Dariusz Plust and Maclaw Jagoszewski v Polish Club Ltd [2014] NSWSC 323

Supreme Court New South Wales

Medium Neutral Citation: Dariusz Plust and Maclaw Jagoszewski v Polish Club Ltd [2014] NSWSC 323 Hearing dates: 27 February 2014 and 12 March 2014 Decision date: 24 March 2014 Jurisdiction: Equity Division Before: Robb J Decision: (1)The court makes no order as to the cost of these proceedings between 7 February 2014 and 27 February 2014, with the intent that each party will pay their own costs of the proceedings for this period. (2)The court orders the plaintiffs to pay the costs of the defendant for the period between 27 February 2014 and 12 March 2014 on the ordinary basis. Catchwords: COSTS - no order as to costs of first hearing - exercise of discretion - each party partly responsible for the making of the application - plaintiffs failed to accept defendant's offer that each party pay their own costs - plaintiffs to pay defendant's costs of second hearing on the ordinary basis Legislation Cited: Corporations Act 2001 (Cth) s 251B Category: Costs Parties: Dariusz Plust (first plaintiff) Waclaw Jagoszewski (second plaintiff) Polish Club Limited (defendant) Representation: Counsel: G Segal (plaintiffs) G Ng (defendant) Solicitors: Drexler & Partners (plaintiffs) Strathfield Law (defendant) File Number(s): 2014/36986

Judgment 1I am concerned with the question of costs in a matter that came before me in the duty list on 27 February 2014, which was adjourned to 12 March 2014. 2On 27 February 2014 and 12 March 2014 Mr Segal, of counsel, appeared for the plaintiffs and Mr Ng, of counsel, appeared for the Club. 3The plaintiffs are members of the defendant, the Polish Club Ltd. 4The plaintiffs sought to be nominated for election to the committee of the Club in 2014, but the Club did not accept the nominations. 5The plaintiffs commenced the present proceedings by summons filed in court on 5 February 2014. They sought various declarations and orders concerning the validity of their nomination, a requirement that their names be placed on the ballot paper, that ballot papers including the names of the plaintiffs be circulated by the Club to members, and that the close of voting be extended to permit members to consider voting for the plaintiffs. 6Ball J gave leave to the plaintiffs to file the summons in court on 5 February 2014, and made the summons returnable on 7 February 2014. 7On 7 February 2014 Ball J made a number of orders by consent of the parties. On that occasion the plaintiffs were represented by Mr Segal, of counsel, and the Club was represented by Mr Pasternacki, solicitor. 8In orders 1 to 8 the court made the declarations and orders that were sought by the plaintiffs in their summons. By order 9 the court ordered the defendant to pay the plaintiffs' costs. 9The court made in orders 10 and 11 two orders that were not sought in the plaintiffs' summons. The orders required the Club to allow the plaintiffs to inspect its register of members, and to provide the plaintiffs with a copy of the register of members within seven days. 10The draft short minutes of order contained a draft order 12 that the Club call a meeting for the purpose of convening an Election Commission as required by clause 56(a) of its constitution. The paragraph containing that order is struck through in the short minutes of order actually made by the court. There is a further draft order 12, that would have given leave to the plaintiffs to file in court an amended summons dated 7 February 2014. Draft order 13 would have stood the claim in par 12 of the amended summons over to a date to be arranged with the associate of the duty judge. Both the second draft order 12 and draft order 13 have been struck through. 11When the matter was called before me on 27 February 2014 Mr Segal handed up a minute of proposed orders. The first order sought was an order that on or before 1 April 2014 the Club, in accordance with article 56(a) of its articles of association convene and conduct a meeting of its members at which meeting an election committee shall be selected by its members. The second order sought was that the defendant pay the plaintiffs' costs since the orders made by Ball J on 7 February 2014. 12The parties were before the court on 27 February 2014 in part because related proceedings No 2014/49582 were before the court. In those proceedings the court by consent made an order that the Club pay the plaintiffs' costs on the ordinary basis. 13In relation to the present proceedings, however, the only reason that the parties were before the court was in exercise of liberty to apply granted by Ball J on 7 February 2014, and the only issue sought to be ventilated by the plaintiffs was the making of the additional two orders. 14Counsel explained to me that the plaintiffs had sought leave from Ball J on 7 February 2014 to file an amended summons in court. The court file does not contain a draft of the amended summons, because it was not received by Ball J. A copy of the draft amended summons is an annexure to the affidavit of Mali Karunaratne sworn 12 March 2014. Mr Ng read out in court the terms of prayer 12 of the draft amended summons, which were: "An order that the defendant club call within the next seven days a meeting in the nature of an information meeting referred to in clause 56(a) of the memorandum of association of the defendant club for the purpose of convening an election commission to conduct an election in the terms referred to in the memorandum of association of the defendant club". 15Clause 56 of the constitution of the Club deals with the procedural requirements for holding valid meetings of members for certain purposes. Subparagraph (a) requires the committee of the Club within one month after the end of each financial year to conduct an information meeting. One of the matters to be dealt with at the information meeting is the selection of an "Election Commission". Subparagraph (b) gives the Election Commission a role in the conduct of ballots of members. 