CVS Capital Partners Pte Ltd (UEN 201505549) v Jaxsta Limited - [2022] WASC 180

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION:   CVS CAPITAL PARTNERS PTE LTD (UEN 201505549) -v- JAXSTA LIMITED [2022] WASC 180
CORAM:   MASTER SANDERSON
HEARD:   16 MAY 2022
DELIVERED          :   20 MAY 2022
PUBLISHED           :   20 MAY 2022
FILE NO/S:   CIV 1747 of 2021
BETWEEN:   CVS CAPITAL PARTNERS PTE LTD (UEN 201505549)
Plaintiff

AND

JAXSTA LIMITED
Defendant

Catchwords:

Practice and procedure - application for security for costs - Turns on own facts

Legislation:

Corporations Act 2001 (Cth)
Rules of the Supreme Court 1971 (WA)

Result:

Security ordered

Category: B

Representation:

Counsel:

Plaintiff	:	Mr T Galic
Defendant	:	Mr AP Hershowitz

Solicitors:

Plaintiff	:	TGC Lawyers
Defendant	:	Maddocks Lawyers

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

Nil

MASTER SANDERSON:

This is the defendant's application for security for costs. The application is brought under O 25 r 2 of the Rules of the Supreme Court 1971 (WA) (The Rules), the plaintiff being a Singapore registered corporation and under s 1335 of the Corporations Act 2001 (Cth) (Corporations Act). The two provisions relied upon by the defendant largely overlap and although the written submissions dealt separately with each provision, the oral submissions quite reasonably conflated the two slightly different approaches. The primary position of the plaintiff was that it had such a strong case, no security ought be ordered. It was the defendant's position that while it conceded the plaintiff had an arguable case, it was not possible to make an assessment of the merits of the plaintiff's claim and in the circumstances, security should be ordered. Before dealing with the contentions of the parties, I should outline the basis of the plaintiff's claim by reference to the statement of claim.
As I have indicated, the plaintiff is registered in Singapore but carries on business in Australia. The defendant is a company listed on the Australian Stock Exchange and has its principal place of business in New South Wales. The defendant at all material times engaged a company known as Automic Pty Ltd (Automic) to act as its agent in the provision of share registry services. The plaintiff alleges in or about 10 December 2020, the defendant instructed Automic to apply what is known as an ASX Holding Lock facility (Holding Lock) in respect of the plaintiff's shareholding in the defendant. Without going into details, this Holding Lock prevents dealing with shares.
The plaintiff says on or about 12 February 2021, it attempted to deal with shares it held in the defendant. It was prevented from doing so by the Holding Lock. The plaintiff says the imposition of the Holding Lock was improper and as a consequence of its inability to deal with the shares in the defendant, it has suffered loss and damage. The damages are put at $900,955.
It is clear then the primary question between the parties is whether or not the defendant is justified in placing the Holding Lock on the shares owned by the plaintiff. In affidavit material filed in opposition to this application, the plaintiff goes to some lengths in seeking to establish it has a good claim against the defendant. The defendant has not set out its basis for resisting the plaintiff's claim as I have noted. The defendant does concede the plaintiff has an arguable case.
Both parties agree the strength of the plaintiff's case is a relevant factor to be taken into account in considering both an application under O 25 of The Rules and an application under s 1335 of the Corporations Act - always assuming the preliminary jurisdictional question under s 1335 has been established in the defendant's favour. The difficulty with the plaintiff's argument is that it has not sought summary judgment. On the face of it, this is a very straight forward claim. The writ of summons was filed on 30 July 2021 and the defendant entered an appearance on 17 August 2021. The statement of claim was lodged on 10 November 2021. The plaintiff then had until early December 2021 to make any summary judgment application. There is no explanation as to why it did not take that step. While it may still be open to the plaintiff to apply for summary judgment, it would need to seek an extension of time and there is nothing in the evidence to explain the delay and to offer any basis upon which an extension of time may be granted. That being so, the plaintiff's claim to have a strong case is largely undermined. The plaintiff's submissions were to the effect that its case was so strong that any trial would amount to nothing more than an assessment of damages. With respect, the approach is far too optimistic. This application must be approached on the basis the plaintiff has an arguable case. It cannot be approached on the basis the plaintiff's case is so strong as to be overwhelming.
Turning then to the evidence, the defendant's application is supported by two affidavits of Timothy Alexander Atkin, the first affirmed 10 December 2021 and the second affirmed 8 February 2022. The plaintiff relies on two affidavits of Brenton Andrew Scott, the first sworn 21 January 2022 and the second sworn 31 March 2022. In written submissions, counsel for the defendant objected to parts of the first affidavit of Mr Scott. Although these objections were not the subject of oral submissions, it is appropriate if I deal with them on their merits.
