Federal Court of Australia

Scott v Aulich, in the matter of Aulich Civil Law Pty Ltd (in liq) (costs) [2025] FCA 1557

ORDERS

THE COURT ORDERS THAT:

1.    The first and third defendants pay to the plaintiff her costs, including the costs of the plaintiff’s application for leave to amend pleadings determined on 15 November 2024, fixed in a lump-sum to be determined by a Registrar as a referee pursuant to s 54A of the Federal Court of Australia Act 1976 (Cth).

2.    The plaintiff, within 21 days from the date of these orders (noting that the days from 24 December to 14 January are not to be counted) or such longer period as may be agreed or ordered, file and serve on the first and third defendants a costs summary, in affidavit form, in compliance with paras [4.10]-[4.12] of the Costs Practice Note (GPN-COSTS).

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

REASONS FOR JUDGMENT

STEWART J:

Introduction

1    On 31 October 2025, I delivered the principal judgment in this proceeding in which I found that the first and third defendants (who were directors of the relevant companies) engaged in oppressive conduct against the plaintiff: Scott v Aulich, in the matter of Aulich Civil Law Pty Ltd (in liq) [2025] FCA 1329. These reasons use the same defined terms as the principal judgment.

2    In the principal judgment, I held that the plaintiff should be directly compensated by the defendant directors on the basis of the value of the shares she held in the relevant companies, being ACL and APT, at times proximate to share issues leading to the dilution of her shareholdings. The quantum of the compensation being a matter for calculation, the parties were ordered to bring in agreed or competing minutes of order within 14 days of the principal judgment.

3    After considering competing minutes of order, on 14 November 2025 I ordered that there be judgment for the plaintiff against the first and third defendants, jointly and severally, in the sum of $715,146.16 inclusive of interest.

4    However, the issue of costs remains in dispute between the parties.

5    The plaintiff, naturally, seeks an order that costs follow the event in light of obtaining judgment in her favour.

6    The defendants resist this course and seek that I order a complicated regime dividing liability for costs by issue and a separate costs order concerning parts of the pleadings for which leave to amend was granted on 15 November 2024.

Procedural background

7    The plaintiff commenced her proceeding against eight defendants on 18 November 2022 seeking various forms of relief, including orders for the winding up of ACL and APT. The first three defendants, Mr Aulich, Ms Taylor and Mr Woodhouse, were directors of ACL and APT and were alleged to have engaged in the oppressive conduct. The fourth, fifth and sixth defendants were corporate vehicles controlled by each of the three directors. The seventh and eighth defendants were ACL and APT.

8    The plaintiff’s claims against Ms Taylor and her corporate vehicle (the fifth defendant) were eventually settled and discontinued. Mr Woodhouse’s corporate vehicle (the sixth defendant) went into liquidation. By late 2024, ACL had also gone into liquidation and APT was expected shortly to be put into external administration. Hence, the active defendants by the time of the final hearing comprised only the first, third, fourth and eighth defendants, ie Mr Aulich, his corporate vehicle, Mr Woodhouse and APT (as its external administration had not commenced).

9    Because of those developments, on 15 November 2024 the plaintiff filed a further amended statement of claim and an amended originating process. The amended pleadings omitted relief being sought against defendants other than the first, third and eighth defendants. The question of who should pay the costs thrown away by reason of the amendments was reserved pending the final hearing. In the event, the plaintiff obtained final relief only in the form of compensation from each of the defendant directors, ie Mr Aulich and Mr Woodhouse.

10    Section 43(2) of the Federal Court of Australia Act 1976 (Cth) provides that “the award of costs is in the discretion of the Court or Judge”, subject to other enactments. The usual approach, of course, is that the costs of a proceeding follow the event unless there are reasons to hold to the contrary: Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [35] per Gaudron and Gummow JJ, [66]-[67] per McHugh J and [134] per Kirby J.

11    The defendant directors contend that the usual approach should not apply. Their proposal divides the question of costs into four separate orders:

(1)    The first and third defendants pay the plaintiff’s costs of the proceedings, other than the costs of and incidental to certain identified paragraphs in the further amended statement of claim filed 15 November 2024.

(2)    The plaintiff pay the first and third defendants’ costs of and incidental to the above-mentioned paragraphs.

(3)    The plaintiff pay the defendants’ costs thrown away by reason of the filing and service of the amended originating process and further amended statement of claim both filed on 15 November 2024.

(4)    The plaintiff pay the fourth and eighth defendants’ costs of the proceeding.

Abandoned claims

12    The paragraphs in the further amended statement of claim referred to at (1) and (2) above were not relied on by the plaintiff on the first day of the hearing on 7 April 2025: see T2:14-3:19 and MFI-2. A second further amended statement of claim deleting those paragraphs was filed later that day. That was the form of pleading upon which I ultimately determined the substantive matters in dispute.

13    The defendants characterise those paragraphs as “Abandoned Claims” in respect of which they should not have to pay costs. They summarise the claims as concerning any obligation of the sixth defendant to hold shares on trust for the plaintiff, that the share issues in ACL and APT breached the constitutions of those companies and that the plaintiff could not dispose of her shares in either without the consent of the first to third defendants.

14    The defendants submit that those issues are separable from the claims against the first and third defendants for compensation under s 233 of the Corporations Act 2001 (Cth), which she was ultimately successful in obtaining.

15    In light of this, the defendants further submit that the plaintiff should pay the first and third defendants’ costs, ie the directors’ costs, incurred in relation to defending the abandoned claims. The defendants also say that since no relief was obtained against the fourth and eighth defendants, they can be considered to have been the “successful party” in the litigation such that their costs should also be borne by the plaintiff.

16    The plaintiff submits that there will be considerable difficulty in apportioning costs between the issues considered “abandoned” by the defendants and the balance of the dispute, and that to undertake such an apportionment would be inappropriate and not reflect the interests of justice.

17    The plaintiff points out that the fourth and eighth defendants, respectively being Mr Aulich’s corporate vehicle which benefitted from the impugned conduct and one of the companies in relation to which the oppression occurred, were rightly joined to the proceeding as parties directly affected by the relief originally sought. Further, they participated in the proceeding as parties on behalf of whom submissions were made together with the other defendants.

18    The plaintiff also submits more broadly that the “abandonment” of the claims only occurred because there was no longer any practical point in pressing the allegations in light of circumstances such as APT prospectively going into external administration and ACL and the sixth defendant going into liquidation.

Costs wasted by amendment

19    The defendants submit that there is no reason why the Court should not make orders making the plaintiff pay the costs thrown away by reason of the amendments to the pleadings on 15 November 2024.

20    In response, the plaintiff submits that the reason for the amendments must be considered in the context of the developments concerning the efficacy of relief against the defendants already mentioned above. The plaintiff says that there is no reason why the operation of r 40.03 of the Federal Court Rules 2011 (Cth) should be disturbed such that costs of the amendment should not also follow the event.

Consideration

21    Beginning with the “abandoned claims”, neither side disputes the principles which govern whether it is appropriate to order an issues-based costs order. Such a costs order contemplates a situation in which both sides have had some degree of success on the various issues in a proceeding, such that apportionment of costs may occur.

22    Yet, in Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53; 327 ALR 192 at [6], the High Court observed there are “good reasons not to encourage applications regarding costs on an issue-by-issue basis, involving apportionments based on degrees of difficulty of issues, time taken to argue them and the like”. Thus, as the Court of Appeal (Beazley, Ipp and Basten JJA) explained in Bostik Australia Pty Ltd v Liddiard (No 2) [2009] NSWCA 304 at [38], “[w]here there are multiple issues in a case the Court generally does not attempt to differentiate between the issues on which a party was successful and those on which it failed”.

23    Departure from the general rule should occur only when there are “special circumstances”, such as “disentitling conduct of the successful party where the raising of the unsuccessful issue was not justified, or it was so unreasonable that it is fair and just to make the order apportioning costs, or where the particular issue was clearly dominant or separable”: see Siemens WLL v BIC Contracting LLC (costs) [2024] FCA 201 at [9] and the cases cited there; see also Bostik at [38].

24    As the Full Court noted in PKT Technologies Pty Ltd v Peter Vogel Instruments Pty Ltd (No 2) [2020] FCAFC 46 at [14], “[i]f the apportionment of costs is appropriate, the object is not mathematical precision but a result that best reflects the interests of justice in the overall circumstances of the case”. However, “the mere fact that a court does not accept all of a successful party’s arguments does not make it appropriate to deal with costs on an issue by issue basis … A court will be reluctant to adopt an approach of apportioning costs between different issues depending on success or failure on those issues where it is likely to be difficult, if not impossible, to allocate items of costs between the different issues”: at [15].

