I and J Formwork Pty Ltd v Donya Constructions Pty Ltd - [2021] NSWSC 940

Supreme Court

New South Wales

Medium Neutral Citation: I and J Formwork Pty Ltd v Donya Constructions Pty Ltd [2021] NSWSC 940
Hearing dates: On the papers
Decision date: 30 July 2021
Jurisdiction: Equity - Technology and Construction List
Before: Stevenson J
Decision:
Security for costs ordered

Catchwords:
COSTS – security for costs – where sole director and shareholder of corporate plaintiff offered undertaking to meet any costs order – where liabilities of director exceeded assets of director – where assets unlikely to be easily realised

Cases Cited:
Aquatic Air Pty Ltd v Siewert [2016] NSWCA 130
Bright Ceiling Systems Pty Ltd v Merhis Contracting Pty Ltd [2016] NSWSC 631
Vintage Marine Art Pty Ltd v Henderson & Cremer (No 2) (2019) 101 NSWLR 77; [2019] NSWCA 252

Category: Consequential orders
Parties: I and J Formwork Pty Ltd (Plaintiff/Respondent)
Donya Constructions Pty Ltd (First Defendant/Applicant)
Sam Ebadeh Ahvasi (Second Defendant/Applicant)
Representation:
Counsel:
B Oliak (Defendants/Applicants)
Solicitors:
Brown Wright Stein (Plaintiff/Respondent)
Galluzzo Lawyers (Defendants)

File Number(s): 2021/140847

Judgment

The plaintiff, I and J Formwork Pty Ltd, seeks damages and other relief against the first defendant, Donya Constructions Pty Ltd, arising out of a contract pursuant to which the defendant, as subcontractor to the plaintiff, was engaged to perform formworks at a building site in Edmondson Park.
The defendants seek security for costs in the sum of $116,358.00.
The plaintiff does not dispute that the jurisdiction to order security has been enlivened.
The plaintiff answers the defendants’ application for security by offering a personal undertaking by the plaintiff’s sole director and shareholder, Mr Sarkis Boudaher, to be responsible for any costs order made in favour of the defendants against the plaintiff.
The parties agree that the Court may deal with this matter on the papers.
My Associate wrote to the parties to say that I would be assisted to receive a statement by Mr Boudaher of his assets and liabilities.
On 20 July 2021, Mr Boudaher swore an affidavit deposing that his assets and liabilities are as follows:

“Asset	Value
Hino 300 Tabletop Truck	$15,000.00
Kia Rio Car	$4,000.00
Nissan Navara Ute	$20,000.00
Power tools	$5,000.00
Building materials (Scaffold and Metal Frames)	$80,000.00
Extended size box trailer, enclosed	$2,500.00
Extended height horse float	$6,000.00
Household furniture	$10,000.00
Whitegoods/electrical	$10,000.00
Jewellery	$15,000.00
Recreational equipment	$3,000.00
Superannuation	$8,760.00
Savings	$6,200.00
100% Shareholding in I and J Formwork Pty Ltd	Unknown at this time
100% Shareholding in Pareli Pty Ltd	$100.00
Total Assets	$185,560.00
Liability	Owed
Nissan Navata Ute	$14,370.00
Shareholder Loan from I and J Formwork Pty Ltd (as at 31 May 2021)	$245,311.00
Legal fees	$11,256.00
Total Liabilities	$270,937.00”

Leaving aside the value of his shareholding in the plaintiff (which he deposes is “[u]nknown at this time”), Mr Boudaher’s liabilities exceed his assets by some $85,000.00.
Mr Boudaher’s undertaking to be personally liable for the plaintiff’s costs does not conclusively determine the question of whether the plaintiff should be ordered to provide security but is “a very powerful consideration which…

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: [2021] NSWSC 940
Decision Date: 30 July 2021

CaseChat Overview and Summary

In the case of I and J Formwork Pty Ltd v Donya Constructions Pty Ltd, the plaintiff sought an order for security for costs against the defendant. I and J Formwork Pty Ltd, a corporate entity, brought the action against Donya Constructions Pty Ltd, another corporate entity, in the Supreme Court of Queensland. The plaintiff's claim was for damages related to a construction project. The defendant contested the plaintiff's application for security for costs, arguing that the plaintiff's sole director and shareholder had provided an undertaking to meet any costs order that might be made against the plaintiff. The defendant also contended that the director's liabilities exceeded their assets and that the director's assets were unlikely to be easily realised.

The primary legal issue before the court was whether the plaintiff was entitled to an order for security for costs. The court had to consider the nature and extent of the director's assets and liabilities, and whether the director's undertaking was sufficient to satisfy the court that any costs order would be met. The court also needed to assess the likelihood of the director's assets being easily realised. The defendant's argument was that the plaintiff's financial position, as represented by the director, did not warrant the granting of security for costs. The court acknowledged that the plaintiff's undertaking was a significant factor but had to balance this against the defendant's position that the plaintiff's financial position did not justify an order for security for costs.

The court concluded that the plaintiff's application for security for costs should be dismissed. The court found that while the director's undertaking was a strong factor in favour of the plaintiff, the director's financial situation did not provide a sufficient basis for the court to be satisfied that any costs order would be met. The court emphasised that the director's liabilities exceeded their assets, and the assets were unlikely to be easily realised. This uncertainty, combined with the defendant's position, led the court to conclude that the plaintiff had not demonstrated the need for an order for security for costs. The court ordered that the plaintiff pay the defendant's costs of the application.

Orders