Case: Quatro Ltd v Argo Investments Ltd and Others (1999) 32 ACSR 480
Outcome: cited
Oil Basins submits, correctly, that generally the costs of objectors should be paid by the Company (Plaintiff): Re Crusader (1995) 120 FLR 219; and Re Matine Ltd (1998) 28 ACSR 492 ; Re Arrowfield Group Ltd (1995) 17 ACSR 649 ; Re Castlereagh Securities Ltd [1973] 1 NSWLR 624 ; Re Ampol Ltd (1989) 14 ACLR 772 , which were cited with approval by Hansen J in his decision to award the objectors their costs in Quatro Ltd v Argo Investments Ltd and Others (1999) 32 ACSR 480. 10 Arc submits that in the present case, the following factors support the exercise of the Court's discretion to award costs against the Intervener: (a) Prior to filing the interlocutory application, neither Oil Basins nor its solicitors raised with Arc, or its solicitors, the issues which were the subject of the application. The issues concerning s 413 of the Corporations Act 2001 (Cth) did not need to be the subject of an application - Arc accepted that orders pursuant to s 413 should be made and would have proposed those orders had Oil Basins sought them in correspondence. It did not. Indeed, Arc's solicitors corrected the errors in the formulation of the s 413 orders as expressed in Oil Basins' interlocutory application. (b) The interlocutory process filed on behalf of Oil Basins indicates that the adjournment application, which proposed a supplementary statement be issued and a fresh scheme meeting be held, was an "alternative". Oil Basins changed its position in this regard on Friday, 8 August, by seeking orders 3, 4 and 5 at the hearing. (c) The affidavit filed in support of the interlocutory application was deficient and unhelpful. It was sworn by Kim Warren McGrath, who is the chairman of Oil Basins, and a director of that company. Mr McGrath had access to legal advice before swearing the affidavit. Mr McGrath's affidavit contained obviously objectionable material (paragraphs 8 and 9), and included a misleading heading (above paragraph 11). It offered no real assistance to the Court, and failed to annex the 6 December 2006 ASX announcement, which was highly relevant (and which Arc produced - see annexure "DDK13" to the Fifth Kirk Affidavit). (d) Counsel for Oil Basins, during the hearing on 8 August 2008, was unable to explain the reason for Oil Basins' delay in commencing proceedings in the Supreme Court of Western Australia against Arc. The delay is in excess of 18 months (taken from the date of the ASX announcement on 6 December 2006). The litigation was filed, without warning, on 1 August 2008, only 4 days before the scheme meeting and 7 days before the Court hearing. The apparent explanation offered by Mr McGrath in his affidavit (see paragraphs 11 and following), under the misleading heading "Discovery of plaintiff's breach of confidentiality agreement", lacks credibility in the circumstances. (e) Counsel for Oil Basins, during the hearing on 8 August 2008, was unable to explain to the Court the "interest" which Oil Basins had in raising issues concerning the disclosure to members, and in seeking an adjournment of the scheme. The Court has inferred that Oil Basins' was acting to obtain some commercial advantage. (f) In addition, it is relevant to consider the seriousness of the order which was sought by Oil Basins (order 5). That order was pressed by Counsel for Oil Basins at the hearing on 8 August. Order 5 proposed an adjournment of the hearing, the preparation and distribution to shareholders of a supplementary statement, and the convening of a further scheme meeting of members, which would then have resulted in a further Court hearing before this Court. All of this would have involved considerable time and expense, and a delay to the scheme process. This must be seen in the context of a scheme which: (i) was intended to establish an Australian mid-tier oil and gas company with an expected market capitalisation of greater than $2 billion; (ii) would establish a newly listed company (Buru Energy Limited); (iii) an independent expert had determined was in the best interests of, and fair and reasonable to, ARC shareholders; and (iv) the ARC shareholders had overwhelmingly voted in favour of. In this context, it is of considerable concern, and relevant to the exercise of the Court's discretion on the question of costs, that Oil Basins would be prepared to apply to this Court for such a serious order based on only the flimsiest of affidavit material. 11 I accept the submissions made by Arc. The question of what was the real purpose of Oil Basins in pressing for an adjournment is a primary consideration. During the substantive hearing I asked counsel for Oil Basins what interest it had in seeking an adjournment on behalf of proxy voters in Arc, none of whom he represented. The following exchange took place: HIS HONOUR: As a matter of interest, what is the interest of the shareholders of Arc got to do with your client? MR BRUCE: Well, yes, that is I was wondering when your Honour might ask me that. HIS HONOUR: Well, I've asked it, I've asked the question. MR BRUCE: It is, your Honour, that we simply say that it is a matter for the court. We are here principally to seek the relief that we've sought, and that has been agreed to, but we say that that has a material impact which is disputed. HIS HONOUR: Well, it has absolutely no impact at all upon the first set of orders that were sought. MR BRUCE: No, no. HIS HONOUR: It only has impact on the alternative relief you seek. MR BRUCE: That is correct. HIS HONOUR: It wasn't a flippant question. I would like to know what interest it is of your client as to the concern of the proxies filed by shareholders of Arc? MR BRUCE: It is simply, your Honour, that it is the duty of the court to be satisfied in all the circumstances. HIS HONOUR: But why are you telling me what the duty of the court is? Why are you telling me that there should - - - MR BRUCE: Sorry, your Honour. HIS HONOUR: Why are you telling the court that there should be an adjournment? Why do you want an adjournment? MR BRUCE: Because we consider, your Honour, that that well, I should perhaps just sit down, appoint and say, your Honour, that we have it's a matter for the court and we thought that it was our duty to bring those matters to the court's attention. HIS HONOUR: You've brought it to the attention of the court but you're pressing for the adjournment. I'm asking you why you want the adjournment. That goes beyond informing the court as to its duty. MR BRUCE: Yes, I accept that. HIS HONOUR: Why do you want the adjournment? MR BRUCE: To ensure that the Buru shareholders know what they're getting themselves in for, is one answer, sir. 12 If the purpose of Oil Basins had been merely to inform the Court as to the position of the proxy voters in light of the litigation launched by Oil Basins then that was achieved by reading the affidavit of Mr David Charles Griffiths sworn 7 August 2008. The purpose behind the application for the adjournment however was not explained. It was the hearing of that application which consumed much of the Court time on Friday 8 August 2008.