FEDERAL COURT OF AUSTRALIA

Searson v Salmon [2014] FCA 748

THE COURT ORDERS THAT:

1.    Order 2 made on 17 April 2014 be set aside and in lieu thereof order with effect from 15 May 2014 that:

   “1.    On or before 12:00 pm of 12 June 2014, the fourth and fifth respondents purchase the 250,000 shares held by the second applicant in the fourth respondent by paying the applicant the sum, being their fair price, of $398,241, together with interest of $29,353 calculated for the period between 8 April 2013 and 15 May 2014.

   2.    On or before 12:00 pm of 12 June 2014, the sixth respondent, as trustee of YPP Property Trust, redeem the 250,000 units held by the second applicant in YPP Property Trust at the sum, being their fair price, of $257,318, together with interest of $13,561 calculated for the period between 29 July 2013 to 15 May 2014.

   3.    On or before 12:00 pm of 12 June 2014, the sixth respondent pay the second applicant the sum of $14,288.82, together with interest of $795.36 calculated for the period between 11 July 2013 to 15 May 2014.

   4.    In the event that any of the sums is not paid by the respective respondent referred to in Order 1, 2 or 3 made today, the applicant file and serve an affidavit as to the facts by 4:00 pm on 12 June 2014 and cause the matter to be restored to the list on 13 June 2014 for the purposes of appointing liquidators to the respective respondent in default of the order for payment pursuant to s 233(1)(a) of the Corporations Act 2001 (Cth).

   5.    The fourth, fifth and sixth respondents pay the costs of the applicants on an indemnity basis in respect of the proceedings generally so far as they relate to those respondents, including the costs of the interlocutory application filed on 28 February 2014, fixed in the sum of $55,000.”

2.    The matter be listed for further directions on 16 May 2014.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

(REVISED FROM THE TRANSCRIPT)

1    On 17 April 2014, I adjourned the applicants’ interlocutory application for default judgment to today. I ordered that the defences of the fourth, fifth and sixth respondents, being K-Lite Pty Ltd, Y Twelve Pty Ltd and YPP Properties Pty Ltd (the defaulting respondents), forming part of the joint defence of all six respondents, be struck out and that, unless the defaulting respondents showed cause on or before today, orders would be made pursuant to s 233 of the Corporations Act 2001 (Cth) and r 5.23 of the Federal Court Rules 2011 (Cth) granting the substantive relief sought in the statement of claim against the three defaulting respondents together with costs on an indemnity basis. I granted the adjournment on the defaulting respondents’ application. Both the interlocutory application and proceedings generally relating to those respondents had been listed for hearing on 17 April 2014.

Background

2    The defaulting respondents had ceased to appear by a lawyer following their former solicitor’s notice of ceasing to act that took effect on 19 December 2013 in relation to Y Twelve and YPP Properties, and 13 January 2014 in relation to K-Lite, and that remained the position until just prior to 17 April 2014. However, at that hearing, each of the defaulting respondents appeared by their new solicitor and both she, Ms Sarah Furlonger, and Mr Salmon, the first respondent, a director of each of the respondent companies, filed affidavits explaining their current position. Ms Furlonger said that, at approximately 5.45 pm on 15 April 2014, she had received telephone instructions from Mr Salmon, for whom she had previously acted when employed by another firm of solicitors who had ceased to act for the defaulting respondents in December 2013. He asked her whether she was available to appear on the interlocutory application in two days’ time. Ms Furlonger attempted to bring herself up to date and made requests of both the solicitors acting for the first, second and third respondents and counsel for the applicants for information and documents that had been filed in the proceedings. She said that Mr Salmon had instructed her that he had not obtained any advice from her former firm, who had acted for the defaulting respondents in relation to the proceedings, since about mid-December 2013. Notably, Mr Salmon did not say that he was unaware of what was going on in the proceedings, nor could he, given that he is actively defending them at the moment, as the first respondent, through other solicitors. Ms Furlonger applied for a two week adjournment so that she could prepare properly to deal with the matters raised in the interlocutory application.

