Edenham Pty Ltd v Meares [No 2] - [2016] WASC 302

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: EDENHAM PTY LTD -v- MEARES [No 2] [2016] WASC 302

CORAM: LE MIERE J

HEARD: 16 DECEMBER 2015

DELIVERED : 22 SEPTEMBER 2016

FILE NO/S: CIV 2715 of 2013

BETWEEN: EDENHAM PTY LTD
Plaintiff
AND
ALEX GOLDSMITH MEARES
First Defendant
KERRY ANNE MEARES
Second Defendant
PREMIER HOLDINGS PTY LTD
Third Defendant
(BY ORIGINAL ACTION)
PREMIER HOLDINGS PTY LTD
Plaintiff by Counterclaim
AND
EDENHAM PTY LTD
First Defendant by Counterclaim
PETER FRANK HARDING
Second Defendant by Counterclaim
KRIS GOLDSMITH MEARES
Third Defendant by Counterclaim
BSO DEVELOPMENT CONSULTANTS PTY LTD
Fourth Defendant by Counterclaim
(BY COUNTERCLAIM)

FILE NO/S :CIV 1517 of 2014

BETWEEN :EDENHAM PTY LTD
First Plaintiff
KRIS GOLDSMITH MEARES
Second Plaintiff
MICHELLE LORRAINE MEARES
Third Plaintiff
PETER FRANK HARDING
Fourth Plaintiff
JENNIFER ELLEN HARDING
Fifth Plaintiff
COLIN GEORGE MILLER
Sixth Plaintiff
CAROLINE LOUISE MILLER
Seventh Plaintiff
AND
PREMIER HOLDINGS PTY LTD
First Defendant
ALEX GOLDSMITH MEARES
Second Defendant
KERRY ANNE MEARES
Third Defendant
BRENDAN ROBERT JAGOE-BANKS
Fourth Defendant
MALCOLM GEORGE COCKMAN
Fifth Defendant
ANDREW JAMES LEANEY
Sixth Defendant

Catchwords:

Security for costs - Section 1335 Corporations Act - Whether party should give security for costs of opponents' counterclaim - Whether by credible testimony there is reason to believe a body corporate will be unable to costs - Threshold satisfied - Whether discretion should be exercised - Turns on own facts

Security for costs - Quantum - Turns on own facts

Security for cost - Where corporate and individual plaintiffs - Where claim defensive in nature - Turns on own facts

Legislation:

Consolidated Practice Directions 2009 (WA)
Corporations Act 2001 (Cth), s 1335
Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (WA)

Result:

Application in CIV 2715 of 2013 successful
Application in CIV 1517 of 2014 refused

Category: B

Representation:

CIV 2715 of 2013

Original Action

Counsel:

Plaintiff:     Mr P J Hannan
First Defendant              :     Mr M R B Hemery
Second Defendant         :     Mr M R B Hemery
Third Defendant            :     Mr M R B Hemery

Solicitors:

Plaintiff:     McAuliffe Legal
First Defendant              :     Hotchkin Hanly Lawyers
Second Defendant         :     Hotchkin Hanly Lawyers
Third Defendant            :     Hotchkin Hanly Lawyers

Counterclaim

Counsel:

Plaintiff by Counterclaim          :    Mr M R B Hemery
First Defendant by Counterclaim :    Mr P J Hannan
Second Defendant by Counterclaim :        Mr P J Hannan
Third Defendant by Counterclaim    :        Mr P J Hannan
Fourth Defendant by Counterclaim :        Mr P J Hannan

Solicitors:

Plaintiff by Counterclaim          :    Hotchkin Hanly Lawyers
First Defendant by Counterclaim :    McAuliffe Legal
Second Defendant by Counterclaim :        McAuliffe Legal
Third Defendant by Counterclaim    :        McAuliffe Legal
Fourth Defendant by Counterclaim :        McAuliffe Legal

CIV 1517 of 2014

Counsel:

First Plaintiff                  :     Mr P J Hannan
Second Plaintiff             :     Mr P J Hannan
Third Plaintiff                :     Mr P J Hannan
Fourth Plaintiff              :     Mr P J Hannan
Fifth Plaintiff                 :     Mr P J Hannan
Sixth Plaintiff                 :     Mr P J Hannan
Seventh Plaintiff             :     Mr P J Hannan
First Defendant              :     Mr…

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] WASC 302
Decision Date: 22 SEPTEMBER 2016

CaseChat Overview and Summary

In the case of Edenham Pty Ltd v Meares [No 2], the primary dispute involves an application for security for costs under section 1335 of the Corporations Act. The court was tasked with deciding whether Edenham Pty Ltd, a body corporate, should be required to provide security for the costs of its opponents' counterclaim, and if so, the appropriate quantum of such security. The case also involved a consideration of the discretionary factors relevant to the exercise of the court's power to order security for costs, particularly in light of the defensive nature of the plaintiff's claims and the circumstances surrounding the initiation of the proceedings.

The legal issues centred around the interpretation of section 1335 of the Corporations Act and the discretion afforded to the court in ordering security for costs. The court had to determine whether the threshold for requiring security had been met, considering the credible testimony suggesting that Edenham Pty Ltd might be unable to pay its opponents' costs. Additionally, the court needed to weigh the discretionary factors, including the nature of the plaintiff's claims and the potential for unnecessary duplication of costs.

The court found that the threshold for requiring security was satisfied, as there was credible testimony suggesting that Edenham Pty Ltd might be unable to pay its opponents' costs. However, the court exercised its discretion not to make an order for security, noting that the proceedings brought by Edenham were defensive in nature, seeking to prevent the defendants from halting its claim in another proceeding. The court highlighted that in such defensive proceedings, requiring security could be oppressive. The court also considered that the claims raised by the plaintiffs in the current proceeding and the counterclaim in the other proceeding involved the same subject matter, and thus should be managed together to avoid unnecessary duplication of costs.

The final orders made by the court were that Edenham Pty Ltd was not required to provide security for the costs of its opponents' counterclaim at that time. However, the court left the door open for the defendants to apply again if the proceedings were conducted in a way that caused unnecessary duplication of costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

An order for security will ordinarily not be made against parties who are defending themselves and thus forced to litigate. Proceedings have been characterised as defensive where, as Ormiston J stated in Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621, 627:… they are … either directly resisting proceedings already brought or seeking to halt self‑help procedures.His Honour continued that in such circumstances:… it would seem that to require security would be oppressive, or at least would provide serious grounds for refusing to make an order. At least it is a factor to be considered in the exercise of the discretion.In Heller Factors Pty Ltd v John Arnold's Surf Shop Pty Ltd (1979) 4 ACLR 492, 496 Mitchell J said that a court, in deciding whether or not to exercise its discretion to make an order for security for costs:is entitled to consider whether the company is a true plaintiff or is forced into the position of plaintiff because the defendant is empowered to take what White J described as 'self‑help' procedures. The usual proceedings which fall into the category of defensive proceedings are cross‑claims brought by a defendant against a plaintiff in response to a plaintiff's claim. However, a plaintiff's claim may be defensive in nature. Edenham commenced CIV 2715 of 2013 to claim relief for breaches of fiduciary duty by Alex and Kerry to which Premier Holdings was alleged to be an accessory. After the plaintiff had commenced that action and served its statement of claim and after the defendants had filed a defence Premier Holdings and other unitholders caused the advisory committee of the Trust to be constituted, gave notice of a meeting of the advisory committee and at the advisory committee meeting the unitholders then present resolved to direct Edenham to discontinue CIV 2715 of 2014 and COR 44 of 2014 and to execute a deed of settlement and release which had the effect of releasing the defendants from the claims the subject of CIV 2715 of 2014. It was in response to those actions that Edenham and the other plaintiffs in CIV 1517 of 2014 then commenced that proceeding in which they seek relief including a declaration that the members of the advisory committee have no power to direct Edenham to discontinue CIV 2715 of 2013 or COR 44 of 2014 and orders under the Trustees Act or the court's inherent jurisdiction to remove any power which the members of the advisory committee have to direct Edenham to discontinue those proceedings. In my opinion, the action brought by the plaintiffs in CIV 1517 of 2014 is defensive in nature; it seeks to prevent Premier Holdings and the other defendants in CIV 1517 of 2014 stopping Edenham from pursuing its claim in CIV 2715 of 2013. The action may properly be characterised as a response to the 'self‑help' procedures adopted by the defendants. I have one reservation. The claims by the plaintiffs in CIV 1517 of 2014 are made in response to the claims by the defendants in the counterclaim in CIV 2715 of 2013. They raise the same subject matter and should be managed together so as to avoid any duplication of costs. If the two sets of proceedings are conducted in a way so as to cause any unnecessary duplication of costs then the defendants in CIV 1517 of 2014 may apply again for security for their costs.