FEDERAL COURT OF AUSTRALIA
Scheuer (Trustee) v Endless Solar Corporation Limited (No 2) [2023] FCA 1658
ORDERS
DATE OF ORDER: |
THE COURT ORDERS THAT:
1. The First Defendant pay the Plaintiff’s costs of the proceeding incurred until and including 29 March 2023.
2. Any costs incurred by the parties in connection with paragraphs 1 and 3 of the orders made on 11 April 2023 (until those orders were vacated by the orders made on 17 November 2023) will be costs in proceeding NSD 172 of 2023.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
O’BRYAN J:
1 On 28 March 2023, the plaintiff (Nathan Joseph (Nick) Scheuer, in his personal capacity and in his capacity as trustee of the Asher & Wald Trust), filed an originating process seeking relief against the first defendant, Endless Solar Corporation Limited (Endless Solar), and the second defendant, Harvard Nominees Pty Ltd (Harvard). The relief concerned the third defendant, Speedpanel Australia Ltd (SPA). On the same day, Mr Scheuer filed an interlocutory process seeking an urgent interlocutory injunction restraining Endless Solar and Harvard from arranging to hold, holding or purporting to hold the general meeting of SPA which was scheduled for 30 March 2023 at 11am.
2 The interlocutory application was heard by me on 29 March 2023 in the Commercial and Corporations Duty List. At the hearing on 29 March 2023, I granted the interlocutory relief sought by Mr Scheuer and made orders for the further case management of the proceeding: Scheuer (Trustee) v Endless Solar Corporation Limited [2023] FCA 299 (Interlocutory Judgment).
3 On 17 November 2023, I made orders to finalise the proceeding by dismissing Mr Scheuer’s originating process, save for the question of costs. Mr Scheuer and Endless Solar have each filed submissions on the question of costs. In summary, Mr Scheuer seeks his costs of the proceeding as he was successful on his application for an injunction and subsequent events have rendered the proceeding inutile. Endless Solar seeks its costs of the proceeding on the basis that Mr Scheuer has abandoned his application without obtaining any of the final relief he sought, and none of the issues raised in this proceeding concerning the meeting called by Endless Solar have been finally determined. In the alternative, Endless Solar submitted that there should be no orders as to costs.
4 Harvard has not participated in the proceeding at any stage and no party sought costs as against Harvard.
5 Having considered the parties’ submissions, I consider that Endless Solar should pay Mr Scheuer’s costs incurred in the proceeding up until 29 March 2023 (that is, the finalisation of Mr Scheuer’s interlocutory application). That is because:
(a) Mr Scheuer’s interlocutory application was necessitated by the conduct of Endless Solar in convening a general meeting of SPA in a manner contrary to the requirements of the Corporations Act 2001 (Cth) (Corporations Act);
(b) Endless Solar contested Mr Scheuer’s interlocutory application;
(c) Mr Scheuer was successful on his interlocutory application; and
(d) the proceeding has been rendered inutile by subsequent events which mean that there is no longer a threat that Endless Solar or SPA will attempt to convene a general meeting of SPA in a manner contrary to law.
6 To explain that conclusion, it is necessary to refer briefly to the chronology of this proceeding and the related proceeding NSD 172 of 2023 (Reinstatement Proceeding). The following summary has been drawn from the Interlocutory Judgment and the two judgments delivered in the Reinstatement Proceeding being Endless Solar Corporation Limited v Australian Securities and Investments Commission, in the matter of Speedpanel Australia Ltd [2023] FCA 720 and Endless Solar Corporation Limited v Australian Securities and Investments Commission, in the matter of Speedpanel Australia Ltd (No 2) [2023] FCA 1290.
7 On 19 June 2022, SPA was deregistered by the Australian Securities and Investments Commission (ASIC) pursuant to s 601AB of the Corporations Act. At the time of deregistration, SPA had no directors.
