ANSAI Pty Ltd v Hak Nominees Pty Ltd - [2006] WADC 179

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: ANSAI PTY LTD -v- HAK NOMINEES PTY LTD [2006] WADC 179

CORAM: COMMISSIONER LEY

HEARD: 1 NOVEMBER 2006

DELIVERED : Delivered Extemporaneously on 1 NOVEMBER 2006 typed from tape and edited by Trial Commissioner

FILE NO/S: CIV 2726 of 2004

BETWEEN: ANSAI PTY LTD
Plaintiff
AND
HAK NOMINEES PTY LTD
Defendant
(BY ORIGINAL ACTION)
HAK NOMINEES PTY LTD
Plaintiff
AND
ANSAI PTY LTD
First Defendant
RICHARD HARRIS
Second Defendant
(BY COUNTERCLAIM)

Catchwords:

Practice and procedure - Appeal from Registrar - Corporations Law - Application for security for costs - Turns on own facts

Legislation:

Australian Securities and Investments Commission Act 2001 (Cth)
Corporations Act 2001 (Cth), s 1335
Fair Trading Act 1987 (WA)

Trade Practices Act 1974 (Cth)

Result:

Appeal allowed

Security for costs ordered

Representation:

Original Action

Counsel:

Plaintiff: Mr P Redding
Defendant: Ms C H Thompson

Solicitors:

Plaintiff: Redding & Associates
Defendant: Mullins Handcock

Counterclaim

Counsel:

Plaintiff:     Ms C H Thompson
First Defendant             :     Mr P Redding
Second Defendant         :     Mr P Redding

Solicitors:

Plaintiff:     Mullins Handcock
First Defendant             :     Redding & Associataes
Second Defendant         :     Redding & Associataes

Case(s) referred to in judgment(s):

Blackbird Entertainment Pty Ltd v IO Research Pty Ltd, unreported; SCt of WA; Library No 980297; 2 June 1998
Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194
Engel Pty Ltd (in liq) v Leeds, unreported; FCt SCt of WA; Library No 940403, 20 July 1994
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 22 WAR 241
Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584
Nelson Capital Pty Ltd v Short [2003] WASC 152

Case(s) also cited:

Dalecoast Pty Ltd v Guardian International Pty Ltd, unreported; SCt of WA; Library No 990168; 7 April 1999
Domelia Pty Ltd v Paiker [2004] WASC 253
Russel v Taparis Pty Ltd & Ors [2004] WASC 238
Satcom Business Exchange Pty Ltd v BCCC Pty Ltd [2001] WASC 126
Scott v Scott [1913] AC 417
Silverstone Holdings Pty Ltd v American Home Assurance, unreported; FCt SCt of WA; Library No 970633; 21 November 1997
SP Hay Pty Ltd v Allcorp Pty Ltd [2004] WASC 77
Tipperary Developments Pty Ltd v State of Western Australia, unreported; SCt of WA; Library No 960620; 31 October 1996
Tradestock Pty Ltd v TNT (Management) Pty Ltd (No 1) (1977) 30 FLR 343

COMMISSIONER LEY: This action was commenced on 30 November 2004. At that time, the plaintiffs were the plaintiff and the second defendant by counterclaim ("Mr Harris"), and the defendants were the defendant and one Henry Kusal ("Mr Kusal"). However, on 20 June 2005, it was ordered inter alia that Mr Harris cease to be a plaintiff and that the plaintiff have leave to discontinue the action insofar as it was against Mr Kusal.
On 1 July 2005, the plaintiff filed an application for summary judgment against the defendant. On 16 August 2005,…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] WADC 179
Decision Date: 1 NOVEMBER 2006 typed from tape and edited by Trial Commissioner

CaseChat Overview and Summary

In the case of ANSAI Pty Ltd v Hak Nominees Pty Ltd, the plaintiff, ANSAI Pty Ltd, initiated proceedings against the defendant, Hak Nominees Pty Ltd, seeking damages for alleged repudiation or breach of contract. The action arose from a written agreement dated 16 April 2004, under which ANSAI agreed to sell its shares in IC Developments Pty Ltd to Hak for $400,000, payable in instalments. The plaintiff alleged that while it transferred its shares in IC Developments to Hak and received the deposit and the first instalment, the defendant failed to pay the second and third instalments. Consequently, ANSAI treated the defendant's failure to pay as a repudiation of the agreement, accepted the repudiation, and terminated the agreement.

The primary legal issue before the court was whether the plaintiff, ANSAI, was entitled to security for costs under section 1335(1) of the Corporations Act 2001 (Cth). This section allows the court to require sufficient security for the defendant's costs if there is reason to believe the plaintiff corporation will be unable to pay those costs if the defendant is successful in its defence. The court was required to determine if the plaintiff's financial position was such that it could not meet the defendant's costs if the defendant succeeded in the action, and if so, whether it should exercise its discretion to order such security.

The court considered the plaintiff's financial situation and determined that there was credible testimony suggesting that ANSAI might be unable to pay the defendant's costs if the defendant were successful. However, the court held that the defendant's application for security for costs was not to be decided on the basis of the Registrar's assessment, but rather required a fresh hearing before a Judge. This is in accordance with the District Court Rules 2005, rule 15(6), which mandates a de novo hearing when an appeal from a Registrar is made to a Judge. Therefore, the court ordered a new hearing to properly assess the plaintiff's financial capacity and to exercise its discretion on the application for security for costs.

The final orders were that the application for security for costs would be heard afresh before a Judge, who would make a decision based on the evidence presented at the new hearing. This approach ensured that the court exercised its powers in accordance with the applicable rules and statutory provisions.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

An appeal from a Registrar of this Court to a Judge is by way of a new hearing or a hearing de novo: District Court Rules 2005, r 15(6). In such a hearing, the matter is heard afresh and a decision is given on the evidence presented at that fresh hearing. The Judge is required to exercise his or her powers whether or not the Registrar fell into error: Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at 203. The defendant's application was brought under s 1335(1) of the Corporations Act 2001 (Cth). That section provides:"Where a corporation is plaintiff in any action or other legal proceeding, the Court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until security is given." The Court's jurisdiction to order security for costs under s 1335 is therefore enlivened only if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the defendant's costs if the defendant is successful. If that question is answered in the affirmative, the question then is whether, in the exercise of the Court's discretion, such an order should be made: FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 22 WAR 241; Nelson Capital Pty Ltd v Short [2003] WASC 152 at [3]. In the action, the plaintiff claims damages from the defendant for repudiation or, alternatively, for breach of contract. The plaintiff alleges that it and the defendant each owned 50 per cent of the issued share capital of a company called IC Developments Pty Ltd, ("ICD"), a building company, and that, by a written agreement dated 16 April 2004 ("the 16 April agreement"), the plaintiff agreed to sell its shares in ICD to the defendant for $400,000 payable in instalments of:(a)$60,000, on 15 March 2004 ("the deposit"); (b)$230,000, on 30 April 2004 ("the first instalment"); (c)$35,000, on 1 July 2004 ("the second instalment"); (d)$25,000, on 1 October 2004, ("the third instalment"); and (e)$50,000, no later than 30 April 2005 ("the final instalment"). The plaintiff says that:(a)it transferred its shares in ICD to the defendant on 30 April 2004;(b)the defendant paid it the deposit on 15 March 2004 or thereabouts; (c)the defendant paid the first instalment on 30 April 2004; but (d)the defendant failed to pay either the second or the third instalments. The plaintiff also says that, on 8 October 2004, it treated the defendant's failure to pay the second and third instalments as a repudiation of the 16 April agreement, accepted that repudiation and terminated the 16 April agreement. The plaintiff claims damages of $110,000, being the total of the second and third instalments, and $50,000, the amount of the final instalment, as damages for the loss of the bargain. Alternatively, the plaintiff claims damages of $110,000 for breach of contract.