AL Powell Holdings Pty Ltd & Anor v Dick & Anor [2012] QCA 254

SUPREME COURT OF QUEENSLAND CITATION: AL Powell Holdings Pty Ltd & Anor v Dick & Anor [2012] QCA 254 PARTIES: AL POWELL HOLDINGS PTY LTD ACN 073 744 411 (first appellant) TREKMERE PTY LTD ACN 082 912 025 (second appellant) v WAYNE KENNETH DICK (first respondent) ALAN POWELL HOLDINGS PTY LTD ACN 010 732 500 (second respondent) FILE NO/S: Appeal No 2236 of 2012 SC No 1510 of 2006 DIVISION: Court of Appeal PROCEEDING: General Civil Appeal ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 21 September 2012 DELIVERED AT: Brisbane HEARING DATE: 28 August 2012 JUDGES: Holmes and White JJA and North J Judgment of the Court ORDERS: 1. Appeal against the order refusing leave to appeal the costs order made in the Trial Division allowed. 2. Appeal against the costs order allowed. 3. Set aside the order made about costs below on 14 February 2012. 4. Order instead in terms of the offer made 29 November 2007 that: (a) AL Powell Holdings Pty Ltd and Trekmere Pty Ltd pay Wayne Kenneth Dick’s costs calculated on the standard basis up to and including 29 November 2007 being the date of service of the offer, and (b) Wayne Kenneth Dick pay AL Powell Holdings -- 1 of 27 -- 2 Pty Ltd and Trekmere Pty Ltd’s costs of the proceedings including reserved costs, if any, thereafter, calculated on the standard basis. 5. Order that Wayne Kenneth Dick pay AL Powell Holdings Pty Ltd and Trekmere Pty Ltd’s costs of the appeal against the refusal of leave to appeal and the costs of the appeal against the costs order. CATCHWORDS: APPEAL AND NEW TRIAL – APPEAL – GENERAL PRINCIPLES – INTERFERENCE WITH DISCRETION OF COURT BELOW – PARTICULAR CASES – OTHER MATTERS – COSTS – where appellants sought leave to appeal costs order of primary judge immediately after order handed down – where primary judge refused leave to appeal costs order because of prolonged litigation and in the interests of finality – where primary judge did not receive submissions from appellants – whether primary judge should have received submissions – whether primary judge had weighed relevant considerations – whether primary judge should have refused leave to appeal PROCEDURE – COSTS – DEPARTING FROM THE GENERAL RULE – CONDUCT OF PARTIES – CONDUCT TENDING TO LITIGATION – where primary judge ordered appellants to pay the first respondent‟s costs on a standard basis – where appellants had made prior offers to settle – where matter characterised by primary judge as involving prolonged litigation – where first respondent failed to prove 28 of 30 particulars of oppression – where appellants contended that the first respondent should pay the whole costs of proceedings including reserved costs on standard basis – whether first respondent ought to pay whole costs of the proceedings on standard basis – whether first respondent obtained judgment "not more favourable" than offer to settle Corporations Act 2001 (Cth), Pt 2F.1, s 461, s 472, Pt 5.5 Supreme Court Act 1995 (Qld), s 253 Uniform Civil Procedure Rules 1999 (Qld), r 361, r 681 Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430, cited Bromley v Bromley (No 2) [1964] 3 WLR 666; [1965] P 111, considered Compagnie Noga d’Importation et d’Exportation SA v Abacha (No 2) [2001] 3 All ER 513; [2001] EWHC QB B1, cited Deeson Heavy Haulage Pty Ltd v Cox (No 2) [2009] QSC 348, cited Dick v Alan Powell Holdings & Ors [2009] QSC 184, considered Drew v Makita (Australia) Pty Ltd [2009] 2 Qd R 219; [2009] QCA 66, considered -- 2 of 27 -- 3 Emanuel Management Pty Ltd (in liquidation) & Ors v Foster’s Brewing Group Ltd & Ors and Coopers & Lybrand & Ors [2003] QSC 484, cited House v The King (1936) 55 CLR 499; [1936] HCA 40, cited Jones v Millward [2005] 1 Qd R 498; [2005] QCA 76, cited Lam v Beesley (1992) 7 WAR 88, considered Mopeke v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395; [2007] NSWSC 153, cited Morrison v Hudson [2006] 2 Qd R 465; [2006] QCA 170, followed New Cap Reinsurance Corporation Ltd v AE Grant [2009] NSWSC 950, considered Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11, cited Roache v News Group Newspapers Ltd [1992] TLR 551, considered Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247, cited Timms v Clift [1998] 2 Qd R 100; [1997] QCA 61, followed Todorovic v Moussa (2001) 53 NSWLR 463; [2001] NSWCA 419, applied Yara Nipro Pty Ltd v Interfert Australia Pty Ltd [2010] QCA 128, considered COUNSEL: D B O‟Sullivan for the appellants R A Perry SC, for the first respondent No appearance for the second respondent SOLICITORS: McCullough Robertson Lawyers for the appellants Lynch Morgan Lawyers for the first respondent No appearance for the second respondent [1] THE COURT: Introduction The first respondent to this appeal, Wayne Kenneth Dick (to whom it is convenient to refer by name) owned 15 per cent of the issued capital in the second respondent, Alan Powell Holdings Pty Ltd (“the Company”)1. Mr Dick commenced proceedings on 23 February 2006 pursuant to Part 2F.1 of the Corporations Act 2001 (Cth) alleging oppression by the appellants in their conduct of the affairs of the Company. [2] The appellants, AL Powell Holdings Pty Ltd (“AL Powell”) and Trekmere Pty Ltd (“Trekmere”) were the second and third respondents respectively below. The Company was the first respondent. AL Powell owned 75 per cent of the issued capital in the Company and was controlled by Mr Alan Powell. Trekmere held 10 per cent of the issued capital and was controlled by Mr Thomas Smith. It is convenient, where appropriate, to refer to those parties compendiously as “the majority shareholders”. 1 The Company has been wound up and took no part in the appeal. -- 3 of 27 -- 4 [3] In his proceedings Mr Dick sought an order pursuant to s 233 of the Corporations Act that AL Powell and/or Trekmere purchase all his shares in the Company at a price to be determined by the court. [4] On 23 June 2009, after a two week trial in which the trial judge found that there had been oppression by the majority shareholders but on a much more limited basis than had been alleged, her Honour indicated that “it is appropriate to order the winding up” of the Company. Her Honour concluded: “I shall hear submissions from the parties as to the formal orders to be made and as to costs.”2 [5] The parties appeared before her Honour on 6 November 2009. The majority shareholders sought the appointment of Mr John Greig of Deloitte Touche Tohmatsu as liquidator of the Company. Mr Dick contended such an appointment was premature until the percentage of the costs incurred in defending the proceedings to be borne by the Company had been determined. The majority shareholders contended that the Company should be responsible for 30 per cent of those costs while Mr Dick submitted that it should be responsible for only five per cent. [6] The matter was relisted for 11 November 2009 and the primary judge made orders settled by the parties3 on that day including appointing Mr Greig liquidator and for the winding up to proceed in the usual way as if under s 461. Her Honour further directed: “5 In determining the allowance or disallowance of any debt which may be sought to be proved as a debt of the [Company] in respect of a claim for reimbursement of legal costs refunded to the [Company], the liquidator may appoint an accredited costs assessor to assess the costs properly incurred by the [Company] in [the present proceedings] being such costs as were necessary to protect the discrete interests of the [Company] solely.” This direction was made because the majority shareholders had caused the Company to pay the legal costs of all respondents, that is, the Company, AL Powell and Trekmere, incurred in defending Mr Dick‟s proceedings. This conduct was not, of course, alleged initially or pleaded in the first statement of claim of 30 January 2007 but was alleged as additional oppressive conduct in a subsequent amendment.4 A question had arisen as to what percentage of the fees ought to be borne by the Company, Mr Powell having by then caused all legal fees paid by the Company to be reimbursed.5 [7] Her Honour, having appointed the liquidator, adjourned the hearing of argument as to how the costs of the proceedings ought to be paid to a future date. 2 Reasons [168]; AR 226. 3 There does not appear to be any order of the court expressly winding up the Company. No formal orders issued when judgment was delivered on 23 June 2009, merely an indication that the Company ought to be wound up. The order which issued on 11 November 2009, “appointed [the liquidator] to wind up the [Company]”, cf s 472 of the Corporations Act, under which the liquidator was appointed, which provides: “[a]n order being made for the winding up of a company, the Court may appoint an official liquidator to be liquidator of the company.” Nothing appears to turn on this as the records of ASIC and all relevant persons have treated the Company as having been ordered to be wound up by order of the court. 4 Further Amended Statement of Claim para 12(u) amended and filed 14 March 2008. 