CCS Equipment Pty Ltd v Galaxy Resources Limited
[2019] WASC 249
•24 JULY 2019
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: CCS EQUIPMENT PTY LTD -v- GALAXY RESOURCES LIMITED [2019] WASC 249
CORAM: ALLANSON J
HEARD: 24 JUNE 2019
DELIVERED : 24 JULY 2019
FILE NO/S: CIV 1678 of 2018
BETWEEN: CCS EQUIPMENT PTY LTD
Plaintiff
AND
GALAXY RESOURCES LIMITED
First Defendant
GALAXY LITHIUM AUSTRALIA LTD
Second Defendant
Catchwords:
Costs - Security for costs - Form of security - Third party litigation funder - Whether ATE insurance policy sufficient form of security - Where undertaking and deed of indemnity offered - Whether authority of agent to give undertaking and indemnity proved
Legislation:
Companies Act 2006 (UK)
Evidence Act 1906 (WA), s 62
Result:
Action stayed until plaintiff provides sufficient security
Category: B
Representation:
Counsel:
| Plaintiff | : | P W Weeks |
| First Defendant | : | M McKenna |
| Second Defendant | : | M McKenna |
Solicitors:
| Plaintiff | : | GW Legal |
| First Defendant | : | Gilbert + Tobin |
| Second Defendant | : | Gilbert + Tobin |
Case(s) referred to in decision(s):
Australian Property Custodian Holdings Ltd (in liq) (rec and mgr apptd) v Pitcher Partners [2015] VSC 513
Australian Property Custodian Holdings Ltd (in liq) (rec and mgr apptd) v Pitcher Partners [2016] VSC 399
DIF III Global Co-Investment Fund, LP v BBLP LLC [2016] VSC 401
In the matter of Tiaro Coal Limited (in liq) [2018] NSWSC 746
Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd [2017] FCA 699
ALLANSON J:
The plaintiff, CCS Equipment Pty Ltd, brings these proceedings against two defendants for damages under the Competition and Consumer Act 2010 (Cth) and for breach of contract. The first defendant, Galaxy Resources Ltd has filed a defence; the second defendant, Galaxy Lithium Australia Ltd, has also counterclaimed.
The plaintiff relied on the following affidavits:
(1)Daniel Hoghton, a director of the plaintiff, dated 20 March 2019; and
(2)Garth Jay Krasinski, insurance broker and Accounts Director of Elliott Australia Group Pty Ltd, dated 1 May 2019, and 19 June 2019.
On 19 June 2018, external administrators were appointed to the plaintiff. In August 2018, it became subject to a deed of company arrangement.[1]
[1] See affidavit of Daniel Hoghton, sworn 20 March 2019, [14] - [15].
The plaintiff is being funded in pursuing its case by GT Capital Partners Pty Ltd, a private litigation funder. In response to an application for security for costs, GT Capital obtained insurance for the costs which the plaintiff may be ordered to pay to the defendants.
The insurer under the policy is Lloyd's Syndicate 4000 (Pembroke). The plaintiff is the insured.
The defendants raised questions about whether the policy, as worded, was adequate security for their costs. To meet those objections, and consistently with several decisions in other jurisdictions, the plaintiff provided a Deed of Indemnity and an enforceable undertaking to supplement the policy. [2]
[2] See Petersen Superannuation Fund Pty Ltd v Bank of Queensland Ltd [2017] FCA 699; In the matter of Tiaro Coal Limited (in liq) [2018] NSWSC 746 ; DIF III Global Co-Investment Fund, LP v BBLP LLC [2016] VSC 401; and Australian Property Custodian Holdings Ltd (in liq) (rec and mgr apptd) v Pitcher Partners [2016] VSC 399.
In Australian Property Custodian Holdings Ltd (in liq) (rec and mgr apptd) v Pitcher Partners [2015] VSC 513 at par 56, Hargrave J said:
The form of the security is immaterial, so long as it can achieve its object as security. Courts have long recognised, for example, that insurance may be adequate security. In weighing up all the circumstances in this case, justice is served by the proposed security. The defendant will not be ‘unreasonably disadvantaged’ by the proposed security. The proposed security is disadvantageous in comparison to payment into Court or an Australian bank guarantee, however it is not unreasonably so given the countervailing factors above. Crucially, the proposed security will adequately protect the defendant.
The countervailing factors to which his Honour referred included: the deed was directly enforceable in Victoria; it was directly enforceable against the insurer; the financial standing of the insurer; the plaintiff's offer to pay into court any enforcement costs of the deed in the United Kingdom; the availability of reciprocal enforcement of Australian judgments in the United Kingdom; and the terms of the deed were acceptable to the defendant.
It is important to record some matters from the outset. First, it was not in dispute that the court should make an order for security for costs. The issue was the form in which security should be given. The court was not required to consider the range of factors, including the merits of the parties' cases, which arise on such applications. Second, the amount of security sought was not in question. Third, the terms of the cover under the insurance policy issued by the insurer were not in issue. Fourth, the fact that the insurer is based in the United Kingdom was not raised as a separate issue.
The insurer is a Lloyd's syndicate, Lloyd's Syndicate 4000 (Pembroke). The managing agent for the syndicate is Pembroke Managing Agency Limited.
There is no question of the financial capacity of the insurer to meet such a modest sum.
The Deed of Indemnity contains an unconditional and irrevocable undertaking by the insurer to pay the defendants' costs on demand following the issue of a court order finally determining those costs. By the undertaking, the insurer irrevocably undertakes to not seek or apply for security for costs should the defendants take proceedings to enforce the Deed of Indemnity or to register any judgment from the enforcement of the deed in the United Kingdom.[3] The defendants do not question the terms of the indemnity or undertaking.
