New South Wales Supreme Court CITATION : Cummins v Australian Jockey Club Limited [2009] NSWSC 254 HEARING DATE(S) : 03/04/09 JUDGMENT DATE : 6 April 2009 JURISDICTION : Equity Division Corporations List JUDGMENT OF : Barrett J DECISION : Plaintiff granted leave to discontinue. Defendant ordered to pay plaintiff's costs. CATCHWORDS : PROCEDURE - costs - where plaintiff seeks leave to discontinue - competing applications for costs - plaintiff contends that she should be awarded costs despite rule 42.19 - where realisation that there was no dispute arose on eve of hearing - defendant at that time accepted thee was no dispute after seeing plaintiff's evidence - defendant says dispute would have evaporated earlier if evidence communicated earlier - but correspondence shows that the matters emerging from the evidence were not the only ones that had prevented defendant accepting plaintiff's position LEGISLATION CITED : Corporations Act 2001 (Cth), s 9 Uniform Civil Procedure Rules 2005. rules 12.1(1), 42.19(1) and (2) CATEGORY : Principal judgment Britannia Pty Ltd v Parkline Construction Pty Ltd [2009] NSWCA 32 CASES CITED : Fordyce v Fordham [2006] NSWCA 274 Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469 Portman Iron Ore Ltd; Re Golden West Resources Ltd [2008] FCA 1362; (2008) 170 FCR 409 PARTIES : Sarah Jane Cummins - Plaintiff Australian Jockey Club Limited - Defendant FILE NUMBER(S) : SC 2144/09 COUNSEL : Mr A J Sullivan QC/Ms C C Spruce - Plaintiff Mr F Gleeson SC/Mr J S Emmett - Defendant SOLICITORS : Hicksons Lawyers - Plaintiff Esplins Solicitors - Defendant IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION CORPORATIONS LIST BARRETT J MONDAY, 6 APRIL 2009 2144/09 SARAH JANE CUMMINS v AUSTRALIAN JOCKEY CLUB LIMITED JUDGMENT 1 These proceedings were commenced on 31 March 2009. On the afternoon of that day, the plaintiff obtained leave to file her originating process and supporting affidavit in court, a direction was made that the originating process be returnable at 10am on 3 April 2009 and it was ordered that the time for service be abridged to 10am on 1 April 2009. 2 The principal relief sought in the originating process is: "1. A declaration that an appointment of proxy in the form of Annexure A to this Originating Process, duly completed and signed by a member of the Defendant, is a valid appointment of a person or body corporate to act as the member's proxy to attend and vote for the member at the general meeting of the Defendant to be held on 9 April 2009 and any adjournment of that meeting. 2. Further, a declaration that an appointment of proxy in the form of Annexure B to this Originating Process, duly completed by or with the authority of a member of the Defendant and signed by a member of the Defendant, is a valid appointment of a person or body corporate to act as the member's proxy to attend and vote for the member at the general meeting of the Defendant specified in the completed form and any adjournment of that meeting. 3. Further, an injunction under s 1342 of the Corporations Act 2001 (Cth) requiring the Defendant to accept duly completed and signed forms in the form of Annexures A and B to this Originating Process received by the Defendant in accordance with s 250B of the Corporations Act 2001 (Cth) as valid appointment of proxy for the meeting of the Defendant to be held on 9 April 2009 and any adjournment of that meeting. 4. Further, or in the alternative, an injunction under s 1342 of the Corporations Act 2001 (Cth) restraining the Defendant from rejecting proxy appointment documents submitted for the meeting of the Defendant to be held on 9 April 2009 and received by the Defendant in accordance with s 250B of the Corporations Act 2001 (Cth) solely on the grounds that such documents are not in the form enclosed with the Notice of General Meeting issued by the Defendant and dated 11 March 2009." 3 When the matter came before the court on 3 April 2009, the plaintiff sought leave to discontinue and an order that the defendant pay her costs of the proceedings. The defendant was content for the plaintiff to discontinue but not on the basis as to costs sought by the plaintiff. The defendant's position was that, if the plaintiff were granted leave to discontinue, it should be on the usual basis that the plaintiff pay the defendant's costs. 4 The question debated on 3 April 2009 was therefore confined, in substance, to the question of the costs order that should be made. 5 It is necessary to traverse aspects of the factual background. The defendant was formed in 2008 as a company limited by guarantee. It is therefore a "public company" within the s 9 definition of that term in the Corporations Act 2001 (Cth). The defendant is the lessee of Randwick Racecourse and now performs a number of the functions formerly performed by the Australian Jockey Club. 6 The plaintiff is one of several members who have joined together to requisition a general meeting of the defendant. The meeting is to be held on 9 April 2009. This date was fixed by the defendant after receipt of the requisition. The purpose of the meeting is to consider several proposed resolutions for the removal of directors of the defendant and several proposed resolutions for the election of persons as directors of the defendant. 7 The group of members with which the plaintiff is associated (it will be convenient to refer to them as "the plaintiff's group") circulated a form of proxy with the intention that members intending to appoint a proxy for the purposes of the meeting might, if they wish, use that form. The form was prepared before the date and place of the meeting had been determined. The form therefore left blanks for those particulars and carried at its foot a separate section, to be separately signed by the member signing the proxy appointment itself, authorising "the bearer" to fill up the blanks. 