5 Affidavit of Alan Powell sworn 9 November 2009, paras 2-4. -- 4 of 27 -- 5 [8] Mr Greig made a report to creditors dated 26 November 2010. At a creditors‟ meeting held on 10 December 20106 the creditors approved his remuneration from the date of appointment to 19 November 2010 in the amount of $107,402.50 and a future sum of $25,000.00 to conclude the winding up. Mr Greig sought an increase in his remuneration for this future period of $24,719.50 due to unforeseen complexities in the winding up. Mr Greig noted in his report to creditors that all but five per cent of the legal costs associated with the shareholders‟ dispute had been paid by parties other than the Company. This, by inference, meant that the liquidator did not need to embark on an assessment of those costs provided for in order 5 made by her Honour on 11 November 2009, set out above.7 [9] On 12 December 2011 Peter Lyons J approved the finalisation of the liquidation and made facilitating orders. Thereafter, Mr Dick applied for orders disposing of the costs of the proceedings. On 23 January 2012 that application was adjourned to 14 February 2012 and Philippides J directed that outlines of submissions be exchanged by 10 February 2012. [10] On 14 February 2012, after hearing oral argument, her Honour ordered AL Powell and Trekmere to pay Mr Dick‟s costs of the proceedings on the standard basis. An application was made instanter by their counsel, Mr JC Bell QC, pursuant to s 253 of the Supreme Court Act 19958, for leave to appeal her Honour‟s costs order. Her Honour refused to grant that leave. It is from that refusal that the majority shareholders now appeal. [11] The appellants‟ draft notice of appeal, should their appeal from the refusal of leave be successful, was exhibited to an affidavit of Sharon Janelle Houser, the appellants‟ solicitor, sworn on 12 March 2012. Correspondence had been exchanged between the parties‟ solicitors about the contents of the appeal book and whether those contents should extend to material relevant to the substantive appeal in the event leave to appeal the costs order appeal was successful. The registrar, appeals, made orders including certain documents in the record which Mr Dick‟s solicitors had contended were only relevant to the substantive appeal. Mr Dick was invited to nominate other documents which, as a consequence of those inclusions, might be relevant. His solicitors expressed satisfaction with the documents proposed in the index to the appeal book which had been settled by the registrar. [12] When the appeal came on for hearing on 28 August 2012 there was resistance by Mr Dick to the proposal that the substantive appeal should be heard with the leave appeal. Mr R Perry SC, who appeared for Mr Dick, submitted, as had his solicitors in earlier correspondence, that there were numerous affidavits which had been read before the primary judge which were not in the appeal record and which this court would need in order to adjudicate on the substantive appeal. [13] The court resolved to proceed, as is its practice when the likelihood of success on a substantive appeal is an aspect of an application for leave, to hear argument on the substantive appeal in conjunction with the leave appeal. It was indicated to the parties that any necessary further material could be provided electronically in the course of the hearing. Mr Dick‟s solicitors provided a considerable volume of 6 Attended by representatives of the Australian Tax Office, Ulton Group (the Company‟s accountants) and AL Powell. There were surplus moneys available for distribution to contributories, affidavit of John Lethbridge Greig sworn 31 March 2011. 7 At [6]. 8 Now s 64(1) of the Supreme Court of Queensland Act 1991 (Qld). -- 5 of 27 -- 6 material in that way. The appellants‟ solicitors supplemented it with material they considered relevant in light of that further material.9 Background [14] The detailed factual background giving rise to the principal proceedings is set out in the primary judge‟s reasons10 and it is necessary only briefly to refer to it to understand the issues raised in the costs appeal. The Company was incorporated in 1987 for the purpose of owning and operating new and used car dealerships in Bundaberg. Earlier, another company controlled by Mr Alan Powell owned these dealerships and had purchased adjoining parcels of land in Bundaberg on which was erected a commercial building to house the dealerships at Bourbong Street. In 1987 the dealerships had approximately 45 employees. The Company was also created to provide for an employee incentive scheme which enabled certain senior employees to own shares in the business. The Company subsequently acquired more land in Walker Street, Bundaberg. [15] Mr Dick commenced employment as a salesman in the business in 1984. In 1996 he was promoted to General Sales Manager of the Ford dealership. He then purchased a parcel of shares in the Company from a retiring employee and further parcels of shares up to 2002. Mr Dick came to own 15 per cent of the issued capital in the Company.11 As mentioned, AL Powell held 75 per cent of the shares and Trekmere 10 per cent. Mr Tom Smith, the controller of Trekmere, was the General Manager of Bundaberg Prestige, another dealership within the group. [16] In 2005 the Company sold many of its assets. The commercial property in Bourbong Street was sold to the Powell Superannuation Fund which the Company leased back. Later that year the Company sold the Ford Dealership to another company, DPH Ford Pty Ltd, which took over the Bourbong street lease and another yard from the Company. As a consequence of the sale of the Ford dealership Mr Dick was made redundant and ceased employment on 31 October 2005. As her Honour related: “It was understood by both Mr Dick and Mr Powell that upon Mr Dick‟s resignation his shares in APH [the Company] would be purchased by Mr Powell and that for that purpose [the Company‟s] accountants, Ulton, would prepare financial statements as at the date of Mr Dick‟s redundancy, that is, 31 October 2005. The general understanding was that Mr Dick‟s shares would be purchased at a price equivalent to 15 per cent of the net assets of the company as disclosed in the financial statements.”12 [17] As her Honour found, the Articles of Association of the Company made provision for the sale of the shares of an employee upon ceasing to be an employee and for their price but neither party adverted to those provisions during the negotiating period. [18] Draft accounts were prepared for the period to 31 October 2005 and provided to Mr Dick‟s accountant. On the basis of those accounts his 15 per cent shareholding was valued at approximately $318,000 and Mr Dick understood that figure was 9 This explains references in these reasons to numerous documents not in the bound appeal record. 10 [2009] QSC 184. 11 Between 1996 and 2007 Mr Dick received a total of $816,126.58 in dividend payments from the Company. 12 Reasons [14]; AR 186. -- 6 of 27 -- 7 proposed for his shares. On the advice of his accountant, Mr Dick was not willing to sell his shares at that price.13 Mr Dick challenged the value of the land which had been sold into the superannuation fund. He obtained his own valuation which was considerably higher than the value which appeared in the Company‟s books. It was this, as found by the primary judge, which commenced the souring of the relationship between Mr Powell and Mr Dick. [19] On 16 February 2006 Mr Dick was removed as a director of the Company by resolution of the board. The remaining directors were Mr Powell and Mr Smith. The Company ceased trading on 13 December 2006. Its assets were all liquid. It had been foreshadowed that the Company would be wound up. [20] As mentioned, Mr Dick commenced proceedings for oppression on 23 February 2006, seeking an order for the compulsory purchase by the majority shareholders of his 15 per cent shareholding in the Company at a price to be determined by the court. On 29 November 2007 after an unsuccessful court-ordered mediation, the majority shareholders made an offer to purchase Mr Dick‟s shares for $300,000 and to pay his costs of the proceedings pursuant to the UCPR. He rejected that offer. The progress of the litigation was slow. Each side has sought to blame the other. Much reliance was placed on observations critical of Mr Dick‟s approach to the litigation by Daubney J in an interlocutory application but it is unprofitable for this appeal to traverse the extensive detail of complaint which has burdened the court file. [21] In his statement of claim Mr Dick alleged some 30 instances of oppression by the majority shareholders. Her Honour described them as follows: “… o Caused APH [the Company] to tender to Mr Dick what was said to be a loan agreement for the amount of $150,000, but which conferred on APH an option directing Mr Dick to sell his shares to AL Powell and/or Trekmere in circumstances where the value of those shares exceeded the value of the loan agreement (para 12(a)); o Caused APH to retain McCullough Robertson Lawyers (“McCullough Robertson”) on two separate occasions, in February 2005 and February 2006, without convening a meeting of directors of APH (paras 12(b), 12(c)); o Instructed McCullough Robertson on various dates in February 2006 to refuse Mr Dick permission to inspect APH‟s books and records contrary to his entitlement to do so as conferred by s 198F Corporations Act and article 85 of the Articles of Association (paras 12(d), 12(e), 12(f)); o Caused APH on 7 June 2006 to refuse Mr Dick inspection of certain of APH‟s books and records contrary to s 198F Corporations Act (para 12(i)); o Caused AL Powell and Trekmere to exercise their votes as shareholders of APH to terminate Mr Dick‟s appointment as a director of the company (para 12(g)); 13 Reasons [21]; AR 187. -- 7 of 27 -- 8 o Caused APH to fail to pay superannuation contributions due to Mr Dick pursuant to the Superannuation Guarantee (Administration) Act 1992 (Cth) in the sum of $28,91514 for the period 1995 to 2000 (para 12(h)); o Caused APH to advance unsecured interest free loans to Mr Powell, his son and the Powell Superannuation Fund for their benefit, in circumstances where there was no meeting of the directors of APH (of which Mr Dick had notice) to authorise the loans, the making of those loans was of no commercial benefit to APH, and APH lost the benefit of earning interest on those monies, being:  an advance of $7,500 to Matthew Powell (para 12(j));  an advance of $340,000 to the Powell Superannuation Fund (para 12(l));  three advances of $15,000 to Mr Powell (para 12(m));  an advance of $195,000 to Mr Powell (para 12(q)); o Caused APH to pay rates payable on land owned by Alan Powell Ford Pty Ltd (para 12(n)); o Caused APH to expend $33,000 on capital works to 26 Bourbong Street in circumstances where the board of directors had not approved the expenditure and the works were of no commercial benefit to APH (para 