In the matter of Munja Bakehouse Pty Ltd

By my judgment delivered on 17 January 2024 ([2024] NSWSC 6), I observed that, unusually, both the Plaintiffs and the Defendants in these proceedings sought the same relief, namely that several Defendants (“Active Defendants”) purchase the shares in Munja Bakehouse Pty Ltd and Smith Street Marrickville Pty Ltd as their first preference and a winding up order as their second preference. I also observed at paragraphs [79]-[81] of that judgment that:

The parties submitted orders which dealt with several matters in different terms, although it was not apparent that those differences were of substance and they were not addressed in the parties’ submissions. I will largely adopt the Active Defendants’ proposed submissions, where I have adopted that form as to the issues noted below. There is a difference between the parties as to the form of order which confers powers on the liquidator of Smith Street as receiver of assets of the relevant trusts, although it is not clear whether it raises any matter of substance. The Active Defendants adopted the form of order by Rees J in granting powers to a receiver over trust assets, in somewhat similar circumstances, in Re Crow Inn Pty Ltd [2020] NSWSC 601 at [64], by reference to powers which will be granted to a receiver of property of a corporation under s 420 of the Corporations Act 2001 (Cth) (“Act”). The Plaintiffs’ proposed orders instead referred the powers which would be granted to a liquidator under s 477 of Act. I propose to follow the form of orders made by Rees J in Crow Inn, given the similarity of the circumstances. I do not consider it necessary specifically to reserve liberty to apply in respect of the conduct of the receivership. The Active Defendants also propose that both the Amended Originating Process and the Amended Interlocutory Process should be dismissed, to the extent that orders have not been made in respect of them, and I will take that approach given the changes between the matters raised by the pleadings and the matters which went to hearing. The stay which I will order will extend to all orders made, including as to costs.

The Plaintiffs also submit that the Active Defendants should pay their costs of the proceedings in respect of the winding up application and in respect of the Interlocutory Process. Mr Parish, who appears for the Plaintiffs, recognised that s 466(2) of the Act provides that a liquidator must, unless the Court orders otherwise, reimburse an applicant in winding up proceedings for its taxed costs out of the company’s property. In Hooke v Bux Global Ltd (No 8) [2019] FCA 671, Colvin J addressed the circumstances in which a different costs order could be made, having regard to the effect of an order under s 466 of the Act, including with respect to the priorities applicable under s 556(1)(b) of the Act. I also briefly addressed that question in Bercich v Riverside Spares Pty Ltd [2019] NSWSC 1900.

Mr Parish also refers to the Court’s powers to make orders for costs under s 1335(2) of the Corporations Act and s 98(1) of the Civil Procedure Act 2005 (NSW) and r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) in that respect. Section 98 of the Civil Procedure Act confers a discretionary power to determine costs on the Court and requires that that discretion be exercised judicially: Ballam v Ferro (No 2) [2022] NSWSC 1358 at [54]. Rule 42.1 of the UCPR in turn provides that:

A successful party in proceedings has a “reasonable expectation” of being awarded costs against an unsuccessful party, unless there is good reason for that presumption to be displaced: Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 at [22], [134]. In Commonwealth of Australia v Gretton [2008] NSWCA 117 at [121], Hodgson JA (with whom Mason P agreed) observed that:

That observation was cited, with apparent approval, by the Court of Appeal in Heath v Greenacre Business Park Pty Ltd [2016] NSWCA 34 at [98] and, in Cellarit Pty Ltd v Cawarrah Holdings Pty Ltd (No 2) [2018] NSWCA 266 at [7]–[14], McColl JA summarised the applicable principles as follows:

Mr Parish submits that the Active Defendants should pay the Plaintiffs’ costs of defending the Interlocutory Application filed by the Active Defendants, on the basis that costs follow the event. I recognise that the Active Defendants were not successful in obtaining the primary relief that they sought in the interlocutory process or in obtaining a buy-out order on a narrower basis on which they sought it at the hearing. However, the order for which Mr Parish contends would not bring about a fair or just result between the parties, where the Plaintiffs had also advanced a broad oppression claim which they did not press at the hearing. While Mr Parish submits that the issues surrounding the oppression claim would have been ventilated in the proceedings in any case, although it seems to me that the issues relating to a just and equitable winding up were narrower in scope.

The Active Defendants in turn sought an order that the Plaintiffs pay half of their costs of the proceedings prior to 13 December 2023 and submitted that the Court should otherwise make no order as to the costs of the proceedings. Mr Ogborne, who appears for the Active Defendants, submits that both the Plaintiffs and the Active Defendants succeeded in their claims, at least in respect of the orders that both sought that the Companies be wound up on the just and equitable ground, and that the Active Defendants had also sought and obtained relief extending to the appointment of any liquidator appointed to Smith Street as receiver of trust assets. He also points out that, up to the point of the hearing, the Plaintiffs had opposed an order that the companies be wound up on the just and equitable ground and had instead pressed an oppression claim, in which evidence in wide scope had been led. I have also had regard to Mr Ogborne’s submissions as to the history of the proceedings, although it is not apparent to me that those submissions support the order sought that the Plaintiffs pay half of the costs of the Active Defendants prior to 13 December 2023, if any order for costs were to be made in their favour.

For the reasons set out above, I am not persuaded that an order for costs should be made in favour of either party in respect of the wider claims that both parties pursued and then abandoned or did not succeed in.

Mr Parish also submits that the Court should otherwise order under s 466(2) of the Act so as to avoid a result that the Plaintiffs would bear a share of the costs of the winding up. He submits that a winding up order could have been made at an earlier point in the hearing, had the Active Defendants not maintained a claim that a buy-out order could be made under s 467(1) of the Act, and that part of the hearing turned on the availability of a buy-out order and the value of the assets of the relevant companies. While there is force in that submission, it neglects that fact that a winding up order could also have been made at an earlier point, well before the matter reached a hearing, had the Plaintiffs not pressed their claim to other relief on the basis of oppression. It cannot be said that one party succeeded, as against the other, in respect of obtaining a winding up order where all parties accepted that it should be made if a buy-out order was not made. I am also not persuaded that there is reason otherwise to order for the purposes of s 466(2) of the Act, where the parties sought but did not obtain other relief and all parties ultimately sought a winding up order if a buy-out order was not made.

For these reasons, I make the following orders: