Federal Court of Australia

Leviston v PQ Management Pty Ltd (No 4) [2023] FCA 1524

ORDERS

THE COURT ORDERS THAT:

1.    Save to the extent previously ordered, the first, second and third defendants are to pay:

(a)    one-half of the plaintiff’s costs of the proceedings incurred on a party and party basis up to and including 8 July 2022; and

(b)    two-thirds of the plaintiff’s costs of the proceedings incurred on a party and party basis on and from 9 July 2022.

2.    Pursuant to r 40.02(b) of the Federal Court Rules 2011 (Cth), the costs in Order 1 are to be paid in a lump sum.

3.    By 4:00 pm AEST on 10 October 2023, the plaintiff is to file and serve his evidence in chief, including a Costs Summary in the form of an affidavit in accordance with paragraphs 4.10 to 4.12 of the Court’s Costs Practice Note (GPN-COSTS), in support of the costs award related to Order 1.

4.    By 4:00 pm AEST on 24 October 2023, the first, second and third defendants are to file and serve any evidence in answer to the evidence in chief referred to in Order 3, including a Costs Response in the form of an affidavit in accordance with paragraphs 4.13 and 4.14 of the Court’s Costs Practice Note (GPN-COSTS).

THE COURT DIRECTS THAT:

5.    Pursuant to r 1.37 of the Federal Court Rules 2011 (Cth), Registrar Schmidt:

(a)    determine the amount of costs payable pursuant to order 1 in such a manner as he sees fit, including, if considered appropriate, on the papers; and

(b)    within 28 days of the making of the determination, make orders for the payment of the amount so determined.

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

REASONS FOR JUDGMENT

DERRINGTON J:

1    The parties have sought orders in relation to the costs of these proceedings. Unfortunately, the litigation in which they have been engaged has been somewhat tortuous and has progressed in a rather piecemeal fashion over a number of years. That is not to say, of course, that the piecemeal approach was inappropriate; merely that it seems to have lengthened the dispute and made the assessment of costs substantially more complicated an exercise than it might otherwise have been.

2    Broadly described, the case involved contractual claims in respect of the sale of a business and the shares of the company operating that business, Treated Waste Agencies Pty Ltd (TWA). It also involved an associated claim for oppression under s 232 of the Corporations Act 2001 (Cth) (Corporations Act). In 2022, a hearing was held to determine the parties’ liabilities in respect of both the contractual claims and the oppression claim. The oppression claim was made out: Leviston v PQ Management Pty Ltd [2022] FCA 787. Two further hearings then occurred in relation to the valuation of the plaintiff’s shares in TWA, which the first defendant had been ordered to purchase: Leviston v PQ Management Pty Ltd (No 2) [2023] FCA 295; Leviston v PQ Management Pty Ltd (No 3) [2023] FCA 986.

3    As was observed in the reasons for judgment following from the initial hearing, it is fair to say that the plaintiff and the defendants were substantially successful in approximately equal measure. The plaintiff succeeded in securing a determination that the defendants’ actions amounted to oppressive conduct in contravention of s 232 of the Corporations Act. It was found to be appropriate that he have his shares in TWA purchased by the first defendant at a price to be ascertained. At the same time, the defendants had substantial success in repelling several allegations made by the plaintiff in respect of amounts that he claimed were owing under a share sale agreement between him and the first defendant, or that were alleged to be owing as a consequence of the conduct of the business.

4    Mr Lyons, for the defendants, submitted that in these circumstances the Court should order that each party bear its own costs of the proceedings or, at least, of the initial hearing. There is undoubted force in that submission. Conversely, Mr White, for the plaintiff, submitted that his client, having been “largely successful”, should have his costs of the proceedings. In the alternative, he submitted that, if some apportionment was to be made, then certain amounts should be payable to the plaintiff in respect of particular steps taken in the proceedings — in particular, for court fees, mediator’s fees, and costs incurred since the delivery of the initial judgment, including the fees of the Court expert who had valued his shares in TWA.

Applicable principles

5    The principles to be applied in determining the appropriate order as to costs in this case were not seriously in dispute. They were summarised by the Full Court in El-Debel v Micheletto (Trustee) (No 2) [2021] FCAFC 146 at [2] – [4], as follows:

2.     … The award of costs is discretionary: s 43 of the Federal Court of Australia Act 1976 (Cth). The discretion is unconfined, but must be exercised judicially, that is according to relevant considerations and taking account of the contextual features and facts of the litigation: Kazar (Liquidator) v Kargarian; In the matter of Frontier Architects Pty Ltd (In Liq) [2011] FCAFC 136; (2011) 197 FCR 113 at [4].

3.     Settled principle guides the exercise of the discretion: Oshlack v Richmond River Council (1998) 193 CLR 72 at [65] (McHugh J, Brennan CJ agreeing), [134] (Kirby J). Generally, the discretion is exercised in favour of the successful party: Foots v Southern Cross Mine Management Pty Ltd [2007] HCA 56; (2007) 234 CLR 52 at [25]; and Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6]. The exercise of the discretion involves the making of a broad evaluative judgment and factors other than success may have a significant claim on the exercise of the discretion: Gray v Richards (No 2) [2014] HCA 47 at [2]. If there is some disentitling conduct on the part of the successful party then a different order may be made but it is not done to punish the party: Les Laboratoires Servier v Apotex Pty Ltd [2016] FCAFC 27; (2016) 247 FCR 61 at [303]-[305]; and Snedden v Republic of Croatia (No 2) [2009] FCAFC 132 at [3]-[4].