25    The defendants’ submissions on this issue in substance turn on the fact that the plaintiff amended her pleadings to drop certain claims against the defendants at the outset of the trial. The plaintiff accepts that those claims can be considered separable. However, the defendants fail to address why the amendments became necessary.

26    As recounted in the principal judgment at [8]-[10], after the plaintiff commenced the proceeding, the sixth defendant went into liquidation. In addition, on 2 August 2024, the plaintiff was notified by a representative of the defendants that both ACL and APT had ceased trading and would be wound up, and that the companies’ shares “no longer [had] any meaningful value”.

27    The consequence was that there was no utility in the plaintiff continuing to press claims against the sixth, seventh and eighth defendants. The plaintiff was in no way at fault for these intervening events: principal judgment at [9], [126]. By way of amendment on 15 November 2024, the plaintiff sought direct compensation from the directors as the alternative remedies of winding up, buyout or reinstatement would be of dubious value in the circumstances, as acknowledged in the letter of 2 August 2024.

28    In light of the findings at trial, the plaintiff would have been entitled to various forms of relief to remedy the oppression. It is through circumstances beyond the control of the plaintiff that those other remedies, such as a more typical buy-out order, were not sought instead of the relatively novel remedy of compensation from the directors. Had the intervening events not occurred, the fourth and eighth defendants would have been necessary parties for the purposes of those other forms of relief. Further, the fourth and eighth defendants were necessary parties for the purposes of determining liability and making factual findings, as it was their conduct and affairs in contest in the proceeding. There is no circumstance in which any of the defendants could have been said to be “successful” in defending the claim(s) against them.

29    To the extent that the defendants take issue with omission of the “abandoned claims” only being notified on the first day of the trial, or very close to its commencement, I consider any prejudice occasioned to have been minimal. This is because the defendants had already been on notice of the plaintiff’s desired relief being limited to the first, third and eighth defendants since at least 15 November 2024. Further, the defendants had been served on 31 March 2025 with the plaintiff’s opening written submissions which did not advance a case going to any of the omitted issues. In any event, counsel for the defendants did not contest counsel for the plaintiff’s statement on the first day of the trial that the paragraphs had been “notified [to the defendants] some time ago”: T2:14-17.

30    Even aside from all this, I consider it would be virtually impossible to apportion costs between issues concerning the sixth defendant as trustee and the constitutional governance of ACL and APT and the other issues in dispute. That is evidenced by how during the trial the Court was taken to the constitutions of ACL and APT and how there was germane argument concerning the scope of the sixth defendant’s obligations as a trustee: see T20:31-32:25. Resolution of the dispute depended on examining the conduct of all these actors at various times, meaning the matters going to the excised issues are too closely intertwined with the matters going to the issues on foot for apportionment to be practicable. As the plaintiff notes, no evidence was withdrawn or ruled inadmissible because of the amendments and the witnesses would have had to traverse the same terrain in any event. That further supports the conclusion at [29] above that the plaintiff’s omission of pleading paragraphs on 7 April 2025 did not pose prejudice to the defendants’ conduct of their case in light of what had already unfolded since 15 November 2024.

31    Having concluded as part of the reasoning on “abandoned claims” that the amendments of 15 November 2024 were justified in the circumstances and, indeed, inevitably necessary for the continuation and ultimate success of the plaintiff’s case, I consider that there is also no reason for the costs of those amendments to not follow the event in accordance with r 40.03. The plaintiff should not have to pay any costs thrown away because of the amendments (the quantum of which I consider would in any event be insignificant).

32    Hence, the interests of justice require that the costs of the proceeding, including the amendments, follow the event. I will order that the first and third defendants pay the plaintiff her costs, to be fixed in a lump sum.

33    As I have rejected the more complex costs regime proposed by the defendants, it is unnecessary to consider the arguments the defendants have made concerning the merits of taxation versus lump sum assessment.

Associate:

Dated:    9 December 2025

SCHEDULE OF PARTIES