Background
Glenn Barrie Mitchell, a shareholder of Orex Holdings Pty Limited, disputed allegations that he had breached a restraint of trade in the parties’ Securityholders’ Deed. Other shareholders asserted that the alleged default entitled them to exercise an option to acquire his shares.
After the respondents refused Mitchell’s requests for undertakings not to exercise the option pending resolution of the dispute, Mitchell filed an urgent interlocutory application on 3 July 2026. The parties later agreed to consent orders restraining the respondents from exercising the option or dealing with Mitchell’s shares, subject to Mitchell giving the usual undertaking as to damages.
The Court’s Holding
Justice Derrington ordered the respondents to pay Mitchell’s costs of the interlocutory application, to be taxed or agreed. The Court held that Mitchell had been forced to file the application to protect his position after the respondents emphatically declined to give undertakings preserving the status quo.
The respondents’ later agreement to substantially the same restraint did not require the Court to speculate about the merits of an untried application. Their pre-filing refusal to engage meaningfully, followed by their abandonment of that position once proceedings were filed, was unreasonable conduct sufficient to justify a costs order.
Key Takeaways
- A party that refuses reasonable protective undertakings may bear the costs of a later interlocutory application, even if the application is resolved by consent.
- The Court may award costs without deciding the merits where the respondent’s conduct made the application necessary.
- Testing an opponent’s willingness to litigate is legitimate, but a party may face costs consequences if it later abandons that position.
Why It Matters
The decision illustrates the costs risk in shareholder disputes where one side threatens to exercise contractual rights affecting ownership before the underlying dispute is resolved. Parties should carefully consider whether interim undertakings can preserve the status quo and avoid urgent court applications.