3    Mr Salmon’s affidavit was instructive for what it did not reveal about his earlier continuing failure to cause the defaulting respondents to participate in the proceedings following the withdrawal of the previous solicitors from acting. He asserted that at no time had the registered office of the defaulting respondents, being a firm of accountants, Hall Chadwick, forwarded him a copy of the interlocutory application and that, until about 13 April 2014, he had not been advised by Ms Lopes, the solicitor acting for him and the second and third respondents on the substantive defence of the proceedings against him personally, that the interlocutory application was listed for hearing. He said that, on that day, Ms Lopes suggested that the defaulting respondents should obtain legal representation or otherwise seek to appear personally at the hearing of the interlocutory application. He apologised for the delay in the defaulting respondents’ obtaining legal representation.

4    When Ms Furlonger appeared at the hearing of the interlocutory application, I suggested that it would be appropriate, having regard to the lack of any substantive explanation for the defaulting respondents’ failure to participate in the proceedings or to deal with the interlocutory application until just shortly before it was called on for hearing, that I should strike the defaulting respondents’ defence out and make orders to the effect of those sought in the interlocutory application unless the defaulting respondents showed cause on or before today as to why those orders ought not come into effect tomorrow. That was because of the default in compliance with interlocutory orders that the Court had made earlier and the failure of the defaulting respondents to appear at the directions hearing on 14 February 2014.

5    It was plain that the defaulting respondents were in default at the time the interlocutory application was filed on 28 February 2014. That default occurred by force of order 6 that I had made on 14 February 2014, because they had failed to attend the hearing on 14 February 2014 and, by the time of the hearing on 17 April 2014, they had failed to file and serve any affidavits and submissions in opposition to the orders the applicants had sought in accordance with order 6 that I had made on 14 February 2014: see r 5.22. Accordingly, rr 5.23(2)(c) and (d) authorised that judgment be given against the defaulting respondents based on the applicants’ statement of claim and that, among others, orders be made for damages to be assessed.

Principles

6    A plaintiff or applicant who seeks relief in proceedings started by an originating application supported by a statement of claim is entitled upon a default by a defendant or respondent, under r 5.23, to seek judgment based on the statement of claim without needing to rely on evidence supporting that claim. The Court may give judgment in the party’s favour provided that the pleading, on its face, makes that claim and the claim falls within the jurisdiction of the Court: Australian Competition and Consumer Commission v dataline.net.au Pty Ltd (2006) 236 ALR 665 at 677-678 [45] per Kiefel J; Yeo v Damos Earthmoving Pty Ltd; in the matter of Beachwood Developments Pty Ltd (in liq) [2011] FCA 1129 at [9] per Gordon J; Sanko Steamship Co Ltd v Australia Gloria Energy Group Pty Ltd [2012] FCA 798 at [6] per myself.

7    However, as Kiefel J noted in Dataline 236 ALR at 678-679 [49]-[51], the Court could permit the applicant to lead some evidence in relation to the relief sought. That is because r 5.23 operates on the premise that the defaulting party has admitted the facts of the claims as pleaded and the Court then considers whether those facts establish an entitlement to the relief claimed. Her Honour held that the analogue of the rule required that the face of the statement of claim must show a right to some form of relief (236 ALR at 679-680 [53]).

8    Kiefel J held that the matters alleged in the statement of claim must permit the conclusion that some relief may be granted, even if its grant were subject to other considerations. Such a conclusion is at least possible in cases where a declaration and an injunction are sought. An applicant may establish some right or legal interest or legal conclusion capable of resolving a controversy that might properly be expressed in the form of a declaration or establish the infringement of a right or a standard set by a statute.

9    Subject to considerations that might weigh against the grant of relief of those kinds, the applicant may be said to have an “entitlement”. It does not have to be absolute for the purposes of the rule, which is discretionary in nature in any event. Her Honour suggested that, in an appropriate case, such as one brought by a regulator in respect of protecting the public interest, the court might make a qualified declaration, notwithstanding the traditional restraint exercised by courts in making binding declarations without having held a contested hearing of the disputed facts (236 ALR at 680-681 [54]-[59]). She suggested that, in a default judgment context, such declarations might be prefaced by a statement (236 ALR at 681 [59]):

“Upon admissions which [the respondent in question] is taken to have made, consequent upon non-compliance with orders of the court.”

Subsequent events

10    When the matter came on today, Ms Furlonger again appeared for the defaulting respondents and confirmed that they had not sought to show cause pursuant to order 2 made on 17 April 2014 as to why the substantive default judgments sought by the applicants against them ought not be given in the form that I had ordered. In the meantime, the applicants had served the defaulting respondents with updated material seeking to quantify the amounts which they sought be inserted into the proposed orders in respect of, first, the fair price for the 250,000 shares held by the second applicant, Karilla Holdings Pty Ltd in K-Lite and the fair price of the 250,000 units to be redeemed in the YPP Property Trust, the trustee of which is YPP Properties.

11    The basis on which the applicants sought those two quantifications of fair values is as follows. First, Karilla was a party to a deed recording the shareholders agreement between, among others, K-Lite and other shareholders, K-Lite being called the “Company” in the deed. Clause 5 in the deed was a detailed share transfer clause. It provided for a proposing transferor to sell by notifying the other shareholders in writing, irrevocably, of that intention and offering to sell its shares at their fair value. The offer was to be open for 30 days and, if accepted, completion was to follow within a further 30 days. The company’s accountants, in this case, Hall Chadwick, then had to determine the fair value of the shares in an amount representing the proportion of the shareholder’s interest in the company derived from the net asset value of the business that was owned and operated by the third respondent, York Precision Plastics Pty Ltd. In the absence of manifest error, that determination was to be final. Interest was payable on the balance of any purchase moneys outstanding.

12    YPP Properties was the trustee of a deed of trust dated 13 January 2009. That deed created a unit trust in which Karilla came to hold 250,000 units. Under cl 8.1, any unit holder had a right to request the trustee to redeem all or any of its units, at a price per unit determined in accordance with cl 9. The trustee had the power, in its absolute discretion, to determine whether or not to accept or reject an application for redemption made pursuant to cl 8.1. Clause 9 provided that, for the purposes of fixing a unit price under the deed, the trustee would determine the market value of the assets and liabilities of the trust fund and the units into which the fund was divided and, if it thought fit, it could obtain a valuation from an independent valuer.

13    The first applicant, David Searson, had been a long-time employee of York Precision Plastics. He became a director of that company in June 2007. He resigned on 29 June 2012. Importantly, the statement of claim alleged that at a meeting of YPP’s directors on 29 June 2012, Mr Salmon told Mr Searson that he and Glenn Rufford, the second respondent, did not want Mr Searson to be a director anymore and that Mr Searson agreed to resign on the basis that, first, he accepted the offer that Mr Salmon had made on 10 May 2012 to “buy back” Karilla’s shares in K-Lite and, secondly, that, as Mr Rufford had said, YPP would “buy back” the property shares – meaning Karilla’s units in the YPP Property Trust.

14    On 4 July 2012, Mr Searson tendered his written resignation with effect from 29 June 2012. On 5 July 2012, Mr Salmon, first, asked Mr Searson to sign ASIC forms confirming his resignations from the boards of YPP and K-Lite and, secondly, said that Hall Chadwick would determine the payout figure, meaning the amount payable on the buy backs, once the end of year financial statements had been finalised.

15    On numerous occasions after that, the statement of claim alleged, Mr Searson asked Mr Salmon what progress had occurred in obtaining valuations of Karilla’s shares and units for the purposes of perfecting the buyback. On 2 May 2013, Mr Salmon was summarily dismissed by York Plastic Products, and that ultimately led to the institution of these proceedings.

16    On 15 May 2013, as recited in pars 115-128 of the statement of claim, Mr Searson received from York Plastic Products a valuation of Karilla’s shares in K-Lite, based on a letter from Hall Chadwick dated 8 April 2013. The letter set out a short form valuation of the total net assets of K-Lite, based on its financial statements and those of York Precision Plastics, its wholly-owned subsidiary, for the financial year ended 30 June 2012. Hall Chadwick asserted that the total value of K-Lite’s net assets was $1,900,080, resulting in an apportionment of $206,530 attributable to the value of Karilla’s 250,000 shares. The short form valuation had a number of adjustments, one of them being the reduction of the net assets by reason of what was described as “February 2013 YTD [ie year to date] profit/loss” for the loss of $732,000. Other adjustments were made in respect of “impairments” or write-offs of the value of certain loans made to companies associated with Mr Salmon and Mr Rufford.

