In the matter of Wonga Pastoral Development Co Pty Ltd

On 13 December 2022 and 17 February 2023, I heard an application brought by Mr Peter McNamee (to whom I will refer, without disrespect, as “Peter”) for leave under s 237 of the Corporations Act 2001 (Cth) (“Act”) to bring derivative proceedings in the name of Wonga Pastoral Development Co Pty Ltd (“Wonga”). I outlined the manner in which that hearing proceeded in paragraphs 6-7 of my judgment delivered on 23 February 2023, as follows:

By my judgment delivered on 23 February 2023, I dismissed that application. I observed that costs would ordinarily follow the event, but made orders to allow submissions as to costs in accordance with an agreement that had previously been reached between Peter and the Second Defendant, Mrs Margaret McNamee (to whom I will refer, without disrespect, as “Peg”). Peg now seeks an order that Peter pay her costs of the proceedings up to and including 13 December 2022, together with any costs incurred by her after that date arising out of or in relation to Peter’s Notice to Produce dated 8 December 2022 or the question as to the costs of the proceedings.

Peg relies on the affidavit dated 9 March 2023 of her solicitor, Ms Evans, in respect of the costs application. Ms Evans notes that, when Peter commenced the application on 8 June 2022, he joined Wonga as the only Defendant, and Peg was later joined as Second Defendant in the application at her request, allowing her the opportunity to be heard in opposition to the application. Ms Evans refers to work done in preparing the affidavits on which Peg relied in opposition to the application, and to correspondence between her firm and Peter’s solicitors in relation to whether Peter would provide an indemnity as to Wonga’s costs of the proposed derivative proceedings. Ms Evans also notes that Peg’s legal representatives were provided with additional information relating to Peter’s proposal as to how the costs of the proceedings would be met at the commencement of the hearing on 13 December 2022 and, as I noted above, Peg then withdrew from the hearing. Ms Evans also refers to a Notice to Produce dated 8 December 2022 that Peter proposed to issue; to her advice to Peter’s solicitor that Peg would apply to set aside that Notice to Produce; and to the ultimate position that Peter did not call on that Notice to Produce on the second day of the hearing on 17 February 2023.

Mr Pritchard, with whom Mr Macauley appears for Peg, outlines the history of the application in submissions as to costs. He refers to the basis on which Peter brought the application for leave under s 237 of the Act, and contended that the proposed claim by Wonga was not in Wonga’s best interest; and he notes my findings that there was no suggestion that Wonga’s board had reached the decision not to bring that claim other than in good faith; that authorising the action would undermine the governance arrangements that had previously been put in place in respect of Wonga, and particularly notably the appointment of an independent director to exercise a casting vote; and that the proposed claims against Peg, in her own right and as the executrix of her late husband’s estate, and against a current director of Wonga and a third party were not seriously arguable.

Mr Pritchard points to my observation at the conclusion of my judgment that, consistent with Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”) r 42.1, costs would ordinarily follow the event. He submits there is no reason why Peter should not be liable to pay Peg’s costs of the proceedings at least up to 13 December 2022, on the basis that she was justified in her opposition to the application for leave. He points to the fact that I had accepted, in my judgment, several of the written submissions made by Peg in opposition to the application, prior to her withdrawal from the oral hearing. Mr Pritchard also submits that, although Peg did not read her affidavit evidence, some of it was tendered by Peter on the application; that Peg’s intervention in the matter brought about the result, between the parties, that Peter did not seek to pursue a claim in respect of another transaction; and that Peg incurred legal costs in liaising with Peter’s legal representatives as to the form of indemnity offered by Peter at the hearing on 13 December 2022, and as to Peter’s proposed Notice to Produce dated 8 December 2022. Mr Pritchard submits that, in these circumstances, there is no principled basis to depart from the ordinary rule that Peter should pay Peg’s costs of the proceedings.

Mr Condon, who appears for Peter, makes relatively brief submissions, which do not take issue with Peg’s account of the relevant events, or the extent to which Peg’s submissions were accepted in my judgment, or the extent to which her affidavit evidence was relevant to the proceedings. He instead submits that, where Peg had elected to participate in the proceedings, the compensatory principles applicable to an order for costs were not enlivened. He refers to an observation by Professor Dal Pont in Law of Costs, 4th ed (at [11.42]) that:

Mr Condon also refers to the decision in Johnston v Cameron [2002] FCAFC 301, where costs were not ordered in favour of an intervenor in a proceeding under the Workplace Relations Act 1996 (Cth) and to authority that an intervenor can recover costs only if the intervention was necessary to protect an interest not in common with the main parties. Mr Condon submits that:

It seems to me that, as I had foreshadowed in my substantive judgment, an order for costs should be made in Peg’s favour, up to and including 13 December 2022 when she withdraw from the oral hearing, on the basis that costs follow the event. That order should also extend to the costs of Peter’s Notice to Produce and the costs of this application. I reach that result for the following reasons.

First, I bear in mind that UCPR r 42.1 provides that, subject to Pt 42, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs. In Ballam v Ferro (No 2) [2022] NSWSC 1358 at [53]ff, Hallen J summarised the applicable principles as follows:

Peg was joined as party to the proceeding on the basis that she was a necessary or at least a proper party to the proceedings, and had a proper interest in defending the proceedings, and I ultimately accepted a substantial part of her submissions. In those circumstances, an order for costs is properly made in her favour to compensate her for the costs she incurred up to the point that Peter offered an improved indemnity as to Wonga’s costs of the proposed proceedings and she withdrew from the oral hearing.

Second, the case law to which Mr Condon refers recognises that a successful intervenor can recover costs if the intervention was necessary to protect an interest not common with the main parties. Here, Wonga had rightly not taken an active role in the application, where it was the subject of that application and its directors (with the exception of an independent director) and shareholders were the family members in dispute. Absent Peg’s intervention in the application, the Court would have had no proper contradictor to the application brought by Peter. Peg’s intervention was necessary to protect an interest that would not otherwise have been protected, albeit she ultimately withdrew prior to the point of oral submissions.

Third, even if, contrary to the fact, Peg was not party to the proceedings but had been heard in them under r 2.13 of the Supreme Court (Corporations) Rules 1999 (NSW), an order for costs would properly still have been made in her favour where her submissions had provided substantial assistance to the Court. In Re Pan Pharmaceuticals Ltd; Selim v McGrath (2004) 48 ACSR 681; [2004] NSWSC 129 at [20], Barrett J observed that the Court had power to make a costs order against a party to proceedings in favour of a non-party, although such an order would be “extraordinary and exceptional” and require “some very special factor outside the ordinary and expected course of events and engendering a justifiable expectation of compensation in the mind of the non-party”. In Re HIH Casualty and General Insurance Ltd [2006] NSWSC 6, Barrett J made such an order where the parties there heard under r 2.13 made submissions that were highly relevant to the task of the Court in reaching its decision and I took the same approach in Re Gia Firenze Investments Pty Ltd [2013] NSWSC 99 and in Knox v Nile [2022] NSWSC 638. The order for costs that is sought by Peg is consistent with that approach.

For these reasons, I make the order as to costs sought by Peg as follows: