Bacardi Holdings Pty Ltd v GREENTEAK Pty Ltd
[2005] WASC 160
BACARDI HOLDINGS PTY LTD -v- GREENTEAK PTY LTD & ORS [2005] WASC 160
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASC 160 | |
| Case No: | CIV:1437/2005 | 2 JUNE 2005 | |
| Coram: | MASTER NEWNES | 22/07/05 | |
| 12 | Judgment Part: | 1 of 1 | |
| Result: | Application to strike out action dismissed Security for costs ordered | ||
| B | |||
| PDF Version |
| Parties: | BACARDI HOLDINGS PTY LTD GREENTEAK PTY LTD (ACN 086 117 768) HOCKING LAND COMPANY PTY LTD (ACN 084 881 309) RICHKING NOMINEES PTY LTD (ACN 085 284 653) |
Catchwords: | Practice and procedure Application to strike out action Stamp Act, s 27 Pleading of lost document Presumption that lost document duly stamped Whether rebutted Whether Court will inquire into whether stamped document that is pleaded was assessed for correct amount of duty Turns on own facts Practice and procedure Application for security for costs Relevant principles Turns on own facts |
Legislation: | Corporations Act 2001 (Cth) Stamp Act 1921 (WA) |
Case References: | Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VR 468 Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 BPM Pty Ltd v HPM Pty Ltd, unreported; FCt SCt of WA; Library No 960206; 17 April 1996 Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 Closmadeuc v Carrel 139 ER 1276 Coolmo Pty Ltd v Hawkins & Anor, unreported; FCt SCt of WA; 12 April 1999 Crisp v Anderson 171 ER 394 Crowther v Solomons 136 ER 1446 Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale [1999] 2 VR 191 (CA) Hart v Hart (1841) 1 Hare 1 Intercraft Cabinets Pty Ltd v Sampas (1997) 18 WAR 306 Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1 Pooley v Goodwin 111 ER 722 Smart v Australia and New Zealand Banking Group Limited [2002] VSCA 111 Tenth Anemot Pty Ltd Ltd v Colonial Mutual General Insurance Co Ltd [1993] 2 VR 48 Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42 Midland Brick Co Pty Ltd v Welsh [2002] WASC 248 Pindan Pty Ltd v Sunny's Redevelopment Pty Ltd [2001] WASC 104 Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASCA 30 Richlaw Pty Ltd v Blackburne (1998) 19 WAR 164 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
GREENTEAK PTY LTD (ACN 086 117 768)
First Defendant
HOCKING LAND COMPANY PTY LTD (ACN 084 881 309)
Second Defendant
RICHKING NOMINEES PTY LTD (ACN 085 284 653)
Third Defendant
Catchwords:
Practice and procedure - Application to strike out action - Stamp Act, s 27 - Pleading of lost document - Presumption that lost document duly stamped - Whether rebutted - Whether Court will inquire into whether stamped document that is pleaded was assessed for correct amount of duty - Turns on own facts
(Page 2)
Practice and procedure - Application for security for costs - Relevant principles - Turns on own facts
Legislation:
Corporations Act 2001 (Cth)
Stamp Act1921 (WA)
Result:
Application to strike out action dismissed
Security for costs ordered
Category: B
Representation:
Counsel:
Plaintiff : Mr P Mendelow
First Defendant : Mr G D Cobby
Second Defendant : Mr C P K Russell
Third Defendant : Mr G D Cobby
Solicitors:
Plaintiff : Holborn Lenhoff Massey
First Defendant : Christensen Vaughan
Second Defendant : Birman & Ride
Third Defendant : Christensen Vaughan
Case(s) referred to in judgment(s):
Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VR 468
Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1
BPM Pty Ltd v HPM Pty Ltd, unreported; FCt SCt of WA; Library No 960206; 17 April 1996
Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301
Closmadeuc v Carrel 139 ER 1276
Coolmo Pty Ltd v Hawkins & Anor, unreported; FCt SCt of WA; 12 April 1999
(Page 3)
Crisp v Anderson 171 ER 394
Crowther v Solomons 136 ER 1446
Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale [1999] 2 VR 191 (CA)
Hart v Hart (1841) 1 Hare 1
Intercraft Cabinets Pty Ltd v Sampas (1997) 18 WAR 306
Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1
Pooley v Goodwin 111 ER 722
Smart v Australia and New Zealand Banking Group Limited [2002] VSCA 111
Tenth Anemot Pty Ltd Ltd v Colonial Mutual General Insurance Co Ltd [1993] 2 VR 48
Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52
Case(s) also cited:
Custom Credit Corp Ltd v Ravi Nominees Pty Ltd (1992) 8 WAR 42
Midland Brick Co Pty Ltd v Welsh [2002] WASC 248
Pindan Pty Ltd v Sunny's Redevelopment Pty Ltd [2001] WASC 104
Professional Services of Australia Pty Ltd v Mila Properties Pty Ltd [2004] WASCA 30
Richlaw Pty Ltd v Blackburne (1998) 19 WAR 164
(Page 4)
1 MASTER NEWNES: This is an application by the first and third defendants ("these defendants") to strike out the plaintiff's claim or, alternatively, for an order for security for costs.