12(o)); o Held directors‟ meetings of APH on 25 February, 18 May, 29 June and 16 August 2005 in respect of which Mr Dick was excluded for the initial part of each meeting (para 12(p)); o Caused APH to declare interim dividends on 29 June 2005 in circumstances:  where Mr Dick had not been invited to be present at the meeting authorising the payment (para 12(r));  where a declaration of a dividend was made in favour of AL Powell to be credited against sums due by Mr Powell to APH (para 12(s));  which was contrary to the Articles of Association (para 12(t)); o Caused set-offs to be made against dividends payable to Mr Dick (paras 12(k), 12(dd)); o Caused APH to pay professional fees to lawyers and accountants for work undertaken for and advice provided to AL Powell and Trekmere in respect of the current proceedings (paras 12(u), 12(v), 12(w)); o Caused APH to make redundancy payments to Mr Smith and Mr Matthew Powell which APH was under no legal obligation to make (paras 12(x), 12(z)); 14 This increased to $38,039 and was lodged as a Proof of Debt with the liquidator in that sum and eventually became the subject of an Australian Taxation Office Proof of Debt which was satisfied. -- 8 of 27 -- 9 o Caused APH to make payments to the Powell Superannuation Fund totalling $22,489.26 which APH was under no legal obligation to make (para 12(y)); o Caused APH to sell a motor vehicle to Mr Smith at a trading loss (para 12(aa)); o Caused APH to pay for a motor vehicle for Mr Powell (paras 12(bb), 12(cc)); o Caused APH to enter into a sale contract for 26 Bourbong Street to the Powell Superannuation Fund in circumstances where the transaction was not for any bona fide business or commercial purpose benefiting APH or its shareholders, was at a undervalue, and was made in contravention of s 183(1) Corporations Act (paras 13,16); o Exercised their powers in undertaking the conduct referred to in paras 8, 12(j), 12(l), 12(m), 12(n), 12(o), 12(q), 12(r), 12(s), 12(t), 12(u), 12(dd) in contravention of s 181(1) and s 182 Corporations Act (paras 15,16).”15 [22] The trial judge dealt with those allegations in a careful and detailed analysis of each of the factual and legal bases for the claims of oppression in her reasons from para [45] to para [154]. Her Honour found only two allegations of oppression were established – a loan to Mr Powell and the payment by the Company of the majority shareholders‟ legal costs in defending Mr Dick‟s proceedings. [23] The loan to Mr Alan Powell was for $195,000, interest free, made on 28 December 2005. Mr Powell did not proceed, as her Honour found, with the project for which the loan had been advanced and it was repaid to the Company as a set-off against a dividend on 21 April 2006, less than four months later. It was not disputed at the trial that that loan had been made. But it was, as her Honour found, undocumented, unsecured and not for any specified duration. The principal of Trekmere, Mr Smith, gave evidence that he was aware of the loan and agreed to it but Mr Dick was not consulted and was not present at any meeting of directors to approve the loan. Her Honour found that the loan would likely have been approved at a meeting even had Mr Dick been present. The fault, as found by her Honour, was that Mr Dick‟s rights were disregarded by not notifying him of what was being proposed and giving him an opportunity to form and express a view at a properly convened meeting. Her Honour found that the loan was “devoid of any commercial benefit to [the Company] and was simply one directed to the interests of Mr Powell and to his advantage only.” Her Honour concluded: “The conduct in advancing the loan was unfair and oppressive to Mr Dick as a member and contrary to the interests of the members as a whole.”16 [24] The other finding of oppression featured prominently in the submissions below and at this hearing. Mr Dick alleged that Messrs Powell and Smith retained McCullough Robertson Lawyers to act on behalf of the Company without notice to Mr Dick and continued to retain those solicitors causing the Company to pay 15 AR 192-194. 16 Reasons [108]; AR 214. -- 9 of 27 -- 10 McCullough Robertson for work undertaken and advice provided for, and to, the majority shareholders about the proceedings. Her Honour concluded there was no substance in the allegation that the fees were incurred without a resolution but “… the real complaint concerning the incurring of legal expenses was that [the Company‟s] funds were used to pay for the respondents‟ legal expenses in the within proceedings, as opposed to those of [the Company].”17 [25] Her Honour said: “It appears that the sums that were paid by [the Company] by way of legal expenses are in fact greater than stated in the pleadings. As at 13 March 2009, [the Company] had paid a total of $317,286.80 in legal fees to McCullough Robertson. In addition, as at the date of the trial an amount of $215,137.32 remained payable. In respect of the amount of $317,286 paid by [the Company], the respondents repaid to [the Company] on 17 September 2008 a total of $102,139.48: $77,757.93 for McCullough Robertson‟s fees in connection with these proceedings and $792 for counsel‟s fees with the remaining $23,589.55 being reimbursed to [the Company] for money paid to McCullough Robertson in connection with other unrelated matters. The reimbursement to [the Company] was made upon the respondents coming to appreciate after advice from their solicitors in August 2008, that [the Company] could not lawfully pay the legal expenses of all three respondents. At the hearing of the trial, an undertaking18 was given to repay the $215,137.32 in fees which remained outstanding, with the respondents indicating that they would seek to recover from [the Company] its proper share of those fees.”19 [26] Her Honour continued: “The dispute the subject of the within proceedings was one between shareholders. It is apparent that Mr Powell and Mr Smith used their position as directors to cause [the Company] to fund the defence of the respondents‟ own interests in the oppression action, as opposed to the discrete interests of [the Company]. That conduct occurred over a very significant period and in respect of considerable legal expenses. It gave the respondents a distinct advantage over Mr Dick and was clearly objectively unfair to him. It was beside the point that Mr Powell and Mr Smith did not, until August 2008, appreciate their responsibilities in respect of the use of company funds for the payment of such legal expenses.”20 Her Honour noted that a finding of oppression by the conduct outlined might not necessarily lead to an order to purchase a minority shareholder‟s shares but 17 Reasons [130]; AR 218. 18 At subsequent hearings on 6 and 11 November 2009 there was discussion as to whether an undertaking had actually been given and when the repayment was to occur. It is not fruitful to analyse further that question but the primary judge expressed her view firmly that the costs paid by the Company ought to have been repaid once the impropriety of the conduct was identified at the trial – see transcript for 6 November 2009, 1-4. 19 Reasons [132]; AR 219. 20 Reasons [133]; AR 219. -- 10 of 27 -- 11 “… it nevertheless remains that the mere reimbursement of legal expenses or giving of an undertaking to do so does not negate the oppressive conduct engaged in by the respondents insofar as [the Company‟s] funds were used to meet the legal fees relating to the respondents‟ defence of the proceedings.”21 [27] Mr Dick had sought an order for the compulsory purchase of his shares with a valuation date being set as at 31 October 2005 when he ceased employment. It was argued for the majority shareholders that there were three reasons against any relief being granted in the event that oppression was found, namely, that Mr Dick had refused to offer his shares for sale in accordance with the Articles of Association22; that he had refused to accept two reasonable offers to buy his shares; and that he had known since October 2007 that the remaining directors of the Company intended to wind the company up and to distribute the assets to the shareholders in proportion to their entitlements.23 [28] Her Honour dealt with the second and third of those contentions in the following way: “As to the arguments that Mr Dick unreasonably refused the offers contained in the letter of 8 October 2007 and that he unreasonably pursued the oppression proceedings after the sale of much of [the Company‟s] assets and the indication by … Mr Powell and Mr Smith of their intention to wind up [the Company], I note that all of this occurred against the background of ongoing oppression through the use of [the Company‟s] funds to pay for legal fees for the respondents‟ defence of the proceedings. The funds of [the Company] so utilised have only recently been brought into account in their entirety (by reimbursement or an undertaking to do so) and were not taken into account in the letter of 8 October 2007 and the offers made therein.”24 [29] Her Honour noted that a winding up order would permit Mr Dick to benefit from the full price achieved from the sale of assets of the company and concluded: “Although a winding up order is an option to be approached with caution, it would work no prejudice in the circumstances of the present case since [the Company] is no longer a going concern; [the Company] is a dormant entity, holding only cash and a small parcel of shares, and the current directors wish to wind up the company. In the circumstances of the present case, it is appropriate to order the winding up of [the Company].”25 The costs application [30] As mentioned above, after the finalisation of the winding up, Mr Dick sought the determination of the costs in the proceedings. The parties filed extensive written 21 Reasons [134]; AR 219-220. 22 Neither party in the negotiating phase seems to have adverted to this provision as found by her Honour. See discussion at [159]; AR 224. 23 At [157]; AR 224. 