8 On 28 February 2023, Endless Solar filed an originating process in the Reinstatement Proceeding seeking an order under s 601AH(2)(a)(i) of the Corporations Act that ASIC reinstate the registration of SPA. On 2 March 2023, Judicial Registrar Luxton granted the application and ordered ASIC to reinstate the registration of SPA pursuant to s 601AH(2). In recognition of the fact that SPA had no directors, Judicial Registrar Luxton made an order to the following effect:
If, by 31 March 2023, no directors are appointed to the Company, the plaintiff file and serve by 14 April 2023 an interlocutory process seeking orders that:
(a) a meeting of the Company’s members be called pursuant to s 249G of the Act, or on some other basis, for the purpose of considering any proposed resolution concerning the appointment of directors; or
(b) the Company be wound up.
9 Section 249G of the Corporations Act empowers the Court to order a meeting of a company’s members if it is impracticable to call the meeting in any other way.
10 Endless Solar did not apply to the Court for an order to convene a meeting of the members of SPA to appoint directors under s 249G of the Corporations Act. Instead, Endless Solar (and Harvard) attempted to convene a general meeting of SPA under s 249F of the Corporations Act. This proceeding concerned that attempt. After receiving a purported notice of general meeting of SPA to be held on 30 March 2023, and purported proxy forms for the general meeting, Mr Scheuer commenced this proceeding seeking the following orders:
(a) interlocutory and final injunctions restraining Endless Solar and Harvard from arranging to hold, holding or purporting to hold a general meeting of SPA which was scheduled for 30 March 2023 at 11am;
(b) interlocutory and final injunctions restraining Endless Solar and Harvard from arranging to hold, holding or purporting to hold any general meeting of SPA unless and until the register of members of SPA has been created or alternatively corrected;
(c) a declaration that the purported notice of meeting of the members of SPA given by Endless Solar and Harvard on or about 9 March 2023 was invalid;
(d) a declaration that there is no register of members of SPA; and
(e) orders for the creation, or alternatively the correction, of the register of members of SPA, as revealed by, and as a result of, a proper investigation by forensic accountants engaged by SPA, or otherwise as found by the Court.
11 As noted above, on 29 March 2023, I granted an injunction in this proceeding restraining Endless Solar and Harvard from arranging to hold, holding or purporting to hold the general meeting of SPA which was scheduled for 30 March 2023. I was satisfied that there was a prima facie case that the notices of meeting and proxy forms issued by Endless Solar and Harvard were in contravention of a number of legal requirements, and that the balance of convenience favoured the grant of an interlocutory injunction to restrain the meeting from going ahead (Interlocutory Judgment [43]).
12 At the time of the interlocutory hearing, a question was raised as to the shareholdings in SPA. The evidence before me established a prima facie case that: first, the list of shareholders to whom notices of general meeting were sent was not a complete list of the current members of SPA; and second, that Endless Solar and Harvard were not in possession of an accurate register of members (Interlocutory Judgment [34]). The evidence also showed that Endless Solar and Harvard had not even sent notices of general meeting to all of the persons that were named as members on a list of members in the possession of Endless Solar and Harvard (Interlocutory Judgment [33]).
13 On 29 March 2023, I also ordered that this proceeding be case managed with the Reinstatement Proceeding given the connection between the two proceedings. I expressed the following reasons for that order (Interlocutory Judgment [44]-[45]):
44 It is apparent that there is a close connection between the Reinstatement Proceeding and the issues raised in this proceeding. As recognised by Judicial Registrar Luxton in the Reinstatement Proceeding, in circumstances where SPA does not have any current directors, its registration should only be continued if appropriate steps are taken to appoint new directors. By this proceeding, Mr Scheuer applies for orders to ensure that the members of SPA are properly identified so that they may receive proper notice of any meeting to consider the appointment of new directors (or any other resolution that they may wish to bring forward in that regard).
45 Given the close connection between the Reinstatement Proceeding and the issues raised in this proceeding, both proceedings should be case managed together. That will enable appropriate steps to be taken to identify the members of SPA and, if sought by Endless Solar, for the Court to supervise the convening of a meeting of members of SPA under s 249G of the Act.
14 On 11 April 2023, I conducted a joint case management hearing in this proceeding and the Reinstatement Proceeding. Orders were made in this proceeding for the parties to give discovery of documents relating to the shareholdings in SPA and the register of members. Orders were made in the Reinstatement Proceeding to facilitate an anticipated application by Mr Scheuer to review the orders of Judicial Registrar Luxton reinstating SPA. The orders for discovery were to be held in abeyance if Mr Scheuer filed an application for review of the reinstatement of SPA, until the determination of that application.