17    On 11 July 2013, Karilla’s solicitors wrote to the solicitors acting for YPP Properties as trustee seeking payment of the amount of $14,288.82, recorded as owing by the trustee to Karilla in the unaudited financial statements of the trust for the year ended 30 June 2012. The trustee did not make that payment.

18    On 29 July 2013, Mr Searson’s and Karilla’s solicitors wrote two letters addressed to various interests associated with all of the respondents. The first letter was a transfer notice under cl 5.3 of the shareholders agreement, offering to sell Karilla’s 250,000 shares in K-Lite for a price of $286,098. The offer made by the applicants’ solicitors of 29 July 2013 treated the adjustment of $732,000 for the February 2013 YTD loss in Hall Chadwick’s valuation as being inappropriate in a valuation of the shares that was based on the applicants’ acceptance on 29 June 2012 of the respondents’ offer of 10 May 2012. The applicants’ solicitors contended that the value of the shares ought to have been calculated as at 30 June 2012.

19    The second letter was written to YPP Property through its solicitors accepting a valuation given to Karilla on behalf of the trustee, valuing Karilla’s 250,000 units in the trust at $257,318, based on the cost prices of the two real properties held by the trust. Each of the letters was expressed to be without prejudice except as to costs, based on the decision of the English and Wales Court of Appeal in Calderbank v Calderbank [1976] Fam 93 and s 131(2)(h) of the Evidence Act 1995 (Cth). The respondents did not act on either offer.

The pleaded claims

20    The proceedings commenced on 5 August 2013. The applicants relied on claims of oppression under ss 232-233 of the Corporations Act, and other claims under the Fair Work Act 2009 (Cth) and the general law.

21    The statement of claim pleaded that the short form valuation had taken account of write-offs of director-related loans associated with Mr Salmon and Mr Rufford and their companies, Judius Pty Ltd of $208,185, and HM & O Finance Pty Ltd of $564,637 respectively, and an apparent accounting anomaly. The latter anomaly was that, in its accounts for the year ended 30 June 2012, York Plastic Products wrote off its loan to its parent, K-Lite, of $258,773, but the corresponding adjustment in the financial position of K-Lite as at 30 June 2012 was not made.

22    In effect, Mr Searson and Karilla alleged in the statement of claim that part of the oppression complained of was that the companies in the group, of which Karilla was a shareholder, were being used to fund activities for the personal benefit of Mr Salmon and Mr Rufford, represented by the “impairment” charges write-off that had been used to reduce the net asset value of K-Lite and its wholly-owned subsidiary York Plastic Products. The statement of claim asserted that, based on the 30 June 2012 financial statements of K-Lite and York Plastic Products, the fair value of Karilla’s 250,000 shares in K-Lite was $398,241, on the basis that the four items comprising of the three impaired loans and the eight-month loss to February 2013 ought not to have been taken into account in Hall Chadwick’s short form valuation.

23    The statement of claim then claimed in pars 129-137 that the respondents had engaged in conduct amounting to further oppression by failing to make any offer or response to the applicants’ 29 July 2013 request for redemption of the 250,000 units Karilla held in YPP Property Trust. The applicants contended that Karilla was entitled to have its units bought back, inter alia, by reason of what it alleged was unconscionable conduct on behalf of the respondents or some of them, pursuant to s 12CB(1) of the Australian Securities and Investments Commission Act 2001 (Cth), and or Karilla was entitled to remedial relief by way of damages or compensation under ss 12GF(1) and 12GM(2).

24    The orders of 17 April 2014, that are to come into effect tomorrow through the defaulting respondents’ non-opposition to them, provided that the Court could determine a fair price for each of the 250,000 shares and units.

