In the matter of C.V. Joint (Aust) Pty Ltd

By Originating Process filed on 9 June 2022, the Plaintiff, Mr Mi, sought an order winding up CV Joint (Aust) Pty Ltd (“Company”) under sub-ss (e), (f) or (k) of s 461(1) of the Corporations Act 2001 (Cth) (“Act”). By Interlocutory Process filed on 6 July 2022, the Second Defendant, Mr Ury Aleksandroff, sought relief in oppression. Mr Mi and the First Defendant, Ms Duza Aleksandroff, were formerly husband and wife and Mr Ury Aleksandroff is Ms Duza Aleksandroff’s brother.

On 10 June 2022, Mr Mi filed an Interlocutory Process seeking the appointment of a provisional liquidator, and Stevenson J subsequently made that order and appointed Mr Liam Bailey as provisional liquidator of the Company. On 9 November 2022, I made orders, on Mr Bailey’s application, that the Company be wound up in insolvency under s 459A of the Act and that Mr Bailey be appointed as its liquidator. Those orders were not then opposed by any of the parties to the proceedings, although the Second Defendant, Mr Ury Aleksandroff, had previously opposed that application and had put the provisional liquidator to proof of the Company’s insolvency. I then made orders in respect of the costs of that application.

Stevenson J subsequently delivered a judgment as to the costs of Mr Mi’s application to appoint a provisional liquidator on 17 November 2022 ([2022] NSWSC 1579). His Honour noted that, although Mr Mi was successful in the interlocutory application to appoint a provisional liquidator, he was not successful in a number of allegations he made as to the conduct of the Defendants. His Honour found, on a prima facie basis, that Mr Mi had caused the Company’s income to be diverted into an account in his own name without the Defendants’ knowledge; he had placed the Company’s assets in an account controlled by him and beyond the Company’s control; and that his dealings with the Company’s assets were a significant reason to appoint a provisional liquidator. Those findings do not assist Mr Mi to establish that he would have succeeded in his application to wind up the Company on the just and equitable ground, rather than that Mr Ury Aleksandroff would have succeeded in his cross-claim for oppression, had the matter gone to a final hearing.

Mr Mi’s Originating Process was dismissed on 14 November 2022 with costs reserved, as a consequence of the Company being wound up on the provisional liquidator’s application. At the parties’ request, I also made orders allowing an opportunity for written submissions as to questions of costs that had not already been determined, with those questions to be addressed on the papers.

I first set out the applicable principles, before turning to the parties’ submissions in respect of costs. The Court has power to make an order as to costs under s 98 of the Civil Procedure Act 2005 (NSW) and I bear in mind that a successful party 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) 152 ALR 83; [1998] HCA 11 at [22] [134]. In Re Minister for Immigration & Ethic Affairs of the Commonwealth of Australia; Ex parte Lai Qin (1997) 186 CLR 622; [1997] HCA 6 (“Lai Qin”), McHugh J in turn observed that:

His Honour also there observed that:

Mr Smith, who appears for Mr Ury Aleksandroff, also refers to my observation in Re HCafé Chatswood Pty Ltd [2018] NSWSC 362 at [6] that:

Mr Smith notes my observation in that case, in somewhat similar circumstances, at [16] that:

Ms Bailey, who appears for Ms Duza Aleksandroff, in turn refers to HiTech Group Australia Ltd v Riachi [2021] NSWSC 1549 at [46], where Ward CJ in Eq (as the President of the Court of Appeal then was) observed that:

All parties also accept the summary of the applicable principles by Stevenson J in Dymocks Franchise Systems (NSW) Pty Ltd v Chapter 3 Pty Ltd [2022] NSWSC 35 at [2], by reference to Lai Qin and One.Tel Ltd v Deputy Commissioner of Taxation [2000] FCA 270 at [5]–[6] as follows:

By submissions filed on 18 November 2022, Mr Mi seeks an order that the Defendants or at least the Second Defendant, Mr Uri Aleksandroff, should pay his costs of the Originating Process, or alternatively an order that he should have his costs of the winding up as a priority amount in the liquidation of the Company under s 466(2) of the Act. It is common ground that there should be no order as to the costs of Mr Uri Aleksandroff’s Interlocutory Process.