24 Reasons [162]; AR 225. As discussed below, there was no evidence to suggest that Mr Dick was aware of the payments of legal fees to McCullough Robertson by the Company for the defence of the oppression proceedings for all respondents at the time the offer was made. 25 Reasons [166]; AR 226. -- 11 of 27 -- 12 submissions in advance of that hearing and, in light of the grounds of appeal, they should be recounted more fully than might ordinarily be required. [31] The majority shareholders contended that the usual operation of r 361(2) of the UCPR was displaced and that their costs ought to be paid by Mr Dick on the indemnity basis. They advanced three reasons for doing so: Mr Dick had imprudently refused a genuine offer of compromise26; he had failed to prove his pleaded case and, effectively, lost, because it was always the intention to wind up the Company once its assets had all been liquidated; and third, Mr Dick had conducted the proceedings delinquently by persistently breaching court orders and making improper allegations of fraud. In the alternative they sought an order for the payment of their costs assessed on the standard basis up to 13 December 2007 when the offer to purchase Mr Dick‟s shares expired and for indemnity costs thereafter. 27 [32] The majority shareholders contended that the facts surrounding the making of the loan to Mr Powell were admitted28; and that the legal costs paid by the Company for the period alleged in the statement of claim had been reimbursed.29 In their written submissions they noted that after the trial the Company‟s draft accounts to 30 June 2009 were prepared on the basis that the legal fees paid on behalf of the majority shareholders were receivables subject to an allowance for the fees attributable to the Company‟s discrete interests. They also contended that the analysis demonstrated that very little time was spent in preparation for trial and during the trial concerning the conduct which was held by the trial judge to be oppressive. [33] The majority shareholders emphasised to her Honour that the directors had always intended that the Company would be wound up when its assets were realised. The oppressive conduct could have been recognised by orders that they reimburse the Company for the funds spent wrongly on their separate legal expenses30 and the unsecured loan to Mr Alan Powell could have been dealt with by the payment of interest in compensation to the Company for loss of the use of its money which would have been under $500.31 [34] The majority shareholders stressed Mr Dick‟s persistent disregard for court orders32 and his unsupported allegations of fraud. [35] Mr Dick‟s written submissions below set out some past history, particularly focussing on a representation by the majority shareholders that the costs of a liquidation were estimated at $10,000; the “concealment” of the payment of legal fees and a consideration of what eventuated before the primary judge at the hearings on 6 and 11 November 2009 where these matters were ventilated further. At the hearing on 6 November an affidavit from the firm from whom the liquidator would be drawn estimated the costs of the liquidation in the range of $26,100 to $29,720. Much was made by Mr Dick that the costs of the liquidation were many times the 26 Earlier offers may be disregarded. 27 The appellants no longer seek costs on the indemnity basis; they seek an order that Mr Dick pays their costs of the proceedings, alternatively, as provided for in r 361(2). 28 Fourth further re-amended defence para 12(q); AR 146. 29 Fourth further re-amended defence para 12(u)(v); AR 149. 30 Mopeke v Airport Fine Foods Pty Ltd (2007) 61 ACSR 395. 31 A point made by the liquidator in his report to creditors explaining that such a small sum did not justify seeking it. 32 Outline of submissions paras 64-65 (a), (b), (c) and (d). -- 12 of 27 -- 13 estimate. The total costs of the liquidation were said to be in excess of $235,116.56.33 [36] Mr Dick emphasised that the majority shareholders had expressly promised to repay all legal fees paid by the Company on behalf of the majority shareholders and, notwithstanding their appreciation that the Company ought not fund those costs, it had continued to do so after the trial concluded, and until delivery of judgment, in the amount of $190,640.41. [37] Further, Mr Dick submitted that the majority shareholders‟ position maintained throughout the proceedings was that there had been no oppression, notwithstanding their admission of the conduct which was found to be oppressive. He relied not just upon each pleaded individual act but the entire course of conduct that comprised the events pleaded.34 The concluding submission was that he had been successful in obtaining findings that the majority shareholders had engaged in oppressive conduct in that they had “dissipated” unlawfully $600,777.83 of the Company‟s funds made up of $405,777.83 to defend the oppression proceedings and the interest free loan of $195,000 to Mr Powell in the context of the total cash assets of the Company at the date of the liquidator‟s appointment of $1,153,814. [38] The majority shareholders‟ written reply submissions dealt trenchantly with these allegations, demonstrating convincingly that there had been no “concealment” of the continued payment of legal fees by the Company on behalf of all respondents after trial and that Mr Dick had been appraised of that fact in writing and that there was to be repayment to the Company. These fees and their repayment were ventilated in the Joint Statement by Experts tendered at the trial as Exhibit 18. The contentious issue was the percentage to be attributed to the Company. After the delivery of reasons for judgment on 23 June 2009 when the payment of those fees was found to be oppressive, all legal fees had been paid by the majority shareholders.35 [39] Mr Dick‟s written submissions sought costs in accordance with the principle in r 681 that costs follow the event unless the court otherwise orders. It was not until para 80 (of 90) of his written submissions that Mr Dick addressed the offers to settle: 33 Affidavit of the liquidator J Greig, sworn 18 October 2011, filed 7 December 2011, referred to in Mr Dick‟s outline p 13. These costs included outlays. 34 Paras 66-70 of Mr Dick‟s written reply submissions below. 35 The majority shareholders‟ written submissions are detailed and persuasive referring to correspondence with Mr Dick‟s solicitors in which they were appraised of these matters including, on 23 September 2009, provision of a letter of direction to Ulton Group, the Company‟s accountants, dated 21 July 2009, the relevant part of which was as follows: “We refer to the judgement of Her Honour Justice Philippides delivered on 23 June 2009, by which it was ordered that Alan Powell Holdings Pty Ltd (APH) be wound up. Please prepare financial statements for APH for the year ended 30 June 2009 as follows: (a) on the basis you consider appropriate, given that the company has ceased to trade and will be wound up; (b) in which a sum is allowed as a liability for the cost of the liquidator‟s fees, in an amount we will advise you; (c) in which $405,777.83 is added back to the company‟s assets, being the total legal fees paid by APH in relation to this litigation, but not yet refunded by the other Respondents; (d) in which allowance is made for a refund of legal fees properly payable by APH but in fact paid by Mr Alan Powell. The total legal fees invoices as at 30 June 2009 was $1,042,855.81. The percentage of that sum that is to be repaid by APH to Mr Powell is currently uncertain. For the purposes of these accounts, can you please allow as a liability of the company an amount of 5% of $1,042,855.81 and also 30% of $1,042,855.81.” (Underlining in submissions.) -- 13 of 27 -- 14 “Because the court ordered a winding-up of the First Respondent rather than a share buy-out and because no finding was made as to either the value of the Applicant‟s shares in the First Respondent or the date at which they should be valued, it cannot be determined whether these formal offers were better than the relief obtained by the Applicant and such offers are of no relevance to the question of the costs of the proceedings.”36 This, he contended, was because it was necessary to compare like with like and not merely the money figure offered for the sale of shares not ordered by the court. [40] Notwithstanding that stance, the written submissions did make some attempt at comparing: the majority shareholders‟ expert valued the shares at $249,00037; to that should be added $41,793.87 for unpaid superannuation and interest; thus a value higher than $300,000 would be achieved. Mr Dick‟s expert had valued the shares at $528,000 before dividends and $342,000 after dividends. If the unpaid superannuation and interest were added he would have received $569,793.87 or $383,793.87, both of which exceeded the offer. Mr Dick also assessed his likely distribution had the costs of the liquidation been $10,000 rather than $235,116.56 which would have been increased by over $30,000 and thus resulted in more than $300,000. [41] This analysis was subjected to criticism in the majority shareholders‟ reply submissions. They noted particularly that the “value” of Mr Dick‟s shares was irrelevant as the court had not ordered a compulsory purchase; and that the superannuation on sales commissions was not an incident of his shareholding. [42] Mr Dick contended that he had not unreasonably failed to accept the offer made on 29 November 2007 because it was made against the background of ongoing oppression through the use of the Company‟s funds being used to defend the oppression proceedings on behalf of the majority shareholders.38 [43] The orders sought were that the costs should follow the outcome of the proceedings and the majority shareholders pay Mr Dick‟s costs of the proceedings on the standard basis. If this order were not made, Mr Dick contended, then he would have had a “Pyrrhic” victory. Oral hearing below [44] On 14 February 2012 each side had provided her Honour in advance with two sets of submissions – the principal submissions and response submissions and their authorities. The parties relied upon affidavits and, for Mr Dick, the joint expert report prepared for the trial. The primary judge asked if she needed to refer to the submissions from the trial hearing but was assured that they had been superseded by the costs submissions. The court adjourned at 10.12 am and resumed at 2.46 pm so that in the intervening period the primary judge could consider the submissions and material. The written submissions were comprehensive and, consequently, the oral submissions in the afternoon were quite limited. 