[3] Affidavit of Garth Jay Krasinski sworn 19 June 2019, GJK-9.
The Deed of Indemnity and the undertaking are purportedly executed by Pembroke 'in its capacity as managing agent for and on behalf of' the insurer, and signed by Mr David White as director of Pembroke. On each document, the signature of Mr White is witnessed by one witness.
The present application turns on two quite narrow questions: whether the plaintiff has proved that the deed and the undertaking were properly executed by Pembroke Managing Agency Ltd; and whether the plaintiff has provided satisfactory evidence of the authority of Pembroke Managing Agency Limited to bind the insurer to such instruments.
The evidence and findings
The Schedule of Insurance shows that the policy was placed by a Perth based broker with Maxima Litigation Solutions Ltd, a wholesale broker, and underwritten by Thomas Miller Legal.[4]
[4] Affidavit of Daniel Hoghton sworn on 20 March 2019, DH‑1, 6.
In his first affidavit, Mr Krasinski outlines the role of Thomas Miller Professions Limited, as a Lloyd's 'Coverholder', and the involvement of Maxima Litigation Solutions Ltd, a United Kingdom based wholesale broker.
As a Lloyd's Coverholder, Thomas Miller Professions was authorised to enter into contracts of insurance to be underwritten by the members of the syndicate 'in accordance with the terms of a Binding Authority'.[5] A Binding Authority is an agreement between a Managing Agent (in this case Pembroke) and the Coverholder under which the Managing Agent delegates to the Coverholder the Managing Agent's authority to enter into contracts of insurance to be underwritten by the members of the syndicate managed by it.[6] The Binding Authority agreement
will also set out the Coverholder's other responsibilities, such as handling insurance monies or agreeing claims. The relationship between the Coverholder and the members of the syndicate is one of agency delegating authority…
To become a Coverholder at Lloyd's the entity must be sponsored by a Managing Agent, and approved by Lloyd's.[7]
[5] Affidavit of Garth Jay Krasinski sworn on 1 May 2019, GJK-2.
[6] Affidavit of Garth Jay Krasinski sworn on 1 May 2019, GJK-4, 13.
[7] Affidavit of Garth Jay Krasinski sworn on 1 May 2019, GJK-4, 13.
On 30 April 2019, Mr White, purportedly 'as attorney for Lloyd's Syndicate 4000 (Pembroke)', executed a deed of indemnity by which Lloyd's Syndicate 4000 'unconditionally and irrevocably' undertook to pay the defendants any sum or sums payable by the plaintiff following the issue of a court order that finally determined, in full, the plaintiff's liability for the defendants' costs.[8]
[8] Affidavit of Garth Jay Krasinski sworn on 1 May 2019, GJK-6, 57.
The deed of indemnity was provided together with the policy document in a letter sent by Maxima Litigation Solutions. The policy document, and an endorsement that 'if there is a valid claim for adverse costs payable under the Policy the Insurer will pay it directly to the Other Side or the Other Side's legal representatives', were signed by Gemma Fleetwood 'of Thomas Miller Professions Limited on behalf of Lloyd's Syndicate 4000 (Pembroke)'.[9]
[9] Affidavit of Garth Jay Krasinski sworn on 1 May 2019, GJK-6, 74, 76.
In his second affidavit, Mr Krasinski attached a 'reissued' enforceable undertaking and deed of indemnity, each signed by Mr White. Mr Kransinski said that he had been advised by the Head of Insurance at Maxima Litigation Solutions that Mr White did not in fact hold power of attorney to act on behalf of Lloyd's Syndicate 4000 (Pembroke) when he signed the earlier issued documents. The instruments were now signed by Mr White as a director of Pembroke and there is a letter from Pembroke stating that, in that capacity, Mr White is authorised to sign on behalf of the company.
None of the evidence addresses the authority of Pembroke to give the indemnity and undertaking on behalf of the Lloyd's syndicate.
Consideration
The first issue was proof of execution of the two instruments. At the hearing, counsel for the plaintiff handed up a printed extract from the Companies Act 2006 (UK), relying on s 62 of the Evidence Act 1906 (WA).
If accepted the evidence shows that, under the law of England and Wales and Northern Ireland, a document is executed by a company if signed by a director who signs it in the presence of an attesting witness. I am prepared to accept that the deed and undertaking were executed by Pembroke.
The authority of the managing agent is a matter of fact which needs to be proved. The plaintiff sought to rely on a series of Agency Agreement Bylaws, apparently printed from the Lloyd's internet homepage, to establish the authority of Pembroke, as the Managing Agency for the syndicate, to execute the undertaking and deed of indemnity on its behalf. Even if those documents were admissible, they are not sufficient. It is not simply a matter of proof of English law, although that is part of the issue. Should it be necessary for the defendants to enforce the security, they will need to prove the authority of Pembroke to bind the syndicate to unconditional and irrevocable undertakings which go beyond the terms of the policy. None of the evidence addresses that issue.
I am not satisfied that the defendants would not be unreasonably disadvantaged in enforcing the security offered, should that be necessary.
The result is that the plaintiff has not yet provided adequate security for the defendants' costs. The defendants, quite properly, did not press an application for a springing order. The plaintiff's action should, however, be stayed until the plaintiff provides security.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
CG
Associate to the Honourable Justice Allanson15 JULY 2019
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