Faars Pty Ltd v Wellington Capital Limited - [2009] VSC 255

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMON LAW DIVISION

No. 4384 of 2009

FAARS PTY LTD (ACN 076 050 676)	Plaintiff
v
WELLINGTON CAPITAL LIMITED AND ORS (according to the attached schedule) (ACN 114 248 458)	Defendants

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JUDGE:	WILLIAMS J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 June 2009
DATE OF JUDGMENT:	24 June 2009
CASE MAY BE CITED AS:	Faars Pty Ltd & Anor v Wellington Capital Limited and Anor
MEDIUM NEUTRAL CITATION:	[2009] VSC 255

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COSTS – Security for costs – Sale of property by mortgagee defendant – Alleged sale at undervalue by mortgagee - Impecunious corporate plaintiff mortgagor - Additional individual plaintiff guarantor – Alleged misleading and deceptive conduct – Claim for setting aside of guarantee - Some overlap in claims – Little evidence of capacity of individual plaintiff to meet order for costs – Security for costs ordered.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr M Strang	Bolden Lawyers
For the Defendants	Mr R Moore	HWL Ebsworth Lawyers

HER HONOUR:

This is an appeal from an Associate Justice’s order on 28 May 2009 that the first plaintiff (Faars) pay the sum of $25,000 security for the costs of the first defendant (“Wellington”) and the second defendant (“Perpetual”) within 45 days and that the proceeding be stayed until payment.

The appeal is by way of a hearing de novo under r 77.06(7) of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”).

Background

Faars commenced the proceeding against Wellington and Perpetual by a generally endorsed writ filed on 23 January 2009. At that stage, Faars sought to restrain the defendants from proceeding with a sale of its property at 69‑79 Buckley Street, Seddon (“the property”) as mortgagees. The mortgage secured Faars’ obligations under a loan agreement made between it and Perpetual and dated 15 January 2007 (“the loan agreement”). Wellington is a merchant bank and the responsible entity of a fund of which Perpetual is the trustee. Wellington agreed under the loan agreement to lend Faars $8.92m through Perpetual. The defendants allege that the loan was repayable under the loan agreement on 19 February 2009, that Faars then owed Perpetual $10,216,162 and that interest is accruing against Faars.

Faars alleged that the defendants had contracted to sell the property to the then third defendant, Mission Australia Housing (Victoria) Pty Ltd (“MA”), for a price of $8.5m which was less than the market value of the property and that they had failed to advertise or market it properly. Faars claimed to have a purchaser willing to pay more.

On 10 February 2009, Faars unsuccessfully applied to the Court for an injunction to stop the sale. Pagone J concluded that the claim appeared to be compensable by a monetary award and that on the balance of convenience the application should be refused.

On 28 May 2008, the date of the security for costs order, Mr Kourosh Jafari was also added as a plaintiff by the Associate Justice. Leave was granted for…

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: [2009] VSC 255
Decision Date: 24 June 2009

CaseChat Overview and Summary

Faars Pty Ltd, a corporate plaintiff, and an individual guarantor, brought a claim against Wellington Capital Limited, the mortgagee, in the Federal Court of Australia. The plaintiffs alleged that Wellington Capital Limited had sold property at an undervalue, which was part of a larger claim involving misleading and deceptive conduct. The plaintiffs also sought to set aside a guarantee provided by the individual plaintiff. Wellington Capital Limited applied for security for costs, arguing that the plaintiffs were likely to be unable to pay the costs of the proceeding.

The court had to determine whether to grant Wellington Capital Limited's application for security for costs. The plaintiffs argued that the application should be refused because they were likely to be successful in their claims. However, the court found that there was little evidence to suggest the individual plaintiff had the capacity to meet an order for costs. The court also noted the overlap in the claims and the potential for significant costs in the proceeding.

The court held that it was appropriate to grant the application for security for costs. The court ordered that Faars Pty Ltd and the individual guarantor provide security for the costs of Wellington Capital Limited in the amount of $100,000. The court emphasised the need for the plaintiffs to demonstrate their ability to meet the order for costs if they wished to avoid the sale of the property by the mortgagee. The court did not make any final orders regarding the substantive claims at this stage of the proceeding.

Orders