36 Written submissions, para 80. 37 As at 31 October 2005 and on conditions. Mr Hill, the expert, in evidence, assessed the value much lower. 38 As already mentioned at [6], this was unknown to Mr Dick at the time of the offer. -- 14 of 27 -- 15 [45] The primary judge identified as of importance the comparison between the offer made by the majority shareholders and the final outcome for Mr Dick and mentioned the difficulties in making a direct comparison between the offer made on 29 November 2007 and what Mr Dick had received as a result of the court-ordered winding up. The other issue which engaged the oral submissions was the payment of the majority shareholders‟ legal fees by the Company and how that should be dealt with in evaluating the offer. Counsel for Mr Dick dealt briefly with the contention of his delinquency in the conduct of the proceedings and resisted any suggestion costs could be awarded on an issues basis. Decision below [46] When Mr Bell indicated to her Honour that there would be no reply to Mr Perry‟s submissions the transcript records that her Honour proceeded immediately to give her reasons and make orders. The revised reasons39 appear in the Appeal Record. The appellants contend that the revisions are extensive, supplying reasons where there were, relevantly, none given for making the costs order. [47] In Todorovic v Moussa40 the New South Wales Court of Appeal held that in a civil action a judge is permitted to alter the reasons for judgment after delivery of the judgment provided the change is not one of substance. Where the judgment has had impermissible alterations made to it, the proper approach is to treat the judgment as if the additions had not been made. The court referred to observations in Lam v Beesley41 where Owen J said:42 “So far as concerns reasons given orally and later transcribed, the judicial officer has the right to edit the document and correct errors of grammar and style. The difficulty lies in determining the extent to which he or she can go beyond this and make changes of substance rather than of form.” Their Honours also referred to observations of Danckwerts LJ in Bromley v Bromley (No 2):43 “The general principle must be that this court must accept as the authentic record of the judge‟s judgment that which has been approved by him after consideration of the draft produced by the shorthand writer. It is not only a question of possible mistakes by shorthand writers, who do their best extremely well, but are sometimes unable to hear exactly the words used by the judge in the course of his judgment. There are other cases which arise through the judge not saying clearly what he meant, or indeed sometimes by a slip saying something which he cannot possibly have meant. After all, an ex tempore judgment is not always easy to deliver perfectly in all respects on the spur of the moment; there must be corrections which need to be made so as to give the real meaning of the judge, and he is perfectly entitled, so it seems to me, not only to correct mistakes, but to alter words which do not express his intended meaning at the time when he uttered them.” 39 AR 48-56. 40 (2001) 53 NSWLR 463; [2001] NSWCA 419. 41 (1992) 7 WAR 88. 42 At 93-94. 43 [1965] P 111 at 116. -- 15 of 27 -- 16 [48] The approach in Todorovic envisages a two-stage process, that is, to identify whether the changes relate to a matter of substance and, if so, to treat the reasons as if the alterations/additions had not been made. That is, with respect, a convenient approach. Here any changes which concern the appellants appear in the final part of the judgment.44 A CD of the oral pronouncement of the reasons for judgment has been provided with the Appeal Record Book which the court has heard. To deal with this complaint it is necessary to consider the whole of the reasons. [49] Her Honour commenced her reasons by summarising Mr Dick‟s contentions that costs ought to follow the event, and, having succeeded in his oppression action, “… he ought to have the costs of and incidental to the proceeding, following the usual course, pursuant to rule 361 UCPR.”45 Her Honour referred to the contentions of the majority shareholders: “… that an indemnity costs order should be made in their favour, and secondly, in the alternative, that their costs should be paid on a standard basis, up to 13 December, 2007, being the date when an offer to purchase the applicant‟s shares for $300,000 expired, and thereafter, that they should receive indemnity costs.”46 Her Honour then said: “The basis upon which the submissions are made by the [majority shareholders] is three-fold. Firstly, it is contended that the applicant imprudently refused a genuine offer of compromise. Secondly, it is said that the applicant failed to prove his pleaded case, and has in substance lost, succeeding on only two of the alleged acts of oppression. And thirdly, it is said that the applicant conducted the proceedings delinquently by persistently breaching court orders, and by making improper allegations of fraud.”47 [50] Her Honour noted that there were a number of offers to compromise but that the offer upon which emphasis was placed was an offer to purchase Mr Dick‟s shares for $300,000 together with the costs of the proceedings pursuant to Ch 9 Pt 5 of the UCPR dated 29 November 2007. Her Honour said: “I note in the written submissions that the [majority shareholders] contended that, approaching the matter in the best light for the applicant (including for example as to superannuation), the applicant was paid a total of about $245,000 upon the winding up. It is therefore argued that the applicant unreasonably and imprudently refused the respondent‟s [sic] genuine offer.”48 Her Honour noted the opposing submission: “… that a direct comparison between the amount of the compromise offer and the amount paid on the ultimate winding up of the first respondent is not apposite.”49 44 Exhibit SJH-8 to the affidavit of Sharon Janelle Hauser filed 27 August 2012 where the concluding pages have been reproduced showing the alterations added to the original recorded/transcribed reasons. 45 The ordinary rule as to costs is r 681. This is clearly a slip since there was no sense that her Honour was considering a submission under r 361(2) that “another order for costs is appropriate.” 46 AR 49. 47 AR 49-50. 48 AR 50. 49 AR 50. -- 16 of 27 -- 17 Her Honour added: “In my view, there is much to be said for that submission. Moreover, there was in this case, a strongly contested issue to do with the amount to be ascribed to the value of the first respondent‟s assets. That involved a contest, inter alia, between competing valuations, and I do not consider that, in those circumstances, even if one were to make a comparison between the offer and the amount finally paid, the deficit of some $45,000 leads to the conclusion that the applicant acted imprudently or unreasonably in rejecting the offer of compromise, such that an order for indemnity costs should follow.”50 [51] Her Honour made reference to the wrongful payment of the majority shareholders‟ legal fees by the Company “over a significant period, and in respect of significant amounts” and concluded that it: “… is also something to which regard must be had in considering the position of the applicant in rejecting the respondent‟s [sic] offer of compromise.”51 [52] Her Honour moved then to a consideration of the second matter relied on by the majority shareholders as justifying an indemnity costs order that Mr Dick had failed in all but two of the alleged acts of oppression. On this her Honour concluded: “[i]t was sufficient for the applicant‟s purposes to prove only an act of oppression.”52 Her Honour noted that the majority shareholders had argued that the facts of the findings of oppressive conduct were not in dispute but added “at no point was any concession made that that conduct constituted acts of oppression.”53 Had that occurred, her Honour said, the hearing may have been significantly lessened in that Mr Dick would not have been required to press other matters. Her Honour noted the concession made on behalf of the majority shareholders that the mere fact that an applicant did not prove his pleaded case in its entirety or at all was not necessarily a sufficient basis for awarding indemnity costs. Her Honour continued: “However, it was nevertheless said to be a powerful reason why an order in terms of rule 3.6.1 [361] UCPR was not appropriate.”54 [53] Her Honour noted the contention (which she had accepted to be the case in her principal reasons) that the directors always intended to wind up the Company. Nonetheless, she observed, the submissions at trial were: “… against the making of a winding [up] order at all, even if oppression were found … inter alia because the applicant had refused reasonable offers.”55 [54] Her Honour next considered the submission based on Mr Dick‟s delinquent conduct in the conduct of the proceedings. Her Honour observed that all parties under the rules of court in modern litigation are required to act promptly and to bring proceedings of an interlocutory nature if the opposite party acts “in an untoward” fashion and said: “No explanation was provided as to why the respondents tolerated such delays.”56 Her Honour noted the submission made on behalf of Mr Dick that 50 AR 50-51. 