Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 4)

1. [1]

   I gave judgment in this matter on 10 December 2019: Angelis as trustee for the Angelis Family Trust v Pemba Capital Partners Fund I Partnership, LP (No 3) [2019] NSWSC 1759.

2. [2]

   These reasons assume familiarity with that judgment. I will use the same abbreviations here.

3. [3]

   These reasons deal the question of costs to the date of my 10 December 2019 judgment.

4. [4]

   The Angelis Parties accept that they were largely unsuccessful in the proceedings.

5. [5]

   Three distinct claims were brought in the proceedings.

The Angelis Parties’ claim against Pemba and the Kitchin Parties

1. [6]

   This claim by the Angelis Parties failed. The Angelis Parties accept that they should pay Pemba’s costs and the Kitchin Parties’ costs of the amended summons.

Pemba’s cross-claim

1. [7]

   Pemba was successful on its cross-claim. I have concluded that the 2017 Shareholders Agreement was not varied and that shares in Coverforce were not issued to the Kitchin Parties.

2. [8]

   The Angelis Parties accepted that they should pay Pemba’s costs of this cross-claim.

3. [9]

   The Kitchin Parties were also respondents to this cross-claim but they did not actively resist the claim. During the hearing before me they left the field of battle here to the Angelis Parties and Pemba.

4. [10]

   In those circumstances I see no reason to order that the Kitchin Parties pay Pemba’s costs of its cross-claim. That is, there should be no order against the Kitchin Parties in relation to Pemba’s cross-claim.

5. [11]

   On the other hand, the Kitchin Parties seek an order that the Angelis Parties and Pemba pay their costs of resisting Pemba’s cross-claim. I see no basis for this order. Although at the hearing the Kitchin Parties did not actively involve themselves in resisting Pemba’s cross-claim, they stood ready to benefit should it have failed.

The Kitchin Parties’ cross-claim

1. [12]

   Both the Angelis Parties and Pemba resisted the Kitchin Parties’ cross-claim.

2. [13]

   The Kitchin Parties were successful in both establishing an entitlement to “reverse” the Resilium Transaction and in establishing that each of the Angelis Parties and Pemba engaged in misleading and deceptive conduct.

3. [14]

   On the face of it, therefore, the Kitchin Parties should have a costs order against both the Angelis Parties and Pemba.

4. [15]

   The Angelis Parties propose that Coverforce, rather than they, pay the Kitchin Parties’ costs. That was said to be because the relief that the Kitchin Parties obtained, the “unwinding” of the Resilium Transaction, was primarily against Coverforce.

5. [16]

   The Angelis Parties appeared to retreat somewhat from that position in reply submissions. In any event, I do not accept it. The success achieved by the Kitchin Parties is, in substance, by reason of the conduct of Mr Angelis. It was Mr Angelis who purported to commit Coverforce to the Resilium Transaction and the purported 25 March Shareholders Agreement without board approval and in the face of Pemba’s opposition.

6. [17]

   Accordingly, a costs order in favour of the Kitchin Parties on its cross-claim should be directed to the Angelis Parties and not Coverforce.

7. [18]

   Pemba submitted that, overall, the Kitchin Parties should only get 70% of their costs because, at the outset, their claims simply mirrored those of the Angelis Parties. It was only when they filed an amended cross-claim on 3 October 2019 that they advanced the claim on which they have proved successful.

8. [19]

   However, as I have said, at the hearing, the Kitchin Parties did not involve themselves in the dispute between the Angelis Parties and Pemba and focussed their involvement and submissions on their position assuming the Angelis Parties failed in their claim against Pemba and that Pemba succeeded on its cross-claim.

9. [20]

   This was an understandable position for the Kitchin Parties to take. No doubt the Kitchin Parties have incurred some costs otherwise than advancing the position on which they were successful. But I do not see why this should result in a global discount to the Kitchin Parties’ costs entitlement.

10. [21]

    I have found that Pemba engaged in misleading or deceptive conduct and that, but for that conduct, the Kitchin Parties would not have proceeded with the Resilium Transaction (see [626]-[648] and especially at [645] of my 10 December judgment).

11. [22]

    This did not result in any further relief being granted to the Kitchin Parties. But some time was devoted during the hearing to that question.

12. [23]

    Pemba also advanced some arguments against the Kitchin Parties. This included whether Special Majority Board Approval was needed to enter the 25 March 2019 Share Purchase Deed (see [517]-[533] of my 10 December 2019 judgment) and whether the Kitchin Parties could rely on the statutory assumptions in s 129 of the Corporations Act 2001 (Cth) (see [548]-[556] of my 10 December 2019 judgment).

13. [24]

    In those circumstances, my conclusion is that Pemba should pay some proportion of the Kitchin Parties’ costs.

14. [25]

    Overall, I think the fair result is to order that Pemba pay 20% of the Kitchin Parties’ costs.

The costs of AUB

1. [26]

   AUB was the seventh defendant. The Angelis Parties discontinued proceedings against AUB during the course of the trial.

2. [27]

   I am informed that the Angelis Parties and AUB are in discussions about what costs order should be made.

Conclusion

1. [28]

   For those reasons, I order that:

   1. (1)

      The plaintiffs pay the first and second defendants’ costs of the proceedings.

   2. (2)

      The plaintiffs pay 80% of the third to fifth defendants’ costs of the proceedings.

   3. (3)

      The first and second defendants pay 20% of the third to fifth defendants’ costs of the proceedings.