Conclusion

25    I am satisfied, on the material in the statement of claim and, to the extent that explanation or supplementation was required, from the terms of the shareholders agreement, trust deed and correspondence to which I have referred, that it is appropriate to fix the value of the 250,000 shares held by Karilla in K-Lite at $398,241 based on the 30 June 2012 financial statements as adjusted in the manner pleaded in pars 127 and 128 of the statement of claim. That is, the short form valuation by Hall Chadwick of 8 April 2013 should be further adjusted by the deduction or writing back of the $732,000 year to date loss to February 2013 and the elimination of the impairment write-offs for the three loans that I have discussed above.

26    I infer that K-Lite was aware, from no later than the date of Hall Chadwick’s short form valuation of 8 April 2013, that the value of Karilla’s 250,000 shares should have been arrived at as being $398,241 and that it should have paid that sum at that time in accordance with the agreement the parties had earlier made, as identified in the statement of claim. Interest on that sum should be payable at Court rates in accordance with practice note CM16 from that time. The applicants calculated the interest on that sum as at today as $29,353.

27    The value I have found, based on the pleading in the statement of claim, is significantly more than the offer made by the applicants in their letter dated 29 July 2013. However, that offer was a transfer notice given as at 29 July 2013, being over a year after the date at which the statement of claim alleged that the valuation was made.

28    There is no apparent dispute as to the value of the 250,000 units in the YPP Property Trust. While the trustee had a discretion under the trust deed to accept or reject the request for redemption, it did neither. It made no response at all to the applicants’ solicitors’ letter of 29 July 2013. The trustee’s conduct is pleaded in the statement of claim as part of the overall conduct amounting to oppression that must be deemed to be admitted by the defaulting respondents, including the trustee, YPP Properties, by reason of the default judgment against them. In my opinion, on the material pleaded in the statement of claim, the offer, based on the trustee’s valuation to sell the 250,000 units in the applicants’ solicitors’ letter of 29 July 2013, should have been accepted as at that date. Accordingly, I fix the value of the 250,000 units in the sum pleaded of $257,318. The applicants have calculated that the interest due on that sum at Court rates, in accordance with practice note CM16, is $13,561.

29    Finally, there is no defence to the claim made in the applicants’ solicitors’ letter of 11 July 2013 for the payment of the debt of $14,288.82 due to Karilla by YPP Properties. Interest on that sum should be added from 11 July 2013 in the sum of $795.36, as sought.

30    In all the circumstances, I consider it appropriate to vary the orders of 17 April 2014 that I made to come into effect tomorrow by remaking them today with effect from tomorrow. I will insert into those orders the fair values I have fixed of Karilla’s shares in K-Lite and units in YPP Properties and the debt due to it by YPP Properties plus interest up to and including tomorrow for the reasons that I have given.

Costs

31    I am also of opinion that the defaulting respondents should pay the applicants’ costs on an indemnity basis. The justification for the indemnity costs order against the defaulting respondents in respect of the interlocutory application and the proceedings as against them generally flows from a number of factors. First, the Calderbank offers for the purchase of the Karilla’s shares and units were reasonable offers that, in the case of the shares, was substantially bettered by the default judgment and equalled in the case of the units. The defaulting respondents do not appear to have made any bona fide attempt to pursue a defence following the withdrawal of their previous solicitors or to participate in the conduct of the proceedings other than by the co-operation shown by the new solicitors for the defaulting respondents as a result of the earlier adjournment of the interlocutory application. That co-operation appeared in their not opposing the granting of the conditional relief in favour to the applicants.

32    In all of the circumstances, including the failure to accept the offers in the Calderbank letters based on the agreements allegedly made on 29 June 2012 that are taken to have been admitted by the entry of default judgment, I think it is appropriate to order the payment of the costs of both the interlocutory application and the proceedings generally as against the defaulting respondents on an indemnity basis. The Court’s time should not have been taken in defending a claim to the extent it was defended, when no substantive defence was finally offered and where it appeared that an agreement to make the payments had been made.