8 The notice convening the meeting despatched by the defendant to its members states under a heading "Voting Information" that the use of any form of proxy other than "the AJC's prescribed form of proxy" accompanying the notice of meeting "will not be valid". This is an obvious reflection of provisions of the defendant's constitution purporting to empower the board of directors to prescribe a form of proxy for general meetings and otherwise to regulate the manner of appointing proxies. 9 The plaintiff's group had already given its form of proxy (with blanks, as described) to a substantial number of members before the notice of meeting and the "Voting Information" with it were sent by the defendant to its members. Many members had signed the form in blank and given it to a representative of the plaintiff's group. 10 The notice of meeting and accompanying documents were sent by the defendant to its members on or about 11 March 2009. By a letter sent by facsimile on 18 March 2009, Mr Osburg, a member of the plaintiff's group, complained to the defendant about the statement in the "Voting Information" purporting to make the "prescribed form" the only available form of proxy. He said that the statement "is both wrong in law and misleading to Members". The letter was accompanied by a copy of an opinion of senior counsel which, the letter said, confirmed that the defendant's "prescribed form" was not the only form that could be used and that the form the plaintiff's group had generated was valid and could be relied upon "to cast a valid vote". The letter sought acknowledgment to this effect from the defendant, and said that if this were not given, an approach would be made to the court "without further notice". 11 At some time shortly before 18 March 2008, Mr Osburg was alerted by Computershare Investor Services Pty Ltd, a company retained by the defendant to provide certain co-ordination services in connection with the meeting of members, to "a recent court decision to the effect that unless a signed proxy form is sent directly to the company holding the election it may be inadmissible" (these words appear in a letter of 18 March 2008 from Mr Osburg to "Fellow AJC Members"). The case referred to is presumably Portman Iron Ore Ltd; Re Golden West Resources Ltd [2008] FCA 1362; (2008) 170 FCR 409. 12 No doubt realising that this could cause problems in relation to any kind of bulk deposit of the numerous signed forms (with date and place of meeting later completed) collected by the plaintiff's group from members, Mr Osburg returned those forms to the members from whom they had been received. Mr Osburg said in his accompanying letter that the member concerned should take steps of his or her own to deposit the signed (and, by now, completed) instrument of proxy direct with the defendant or Computershare. The arrangements for the return of the proxy forms in this way were overseen by Mr Bracks, another member of the plaintiff's group. 13 Mr Osburg's quite separate letter faxed on 18 March 2009 to the defendant became the subject of a reply sent by the defendant's chief executive officer on 20 March 2009. The reply was in the nature of an acknowledgment, with a statement that a response would be provided "early next week" (20 March was a Friday). The response was in fact sent at the end of the next week (27 March 2009). It said: "We note the advice you have received from Alan Sullivan SC [sic]. We believe that additional issues arise which are not directly covered by the opinion. For example, our advice is that the provisions of s 250A of the Corporations Act require the proxy to be complete when it leaves the hand of the member and it should then be sent by that member direct to the returning officer." 14 On 30 March 2009, solicitors acting for Mr Osburg (who are also the plaintiff's solicitors in these proceedings) wrote to the defendant taking issue with the correctness of the defendant's letter of 27 March 2007. Attached to the solicitors' letter were the two forms of proxy that later became annexures to the originating process. The solicitors requested the defendant's undertaking that those forms of proxy "will be accepted as valid forms of proxy for the purpose of the general meeting to be held on 9 April 2009". The undertaking was sought "by 9am tomorrow, 31 March 2009". 15 This letter of 30 March 2009 was received by facsimile at the defendant's office at 2.25pm on that day. An employee of the defendant sent the letter by email to Mr Esplin, the defendant's solicitor, at 4.34pm. The employee had previously spoken to Mr Esplin. Mr Esplin was away from his office at a meeting when the email arrived. He went back to his office building at about 6.20pm but could not get up to his floor because the lifts were not functioning. There was a widespread electricity disruption in Sydney at that time. Mr Esplin saw the email from the defendant at about 9.30am the next day, 31 March 2009. 16 At or shortly after 2.00 pm on 30 March 2009, the plaintiff, by her counsel, approached the court in the way outlined at the start of these reasons. At 2.34pm on 31 March 2009, the defendant emailed a letter to the solicitors acting for Mr Osburg and the plaintiff. That letter referred to both forms of proxy annexed to the letter of 30 March 2009. As to one, it said: "This proxy may be valid provided it is physically forwarded by the member directly to the AJC. Our position is that it would not be valid if it were handed from a member into the hands of third parties." 17 In relation to the other form, the letter said that "it could be valid provided that" certain characteristics existed. These were concerned with signing and direct deposit. The letter went on to express reservations about forms containing blanks at the time of signing. 18 On 2 April 2009 – two days after the defendant's letter just mentioned and the day before the return date of the originating process – the defendant's solicitors sent to the plaintiff's solicitors the written submissions proposed to be made by counsel for the defendant at the hearing. The letter said: "It appears that on the case advanced by the plaintiff's evidence the only live issues in contention are academic". 19 The submissions – which were in fact handed up by Mr F Gleeson SC when he appeared for the defendant on 3 April 2009 – refer to the correspondence and then say: "7. On the basis of this correspondence, the issues between the parties are twofold: (a) First, is a proxy valid if it is sent by a member to a third party and then forwarded by the third party to the company, where that third party is not receiving proxies on behalf of the company? (b) Second, if the answer to the first question is, 'Yes', is a proxy valid if the member does not identify the meeting or meetings for which the proxy appointment is made, but leaves that part of the proxy for someone else to complete before that second person forwards the proxy to the company? 8. In light of the Plaintiff's evidence, both these issues appear to be academic. 9. According to the evidence of Mr Bracks, all proxies the subject of the present dispute were returned to the relevant member to be forwarded directly to Computershare Investor Services Pty Ltd ( Computershare ), being the entity appointed to receive proxies on behalf of the AJC. This matter was not canvassed in the letter from Hicksons dated 30 March 2009. 10. Insofar as the steps described by Mr Bracks have been taken, the AJC does not take issue with the validity of those proxies on the grounds identified in the AJC's letter of 31 March 2009. It appears from the evidence that Mr Bracks has taken the steps set out in his affidavit. If this is what occurred, the AJC does not take issue with the manner in which those proxies were completed or sent to Computershare. No dispute has crystallised in relation to any particular proxy form, and the Court is not in a position to decide such questions in the present proceedings. 11. The AJC maintains its position that insofar as any proxies in the form of Annexure 'B' are received by Mr Bracks, completed by him or his staff and forwarded directly to Computershare, those proxies will be invalid. No dispute has crystallised in relation to any particular proxy on this basis." 20 It is in this factual context that the plaintiff's application for leave to discontinue arises and the competing applications in relation to costs must be addressed. Discontinuance is dealt with by rule 12.1(1) of the Uniform Civil Procedure Rules 2005: "The plaintiff in any proceedings may, by filing a notice of discontinuance, discontinue the proceedings, either as to all claims for relief or as to all claims for relief so far as they concern a particular defendant: (a) with the consent of each other active party in the proceedings, or (b) with the leave of the court." 21 The consequences, in terms of costs, are set out in rule 42.19(1) and (2): "(1) This rule applies to proceedings that are discontinued by the plaintiff, as referred to in rule 12.1. (2) Unless the court orders otherwise or the notice referred to in rule 12.1 (2) otherwise provides, the plaintiff must pay such of the defendant's costs as, at the date on which the notice of discontinuance was filed, had been incurred by the defendant in relation to each claim in respect of which the proceedings have been discontinued." 22 The rule just quoted does not give rise to a presumption as to the appropriate or correct costs outcome. This is because of the residual discretion given to the court: Fordyce v Fordham [2006] NSWCA 274. In Britannia Pty Ltd v Parkline Construction Pty Ltd [2009] NSWCA 32, the Court of Appeal said that a plaintiff seeking to discontinue on a basis as to costs other than that prescribed by rule 42.19 must show some positive ground or good reason for departing from the ordinary course. It was also indicated that such a departure will not generally be appropriate where the plaintiff effectively capitulates. 23 An example of a case in which a different order was made and the defendant was ordered to pay the costs of a discontinuing plaintiff is Garwolin Nominees Pty Ltd v Statewide Building Society [1984] VR 469. In that case, a plaintiff who had sought to enforce a lease assigned to the defendant sought leave to discontinue when, shortly before the hearing, the defendant remedied its non-compliance. Mr Sullivan QC, in making submissions on behalf of the plaintiff, drew an analogy with that case. 24 It is necessary to come to a view about why the plaintiff seeks to discontinue and why it was that the desire arose only very soon before the matter came before the court on 3 April 2009. 25 The immediate cause of the stance ultimately taken by the plaintiff is obviously the plaintiff's acceptance of the proposition advanced by the defendant on the eve of the hearing, namely, that, in the light of the plaintiff's evidence, the parties were not in dispute. 26 The defendant's position is that it did not realise that there was, in reality, no dispute until after the plaintiff's evidence had been served on 1 April 2009. It was not until then that the defendant knew of the steps taken by Mr Osburg on 18 March 2009 to return completed proxy forms to members from whom they had been collected with a view to bulk lodgment. The defendant's letter of 27 March 2009 (more than a week later) alerted Mr Osburg to the problem that would arise, according to the advice the defendant had, if a member's proxy passed through other hands on its way to being deposited. The letter of 31 March 2009 – with its statements that one form "may be valid" and the other "could be valid", subject to a proviso in each case – repeated the concern. 27 There is some substance to the defendant's submission that, had it been notified on or soon after 18 March 2009 that the plaintiff's group had taken steps to side-step the perceived problem of third party deposit of forms in which blanks had been completed after signature, the major reservation expressed in the defendant's letters of 27 and 31 March 2009 would not have been expressed. Such notification would have defused that issue, at least. 28 But even then, the letters received by Mr Osburg from the defendant did not make it clear that the third party lodgment issue (coupled with the concern about filling of blanks after the appointor had signed) was the only thing that prevented the defendant giving an assurance of non-objection in relation to forms in respect of which the plaintiff's group had made inquiries of the defendant. 29 The defendant's letter of 27 March 2009, after noting the advice of senior counsel, said that "additional issues arise which are not directly covered by the opinion". The next sentence began "For example," and went on to refer, first, to a need for the proxy to be "complete when it leaves the hand of the member" (implying that a form in which blanks appear and which is signed by the member and given to someone else may raise an "issue") and, second, to the need for direct lodgment. The use of the words "For example" indicated that these were but two of some greater number of "additional issues" about which the defendant was concerned. 30 The defendant's letter of 31 March 2009 was also equivocal. It said of the first form that it "may be valid" if the direct deposit requirement was observed and "would not be valid" if that requirement was not observed. In relation to the second form, it said that it "could be valid" if directly lodged and that it was necessary for the member to complete it either as a standing proxy or by inserting the date of the meeting. The clear message was that, even if those specific matters were satisfactorily dealt with in some way, the defendant still harboured unexplained doubts about validity reflected by the words "may be valid" and "could be valid". 31 With the correspondence in that state, the plaintiff says, she had no assurance from the defendant and was justified in pressing on with the application. 32 I am of the opinion that it was not until the submissions of the defendant's counsel were copied to the solicitors for the plaintiff on the afternoon of the day before the hearing that the defendant gave any clear indication that the defendant's concerns were confined to the matters Mr Osburn had taken steps on 18 March 2009 to remedy. Until that point, the plaintiff was entitled to believe in the existence of the unexpressed reservations in the defendant's letters of 27 and 31 March 2009, that is, those of the "additional concerns" beyond the two specifically mentioned as examples in the letter of 27 March 2009 and the concerns over and above the concerns about bulk lodgement and completion of blanks referred to in the letter of 31 March 2009 that caused the words "may be valid" and "could be valid" to be used in that letter. 33 My assessment of this case is that, while earlier communication by the plaintiff's group to the defendant of the steps Mt Osburn had taken on 18 March 2009 may have gone some way towards narrowing the concerns the defendant had about proxies solicited by the plaintiff's group, there would still have been, on 27 March 2009 and 31 March 2009, expressions of reservations and concerns by the defendant preventing its giving the assurances sought by the plaintiff's group. I refer, of course, to the unarticulated concerns the existence of which was indicated in the letters of those dates. One is left with the unmistakable impression that it was only in the last minute preparations before the hearing that the defendant reached the point where the bulk deposit concern and the blank-filling concern became, in its mind, the only concerns it held. 34 The plaintiff did not capitulate. The fact that there was no dispute came home to the plaintiff only when she saw the submissions of counsel for the defendant on the eve of the hearing. Until then, the plaintiff had valid grounds for thinking that she would have to argue her case in support of the efficacy of the steps with respect to proxies that the plaintiff's group had taken. The analogy that Mr Sullivan QC sought to draw on the plaintiff's behalf with Garwolin Nominees Pty Ltd v Statewide Building Society (above) is a valid analogy. 35 The orders of the court are as follows: 1. Order that the plaintiff have leave to discontinue as to all claims for relief. 2. Order that the defendant pay the plaintiff's costs of the proceedings. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.