4.     Where there has been mixed success three aspects generally assume significance in guiding the exercise of the discretion. First, an assessment as to whether one party has enjoyed real practical success. Second, a reluctance on the part of the Court to assess costs on an issue by issue basis because the Court has an eye to the interests of justice in bringing finality to the dispute and the diminishing returns involved in expending further time and costs in identifying the extent to which costs related to particular aspects of the conduct of the proceedings. Third, a preference for adjustments by way of percentage reductions made on a broad brush approach taking account of the degree of success and the likely extent of costs associated with that aspect of the case. As to these matters, see Firebird at [6]; Les Laboratoires at [297]-[305]; and Fuchs Lubricants (Australasia) Pty Ltd v Quaker Chemical (Australasia) Pty Ltd (No 2) [2021] FCAFC 114 at [15].

Determination

6    One matter that looms large in the Court’s exercise of its discretion as to costs in this case is that the plaintiff, whilst unsuccessful in a number of his claims, was required to bring the proceedings in order to vindicate his rights in respect of the oppression that was found to have occurred. The circumstances that led up to his ousting from the company, TWA, are set out in the initial reasons for judgment in this matter and need not be repeated. It suffices to observe that the defendants purported to exercise an option to purchase shares under an agreement, tendered an amount of money and, thereafter, claimed that the option had been effective. On this basis, the plaintiff was excluded from the operation of the company and its business. As was concluded in the initial reasons, the purported exercise of the option was ineffective and the resultant exclusion of the plaintiff from the operation of TWA’s business was improper. On the other hand, it should be acknowledged that, by that time, acrimony between the parties had set in and the plaintiff was not involved in the business to any great degree. Nevertheless, he had legal rights to participate in the business by reason of his shareholding, and he was entitled to protect those rights by bringing the action in this Court.

7    As it was, he succeeded in his claim that he had been oppressed by the wrongful exercise of the option and by his subsequent ousting from the company. However, he failed in the remainder of his claims, concerning amounts that he alleged were owing to him under a share sale agreement or otherwise. These claims occupied a large portion of the initial hearing. Nevertheless, it can properly be said that the plaintiff had a not insignificant measure of success in an action that he was effectively compelled to bring.

8    It was submitted on the defendants’ behalf that the plaintiff could have pursued other measures that might have rendered this litigation unnecessary, such as exercising a put option in relation to the shares. Whilst that might in theory have been a possibility, it is obvious that, in the circumstances that prevailed, such a measure would not likely have advanced his position. The evidence as to the relationship between the parties indicated that recourse to the Courts was effectively the plaintiff’s only avenue of redress, it being unlikely that the defendants would have accepted any purported exercise of the put option. It might be said more generally that it is not especially valuable, in cases of this nature, to look back and speculate as to how the parties, who were at odds with one another, could have resolved their issues differently.

9    As the plaintiff was substantially successful, he should be entitled to an order that he recover some of the expenses that he incurred in conducting the proceedings. Taking a broad-brush approach, the circumstances support the conclusion that he should be entitled to half of his costs for the proceedings up to the delivery of judgment in respect of the initial hearing. That judgment was delivered on 8 July 2022. This recognises the defendants’ substantial success on at least some of the central issues.

10    The next question concerns the costs incurred by the parties in respect of the remainder of the proceedings, which involved the valuation of the plaintiff’s shares in TWA in order to facilitate their purchase by the first defendant pursuant to orders of this Court. This is slightly more problematic. It was a characteristic feature of these proceedings that the parties were not prepared to agree on any matter. In that vein, a hearing was required to determine whether the Court expert who was appointed to value the plaintiff’s shares in TWA, Mr Ashby of McGrathNicol, could be cross-examined. Although the application for leave to cross-examine was opposed by the plaintiff, it ultimately proved successful.

11    A further hearing then occurred in which Mr Ashby’s valuation was challenged by the defendants. They achieved some success at that hearing by demonstrating that the value placed on the shares by Mr Ashby was higher than it ought to have been. It followed that the amount that the first defendant was required to pay for the shares in TWA was reduced from the amount that Mr Ashby had identified, though not by as much as the defendants had contended. In this way, the plaintiff was substantially able to maintain Mr Ashby’s valuation.

12    In these circumstances, it is to be recognised that, whilst the defendants had some success in relation to the valuation process, the plaintiff largely maintained the value of his shares in TWA, as had been calculated by the Court expert. It is also relevant to note that the hearing in respect of the valuation was, essentially, part of the process of ascertaining the plaintiff’s entitlement to the purchase of his shares by the first defendant consequent upon the initial judgment. Therefore, whilst the defendants are entitled to some deduction in the amount that they are to pay, overall, the plaintiff should have his costs of this part of the proceedings. Again, adopting a broad-brush approach, an appropriate order is that the defendants should pay two-thirds of the plaintiff’s costs of the proceedings in relation to the valuation of his shares in TWA. In effect, that is to be from the date immediately following the day on which the initial judgment was handed down, being 8 July 2022.

13    These costs orders probably do not satisfy either the plaintiff or the defendants. However, they recognise the measure of the defendants’ success in contesting the plaintiff’s claims in a number of respects.

14    Orders are to be made accordingly.

15    As a final matter, it ought to be observed that TWA, the fourth defendant, was wholly successful in defending the claims made against it. However, as it had the same representation as the other defendants, there is no need to deal with any additional question in relation to costs beyond those already addressed above. Nevertheless, the orders referred to above in relation to the payment of the plaintiff’s costs are not to extend to the fourth defendant. As between it and the plaintiff, neither should be entitled to its costs as against the other. The plaintiff’s costs are only payable by the first, second and third defendants.

Associate:    

Dated:    4 December 2023

SCHEDULE OF PARTIES