Lump sum costs

33    The applicants relied on the affidavit of their solicitor, Robert Davies, of 24 April 2014, to support a lump sum award, inclusive of GST, representing the indemnity costs to which I have found them entitled. Mr Davies identified, by his calculations and the tax invoices rendered by the former solicitors for the applicants and their counsel, that their costs of the interlocutory application on an indemnity basis amounted to $31,426 inclusive of GST. He estimated that the general costs of the proceedings against all six respondents other than the costs connected with the conduct of the interlocutory application totalled approximately $70,000, in respect of which he attributed half to the conduct of the proceedings against the defaulting respondents. That led to his calculation that approximately $35,000 should be attributed to the general costs of the proceedings, excluding the interlocutory application, in respect of the defaulting respondents and $30,000 to the costs of the interlocutory application.

34    As I said in Ariix LLC v Mahilall (No 2) [2014] FCA 494 at [10]:

“The making of a lump sum costs order will be appropriate in cases where the assessment of costs will be protracted and expensive, and in particular, where it appears that a party obliged to pay the costs will not be able to meet a liability of the order likely to result from the assessment. However, before that is done, the Court must consider that it can fix a sum fairly between the parties with sufficient confidence that it is an appropriate amount on the materials available: see Hamod v The State of New South Wales [2011] NSWCA 375 at [813] per Beazley JA, with whom Giles and Whealy JJA agreed. Her Honour continued that the power may also be exercised where a party’s conduct had unreasonably contributed to the costs of the proceedings, especially where the costs incurred have been disproportionate to the result of the proceedings. She said that the assessment of any lump sum to be awarded must represent a review of the successful party’s costs by reference to the pleadings, the complexity of the issues raised on the pleadings, including interlocutory processes, the preparation for final hearing, and the final hearing. However, the Court is not required to undertake a detailed examination of the kind appropriate in a formal taxation or costs assessment: Hamod [2011] NSWCA 375 at [818]-[819]; see also the discussion by Jacobson J in Sony Entertainment (Australia) Limited v Smith (2005) 215 ALR 788 at 812-813 [188]-[200].”

35    Of course, in this case, there has been no final hearing, albeit that a degree of finality will be wrought by the entry of the default orders for judgment against the defaulting respondents. Beazley JA said that the Court is not required to undertake a detailed examination of the kind appropriate in a formal taxation or costs assessment: Hamod [2011] NSWCA 375 at [818]-[819]; see also Sony Entertainment (Australia) v Smith (2005) 215 ALR 788 at 812-813 [188]-[200] per Jacobson J; Nine Films & Television Pty Limited v Ninox Television Limited [2006] FCA 1046 at [4]-[10] per Tamberlin J and Avetmiss Easy Pty Ltd v Australian Skills Qualifications Authority (No 2) [2014] FCA 444 at [18]-[22] and [30]-[31] per Mortimer J.

36    The defaulting respondents have provided no explanation for their default or why, having sought the adjournment of the interlocutory application on 17 April 2014, they then did nothing to challenge the making of the default orders against them. I infer that that is because there is no bona fide defence to the making of those orders and that it is not likely that those respondents intend to meet the orders by payment. It will be necessary in the event that that occurs to make an order for the appointment of liquidators to the defaulting respondents, as I will do in due course.

37    There is a deal of material before me, including detailed and helpful written submissions by counsel for the applicants and substantive affidavit evidence, to suggest that a considerable amount of time and effort has been applied by the lawyers acting for the applicants to prepare for and pursue the interlocutory application. I am satisfied by the evidence in Mr Davies’ affidavit that the amounts for which the applicants will be liable to their solicitors will exceed $30,000. I note that there is no opposition to that quantification by the defaulting respondents’ solicitor. I fix the amount of the applicants’ costs for the interlocutory application in the sum of $30,000.

38    While I accept that the applicants have, as Mr Davies said in his affidavit, incurred a liability to their lawyers of about $70,000 for the balance of the proceedings, apart from the interlocutory application, I am concerned that it will not be likely to be particularly precise or accurate simply to apportion half of those costs to the three defaulting respondents in circumstances where the three active respondents apparently are still defending the proceedings and there is an almost complete overlap between claims against them and, to the extent that the defaulting respondents are concerned, those companies.

39    The substantial dispute between the parties, albeit nominally conducted through companies, is clearly between the individuals who are the parties to the proceedings. There is no doubt that, substantially, the work done in preparing the proceedings generally by the applicants prior to the interlocutory application concerned those common matters. That work provided the foundation for the applicants to obtain the relief which they have in the interlocutory application. Indeed, I was taken to some of the earlier affidavit material for the purposes of establishing those and some other matters. However, Mr Davies’ affidavit did not explain with any detail or precision how he arrived at his estimate of one half of the general costs of the proceedings being attributable to the defaulting respondents. The proceedings have continued without their active participation, bearing in mind that I have assessed separately the costs of the interlocutory applications that have been incurred since late December 2013. The solicitors’ costs up to 1 December 2013 incurred by the applicants totalled about $21,000 and counsel’s fees to 16 January 2014 totalled approximately $38,000.

40    In my opinion, the appropriate sum to assess on a lump sum basis against the defaulting respondents for the balance of the proceedings should be a sum less than half of the total costs of the applicants. I appreciate that, ordinarily, all respondents would be jointly and separately liable for costs orders at the conclusion of the final hearing unless some other cause were shown. However, this is not a taxation and I am not armed with the materials appropriate to enable me to, and nor can I, make any detailed assessment. Nonetheless, I am satisfied that it is appropriate that I should make an assessment of the applicants’ entitlement to costs against the defaulting respondents for the general part of the proceedings to date. In all the circumstances, I consider that I should award a lump sum amount for the balance of the proceedings of $25,000 against the defaulting respondents, making a total of $55,000 in the lump sum order.

41    The applicants have also sought that, if the orders for the payment of moneys that will come into effect tomorrow are not complied with, liquidators be appointed to each defaulting respondent that fails to pay those sums. In my opinion, that is an appropriate order.

Appointment of liquidators

42    The statement of claim pleaded that K-Lite would be responsible for buying back Karilla’s shares based on the discussions in May and June 2012. It then referred to the adjustments necessary to be made to the short form valuation that I have accepted are appropriate and to the fact that the “impairments” in the balance sheet were loans, allegedly made to Mr Salmon and Mr Rufford in breach of their fiduciary duties as directors of York Precision Plastics and K-Lite. It claimed that each of those gentlemen should purchase Karilla’s shares in the event that Y Twelve did not have the capacity to do so. At the time that the statement of claim was filed, Y Twelve was recorded as being the holder of 1.3 million out of a total 2.3 million of the issued shares in K-Lite as a result of a transfer to it that had occurred on 30 August 2012. Y Twelve was two-thirds owned and controlled by Mr Salmon and Mr Rufford. In those circumstances, the applicants sought relief against Y Twelve, that it be ordered to buy back Karilla’s 250,000 shares pursuant to s 233(1) of the Corporations Act. That section provides that the Court can make an order that it considers appropriate in relation to a company in which oppression has occurred, relevantly, K-Lite. Such an order can include requiring a party involved in the oppressive conduct to purchase shares.

43    In the event that K-Lite itself does not but back the shares, Y Twelve, being a member of K-Lite at the time that Mr Searson was summarily dismissed, and being its controlling shareholder, is an appropriate person to order to purchase those shares.

44    I am of opinion that it is appropriate to make an order that each of the defaulting respondents that does not comply with the orders I will make for the payment of moneys, either for the purchase of shares in the case of K-Lite and Y Twelve, or the purchase of the units or repayment of the debt by YPP Properties, should be wound up pursuant to s 233(1)(a) of the Corporations Act, and that David Winterbottom and Michael Brereton be appointed as joint and several liquidators. I am satisfied that each of those persons consents to act in that capacity.

Associate:

Dated:    16 July 2014

SCHEDULE

NSD 1584 of 2013

CHRISTOPHER JOHN SALMON

First Respondent

GLENN JOHN RUFFORD

Second Respondent

YORK PRECISION PLASTICS PTY LTD (ACN 000 671 616)

Third Respondent

K-LITE PTY LTD (ACN 125 264 324)

Fourth Respondent

Y TWELVE PTY LTD (ACN 160 036 617)

Fifth Respondent

YPP PROPERTIES PTY LTD (ACN 134 373 989)

Sixth Respondent