15 On 14 April 2023, Mr Scheuer filed an application in the Reinstatement Proceeding seeking a review of the orders of Judicial Registrar Luxton reinstating SPA. On 30 June 2023, I concluded that Endless Solar had failed to afford procedural fairness to persons likely to be affected by the reinstatement, and made orders requiring Endless Solar to notify those persons of the reinstatement and Mr Scheuer’s application for review of the reinstatement: see Endless Solar Corporation Limited v Australian Securities and Investments Commission, in the matter of Speedpanel Australia Ltd [2023] FCA 720. On 27 October 2023, I dismissed Mr Scheuer’s application for review of Judicial Registrar Luxton’s order reinstating the registration of SPA and ordered each party to bear their own costs of that application: see Endless Solar Corporation Limited v Australian Securities and Investments Commission, in the matter of Speedpanel Australia Ltd (No 2) [2023] FCA 1290.
16 At a joint case management hearing conducted on 17 November 2023, I expressed a view to the parties that:
(a) the appointment of directors to SPA and the resolution of any questions concerning the membership and shareholdings in SPA would be best resolved in the Reinstatement Proceeding; and
(b) as such, there was no longer any utility in the maintenance of this proceeding.
17 The parties largely agreed with that conclusion and, as a consequence, I made orders vacating the extant orders and dismissed this proceeding save for the question of costs.
18 Subsequently, in the Reinstatement Proceeding, I made orders by consent for the appointment of directors and secretaries and orders for the discovery of documents relating to the shareholdings in SPA and the register of members. The latter orders were materially the same as the orders that had previously been made in this proceeding.
19 Overall, I consider that Mr Scheuer was justified in bringing the interlocutory application to restrain the general meeting that Endless Solar (and Harvard) had attempted to convene under s 249F of the Corporations Act. The attempt by Endless Solar to convene the general meeting, in the circumstances that confronted SPA at that time, was ill-advised. As the evidence before the Court showed, there was significant doubt about the composition of the register of members of SPA, and there were real difficulties in complying with the meeting requirements of the Corporations Act in circumstances where SPA had no directors and no registered office. The appropriate course would have been for Endless Solar to make an application under s 249G for the Court to convene the meeting, which would have enabled the foregoing difficulties to be addressed by the Court.
20 Endless Solar unsuccessfully contested Mr Scheuer’s application for an interlocutory injunction. In my view, costs should follow the event and Mr Scheuer should receive his costs of that application. The appropriate form of order is for Mr Scheuer to receive his costs of the proceeding until and including 29 March 2023.
21 Endless Solar advanced submissions criticising Mr Scheuer’s conduct in the proceeding, arguing that not all relevant evidence concerning the register of members of SPA was before the Court and, if it were before the Court, the proceeding may have taken a different course. I reject those submissions. While the doubt about the content of the register of members of SPA was a central concern in the interlocutory hearing, there were numerous problems with Endless Solar’s attempt to convene the general meeting as discussed in the Interlocutory Judgment.
22 Endless Solar also submitted that there has been no adjudication on the merits of the matters raised by Mr Scheuer in this proceeding. It is correct that the proceeding has not progressed to a final hearing. However, there was an adjudication on the matters raised at the interlocutory hearing. Endless Solar opposed the interlocutory application and Mr Scheuer was successful on that application. Having regard to all of the circumstances, I consider it just that Endless Solar be required to pay Mr Scheuer’s costs of that application, which is the effect of the costs order I propose to make.
23 The ongoing dispute with respect to the content of the register of members of SPA will be resolved within the Reinstatement Proceeding. It is possible that the parties incurred costs in connection with the discovery orders made in this proceeding before those orders were vacated (and subsequently replaced by materially the same orders in the Reinstatement Proceeding). In the circumstances, it is appropriate that any such costs incurred be treated as costs in the Reinstatement Proceeding and subject to any orders as to costs that may in the future be made in that proceeding.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice O'Bryan. |
Associate:
