ACN 110 769 929 Pty Ltd v R.V Investments (Aust) Pty Ltd

[2012] VCC 1755

IN THE COUNTY COURT OF VICTORIA Revised
(Not) Restricted

AT MELBOURNE

COMMERCIAL LIST
GENERAL DIVISION

Case No. CI-12-03119

ACN 110 769 929 PTY LTD & ANOR	Plaintiffs
v.
R.V INVESTMENTS (AUST) PTY LTD	Defendant

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	12 November 2012
DATE OF JUDGMENT:	12 November 2012 (revised 13 November 2012)
CASE MAY BE CITED AS:	ACN 110 769 929 Pty Ltd & Anor v. R.V Investments (Aust) Pty Ltd
MEDIUM NEUTRAL CITATION:	[2012] VCC 1755

REASONS FOR JUDGMENT

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Catchwords:             Practice and procedure – Security for costs – Application against a plaintiff in liquidation – Liquidator also named as a plaintiff – No claim made by the liquidator in proceeding – Security ordered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D. Harrison	Herman Partners Pty Ltd
For the Defendant	Mr G. McCormick	SW Legal

HIS HONOUR:

1The defendant makes a claim for security for its costs up to and including the first day of trial. The application was made against the first plaintiff, a company in liquidation. The application is not made against the second plaintiff who is the liquidator of the first plaintiff. No actual claims are made by the second plaintiff in the proceeding.

2Two claims are made in the proceeding by the first plaintiff. Firstly, for the repayment of $31,900 being the total of five payments made by the first plaintiff to the defendant in the months leading up to the liquidation of the company. This claim is made both on the basis of unjust enrichment and money had and received.

3The more substantial claim for $242,000 is made in respect of goods sold and delivered by the first plaintiff to the defendant.

4The application for security is primarily made on the basis that the first defendant would have no financial capacity to pay the defendant’s costs if the defendant were to succeed in the litigation. It has not been suggested that some other relevant person or entity, for example, creditors or shareholders of the first plaintiff, are not available to contribute to an order for security. Therefore, it is unlikely that an order for security would stultify the action.

5The plaintiffs rely upon the following matters in response:

a.the merits of the case overwhelmingly favour the plaintiffs;

b.there has been delay in bringing the application for security;

c.the liquidator is the second plaintiff and if the first plaintiff were not successful at trial, the trial judge could make an order for the defendant’s costs against the second plaintiff;

d.the quantum of the costs in respect of which security is sought is excessive.

6Further, plaintiffs’ counsel, Mr Harrison, informed the Court that the liquidator as second plaintiff would remain amenable to a costs order being made against him if the defendant succeeded in the action.

7The proceeding was commenced by writ dated 29 June 2012. The defendant’s solicitors by letter dated 4 August 2012 first sought security for the defendant’s costs. Following correspondence between solicitors, the defendant issued a summons seeking an order for security on 5 November 2012. This took some time because of the need for the application to be supported by an appropriate estimate of the costs, prepared by a costs consultant. In the circumstances, I do not consider there has been delay of the sort which should lead me to refuse the order.

8Although the liquidator is a plaintiff to the proceeding, no claims are made by him. The claim in respect of payments made to the defendant, in the months leading up to the liquidation of the first plaintiff would, in respect of at least four of the five payments, have been the basis for a preference claim by the liquidator. No such claim has been made. Plaintiffs’ counsel indicated that a decision was made to pursue what was said to be the “simpler” claim in its present form. It is not therefore a proceeding where more than one plaintiff brings interdependent claims against a defendant where ordinarily one might expect a lack of success with those claims would lead to an order for costs against both plaintiffs.

9Plaintiffs’ counsel has today informed the Court that the liquidator would be amenable to a costs order being made against him at trial if the first plaintiff were unsuccessful in its claims. If such an undertaking had been offered by the liquidator in the correspondence between the solicitors leading up to the present application, the plaintiffs may have had a stronger argument that no order for security should be made.

10Although the first plaintiff asserts that it has a strong case in relation to its first claim for $31,000, being the total of payments made to the defendant, the defendant has consistently maintained that these payments represented repayments of personal obligations of the directors and shareholders of the first plaintiff to a director of the defendant, Ms Rosa Villella. Four of the five payments were made in the period of 6 months leading up to the liquidation of the first plaintiff. As I have noted, no preference claim has been made by the liquidator. In the circumstances, I do not consider it would be appropriate to deny an order for security on the basis of the perceived merits of the first plaintiff’s smaller claim.

11The defendant’s costs consultant has estimated the costs of the defendant to the first day of trial at $25,274. Plaintiffs’ counsel has taken the Court through the estimate. The estimate includes the sum of $5,000, and a 50% loading on top of that sum, for instructions for brief, and one day’s fees to counsel for drawing and settling an outline of submissions, before the commencement of the trial.  The trial is estimated to take 2 sitting days.

12I consider it is likely that the estimate of the defendant’s costs may be slightly overstated although there are no contingency items included in the estimate. The plaintiffs also allege that a mediation, which was to be conducted by the parties on 25 September 2012, was effectively aborted as a consequence of the lack of authority of the person attending to represent the defendant. The plaintiffs’ costs allegedly thrown away by their attendance at the mediation were $6,205.25.

13The matters raised by the plaintiffs in relation to the mediation are not answered by the defendant and although it is not appropriate for me to formally reach a view as to this issue, I consider that it is a matter I should take into account in determining the quantum for any security for costs order. Defendant’s counsel, Mr McCormick, did not argue to the contrary.

14In the circumstances, I propose to make the following orders:

1By 4pm on 26 November 2012, the first plaintiff must provide security for the defendant’s costs of the proceeding, from the present date up to and including the first day of trial (and without prejudice to the right of the defendant to make a further application for security). The security is to be provided as follows:

(a)  by the second plaintiff providing a written undertaking in a form satisfactory to the defendant’s solicitors, that he will remain a party to the proceeding until its resolution and that he shall not oppose an order for costs being made in the proceeding against him if the defendant is successful against the first plaintiff, or;

(b)  by payment of the sum of $20,000 to the Registrar of the Court or by the provision of such a sum in an alternative form of security agreed in writing by the defendant’s solicitors prior to the date for compliance with this order.

2Reserve liberty to the parties to apply further, including in the event that the defendant does not agree to the first plaintiff providing security by an alternative method which would otherwise appear to be reasonable in the circumstances, or does not reasonably agree to the form of the second plaintiff’s undertaking.

3It is noted that plaintiffs’ counsel has foreshadowed that in the event security is provided by the first plaintiff in the terms of paragraph 1(b), the plaintiffs would seek an order that the second plaintiff be deleted as a party to the proceeding. Any application for such an order, if not opposed by the defendant, can be made to the Directions Group and an order will be made “on the papers” without the need for the parties to attend before the Court.

4         Reserve costs.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge Anderson delivered on 12 November 2012 and revised on 13 November 2012.

Dated:       13 November 2012

Philippa Gilkes    

Associate to His Honour Judge Anderson