Farm Fresh Investments Pty Ltd v M and L Evangelou Pty; Ltd and Ors

[2011] VCC 80

IN THE COUNTY COURT OF VICTORIA Revised

(Not) Restricted

AT MELBOURNE
COMMERCIAL LIST

GENERAL DIVISION

Case No. CI-10-02072

FARM FRESH INVESTMENTS PTY LTD	Plaintiff
v.
M & L EVANGELOU PTY LTD and M & S MARKETING PTY LTD	Defendants
and MICHAEL EVANGELOU and MICHAEL WILLIAM O’CONNOR

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JUDGE:	His Honour Judge Anderson
WHERE HELD:	Melbourne
DATE OF HEARING:	17 February 2011
DATE OF JUDGMENT:	17 February 2011 (revised 18 February 2011)
CASE MAY BE CITED AS:	Farm Fresh Investments Pty Ltd v. M & L Evangelou Pty Ltd & Ors
MEDIUM NEUTRAL CITATION:	[2011] VCC 0080

REASONS FOR JUDGMENT

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Catchwords:  Practice and procedure – Security for costs application.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms C. Welsh	Vadarlis & Associates
For the First and Third	Mr A.P. Dickenson	Velos Lawyers
Defendants
For the Second and Fourth	Mr B. Ross	Rigby Cooke
Defendants
HIS HONOUR:

1           The are two applications before the Court:

a.	the second and fourth defendants’ application by summons, dated 13 January 2011, seeking security for their costs from the plaintiff;
b.	application by the first and third defendants by summons, dated 7 February 2011, seeking security for their costs from the plaintiff and alternative relief based on the plaintiff’s failure to pay a costs order of $1,750.

2

capacity to pay any order for costs which may be ordered against it in favour of the
defendants if they were to succeed at trial. The plaintiff has filed affidavit material by
its accountant, Steven Cincotta, attaching copies of the 2009 and 2010 tax returns
and unsigned copies of a financial report for the year ended 30 June 2010 of the Best

I am not satisfied in this matter that there is credible evidence that the plaintiff has the the trust. Perusal of the trust deed discloses that the trustee has a right of indemnity from the assets of the trust.

3           It was not until the filing of Mr Cincotta’s affidavit that it was apparent the plaintiff acted as trustee of the trust, and detailed financial statements were available in respect of the trust. There is no other material filed on the plaintiff’s behalf. Mr Cincotta purports to comment on matters other than the taxation returns and the financial accounts. He says he does this on the basis of information supplied by the local directors of the plaintiff and from his examination of the books and records of account of the business.

4           In my view, the principal deficiency in the material filed on the plaintiff’s behalf is that there is an absence of any financial information after 30 June 2010 and, save that the business continues to trade, an absence of any evidence as to the trading position of the trust since that time.

5           The following matters suggest that the position of the trust, and therefore the position of the plaintiff, is financially difficult:

a. the gross sales of the business have declined significantly between 2008/09 and 2009/10. There was a large decline in the gross profit, and the business moved from a profit of $715,909 to a loss of $329.789.

The only explanation given by Mr Cincotta was that there has been a reduction in the business derived from Safeway and there had been competition from other traders, including the third defendant. These statements relate to allegations made in the statement of claim that representations were made, prior to the purchase of the business, that

Safeway was a “guaranteed customer” of the vendor of the business and it was likely that the Safeway business would increase rather than decrease, and that the third defendant should have been a person who executed a

document prohibiting him, for a period of ten years, from engaging in conduct
which might compete with the business of the trust.

I consider that in the absence of more direct evidence of these matters from the directors of the plaintiff, I can give them little weight in terms of explaining the deteriorating trading position of the business, and no weight at all in terms of any discretion I might exercise on the basis the security for costs should not be ordered as the financial position of the plaintiff is a result of the actions of the defendants.

b. A document was apparently distributed by the plaintiff in December 2010, indicating that there had been a readjustment in the ownership of the plaintiff. Mr Cincotta explained the letter on the basis that it had been “sent out prematurely”. A copy of the letter was received by a supplier of the business who asserted that he has unpaid debts from the business of about $40,000. These matters are not otherwise referred to in any material filed on behalf of the plaintiff.

6           In the circumstances, I propose to make an order for the provision of security by the plaintiff for the defendants’ costs up to the day prior to the trial fixed for hearing on 8 June 2011. Both sets of defendants, through their counsel, sought security in the sum

of $35,000. That sum is comprehensively justified in a report prepared by a costs
consultant. It is apparent from an examination of the court file, including the present
state of the pleadings and the fact that one trial date has been vacated as a result of
extensive defaults by the plaintiff, that this is a case where the interlocutory steps
required before this matter reaches trial are likely to be greater than might ordinarily
be the case. There will also be a need for expert evidence relating to financial
matters. There are likely to be further documents which the plaintiff must discover if
the financial position of the plaintiff and the alleged consequences of the defendants’
actions are to be fully investigated.

7           In these circumstances, the figure of $35,000 is not an unreasonable figure. It does seem, however, that some of the costs which have been included in the estimate might more properly have been incurred at the time of taking initial instructions to defend the proceeding in order that a defence might be filed to the statement of claim. Also, allowance has been included for the preparation of witness statements. In this case, the evidence would better be given by oral testimony rather than by the filing of witness statements. In these circumstances, I consider that it is more appropriate that security be provided for each defendant in the sum of $28,000.

8           I will make the following orders:

1	The name of the plaintiff be amended to read “Farm Fresh Investment Company Pty Ltd (ACN 131 335 307)”. The writ will be amended in accordance with the Rules. Further service of the amended writ will be dispensed with.
2	By 4pm on 16 March 2011, the plaintiff must provide security for the defendants’ costs by payment to the Registrar of the following sums, or by the provision of alternative security in a form which is consented to in writing by the appropriate sets of defendants :

a.	to the second and fourth defendants, the sum of $28,000;
b.	to the first and third defendants, the sum of $28,000.

3        Apart from the provision of security in accordance with this order, the proceeding is stayed until:

a.	the security is provided;
b.	the costs of $1,750 ordered by His Honour Judge Anderson on 2 December 2010 are paid to the first and third defendants, and
c.	the payment of the costs of the defendants of their respective summonses, each in the sum of $3,200 as hereinafter ordered.

4        If the security is provided in accordance with this order, the costs of the first and third defendants of $1,750 is paid, and the costs of the summonses as hereinafter ordered are paid, the parties must, by 30 March 2011, notify the Court of the timetable required for the remaining interlocutory steps in order for the trial to proceed on 8 June 2011, or, if the parties are unable to agree on those steps and/or the viability of the trial date there will be a further directions hearing before the Commercial List Duty Judge as soon as practicable after that date.

5        The administrative mention fixed for 28 February 2011 is vacated.

6        The plaintiff must pay the costs of the defendants’ summonses, fixed at the sum of $3,200 in respect of each set of defendants’ costs for their respective summons.

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Certificate

I certify that these 4 pages are a true copy of the reasons for decision of His Honour Judge

Anderson delivered on 17 February 2011 (and revised on 18 February 2011).

Dated: 25 February 2011

Caroline Dawes

Associate to His Honour Judge Anderson