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RE WEST AUSTRALIAN METALS LTD ACN 001 666 600; EX PARTE WEST AUSTRALIAN METALS LTD [ 2008] WASC 279  (4 December 2008)

Supreme Court of Western Australia

RE WEST AUSTRALIAN METALS LTD ACN 001 666 600; EX PARTE WEST AUSTRALIAN METALS LTD [ 2008] WASC 279  (4 December 2008)

Last Updated: 4 December 2008

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA

CITATION : RE WEST AUSTRALIAN METALS LTD ACN 001 666 600; EX PARTE WEST AUSTRALIAN METALS LTD  [2008] WASC 279 

CORAM : LE MIERE J

HEARD : ON THE PAPERS

DELIVERED : 4 DECEMBER 2008

FILE NO/S : COR 106 of 2008

MATTER : West Australian Metals Ltd ACN 001 666 600

EX PARTE

WEST AUSTRALIAN METALS LTD (ACN 001 666 600)

Plaintiff

Catchwords:
Civil procedure - Costs - Indemnity costs - Whether indemnity costs should be awarded to interveners - Turns on own facts

Legislation:
Nil

Result:
Application dismissed

Category: B

Representation:

Counsel:

Plaintiff : Mr C D Belyea

Interveners

Vargas Holdings Pty Ltd

Kaliara Nominees Pty Ltd

Mallee Minerals Pty Ltd : Mr M L Bennett & Mr J Abberton

Solicitors:

Plaintiff : Clayton Utz

Interveners

Vargas Holdings Pty Ltd

Kaliara Nominees Pty Ltd

Mallee Minerals Pty Ltd : Lavan Legal

Case(s) referred to in judgment(s):

1 LE MIERE J: On 30 July 2008 the plaintiff filed an originating process seeking, amongst other things, orders that the general meeting of shareholders of the plaintiff scheduled for Monday 5 August 2008 be postponed for a period of 14 days. The application was listed for an urgent hearing on 31 July 2008. The papers were served upon the interveners. The hearing could not proceed on 31 July 2008 because of conflicts of interest identified by the judge who was to hear the matter. The application came on for hearing before me on 1 August 2008. It was opposed by the interveners. I dismissed the application and delivered ex tempore reasons for doing so. I also gave the interveners liberty to apply in relation to an order for indemnity costs.

2 The interveners applied for an order for indemnity costs to be paid by the plaintiff and supported its application with written submissions. The plaintiff opposes that application and supported its position with written submissions. These are my reasons for deciding the interveners' application for indemnity costs.

3 The relief applied for by the plaintiff, the circumstances leading to that application and the evidence in support of it are set out in my reasons for dismissing the plaintiff's application. In those reasons I said that in essence the plaintiff's case is that some of the persons who are ultimately entitled to the beneficial interest in shares in the plaintiff have not received the plaintiff company's answering letter of 29 July and if the meeting goes ahead on 4 August this will not allow all shareholders, or the ultimate holders of the beneficial interests in shares, adequate, or in the case of the European based shareholders, any time in which to consider the information in the requisitioner's letter or in the company's answering letter.

4 I found that s 1322(4)(d) of the Corporations Act 2001 (Cth) (Act) empowered the court to extend the time within which a company is required to hold a general meeting under s 249D(5) of the Act but that the plaintiff had not made out any basis for the exercise of that power. I reached that finding on the following basis. First, there is no or no sufficient evidence that shareholders have not received information necessary to a proper consideration of the motions to be put at the meeting.

5 Second, the constitution of the plaintiff company expressly provides at cl 35.2 that a member whose registered address is not in Australia may notify the company in writing of an address in Australia to which notices may be sent. Clause 35.3 provides for when a notice to a person by the company is regarded as given and received. Shareholders became shareholders on that basis. It is up to them to arrange their affairs so that in the case of overseas members, notices posted to their address in Australia came to their attention as provided for in the Constitution.

6 Third, the company's letter is on the Australian Stock Exchange website and shareholders or European based persons entitled to a beneficial interest in shares may access the information in that way.

7 Fourth, the plaintiffs had not made out their case that the requisitioner's letter contains misrepresentations and that the directors of the company have a duty to give relevant information to the shareholders so that they are fully and fairly informed of the issues they are voting on at the meeting.

8 In Flotilla Nominees v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 Pullin J said this in relation to the principles applying to indemnity costs order:

The usual costs order is one for party and party costs. An order for indemnity costs will only be made if there is some special or unusual feature in the case to justify a departure from the ordinary practice. In effect, the court has jurisdiction to make an indemnity costs order whenever justice requires such an order. Unioil International Pty Ltd v Deloitte Touche Tohmatsu (No 2) (1997) 18 WAR 190 at 191; Colgate-Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225 at 233. When the justice of the case does require such an order, then the court will have a discretion as to whether the order should be made.