51 AR 51. 52 AR 51. 53 AR 52. 54 AR 52. 55 AR 53. 56 AR 54. -- 17 of 27 -- 18 substantial disclosure was provided late by the majority shareholders. Against Mr Dick‟s dilatory conduct and his contravention of directions and orders her Honour noted the “repeated payment of their [the majority shareholders‟] legal fees by [the Company]”: “That conduct proceeded over a significant period of the litigation, and concerned very substantial amounts of money. Moreover, I note that there were payments made between the period after judgment was reserved and judgment being delivered.”57 Her Honour rejected the explanation offered by Mr Alan Powell that he misunderstood when he needed to direct repayment to the Company.58 [55] The final part of the reasons, about which complaint is particularly made, are now set out as marked up by the appellants‟ solicitors and not said by the respondents to be incorrect. The crossed out words were added when the transcript was revised: “When regard is had to that, I do not consider that the dilatory and delinquent conduct of the applicant referred to by the second and third respondents is such that it should result in an order for indemnity costs. The applicant succeeded in proving oppression and obtained an order for relief in the form of a winding up of the first respondent. In the circumstances, I am not persuaded that there should be an order requiring costs to be paid by the applicant. I consider that the appropriate order is one that requires the second and third respondents to pay the applicant‟s costs on a standard basis MR PERRY: Thank you, your Honour. MR BELL: Your Honour, it‟s essential for me to seek your leave should we wish to appeal the order in relation to costs, under section 2÷5÷3 of the Supreme Court Act, and I seek your leave to appeal the costs, your Honour, the costs order just made. HER HONOUR: In my view, this matter has been characterised by prolonged litigation, and it is in the interests of finality that the costs order remain. And I refuse leave.”59 Grounds of appeal if leave given [56] As Mr D O‟Sullivan for the appellants acknowledged, the grounds of appeal are extensive but may be considered under four headings:  Failure by the primary judge to give effect to r 361 of the UCPR.  Failure by the primary judge to analyse the offer to settle and the amount paid on the ultimate winding up. 57 AR 55. 58 Mr Powell was not cross-examined on his affidavit and there was no contradictory evidence. 59 Exhibit SJH-8 to the affidavit of Sharon Janelle Hauser filed 27 August 2012, pp 20-21 of the affidavit. -- 18 of 27 -- 19  Failure by the primary judge to have regard to relevant considerations, namely that the appellants intended to wind up the Company prior to the commencement of proceedings; that Mr Dick failed to obtain the orders sought in the application that the appellants purchase his shares and failed to obtain an order more favourable than the offer to settle; that the majority of the costs of the proceedings had been incurred in relation to matters in which Mr Dick failed; and his inappropriate conduct of the proceedings at first instance.  Failure by the primary judge to give any reasons or adequate reasons for the decision for the orders made. [57] The orders sought are:  Set aside the order below.  In lieu thereof order that – (i) Mr Dick pay the appellants‟ costs of the proceedings at first instance; alternatively (ii) the appellants pay Mr Dick‟s costs of the proceedings up until 13 December 2007, when the offer to settle expired and thereafter Mr Dick pay the first and second appellants‟ costs of the proceedings; and (iii) Mr Dick pay the appellants‟ costs of the appeal. [58] It is immediately apparent that the appellants have abandoned any claim for indemnity costs. It is not clear if (i) is sought under r 681 “unless the court orders otherwise” or r 361(2) “another order for costs is appropriate in the circumstances”, but it may reasonably be assumed that it is a reference to r 361(2). Should leave to appeal have been granted below? [59] The appellants accept that the primary judge‟s order refusing leave pursuant to s 253 of the Supreme Court Act 1995 is a discretionary judgment to which the principles in House v The King60 apply. The primary judge refused leave to appeal her order because the matter had “been characterised by prolonged litigation” and it was in the “interests of finality” that the costs order not be appealed. In Emanuel Management Pty Ltd (in liquidation) v Foster’s Brewing Group Ltd61 Chesterman J (as his Honour then was) said:62 “The evident purpose of s 253 is to limit appeals „as to costs only.‟ This is because decisions on costs afford a prime example of a discretionary judgment which parliament has recognised should be left to the trial judge.” [60] Keane JA (as his Honour then was) in Morrison v Hudson63 similarly drew attention to affirmations of the restrictive policy in relation to appeals on questions of costs only.64 His Honour mentioned factors which should be considered by a trial judge when entertaining an application for leave to appeal a costs order: “Whether leave to appeal should be granted will usually depend on the primary judge‟s view as to the balance of competing arguments, whether those arguments relate to matters of legal principle or 60 (1936) 55 CLR 499 at 504-505. 61 [2003] QSC 484. 62 At [30]. 63 [2006] QCA 170. 64 At [23]. -- 19 of 27 -- 20 disputed questions of fact, the importance and difficulty of such arguments, and, on occasion, the amount of money involved.”65 Recently, in Yara Nipro Pty Ltd v Interfert Australia Pty Ltd,66 the court affirmed this approach, Fraser JA observing: “It has been said that the powers of a Court of Appeal to entertain an appeal against the refusal of leave are „extremely limited‟. Certainly Nipro assumed a heavy burden in seeking to establish that the discretion under s 253 of the Supreme Court Act 1995 (Qld) miscarried.”67 [61] The primary judge gave decisive weight to the prolongation of the litigation and achieving finality of the litigation. The appellants contend that neither should have been regarded in that light and thus her Honour effectively took into account factors that were irrelevant or, at best, should have been accorded minimal weight and failed to have any regard to the relevant considerations identified by Keane JA in Morrison v Hudson. [62] The second error identified by the appellants was the failure of the primary judge to give the appellants an opportunity to advance their case for leave. The recording of the proceeding has a short pause after Mr Bell made his application and before her Honour made her ruling. Mr Perry, for Mr Dick, submitted that Mr Bell could have asked for an opportunity to make submissions when it was apparent that her Honour was not going to invite him to do so. This is a delicate area. Advocacy must be firm and fearless but also courteous. It may not have been immediately apparent that her Honour was about to make her ruling rather than merely making an (not unjustified) observation. Discussion and conclusion on leave appeal [63] It can fairly be said that an attempt to have her Honour receive submissions after she had decided not to give leave would, in effect, have been an application to re-open. Mr O‟Sullivan, for the appellants, referred to New Cap Reinsurance Corporation Ltd v AE Grant68 where Barrett J said: “It seems to me that these principles [relating to the discretion to re-open or vary a judgment], as they apply in a case such as the present, can be summarised in one basic proposition, namely, that a single judge whose decision is susceptible to appeal through readily available channels (with or without any preliminary need for leave to appeal) should allow re-opening after judgment where it is obvious to that judge that the decision has miscarried and that the miscarriage may be rectified and the situation retrieved by attention to the matter by that judge rather than by an appeal court. What is highly undesirable is that the first instance judge be cast in the role of hearing what amounts to an appeal against his or her own decision.”69 65 At [24]. 66 [2010] QCA 128. 67 At [67]. 68 [2009] NSWSC 950. 69 At [20]. See also observations of Rix LJ in Compagnie Noga D’Importation et D’ Exportation SA v Abacha (No 2) [2001] EWHC QB B1. -- 20 of 27 -- 21 [64] The preferable course might have been for her Honour to seek brief submissions as to why leave ought to be given which may have directed consideration of matters relevant to the exercise of her discretion. Still, extensive written submissions had been made, supplemented by oral submissions in an application which had occupied the whole day so that the matters to which Keane JA made reference should have been apparent and need not have been re-agitated again. It will often be the case that the complexity of the competing arguments about costs is obvious and a primary judge will be alive to those matters and give leave without needing further persuasion. The failure to give counsel the opportunity to make submissions about leave was not here an error, although had an invitation been extended, it might be supposed that her Honour would have been directed to the factors mentioned by Keane JA as enlivening the discretion. [65] The error was to refuse leave, because the relevant considerations had not been weighed. This is not a case where the discretion is sought to be set aside because, having had regard to the various relevant factors, the decision was not to a party‟s liking. Her Honour‟s discretion was not informed by the correct considerations. In all disputes finality is a desirable goal but not where there is a fairly arguable case for a different outcome on appeal. Leave ought to have been given. It is, however, necessary to consider, in this court, if there are reasonable prospects of success on appeal if leave now is given. If there are not, then there would be no utility in it. Because that question is subsumed in the substantive appeal it suffices to answer that there are such prospects so that the appeal against the order refusing leave should be allowed. Appeal from costs order (i) The offer to settle [66] Rule 361 appears in Ch 9 Pt 5 of the UCPR dealing with offers to settle. It provides, relevantly: “(1) This rule applies if – (a) the defendant makes an offer to settle that is not accepted by the plaintiff and the plaintiff obtains a judgment that is not more favourable to the plaintiff than the offer to settle; and (b) the court is satisfied that the defendant was at all material times willing and able to carry out what was proposed in the offer. (2) Unless a party shows another order for costs is appropriate in the circumstances, the court must – (a) order the defendant to pay the plaintiff‟s costs, calculated on the standard basis, up to and including the day of service of the offer to settle; and (b) order the plaintiff to pay the defendant‟s costs, calculated on the standard basis, after the day of service of the offer to settle.” [67] Rule 361(2) is couched in mandatory language – unless a party shows that another order for costs is appropriate the court must make orders of the kind described in the rule. The important question on this appeal is whether Mr Dick obtained a judgment that was “not more favourable” than the offer to settle.70 There is no 70 Rule 361(1)(a). -- 21 of 27 -- 22 contest about the other conditions of the rule.71 If the answer to this question is that the judgment was “not more favourable” then the next question, whether some other order be made instead of the usual order, will be considered subsequently. [68] The appellants had made earlier offers to settle under cover of a letter dated 8 October 2007 and had included with it a formal valuation of Mr Dick‟s shares prepared by the Company‟s accountants, Ulton Group. The approach which those accountants had taken was to ascertain the net present value of the expected after tax distributions of the Company prior to being wound up. Mr Dick‟s shares were then valued by the accountants at $107,995. As was intimated in the letter, the Company was to be liquidated and Mr Dick would be paid out in the liquidation. [69] Mr Dick, together with the other shareholders, had previously received cash generated by the sale of assets of the Company by way of dividends. Ulton Group exhibited the unaudited financial statements for the Company to 30 June 2007.72 [70] This court in Timms v Clift73 considered the ambit of r 118(1) of the District Court Rules 1968 which was, in material respects, the same as r 361. It had been contended that r 118 had no application because the offers had included a requirement for a published apology which was not quantifiable in monetary terms. The court74 concluded that: “… the expression „a judgment no less favourable‟ in r. 118 does not in our opinion exclude from consideration relief sought other than money claims. For example, if an action was brought relating to the winding up of a partnership, various items of relief might be claimed, including declaratory relief; it would be a matter for the court‟s judgment as to whether, an offer to settle having been made, the effect of the judgment overall was „no less favourable‟ to the plaintiff than the offer.”75 The court referred with approval to observations by Bingham MR in Roache v News Group Newspapers Ltd76, another defamation case: “The judge had to look closely at the facts of the particular case before him and ask: Who, as a matter of substance and reality, had won? Had the plaintiff won anything of value or anything he could not have won without fighting the action through to a finish? Had the defendant substantially denied the plaintiff the prize which the plaintiff fought the action to win?”77 [71] The primary judge did not squarely deal with this issue in the context of r 361. Her Honour said that there was much to be said in favour of Mr Dick‟s argument that: “… a direct comparison between the amount of the compromise offer and the amount paid on the ultimate winding up of the first respondent is not apposite.”78 71 Rule 361(1)(b). 72 AR 85-103. 73 [1998] 2 Qd R 100. 74 Pincus and Davies JJA and Mackenzie J. 75 At 107. 76 [1992] TLR 551. 77 At 551-552. 78 AR 50. -- 22 of 27 -- 23 In the absence of any other clear decision in the reasons this observation may be taken as a rejection of the submission that the offer and the outcome after trial could be compared. If that were her Honour‟s conclusion it was an error. It was quite possible to make a comparison and material had been filed and submissions made which facilitated it. [72] Following the above observation her Honour immediately proceeded to reject the submission that indemnity costs should be awarded because there was: “… a strongly contested issue to do with the amount to be ascribed to the value of the first respondent‟s assets”.79 Her Honour noted that there was a contest between competing valuations. Her Honour suggested that even if there were a comparison between the offer and the amount finally paid to Mr Dick which her Honour identified as a deficit of $45,000, it did not compel the conclusion that Mr Dick had acted imprudently or unreasonably such as to require an order for indemnity costs. [73] Mr Dick had received dividends from the Company since 29 November 2007 (the date of the offer) of $203,248.9280 made up of a dividend declared on 18 December 2008 in the amount of $74,999.00, an interim distribution in the liquidation made on or about 19 December 2011 in the amount of $119,734.91, and a final distribution on 30 January 2012 in the amount of $8,515.01. [74] Mr Dick alleged that the non-payment of a superannuation benefit on sales commissions was an aspect of the oppression conduct and should be included. It was an incident of his employment not of his rights as a shareholder. The sum of $38,378.87, which he received as a result of the winding up, should not be included in any calculation comparing the offer and the outcome from the court-ordered winding up. Had Mr Dick accepted the $300,000 plus costs, because the offer was expressed as an amount for the purchase of his shares, he was still entitled to lodge his claim for unpaid superannuation. But even if it were included, the figure for comparison was under $250,000. [75] Mr Humble, the majority shareholders‟ solicitor, set out interest calculations on $300,000 for the period from 14 December 2007 when the offer expired and the date Mr Dick received the final distribution on 30 January 2012. He applied the rate of five per cent per annum being, as he noted, half the rate awarded often by the court on damages or debt. Over that period Mr Humble calculated an amount of $62,013.70. It need not be regarded as a precise figure but gives an acceptable idea of what had been foregone by refusing the offer. [76] The deficit between the offer and the receipt on winding up was identified by the primary judge as “some $45,000”.81 Without including interest on $300,000 the difference was $96,751.08. If interest were included then the difference is almost $160,000 ($158,764.78). On those figures and without reference to factors which would dictate that “another order for costs is appropriate”, r 361(2) mandated an order for costs in the form set out in r 361(2)(a) and (b). [77] The primary judge seemed to conclude that the payment of legal fees by the Company on behalf of the majority shareholders operated against the orders sought 79 AR 50. 80 Para 20 of affidavit of Guy Humble sworn 10 February 2012; AR 114. 81 AR 51. -- 23 of 27 -- 24 by the majority shareholders about costs. It is far from clear if her Honour was referring to the effect of r 361(2) to preclude any costs order in favour of the majority shareholders or to award costs on the indemnity basis. [78] At the time when the offer was made on 29 November 2007 the payment of the majority shareholders‟ legal fees was not an alleged ground of oppression and does not appear to have been known to Mr Dick so as to have been an operating factor on any decision he made about the offer. Those fees were, in fact, relevantly, neutral because they were repaid to the Company and were, in effect, distributed amongst the shareholders. The issue of the legal fees was an irrelevant consideration, or at best, a minor matter, so far as the operation of r 361(2) was concerned and ought not to have been the decisive factor which it seems to have been. [79] Her Honour noted that although the majority shareholders did not contest the facts of the conduct which her Honour found to be oppressive, they had not admitted oppression, and if they had, the trial might have been considerably shortened. The approach of Mr Dick on the costs submissions that all the pleaded conduct was relevant tells against this optimism.82 That failure to admit oppression was largely irrelevant to a consideration of r 361(2). If anything, the failure on 28 allegations of oppression which occupied the bulk of the trial might have dictated, alone, some costs adjustment in favour of the majority shareholders. [80] When Mr Dick received the offer to settle in November 2007 he was aware that the Company was to be wound up and its assets distributed. He had been provided with the Company accounts and the calculations of the Company accountants in respect of the value of the shares. A members‟ voluntary winding up under Pt 5.5 of the Corporations Act would have been relatively straight forward – and inexpensive – likely within the original $10,000 nominated by the majority shareholders. Mr Dick could have advanced his separate claim for his unpaid superannuation entitlements with that liquidator. [81] Mr Dick could have made an informed decision about what he would receive should the court order a compulsory purchase of his shares after trial. He would have needed to weigh the possibility that no such order would have been made and that the court might utilise its other