BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1499

Supreme Court New South Wales

Medium Neutral Citation: BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1499 Decision date: 30 October 2014 Jurisdiction: Equity Division - Commercial List Before: Stevenson J Decision: Order that the defendants pay the plaintiff's costs of the proceedings Catchwords: PRACTICE AND PROCEDURE - costs - whether plaintiff had achieved substantial success - whether both defendants should pay plaintiff's costs Legislation Cited: Corporations Act 2001 (Cth) Cases Cited: BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1363 Cassegrain v Cassegrain [2006] NSWCA 39; 56 ACSR 711 Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 Category: Costs Parties: BB Retail Capital Pty Limited (Plaintiff) Alexandria Landfill Pty Limited (First Defendant) Ian Raymond Malouf (Second Defendant) Representation: Counsel: J Williams (Plaintiff) D Healey (First Defendant) K Smark SC (Second Defendant) Solicitors: Gilbert & Tobin (Plaintiff) HopgoodGanim (Defendants) File Number(s): SC 2013/68976

Judgment 1I gave judgment in this matter on 3 October 2014 (BB Retail Capital Pty Ltd v Alexandria Landfill Pty Ltd [2014] NSWSC 1363) and made final orders on 23 October 2014. 2The matter remaining for consideration is what order should be made for the costs of the proceedings. 3In these reasons I shall use the same abbreviations adopted in my judgment of 3 October 2014. 4By that judgment I decided, favourably to BBRC, that BBRC's 20 million convertible notes converted to preference shares at the rate specified in the Terms of Issue, and not on a "$1 for 1 share" basis. 5I also dealt with the question of Organic Debt. By the time of hearing, it was common ground that, as at 1 January 2013, there was Organic Debt of approximately $92.5 million. The parties were divided as to whether a further amount of $27.7 million should also be characterised as Organic Debt. The effect of my judgment is that, of that sum of $27.7 million, only a further $4.2 million was Organic Debt. 6Until very shortly before the hearing there had been a further issue as to the nature of BBRC's entitlement under cl 8.2(b) of the Shareholders Agreement. That dispute was resolved by the time the hearing before me commenced; agreement was reached as to the form of a declaration to be made. 7In my opinion, in relation to the issues ultimately pressed, BBRC has achieved substantial success. It succeeded on the issue which took the bulk of the hearing time before me (in substance, whether the parties "otherwise agreed" for the purpose of cl 7.1 of the Terms of Issue). 8The Organic Debt issue took only a small proportion of the hearing time before me. 9In any event, overall, the level of Organic Debt finally adjudicated or agreed upon between the parties ($96.7 million) was significantly higher than the amount for which the defendants contended until very shortly before the hearing commenced. 10In relation to the issue of cl 8.2(b) of the Shareholders Agreement, it had been the defendants' contention that the relevant clause was contrary to s 254T of the Corporations Act 2001 (Cth), contrary to the provision of ALF's constitution and void for uncertainty. Those contentions were abandoned shortly before the hearing. 11The declaration which has now been made by consent varies somewhat from that originally sought by BBRC. BBRC sought a declaration that, in effect, replicated the terms of cl 8.2(b) and called for ALF "to make a quarterly payment" to BBRC of the kind contemplated by the clause. The declaration now made by consent calls for ALF to make such a payment "or to accrue" a corresponding amount "by way of loan...pending accrual of income". 12However, BBRC made clear, in its Second Further Amended Reply, that it accepted that the relevant payment could be made "by way of loan pending accrual of income". 13In those circumstances it appears to me that, despite the familiar observations of McHugh J in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 at 624/5, it can be seen that, as a matter of substance, BBRC has achieved success on this issue as well. 14In those circumstances, in my opinion, BBRC should have its costs of the proceedings. 15The remaining question is whether the costs order should be directed to both ALF and Mr Malouf or, as both BBRC and ALF contend, to Mr Malouf alone. 16In that regard, BBRC contended that, in relation to the issue referred to at [4] above, the "real protagonists" were BBRC and Mr Malouf as it was Mr Malouf who stood to lose if BBRC's claim was successful (see [10] of my judgment of 3 October 2014). 17There is substance in that submission. ALF's interest in that issue was confined to its concern about the proper state of its share register. 18However, ALF had a direct interest in the question of the proper construction of the Shareholders Agreement. As I understand it, much of the costs that have been incurred by the parties relate to that issue, which was not resolved until very shortly before the hearing commenced. 19It is true that an order for costs directed to ALF (as well as Mr Malouf) will impact all of ALF's shareholders, including its preference shareholders who had nothing to gain in resisting BBRC's claims. It is also true that when there is a dispute between shareholders, the Court has the power to fashion costs orders to insulate the company from the costs burden of the proceedings, as sometimes occurs in winding up or oppression proceedings: for example Cassegrain v Cassegrain [2006] NSWCA 39; 56 ACSR 711 at [7-9], [13]. 20However, in this case, there is no suggestion of any impropriety or misconduct on Mr Malouf's part and, in any event, he owns the majority of the shares in ALF and will thus himself bear most of the burden of a costs order directed to company. 21In those circumstances, I am not persuaded I should make direct the costs order directed only to Mr Malouf. 22I order that the defendants pay the plaintiff's costs of the proceedings.