendant

FILE NUMBER(S) : SC 2086/05

Mr M.J. Dawson - Plaintiff COUNSEL : Mr P.L. Dodson - Pantlings & Co Pty Ltd

TressCox - Plaintiff SOLICITORS : Cohen & Krass - Pantlings & Co Pty Ltd

LOWER COURT JURISDICTION :

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST

BARRETT J

THURSDAY 21 JULY 2005

2086/05 - LAING & SIMMONS CORP PTY LTD v SYDNEY PROPERTY AUCTION CENTRE PTY LTD

JUDGMENT

1 I am dealing with the question of costs following resolution of these proceedings. The plaintiff is one of two shareholders in the defendant. It sought a winding up order and, as an interlocutory measure, an order appointing a provisional liquidator in respect of the defendant. Those applications were not pressed after action was taken by the directors to appoint an administrator under Part 5.3A of the Corporations Act 2001 (Cth). 2 The winding up application and the application for the appointment of the provisional liquidator were based on both the insolvency ground and the just and equitable ground. 3 The plaintiff maintains that its co-shareholder, Pantlings & Co Pty Ltd, should pay the costs of the proceedings. Pantlings & Co is not formally a party, but it was given leave to file an appearance and appeared by counsel on the question of costs and made submissions. Pantlings & Co did not argue that that its non-party status represents any form of barrier to the making of a costs order against it, although it does argue on the merits that it should not be subjected to a costs order. 4 The substantive matter was before the court on 29 March 2005, the originating process and the interlocutory process having been filed on 23 March 2005. There is, in the court records, some uncertainty as to what transpired on that occasion. It is common ground that the plaintiff's application was not pressed because a voluntary administrator had been or was about to be appointed. The associate's record of proceedings does not record any order of dismissal of proceedings or any grant of leave to discontinue, but there are directions for the filing of submissions on costs. In the end, I do not think that any of this matters so far as costs are concerned, although, for the sake of good order and with the concurrence of both counsel indicated by them this morning, I will, in due course, make an order by consent dismissing the proceedings. 5 Written submissions on costs were directed on 29 March 2005 and later filed, although with some delay in one case. The matter was re-listed for further argument on costs this morning at the request of Mr Dodson's client. 6 Important factors from the costs viewpoint are that there was never a hearing on the merits and that the parties found an out of court resolution that made it unnecessary and inappropriate for the court to determine the application. Also of importance is the fact that the resolution involved acceptance by the defendant's two directors (effectively the alter-egos of its two shareholders) that, in the words of s.436A, the company was insolvent or likely to become insolvent. This is of significance when it is recognised that the plaintiff's winding up application was advanced on the ground of insolvency as well as the just and equitable ground. 7 In cases where there is no determination on the merits, it is only rarely that the court can see such matters going to the merits as might warrant the making of some order other than that each party bear its own costs. I refer in that connection to the observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 (at pp.624-5): "In an appropriate case, a court will make an order for costs even when there has been no hearing on the merits and the moving party no longer wishes to proceed with the action. The court cannot try a hypothetical action between the parties. To do so would burden the parties with the costs of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action. In administrative law matters, for example, it may appear that the defendant has acted unreasonably in exercising or refusing to exercise a power and that the plaintiff had no reasonable alternative but to commence a litigation. Thus, for example, in R v Gold Coast City Council; Ex parte Raysun Pty Ltd , the Full Court of the Supreme Court of Queensland gave a prosecutor seeking mandamus the costs of the proceedings up to the date when the respondent Council notified the prosecutor that it would give the prosecutor the relief that it sought. The Full Court said that the prosecutor had reasonable ground for complaint in respect of the attitude taken by the respondent in failing to consider the application by the prosecutor for approval of road and drainage plans.