powers under s 233 to restore in monetary terms to the Company what had been lost due to the oppression. The Company was essentially a dormant cash box so there was a real possibility that there would be no order to purchase his shares. In that likelihood Mr Dick needed to reflect upon his distribution in a winding up. [82] The first statement of claim dated 30 January 2007 was the operative pleading at the time of the offer and made numerous wide ranging allegations against the majority shareholders including disputed valuations of property. Mr Dick‟s lawyers could readily have advised him of the likely duration and costs of any trial in the Supreme Court. It would have been prudent to factor in the delay to the trial and judgment against the certainty of $300,000 immediately and the costs for which he would be liable to his lawyers even were he to be successful and be awarded costs presumably on the standard basis. Finally, Mr Dick had to contemplate what costs he might be ordered to pay if he did not better the offer. [83] The object of the rules about offers to settle is to encourage the resolution of disputes without the necessity of a trial and, inherent in the essence of an offer, is 82 See [37] above. -- 24 of 27 -- 25 some element of compromise.83 Mr Dick, or at least his lawyers, would have understood this. [84] It was possible to compare the offer with what Mr Dick achieved after the trial. Had that occurred that comparison would have demonstrated clearly that he received a judgment that was not more favourable than the offer to settle and, accordingly, the majority shareholders were entitled to a costs order in their favour. Mr Dick had advanced no relevant consideration which dictated that any other order ought to be made. (ii) Should the appellants obtain a costs order which betters the usual order under r 361(2)? [85] The primary order now sought by the appellants is that Mr Dick pay the whole of the costs of the proceedings including reserved costs on the standard basis. Their principal ground for seeking such an order is that although Mr Dick obtained findings of oppression by the majority shareholders, he did not get the relief which he sought – the court-ordered purchase of his shares. Added to that was his failure on 28 out of the 30 particulars of oppression, examination of which occupied many of the pre-trial contests and the trial itself. [86] In the absence of an operating offer to settle by the majority shareholders there is much to be said for an approach to the costs in this case on an issues basis,84 or, more broadly, so as to avoid an expensive assessment procedure, on a percentage basis.85 [87] Generally, a successful moving party is entitled to his costs,86 and will only be deprived of his costs if the opposite party can point to some misconduct relative to the litigation. Whilst there was much to complain about Mr Dick‟s approach to the litigation, it did not, overall, give rise to disentitling conduct.87 The terms of the offer give Mr Dick his costs for approximately 20 months from the commencement of his proceedings. Thereafter the appellants are entitled to costs on the standard basis which will include the costs of the trial. An order in those terms which reflects r 361 sufficiently reflects the various factors to which regard must be had, including that Mr Dick did, no matter how modestly, have success. [88] Factors that would make some other order appropriate under r 361(2) as propounded by Mr Dick have been considered above and rejected. (iii) Revision of reasons and insufficiency of reasons [89] As has been stated on numerous occasions, a court from which an appeal lies must state adequate reasons for its decision.88 The failure to do so is an error of law.89 [90] Muir JA explained the rationale for such a rule in the following passages in Drew v Makita:90 83 Jones v Millward [2005] 1 Qd R 498; [2005] QCA 76. 84 Rule 684(1). See, for example, Deeson Heavy Haulage Pty Ltd v Cox (No 2) [2009] QSC 348 where McMeekin J departed from the “usual” order as to costs under r 681 to accommodate limited success by a plaintiff and alleged misconduct. 85 Rule 684(2). 86 Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at [66]. 87 Oshlack v Richmond River Council (1998) 193 CLR 72 per McHugh J at [69]. 88 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 270 per Mahoney JA, 279 and 280 per McHugh JA. 89 Drew v Makita (Australia) Pty Ltd [2009] QCA 66; [2009] 2 Qd R 219 per Muir JA at [57]; 237. 90 At paras [58] – [62]. -- 25 of 27 -- 26 “[58] The rationale for the requirement that courts give reasons for their decisions provides some guidance as to the extent of the reasons required. The requirement has been explained, variously, as necessary: to avoid leaving the losing party with „a justifiable sense of grievance‟91 through not knowing or understanding why that party lost;92 to facilitate or not frustrate a right of appeal;93 as an attribute or incident of the judicial process;94 o afford natural justice or procedural fairness;95 to provide „the foundation for the acceptability of the decision by the parties and the public‟ and to further „judicial accountability‟.96 [59] The extent to which a trial judge must expose his or her reasoning for the conclusions reached will depend on the nature of the issues for determination and „the function to be served by the giving of reasons‟.97 For that reason, what is required has been expressed in a variety of ways. For example, in Soulemezis v Dudley (Holdings) Pty Ltd, Mahoney JA said:98 „... And, in my opinion, it will ordinarily be sufficient if – to adapt the formula used in a different part of the law ... by his reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he has acted.‟ [60] McHugh JA‟s view was that reasons sufficient to meet the above requirements do not need to be lengthy or elaborate but „... it is necessary that the essential ground or grounds upon which the decision rests should be articulated‟.99 [61] In Strbak v Newton,100 Samuels JA said: „…What is necessary, it seems to me, is a basic explanation of the fundamental reasons which led the judge to his conclusion. There is no requirement, however, that reasons must incorporate an extended intellectual dissertation upon the chain of reasoning which authorises the judgment which is given.‟ 91 Beale v Government Insurance Office of NSW at 431. 92 Beale v Government Insurance Office of NSW at 442. 93 Soulemezis v Dudley (Holdings) Pty Ltd at 259, 271: Public Service Board of New South Wales v Osmond (1986) 159 CLR 656 at 666-667 per Gibbs CJ; Waterways Authority v Fitzgibbon (2005) 79 ALJR 1816 at 1835 [129]. 94 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 257, 269, 273, 279. 95 Soulemezis v Dudley (Holdings) Pty Ltd at 279; Flannery v Halifax Estate Agencies [2000] 1 WLR 377 at 381-392; Waterways Authority at 1835 [129]; Cypressvale Pty Ltd v Retail Shop Leases Tribunal [1996] 2 Qd R 462 at 475, 476. 96 Soulemezis v Dudley (Holdings) Pty Ltd at 279. 97 Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd [1983] 3 NSWLR 378 at 386. 98 Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 273. 99 Soulemezis v Dudley (Holdings) Pty Ltd at 280. 100 (Unreported, New South Wales Court of Appeal, Gleeson CJ, Samuels and Priestley JJA, 18 July 1989). -- 26 of 27 -- 27 [62] Woodward J, in Ansett Transport Industries (Operations) Pty Ltd v Wraith,101 said that the decision maker: „...should set out his understanding of the relevant law, any findings of fact on which his conclusions depend (especially if those facts have been in dispute), and the reasoning processes which led him to those conclusions.‟” [91] His Honour set out at some length certain propositions of Meagher JA in Beale v Government Insurance Office of NSW102 which it is not necessary to repeat here but which his Honour described as “useful guidance for a determination of the sufficiency of reasons in the general run of cases”.103 [92] When regard is had to the additions to the reasons it can readily be seen that they add little of substance. Reading the reasons without the alterations does not produce, relevantly, reasons different from the oral pronouncement. [93] The real fault here lay in a failure to analyse the offer to settle in terms of r 361 and to give the offer little and insufficient consideration. The other conditions which appeared to carry decisive weight with her Honour, namely, that Mr Dick was successful in his proceedings and the payment of the legal costs related, it would seem, largely to the issue of indemnity costs. [94] It was not necessary to give lengthy or elaborate reasons but something more was required to demonstrate that the very detailed submissions of the appellants had been properly considered. However since the appeal is to be upheld there is nothing further that needs be said on this ground. Orders [95] The orders should be as follows: 1. Appeal against the order refusing leave to appeal the costs order made in the Trial Division allowed. 2. Appeal against the costs order allowed. 3. Set aside the order made about costs below on 14 February 2012. 4. Order instead in terms of the offer made 29 November 2007 that: (a) AL Powell Holdings Pty Ltd and Trekmere Pty Ltd pay Wayne Kenneth Dick‟s costs calculated on the standard basis up to and including 29 November 2007 being the date of service of the offer,104 and (b) Wayne Kenneth Dick pay AL Powell Holdings Pty Ltd and Trekmere Pty Ltd‟s costs of the proceedings including reserved costs, if any, thereafter, calculated on the standard basis. 5. Order that Wayne Kenneth Dick pay AL Powell Holdings Pty Ltd and Trekmere Pty Ltd‟s costs of the appeal against the refusal of leave to appeal and the costs of the appeal against the costs order. 101 (1983) 48 ALR 500 at 507. 102 (1997) 48 NSWLR 430 at 443-444, at [63] in his reasons. 103 At [64]. 104 This reflects the terms of r 361(2) rather than the less favourable for the appellants‟ order sought in the Notice of Appeal. -- 27 of 27 --