Ms Perry, who appears for Mr Mi, acknowledges that there has been no hearing on the merits of Mr Mi’s Originating Process or Mr Uri Aleksandroff’s Interlocutory Process and that ordinarily each party would pay their own costs. However, Ms Perry submits that Mr Mi has achieved the relief sought in the Originating Process and that the Defendants or the Second Defendant acted unreasonably such that the Court should exercise its discretion to award costs against them on the basis set out in Lai Qin. Ms Perry also draws attention to aspects of the conduct of the proceedings, referring to evidence led at various points in the proceedings and to matters relating to the appointment of the provisional liquidator, which were the subject of Stevenson J’s costs judgment. Ms Perry submits that Mr Mi incurred the costs of preparing for a final hearing, including the costs of compiling a court book and in relation to a dispute as to notices to produce. Ms Perry then returns to matters agitated before Stevenson J, and before me, and addressed by the earlier costs orders.

By her submissions dated 25 November 2022 on behalf of the First Defendant, Ms Duza Aleksandroff, Ms Bailey opposes any order for costs against Ms Aleksandroff in respect of the costs of the Originating Process and notes that no order for costs is sought against her in respect of Mr Aleksandroff’s Interlocutory Application dated 6 July 2022. Ms Bailey submits that the Originating Process has not been determined and became otiose when the Court wound up the Company in insolvency on Mr Bailey’s application, and relies on the principle in Lai Qin in that respect. She also points out that the Plaintiff did not obtain the relief he sought, which was a winding up on the just and equitable ground, when the Company was instead wound up on the basis of insolvency.

Ms Bailey in turn addresses Ms Perry’s criticisms of Ms Aleksandroff’s involvement in respect of the conduct of the proceedings. She submits that Ms Aleksandroff’s position was, throughout, that she neither consented to nor opposed the substantive relief sought in the Originating Process, and that Mr Mi cannot be characterised as a successful party in respect of the Originating Process, so as to have the expectation of his costs of the proceedings.

Mr Smith, on behalf of Mr Uri Aleksandroff, points to the distinction between a winding up in insolvency by reason of the Company’s inability to pay its debts as and when they fall due, as sought and obtained by the provisional liquidator, and a winding up on the just and equitable ground reflecting a breakdown of the relationship between the parties, as sought by Mr Mi. He submits, and I accept, that Mr Mi did not achieve the relief sought, at least in legal terms, where he sought relief on the just and equitable ground, and the Company has now been wound up on the basis of its insolvency, on the application of its provisional liquidator, several months after he commenced the proceedings. Mr Smith also submits, and I also accept, that Mr Mi’s Originating Process has not been determined on its merits, but instead been rendered moot by the supervening winding up made on the provisional liquidator’s application, by reason of the Company’s insolvency. Mr Smith also points out, and I accept, that the Court cannot find that a winding up of the Company on the just and equitable ground was inevitable, where Mr Uri Aleksandroff sought an order that Mr Mi buy out his shares, and the circumstances in which a winding up order would have been made was limited by s 467(4) of the Act. The position changed, of course, once it was accepted that the Company was insolvent. Mr Smith in turn takes issue with the accuracy and significance of complaints made by the Mr Mi as to the conduct of the proceedings, but I do not consider it either possible or necessary for me to determine those matters in an application of this kind.

I recognise that Mr Mi contends that the Defendants, and particularly Mr Uri Aleksandroff, acted unreasonably in respect of the conduct of the proceedings, but I am not satisfied that that has been established as a matter of fact. Although the Company has been wound up, on the provisional liquidator’s application, I am not able to conclude that Mr Mi would have succeeded, still less that he would almost certainly have succeeded where Mr Uri Aleksandroff had a Cross-Claim in respect of oppression against Mr Mi. It seems to me that all parties have surrendered, not to each other, but to the fact of the Company’s insolvency, in not opposing the appointment of a liquidator. Accordingly, I am not persuaded that I should make any order that either Defendant pay Mr Mi’s costs of the proceedings.

Mr Smith also submits that the Court should not make an order under s 466 of the Act in relation to the Originating Process, where that section applies to the person on whose application any winding up order was made. I accept that the winding up order, here made on the basis of insolvency, was made on the provisional liquidator’s application, where Mr Mi had not sought a winding up on the ground of insolvency. I also accept Mr Smith’s submission that, as a matter of discretion, Mr Mi should not have his costs of the winding up on the just and equitable ground, the merits of which have not been determined, paid in priority to the claims of the Company’s creditors. That is particularly the case where it is now accepted that the Company is insolvent and there is no certainty that its assets would be sufficient to pay the proper claims of those creditors, a fortiori if Mr Mi’s costs were paid in priority to creditors’ claims.

On balance, I am not satisfied that, given the history of the proceedings, the Court should make further orders in respect of the costs of the costs application.

Accordingly, I make the following orders: