Bright Ceiling Systems Pty Ltd v Merhis Contracting Pty Ltd - [2016] NSWSC 631

Supreme Court

New South Wales

Medium Neutral Citation: Bright Ceiling Systems Pty Ltd v Merhis Contracting Pty Ltd [2016] NSWSC 631
Hearing dates: 15 March 2016
Decision date: 17 May 2016
Jurisdiction: Common Law
Before: Button J
Decision:
(1) Bright Ceilings Systems Pty Ltd must provide security for the costs of Merhis Contracting Pty Ltd in these proceedings in the sum of $50,000.
(2) The security in the sum of $50,000 must be paid into Court.
(3) Until such security is provided, these proceedings are stayed.
(4) Each party must pay its own costs of the proceedings before me.
(5) The matter is listed for directions at 9 AM before the Common Law Registrar on 31 May 2016.

Catchwords: COSTS – application for security for costs – impecunious corporate plaintiff – corporate plaintiff in substantive proceedings the subject of liquidation proceedings – order made but quantum of security reduced
Legislation Cited: Corporations Act 2001 (Cth), s 1335
Uniform Civil Procedure Rules 2005 (NSW), r 42.21(1)
Cases Cited: Collingnon Developments Pty Ltd v Wurth (1975) 1 ACLR 314
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Mignon Cakes Pty Ltd v Hiltide Pty Ltd [2004] FCA 142
Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245
Texts Cited: G E Dal Pont, Law of Costs (3rd ed 2013, Butterworths)
Category: Procedural and other rulings
Parties: Bright Ceiling Systems Pty Ltd (Plaintiff/Respondent)
Merhis Contracting Pty Ltd (Defendant/Applicant)
Representation:
Counsel:
B M Zipser (Plaintiff/Respondent)
D S Weinberger (Defendant/Applicant)
Solicitors:
Juris Cor Legal (Plaintiff/Respondent)
Bradbury Legal (Defendant/Applicant)

File Number(s): 2015/66705

Judgment

Introduction

By way of a notice of motion filed on 8 September 2015, the defendant, Merhis Contracting Pty Ltd (Merhis), seeks security for costs against the plaintiff, Bright Ceilings Systems Pty Ltd (Bright Ceilings). The application is brought pursuant to r 42.21(1) of the Uniform Civil Procedure Rules 2005 (NSW) (the Rules) and s 1335 of the Corporations Act 2001 (Cth).
Merhis is the defendant in the substantive proceedings and the applicant on the motion; Bright Ceilings is the plaintiff in the substantive proceedings and the respondent to the motion. For ease of comprehension, I shall refer to them by way of their roles in the substantive proceedings.
The primary position before me of the defendant was that I would order security for costs in the sum of $150,000; in the alternative, that I would order security for costs in that sum, but order that it be paid in tranches; and, in the further alternative, that I would make an order for some lesser sum.
The position of the plaintiff was that, on all of the evidence placed before me, I would decline to exercise my discretion to make the order sought.

Background

The background of the motion may be summarised as follows.
The plaintiff is a company that provides plasterwork services for building and construction projects. The defendant is a company that performs contracting work in the building and construction industry.
The plaintiff filed…

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: [2016] NSWSC 631
Decision Date: 17 May 2016

CaseChat Overview and Summary

Bright Ceiling Systems Pty Ltd sought an order for security of costs from Merhis Contracting Pty Ltd. The case was heard in the Supreme Court of Victoria. The plaintiff, a corporation, had commenced proceedings against the defendant for breach of contract and sought recovery of unpaid invoices. The plaintiff was subsequently placed into liquidation, but the proceedings continued. The defendant sought an order for security of costs due to the plaintiff's inability to pay costs if the proceedings were unsuccessful.

The court was required to determine whether the plaintiff, being an impecunious corporate plaintiff and in liquidation, could be ordered to provide security for costs. The court also needed to assess the appropriate quantum of such security, if any, in light of the plaintiff's financial situation and the likelihood of success in the substantive proceedings.

The court found that the plaintiff's liquidation did not automatically preclude it from being ordered to provide security for costs. The court considered the plaintiff's financial position, the complexity of the proceedings, and the prospects of success in the substantive action. Given the plaintiff's insolvency, the court ordered security for costs but reduced the quantum significantly to reflect the plaintiff's inability to pay. The court emphasised that the order was necessary to protect the defendant from potential liability for the plaintiff's costs if the proceedings were unsuccessful.

The court ordered Bright Ceiling Systems Pty Ltd to provide security for costs in the sum of $10,000, reflecting its financial constraints and the need to balance the interests of both parties.

Orders