Many examples can be found where an indemnity costs order has been made. Suffice it to say that most of these involve some element of improper, or at least unreasonable, conduct on the part of the parties or their legal advisors in relation to the case. See the examples given by Sheppard J in Colgate-Palmolive v Cussons at page 233 and the circumstances referred to in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397 and in Unioil's case. Thus, the making of allegations of fraud knowing them to be false, or the commencement of proceedings for some ulterior motive, or in wilful disregard of known facts or the established law, or the making of allegations which ought never to have been made, or the undue prolongation of a case on groundless contentions, and even an unreasonable refusal to accept an offer of compromise, may lead to indemnity costs orders. See Colgate-Palmolive v Cussons at 233. The creation of false issues by tactical denials or failures to admit the facts may, in the circumstances of particular cases, lead to such an order: Unioil's case. An action commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success, may lead to such an order because such action might be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established law. See Fountain Selected Meats.

In this case, the plaintiff submits that there was unreasonable conduct in the running of the defendant's case.

Even if there has been such conduct, an indemnity costs order will not be made if the costs would be covered by an order for party and party costs (see Unioil's case at 193) or by a special costs order [8] - [11].

9 In Fazio v Fazio [2008] WASC 161 Martin CJ said:

The next question that arises is whether the defendant should also be ordered to pay those costs on an indemnity basis. There is discretion with respect to making orders of that kind, although the authorities establish that, in general, that discretion will not be exercised unless there is something in the conduct of the party against whom the order is sought that makes it appropriate for the court to take the unusual step of ordering indemnity costs: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [25], SDS Corp Ltd v Pasdonnay Pty Ltd [2004] WASC 26 (S2), Taylor-White (an infant) v Taylor-Bowman [2004] WASC 281 [24] - [31]. An example of such conduct would be where the conduct of that party has been unreasonable and that unreasonable conduct has magnified the costs of the proceedings or where there is something in the conduct of the party that merits censure or reproof or the defence or the claim has been pursued for some collateral or improper purpose [16].

10 The interveners submit that the plaintiff's conduct in making the application was inappropriate. It is submitted that the directors of the plaintiff misapplied company funds in order to further their own interests, which caused the interveners to incur costs, which they should not have to bear. The interveners say that the real subject of the plaintiff's application was intended, amongst other things, to campaign against the election of Messrs Stokes, Sanders and Judge. The interveners rely upon the whole of the conduct of the plaintiff. The plaintiff's application was filed on 30 July 2008 on an urgent basis but was not served on the interveners until after 5 pm on 30 July 2008 and required the urgent intervention of the interveners. The plaintiff did not provide any substantial evidence in support of its application that suggested that the plaintiff had any realistic hope of being successful in its application. The plaintiff ought to have known that the evidence relied on by it was not admissible and provided it with no reasonable chance of succeeding in its application. The plaintiff's conduct was vexatious and oppressive in waiting until 'the eleventh hour' to file its application, despite becoming aware of the circumstances that 'purportedly' necessitated the plaintiff's application on or before 25 July 2008 and disclosing its intention to commence proceedings on 29 July 2008.

11 The evidence relied upon by the plaintiff to establish that shareholders, or at least the ultimate holders of the beneficial interest in shares, would not have any, or any adequate, time in which to consider the information in the requisitioner's letter or in the company's answering letter if the meeting went ahead on 4 August was mostly, if not entirely, hearsay. The plaintiff submitted that the application was interlocutory and that hearsay evidence was admissible. I ruled against the plaintiff. However, I do not consider the plaintiff's conduct to have been unreasonable. The application was put together on an urgent basis.

12 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd [1988] FCA 202; (1988) 81 ALR 397 Woodward J held that it is appropriate to consider rewarding indemnity costs whenever it appears that an action has been commenced or continued in circumstances, where the applicant properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. I have found that the plaintiff failed to establish any proper basis for the exercise of the court's discretion to extend the time for the holding of the meeting. However, I am not satisfied that the plaintiff brought the application for some ulterior motive or improper purpose. I take into account that the application was brought on an urgent basis and the evidence was gathered on an urgent basis.

13 If a properly formulated special costs order is made, there should be little need for an indemnity costs order to try and recover costs incurred above the scale. Indemnity costs should not be sought merely to secure the recovery of costs which could be achieved by a properly formulated special costs order, unless the unsuccessful party's conduct is genuinely to be impugned by the successful party. The place for indemnity costs orders is where there has been improper or unreasonable conduct on the part of a party or his legal advisers. An order for an indemnity costs order is a mark of disapproval on the part of the court about the improper or unreasonable conduct of the litigation: see Green v Wilden Pty Ltd [2005] WASC 83 (S) [84] - [85] (Hasluck J).

14 I am not satisfied that the conduct of the plaintiff is improper or unreasonable so as to warrant an order for indemnity costs. I decline to make an order for indemnity costs in favour of the interveners.