16After some discussion between counsel and the bench, the question arose as to how the court could justify making the orders sought by the plaintiffs in par 1 of the minute of proposed orders, if it was not first satisfied on the evidence that the Club had not already complied with clause 56(a), or if it had purported to do so, the attempt was invalid. The court could not justify making an order that the Club implement its constitutional processes to appoint a new Election Commission if one was already validly in place under the constitution. 17Mr Segal advanced the plaintiffs' case that the court should entertain an application to make an order that the Club appoint a new Election Commission. That caused Mr Ng to respond that it had been the Club's understanding that the only issue that the plaintiffs had raised was that there was insufficient evidence to persuade them that the Club had validly appointed its existing Election Commission. The Club had come to court without notice, or an appreciation, that the plaintiffs would seek the orders in the minute of proposed orders. 18In this context I raised the issue of the legal entitlement of members of the Club to require the Club to allow them to inspect, or to provide copies, of the Club's documents. 19The luncheon adjournment intervened. Immediately after the hearing recommenced Mr Segal advised the court that the Club had furnished to the plaintiffs a number of documents which, upon inspection, persuaded the plaintiffs that it was no longer necessary for them to seek order 1 in the minutes of proposed orders. 20That only left outstanding the question of costs in these proceedings between 7 February 2014 and 27 February 2014. Mr Segal sought an order that the Club pay the plaintiffs' costs. Mr Ng submitted that the appropriate order was that each party should pay their own costs. The matter was stood over to 12 March 2014 to enable the court to deal with the question of costs. 21The plaintiffs' solicitor, Mr Mali Karunaratne, swore an affidavit on 27 February 2014. The effect of this evidence was that on 7 February 2014 Ball J raised the question of whether the orders that he made would be effective if there had not been a proper appointment of an Election Commission. Prior to the orders being made, Mr Pasternacki had advised that on his instructions there was a meeting at which the Election Commission had been selected. Mr Pasternacki said that he would advise the Club to provide to the plaintiffs documentation in respect of the selection of the Election Commission. The second plaintiff attended the premises of the Club on 8 February 2014, without receiving any documents concerning the selection process. On 13 February 2014 the second plaintiff was provided with a copy of the register of members, as well as a Facebook posting dated 22 June 2013 concerning a members information meeting, which stated that such a meeting would be held on Sunday, 7 July 2013. 22The plaintiffs' solicitors complained of this matter in a letter to the Club's solicitors dated 20 February 2014. By this letter the plaintiffs threatened to bring the issue to the attention of the court on 27 February 2014 at the same time as the other proceedings between the parties that had already been listed before the duty judge on that date. The plaintiffs required that they be given "further evidence that demonstrates a proper selection of an election commission". 23Mr Pasternacki in swore an affidavit in reply on 11 March 2014. That affidavit referred to the Club having found on about 23 February 2014 a copy in electronic form of posters that had been displayed in the Club's foyer before the information meeting to be held on 7 July 2013. On about the same date that Club's president located an electronic version of a PowerPoint presentation that was used by him as the agenda for the information meeting during which the Election Commission was appointed. He said that a copy of the PowerPoint presentation was provided to the plaintiffs' legal representatives on 27 February 2013. That was seven days after the plaintiffs' solicitors' 20 February 2014 letter. 24Mr Karunaratne swore a further affidavit on 12 March 2014. He said that when the matter came on before Ball J on 7 February 2014, discussions took place, in which Mr Pasternacki said: "I am instructed that the Club did hold a meeting at which the Election Commission was appointed." Mr Segal replied: "If your client produces evidence that this occurred then we will not need order 12 and I suggest that in the meantime we stand over the proceedings in respect of order 12". Mr Pasternacki agreed. Mr Karunaratne further said that Ball J said that the appropriate way to deal with the issue was to grant leave to restore the matter if it became necessary to pursue the issue. He said that he had been instructed by the plaintiffs that they had not seen a copy of the poster that had been displayed in the Club's foyer. 25The evidence suggests that the plaintiffs raised the issue of whether an Election Commission had validly been appointed shortly before the hearing on 7 February 2014. They had no evidence that an Election Commission had not been appointed. On the evidence given on information and belief by their solicitor, they missed whatever notification of the members information meeting that was circulated by the Club. While in principle the plaintiffs had a proper interest in ensuring that the Club's electoral processes were validly complied with, they had no evidence of any departure from the constitution. 26The plaintiffs referred to clause 71 of the constitution, which apparently provides that "all resolutions and proceedings at all meetings of members of the Club and of the committee and any subcommittee" are to be minuted. That provision probably required the Club to keep minutes of the selection of the members of the Election Commission at the members information meeting at which that occurred. 27Section 251B of the Corporations Act, 2001 (Cth) gave the plaintiffs as members of the Club a right to inspect the minutes of the Club and to obtain copies upon request in writing. 28In Mr Karunaratne's 20 February 2014 letter, to which reference is made above, he did request that the Club provide to the plaintiffs evidence that the Election Commission had been that of the appointed, but as I read the letter, he did not make a request on behalf of the plaintiffs for the inspection of minutes under s 251B. 29I infer that it would not have availed Mr Karunaratne to do so, because the Club did not keep minutes of the members information meeting. Had it done so, it would have put the minutes into evidence to prove the valid appointment of the Election Commission. 30The question is: what in all of these circumstances should the court do on the question of costs? 31Although the Club offered on 27 February 2014 to accept an order that each party pay their own costs, by 12 March 2014 its position was that the plaintiffs should be ordered to pay the Club's costs. 32The starting position is that, on the day before the hearing before Ball J on 7 February 2014, the plaintiffs advised the Club that they would seek an order for the appointment of an Election Commission. That approach was not appropriate, because they did not have evidence that there was not an existing validly appointed Election Commission. It does not appear to me that the plaintiffs had any objective grounds for doubt on the subject. They simply did not know one way or the other. They did not give notice that they would make an application, say under s 251B, to be provided with documents relevant to the appointment of the existing Election Commission. 33On 7 February 2014 there was some form of agreement that the Club would provide the plaintiffs with available documents relevant to the appointment of the Election Commission. The evidence suggests that there were few such documents. It may be, although the issue was not the subject of submissions by the parties, that the Club failed to produce proper minutes of the appointment. Additional electronic information was discovered by officers of the club on about 23 February 2014 34I infer that the further information that was discovered in electronic form was provided to the plaintiffs in hard copy after the luncheon adjournment on 27 February 2014. 35That information apparently satisfied the plaintiffs that they should accept that the Election Commission had validly been appointed. It is not at all clear why the plaintiffs would think that an agenda for a meeting provided adequate proof of what happened at the meeting. 36The plaintiffs decided not to proceed with the foreshadowed application for an order that the Club take the steps required by its constitution to cause an Election Commission to be appointed. 37In my view the appropriate costs order that should have been made on 27 February 2014 was that each party pay their own costs. 38On the plaintiffs' side, they had sought an order that the court could not properly make without proof that the existing Election Commission had not validly been appointed. The plaintiffs had not first gathered evidence to prove that essential matter. It was a matter for them that they decided not to proceed with their application upon the basis of evidence which was not sufficient to prove that the existing Election Commission had validly been appointed. The plaintiffs did not seek any order that they be provided by the Club with information to which they were entitled as a matter of law. 39The Club's conduct was also not without blemish. The Club should have been in a position to prove that the existing Election Commission had validly been appointed, by providing minutes of the relevant resolutions to the plaintiffs, which was information to which they were entitled as a matter of law. In a practical sense inadequate record keeping on the part of the Club was responsible for this minor imbroglio. Although the evidence as to the terms of the agreement is not clear, the inference is justified that on 7 February 2014 the Club did agreed to provide information to the plaintiffs. The information that was available came to light on or about 23 February 2014. That information was not provided to the plaintiffs until after the luncheon adjournment on 27 February 2014. 40However, on 27 February 2014 the plaintiffs insisted upon an order that the Club pay their legal costs. 41The order that I will make in respect of the costs of these proceedings after 7 February 2014 up to 27 February 2014 will have the effect that each party will pay their own costs. 42That leads to the question of what should be done in relation to the costs for the period between 27 February 2014 and 12 March 2014. 43The parties would not have incurred those costs had the plaintiffs accepted the costs order offered by the Club on 27 February 2014. The plaintiffs have failed in their attempt to persuade the court that it should make an order for costs in their favour in relation to the period up to 27 February 2014. 44In those circumstances I will order the plaintiffs to pay the Club's costs for the period between 27 February 2014 and 12 March 2014. 45The orders of the court will be: (1)The court makes no order as to the cost of these proceedings between 7 February 2014 and 27 February 2014, with the intent that each party will pay their own costs of the proceedings for this period. (2)The court orders the plaintiffs to pay the costs of the defendant for the period between 27 February 2014 and 12 March 2014 on the ordinary basis.