The first objection relates to evidence Mr Scott purports to give in par 6 of his first affidavit about what a third party, Critical Infrastructure Technologies Pty Ltd (CIT) might do with certain shares. In his second affidavit, Mr Scott says he is a director of CIT and is authorised to make an affidavit on its behalf. While the wording of par 3 of Mr Scott's second affidavit is unfortunate, there is no reason why Mr Scott in his capacity as a director both of the plaintiff and of CIT cannot state what CIT intends to do with its property. On that basis, I would allow the paragraph complained of to stand.
Objection is also taken to par 7 and par 15 of Mr Scott's first affidavit. I accept par 7 is speculation and submission and should be struck out. As to par 15, as the defendant correctly submits, it amounts to a submission more properly found in an affidavit supporting a summary judgment application. That said, it is a statement of the belief of Mr Scott and it contains no mischief in the context of a security for costs application. I would not strike out the paragraph.
It is convenient to begin with the application so far as it concerns s 1335 of the Corporations Act. Put at its highest, it is the plaintiff's contention it is entitled to have transferred back to it 2.5 million shares it owns in the defendant. At present, those shares are held by CIT. The plaintiff holds a transfer of these shares, that transfer being in a form which the defendant accepts would, if lodged with the appropriate authority, be effective to transfer the shares to the plaintiff. However, the transfer has not been lodged. So although the plaintiff may have a beneficial interest in these shares, it does not at present hold a legal interest. The difference is fine particularly when the share transfer can be lodged at any time. But in my view, it does mean that at present, the plaintiff does not have assets which would allow it to meet any costs order made against it. That being so, the jurisdictional question is answered in the defendant's favour. It then becomes a question of whether or not in the exercise of discretion, an order for costs should be made.
In considering the exercise of discretion, a number of factors are to be taken into account. They are:
(a)the strength and bona fides of the plaintiff's case;
(b)the likelihood of the plaintiff being unable to pay the defendant's costs;
(c)whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
(d)whether the application for security is oppressive;
(e)whether the award of security would deny an impecunious plaintiff a right to litigate;
(f)whether there are persons standing behind the plaintiff who are likely to benefit from the litigation;
(g)whether the person standing behind the plaintiff had offered any security or personal undertaking to be liable for costs and, if so, the form of such an undertaking;
(h)whether the application for security is being brought promptly; and
(i)whether the defendant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour.
In this case, the factor that I see as decisive is the likely inability of the plaintiff to meet any costs order. At par 11 of his second affidavit, Mr Scott says that the 2.5 million shares the plaintiff holds in the defendant are the only assets of the plaintiff. He says in par 12 the plaintiff's costs of the action 'had been intended to be met from the incremental sale of the shares left to raise funds necessary to finance the costs of this litigation'. It is reasonable to suppose then that the plaintiff will, during the course of this litigation, sell down its shareholding in the defendant to the point where if the plaintiff was ultimately unsuccessful, the defendant would be unable to recover any costs. In these circumstances, it is appropriate that a security for costs order be made.
In its chamber summons, the defendant seeks an order for costs in the amount of $119,405. This it says is the full amount of the costs it is likely to recover if it successfully defends the action. This is a case where it is appropriate to order security for costs in tranches. The plaintiff's claim is relatively straight forward and the defence, when filed, should not be a complex document. It is also difficult to see how discovery in a case such as this could be extensive. That being so, I would order the plaintiff to provide security for costs in the amount of $25,000, such security to be paid into court. The action should be stayed pending the provision of the security. This order is made on the understanding the defendant may apply for top up security at a later date.
In reaching this determination, I have taken into account the possibility of an order that the plaintiff not deal with some of the shares it holds in the defendant. That form of order does not really provide security for the defendant. Mr Scott's affidavit makes it plain the plaintiff intends to realise some or all of its shareholding in the defendant and there seems to be no reason why that should not be done to allow security to be provided.
The parties should confer as to the form of orders. If no form of orders can be agreed, competing minutes should be lodged within 7 days of the publication of these reasons. The parties should file short submissions as to costs (assuming there is no agreement on the issue) within 7 days of the date of these reasons.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
AH
Associate to Master Sanderson
20 MAY 2022