2 In the action, the plaintiff pleads that, as at February 1999, it held one-third of the issued shares in the second defendant and 50 per cent of the issued shares in the third defendant. The plaintiff alleges that, at that time, the second defendant had entered into agreements to purchase four lots of land in Hocking and the third defendant had entered into agreements to purchase nine lots of land in Canning Vale. Under the respective agreements, deposits were payable by the second and third defendants to the vendors of the land.
3 The plaintiff says that, in about late 1998, it loaned money to the second and third defendants to pay the deposits. In about February 1999, it entered into a written agreement with, among others, the defendants. The plaintiff pleads that under the agreement the first defendant was to acquire the plaintiff's shares in the second and third defendants and the directors of the second and third defendants were to resign; the plaintiff was to forego its rights against the second and third defendants to recover payment of the loan; the second and third defendants were to subdivide the respective properties they were purchasing to create residential lots and each of the second and third defendants was to pay to the plaintiff the sum of $2500 upon the sale of each subdivided lot. It was further agreed that in respect of other land acquired by them in the vicinity of the original land the second and third defendants would each pay to the plaintiff $2000 for each lot created by subdivision within a period of three years from the date of the agreement. In the event that the original land was not subdivided within three years from the date of the agreement, the second or third defendant (as the case may be) would pay to the plaintiff $2500 for each lot that could have been created had the land been subdivided. Similarly, if any other land subsequently acquired was not subdivided within three years the second or third defendant (as the case may be) would pay to the plaintiff $2000 for each lot that could have been created.
4 The plaintiff pleads that the agreement provided that as security for the respective obligations of the second and third defendants, any land the subject of the agreement was charged in favour of the plaintiff and the plaintiff was entitled to lodge caveats against the title to the land to protect its interest under the agreement.
(Page 5)
5 The first defendant guaranteed the obligations of the second and third defendants under the agreement.
6 It is alleged that, pursuant to the agreement, in about May 1999 the plaintiff transferred its shares in the second and third defendants to the first defendant, the directors resigned and the plaintiff forgave its loan. It is pleaded that, in breach of the agreements, the defendants have not accounted to the plaintiff in respect of the sale of the subdivided lots, or as to any unsold lots in respect of that land or any other land acquired by them in the vicinity, and have failed to pay the money to which the plaintiff is entitled under the agreement. The plaintiff pleads that the defendants have denied the existence of the agreement and its terms, and it seeks against the defendants an account, damages and a declaration as to their liability to the plaintiff under the agreements.
7 The plaintiff says the agreement was prepared by the late Mr Christopher Nash, then a partner in the law firm, Fiocco Hopkins Nash. The plaintiff pleads that it is currently unable to locate a copy of the agreement as the partnership of Fiocco Hopkins Nash was dissolved on 30 June 2000, Mr Nash died in early February 2004, and the plaintiff's copy of the agreement and the records relating to it were destroyed in a fire. It says that the other former partner of Fiocco Hopkins Nash has been unable to locate a copy in the records of the firm.
8 These defendants have applied to strike out the action on the ground that the plaintiff seeks to rely on a dutiable instrument that has not been stamped in accordance with the Stamp Act 1921 (WA). They rely on s 27(1) of the Act which, relevantly, provides:
"… No instrument chargeable with duty and executed in Western Australia … shall … be pleaded or given in evidence or admitted to be good, useful or available in law or equity, unless it is stamped in accordance with the law in force at the time when it was first executed."
9 In an affidavit sworn on behalf of the plaintiff, a director, Mr Hughes, says he recalls that prior to the agreement being executed he had discussions with Mr Nash to the effect that Mr Nash would conduct research to ascertain the best way of minimising the stamp duty to be paid. Mr Nash subsequently told him that the most effective way of minimising stamp duty was to ensure it was drafted as a deed and that he (Mr Nash) had made some amendments to the draft agreement as a result. Mr Hughes says that after the agreement was executed he delivered it to
(Page 6)
- Mr Nash because Mr Nash had told him that the agreement had to be stamped and stamping was crucial as one day the agreement may have to be relied upon.
10 Mr Hughes says he does not recall whether he or the plaintiff paid the stamp duty, or whether Fiocco Hopkins Nash paid all or part of it as a disbursement. Mr Hughes says he does recall paying a sum of money to Fiocco Hopkins Nash on account of stamp duty. According to Mr Hughes, he does not specifically recall seeing a stamp duty notation on the agreement after it was returned to him by Fiocco Hopkins Nash, but he says that had it not been stamped he would have noticed that because his attention had previously been directed to the stamp duty issue.
11 An affidavit of Mr John Fiocco, sworn 1 June 2005, has been filed on behalf of the plaintiff. Mr Fiocco was formerly a partner in the firm of Fiocco Hopkins Nash. He confirms that the partnership was dissolved on 30 June 2000, at which stage his only partner was Mr Nash. Mr Fiocco annexes to his affidavit copies of account summaries kept by the firm in respect of a file in the name of Mr Hughes. The summaries contain descriptions of work carried out on the file. The entries include time charged by the firm in February 1999 for "stamp duty valuation", telephone calls to "State Revenue", and dealing with a stamp duty requisition and a stamp duty valuation. There is also a record of disbursements which notes a payment of stamp duty on 17 February 1999 in the sum of $19.75 and a further payment on 23 February 1999 in the sum of $5.85. It also records the attendance of an outside clerk on the Department of State Revenue on 19 February 1999.
12 It was submitted by counsel for these defendants that the amounts referred to were insufficient to meet the amount of stamp duty for which the agreement would properly have been assessed, the correct amount of stamp duty as at February 1999 being not less than $60, and probably much more than that. It was therefore clear that the agreement had not been stamped, or at least had not been stamped in accordance with the Stamp Act, and the plaintiff could not rely upon it in these proceedings.
13 It was submitted on behalf of the plaintiff that the burden of showing that an instrument is inadmissible for want of sufficient stamping lies on the party objecting to it. Where a document is lost or has been destroyed, the Court would presume the document was duly stamped in the absence of evidence to the contrary. The presumption applied in this case and there was no evidence to rebut it.
(Page 7)
14 I accept that where an instrument has been lost or destroyed, there is a presumption that it has been duly stamped, unless some evidence to the contrary is given: Hart v Hart (1841) 1 Hare 1; Crisp v Anderson 171 ER 394; Pooley v Goodwin 111 ER 722; Crowther v Solomons 136 ER 1446. When circumstances are proved which raise a strong presumption that the instrument was not duly stamped, the burden of proving that it was duly stamped lies on the party seeking to rely upon it. But where the circumstances strongly suggest that the instrument might have been duly stamped, the objector fails to discharge the onus: Closmadeuc v Carrel 139 ER 1276 at 1280.
15 The evidence of Mr Hughes, and the documents produced by Mr Fiocco, all point to the agreement having been submitted to the Commissioner of State Revenue and duly stamped.
16 It was contended by these defendants that, even if it was stamped, the agreement was not stamped in accordance with the law in force at the time under s 27(1), in that it was not assessed with the correct amount of stamp duty. It could not therefore be relied upon by the plaintiff. Counsel for these defendants sought to demonstrate, by reference to the various rates of stamp duty applicable at the time and the documents produced by Mr Fiocco, that an inadequate amount had been paid. Given that the latter are, at best, inconclusive as to the amount actually paid, I did not find that exercise of any real assistance. It was also quite unclear from counsel's submissions what amount of stamp duty these defendants say was payable on the agreement.
17 I am satisfied on the evidence that the presumption that the agreement was duly stamped applies and that these defendants have not discharged the onus of rebutting it.
18 I might add that, once it is accepted that a document has been stamped, I would not have thought it is the function of the Court, in considering whether the agreement may be tendered in evidence, to enquire into the adequacy of the amount of stamp duty for which it was assessed.
19 In Coolmo Pty Ltd v Hawkins & Anor, unreported; FCt SCt of WA; 12 April 1999, the admissibility of a document that had been stamped was contested on the basis that it had been assessed for the incorrect amount of stamp duty. The Full Court held that where a document has been stamped, the Court, in considering whether the document has been duly stamped such that it can be tendered in evidence, will not go behind the
(Page 8)
- stamping of it to enquire whether it was assessed for the correct amount of stamp duty. See now Stamp Act, s 31.
20 In Backstop Nominees Pty Ltd v Goscor Pty Ltd [1990] VR 468, Tadgell J (at 471 - 472) considered that a person seeking to rely on a document that had been stamped could rely on the presumption of regularity in the acts of public officials to establish that the document was "duly stamped" and therefore admissible in evidence. Backstop Nominees was cited with approval by the Court of Appeal of Victoria in Smart v Australia and New Zealand Banking Group Limited [2002] VSCA 111 per Batt JA (with whom Charles and Eames JJA agreed) at [26].
21 In this case, all the evidence points to the agreement having been submitted for stamping and stamped. In those circumstances, I would have thought that, equally, it was not the function of the Court to seek to enquire whether the Commissioner had in fact assessed the correct amount of stamp duty. In any event, there was no evidence capable of rebutting a presumption that the agreement was properly assessed for stamp duty.
22 I would dismiss the application to strike out the action.
23 I turn then to the application by these defendants for security for costs. The power to order security for costs is to be found in s 1335 of the Corporations Act 2001 (Cth). That relevantly provides that where a corporation is a plaintiff in an action, and 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 its defence, the court may require that sufficient security be given for those costs and stay all proceedings until the security is given.
24 I do not think it was in issue that the plaintiff will be unable to meet these defendants' costs of the action if the defendant successfully defends the action. Mr Hughes has deposed to the assets of the plaintiff in an affidavit sworn on 29 March 2005 in related proceedings, namely CIV 1222 of 2005, to which he refers in his affidavit in these proceedings. Mr Hughes says the plaintiff's assets consist of a share portfolio which, as at 27 March 2005, had a value of $9404. Mr Hughes says he is prepared to give a personal guarantee in the sum of $50,000 to secure these defendants' costs, but he is not to pay that amount into Court. Mr Hughes describes his assets as consisting of a residential property worth "in the vicinity of $200,000 to $220,000, which is encumbered by a mortgage
(Page 9)
- which currently secures an amount of approximately $140,000", and a beneficial interest in the residence which he shares with his wife. Mr Hughes does not ascribe a value to the residence or to the interest which he claims in it.
25 It is evident from documents put in evidence by these defendants that Mr Hughes' wife is an undischarged bankrupt and that in fact her interest in the residence has vested in her trustee in bankruptcy. The house is encumbered by a mortgage to St George Bank and a caveat was lodged on 25 August 2004 by other parties claiming an interest as equitable owner under a loan agreement dated 26 October 2003. Mr Hughes lodged a caveat against the title on 14 March 2005. In a statutory declaration in support of that caveat, Mr Hughes claims an equitable interest by virtue of the fact that he is married to the registered proprietor and has made contributions to the purchase, maintenance and upkeep of the property.
26 It is well established that the Court has a very wide discretion whether to require a corporate plaintiff to provide security. In the exercise of its discretion the Court will be concerned to achieve a balance between ensuring the defendant is adequately and fairly protected, and avoiding injustice to an impecunious company by unnecessarily shutting it out or prejudicing it in the conduct of the litigation: Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 at 304; Tradestock Pty Ltd v TNT (Management) Pty Ltd (1977) 14 ALR 52 at 56.
27 The inability of the plaintiff to pay the defendants' costs should the defendants succeed not only goes to the jurisdiction of the Court to order security but is a factor, and often the most significant factor, in the exercise of the Court's discretion.
28 I should say that it was not contended by these defendants that this action was not bona fide or that it did not have reasonable prospects of success, nor did the plaintiff contend that this application was being used oppressively by these defendants to frustrate a genuine claim.
29 As I have said, it is clear that the plaintiff has no significant assets. It will be unable to meet its own costs of the action from its own assets, let alone meet any order for the defendant's costs of the action that might be made against it. Whether an order for security would therefore have the effect of stultifying the action raises the question of whether those who stand behind the company have the means to provide appropriate security.
30 In Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1, the Full Court of the Federal Court said:
(Page 10)
- "In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts."
31 See also Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1 at 3; BPM Pty Ltd v HPM Pty Ltd, unreported; FCt SCt of WA; Library No 960206; 17 April 1996 at 12.
32 But the fact that shareholders or other persons behind the company make all of their own assets available does not conclude the question of whether security should be ordered. The fact that they are exposed to personal liability for whatever they may be worth is a relevant but not necessarily a decisive consideration: Intercraft Cabinets Pty Ltd v Sampas (1997) 18 WAR 306, per Malcom CJ at 314; Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale [1999] 2 VR 191 (CA). The issue has to be looked at in the light of all relevant considerations: Intercraft Cabinets Pty Ltd v Sampas (supra) at 316.
33 Where those who stand behind the company stand to benefit if the litigation is successful, the absence of evidence that they are also without means is a matter which the Court may take into account: Tenth Anemot Pty Ltd Ltd v Colonial Mutual General Insurance Co Ltd [1993] 2 VR 48 at 56.
34 A search by these defendants of the records of ASIC has revealed that the shareholders of the plaintiff are Mr Hughes and Mr Anthony Cumins. Mr Cumins is an equal shareholder in the plaintiff with Mr Hughes. There is no evidence as to Mr Cumins' financial position, nor any indication that he is prepared to provide any security or assume any personal liability for these defendants' costs of the action, should the plaintiff's claim fail. No explanation has been offered for the lack of evidence as to Mr Cumins' financial position. On the face of it, as an equal shareholder in the plaintiff he stands to benefit equally from the action if it is successful.
(Page 11)
35 In the circumstances, I consider these defendants are entitled to an order for security for costs.
36 That leads to the question of what is an appropriate amount by way of security. There are currently two proceedings on foot between these parties. The original proceedings, CIV 1222 of 2005, concern one of the lots referred to in this action. This action encompasses all of the lots. It is plainly appropriate that the actions be consolidated or heard together, and I therefore propose to approach the question of costs on the basis that hereafter only one set of costs will be incurred.
37 These defendants' draft bill of costs estimates their costs at $97,960 in this action and at $28,874 in CIV 1222. The latter bill of costs has been prepared on the basis that that action proceeds as a separate action. It also includes an amount of $8679 in respect of the earlier application for an extension of the caveat, and an amount of $3000 for the application for security for costs in those proceedings. The same amount is claimed in this action for the application for security for costs. In my view, only one amount should be allowed for the applications, which were heard together.
38 The draft bill in this action includes an amount of $21,000 for chamber applications, being applications to strike out the statement of claim, for further and better particulars of it, for discovery, for production of documents, for leave to interrogate and for leave to issue subpoenas, in an amount of $3500 each. That assessment of the likely progress of the action seems to me, at this stage, to be unduly pessimistic. In respect of the application for leave to interrogate, on the other hand, it may be a little optimistic, in circumstances where leave is not readily given to a defendant to administer interrogatories.
39 On balance, I consider that, based on a reasonable assessment of the costs reflected in these defendants' draft bills of costs, a proper amount for security would be the sum of $70,000. I would not, however, order security to be provided in one lump sum for the entire action, but would require it to be provided in stages. To that end, I would order that security up to entry for trial be provided in an amount of $45,000, with liberty to the parties to apply to vary that amount if good cause exists, and liberty to these defendants to apply for additional security upon entry for trial.
40 On the question of the form of the security, I accept the submissions of these defendants that it is quite unclear what is the true realisable value of Mr Hughes' personal assets. I accept too that, on the evidence, there is
(Page 12)
- reason to believe their value may be insufficient to make good a personal guarantee of $50,000. Mr Hughes has not offered to provide security in any other form and he has expressly refused to pay that amount into Court. It also relevant that Mr Hughes has given an undertaking as to damages in action CIV 1222 to obtain an order extending a caveat over one of the lots referred to in the proceedings. As I have said, no evidence has been adduced on behalf of the plaintiff as to Mr Cumins' financial capacity.
41 I do not consider that the personal guarantee proffered by Mr Hughes is a proper form of security. In the absence of some proposal on behalf of the plaintiff, or those who stand behind it, to provide proper and adequate security, I would order that the security be paid into Court.
42 I will hear the parties on the appropriate orders and on costs.
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