Darwin Offshore Logistics Base Pty Ltd v Cox - [2010] WASC 356

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: DARWIN OFFSHORE LOGISTICS BASE PTY LTD -v- COX [2010] WASC 356

CORAM: ALLANSON J

HEARD: 23 NOVEMBER 2010

DELIVERED : 3 DECEMBER 2010

FILE NO/S: CIV 3167 of 2009

BETWEEN: DARWIN OFFSHORE LOGISTICS BASE PTY LTD
Plaintiff
AND
PETER COX
First Defendant
TRIDENT AUSTRALASIA PTY LTD
Second Defendant

Catchwords:

Practice and procedure - Security for costs - Evidence of plaintiff's financial position - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 1335

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff:     Mr K L Christensen
First Defendant            :     Mr B Lynch
Second Defendant        :     Mr B Lynch

Solicitors:

Plaintiff:     Gadens Lawyers
First Defendant            :     Mony de Kerloy
Second Defendant        :     Mony de Kerloy

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

FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241

ALLANSON J: By chamber summons filed 20 September 2010, the defendants apply for an order that the plaintiff give security for the defendants' costs of the action in the sum of $175,881 by payment of that amount into court, and that in the meantime all further proceedings be stayed.
The application was apparently brought on two bases - s 1335 of the Corporations Act 2001 (Cth) and Rules of the Supreme Court 1971 (WA), O 25. The defendants pressed the application only in relation s 1335.
The principles applicable to an application under s 1335(1) are well known. It is necessary for present purposes to refer only to the two aspects of the section: there is an initial jurisdictional question as to whether it appears by credible testimony that there is reason to believe that the corporation will be able to pay costs; once the court has jurisdiction, there is an unlimited discretion: see FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241 [21]. There is no requirement for proof that a party will not be able to meet a costs order against it. The section requires an evaluation of the evidence to see whether that leads to a reason to believe that the plaintiff will be unable to pay the costs of the defendant.
The question whether the plaintiff will be unable to pay costs requires the court to form an opinion about what the financial position of the applicant will be at the time of judgment. The only evidence I have before me relates to the plaintiff's financial position at the time of this application.
On 27 August 2010, the solicitors for the defendant began the conferral process by writing to the solicitors for the plaintiff on various matters, including whether there should be an order for security for costs. The letter supported the need for security on four bases:
(a)the weakness of the plaintiff's claim;
(b)the plaintiff is a Northern Territory‑based company;
(c)the plaintiff has overseas directors and shareholders; and
(d)the plaintiff does not appear to have any assets in Western Australia or indeed, in Australia.
On 15 September 2010, the solicitors for the plaintiff replied that they were instructed that their client had assets in the nature of property, plant and equipment in Australia to the value of approximately $1.7 million and that those assets were more than sufficient to meet any costs awarded against it. No supporting evidence in relation to those assets was provided to the defendants. Following further correspondence and conferral, the plaintiff's solicitors offered to provide a schedule of assets on the basis that it be strictly confidential to the solicitors for the defendant and not shown to the defendant. That offer was refused, and the summons was filed.
After the summons was filed, a director of the plaintiff, Wendy Lee Lee Low filed an affidavit dated 27 October 2010 in which she states:
1.The plaintiff has conducted business since 2001 in the Northern Territory.
2.The plaintiff has operated from the same premises since its incorporation.
3.The plaintiff is currently negotiating a further five year lease with an option for five years on the premises from which it operates. Those premises are a yard of approximately 30 acres.
The affidavit then refers to various categories of property, plant and equipment. It attaches an unaudited depreciation schedule for the year ended 31 December 2009 listing those assets. The plaintiff puts forward no evidence regarding cash or receivables, but relies on the evidence of its tangible assets. The plaintiff has no real property in Australia.
The affidavit of Ms Low also sets out various liabilities, including encumbrances on motor vehicles, payables to creditors, loan repayments, employee entitlements and sundry liabilities. There are various registered charges which show on the ASIC current and historical extract for the plaintiff, dated 13 September 2010; all of but one of those charges are fixed charges. There is no further evidence regarding the charge which is both fixed and floating.
An issue has arisen in the application because of the difference in wording between par 13 of Ms Low's affidavit and other paragraphs dealing with assets. Paragraph 13 says:
Attached to this affidavit and marked 'WL5' is the plaintiff's depreciation schedule for the plant and equipment which are kept at the Yard as at 31 December 2009. Other than the Crown Equip forklift CD160S which is the subject of a mortgage in the amount of approximately $104,000, all of the plant and equipment are unencumbered. As at 31 December 2009 the combined value of the plant and equipment is at least $1,034,305 before deduction of any encumbrances.
In pars 14, 16, 17 and 18, Ms Low describes other property (motor vehicles, bin fabrication equipment, a waste container, and office equipment) as owned by the plaintiff and kept at the yard.
Counsel for the defendants submits that, on the wording of par 13, I should accept that the equipment referred to in that paragraph is not property owned by the plaintiff. On that basis, the defendants calculate that the plaintiff is insolvent.
Counsel for the plaintiff, on the other hand, does not agree with the defendants' reading of par 13, and says the property referred to in that paragraph should be included in the plaintiff's assets. The evidence then shows the plaintiff has tangible assets, after deduction of all secured liabilities, of $1.3 million. While there are unsecured liabilities, the plaintiff still has sufficient assets in Australia to satisfy any order for costs.
Nothing was put before me regarding any difficulty in realising the assets of the plaintiff should the need arise.
In my opinion, there would be reason to believe that the plaintiff will be unable to pay costs if the assets referred to in par 13 of Ms Low's affidavit are not owned by the plaintiff. But it is not satisfactory to determine this application by speculating about why par 13 is differently worded from the other paragraphs. The depreciation schedule does not purport to draw a distinction between the different categories of assets. Further, counsel for the plaintiff bases his submissions that there are sufficient assets available to meet an order for costs on the premise that the assets in par 13 are owned by the plaintiff. As the legal representative of the plaintiff, and the legal representative who participated in the conferral process referred to earlier, I am prepared to accept his submission on what par 13 says.
Should I be mistaken as to the facts as a result of accepting that submission, I expect that mistake would be brought to my attention.
On that basis, I find that there is no reason to believe that the plaintiff will be unable to pay costs. The application is dismissed.