Mapeline Pty Limited v National Nominees Limited as custodian for Sunsuper Superannuation Fund, and Military Superannuation and Benefit Fund 1

[2014] NSWSC 906

Supreme Court

New South Wales

Medium Neutral Citation:	Mapeline Pty Limited -v- National Nominees Limited as custodian for Sunsuper Superannuation Fund, and Military Superannuation and Benefit Fund 1 [2014] NSWSC 906
Hearing dates:	27 June 2014
Decision date:	27 June 2014
Jurisdiction:	Equity Division - Commercial List
Before:	Hammerschlag J
Decision:	Motions dismissed
Catchwords:	COSTS - Application for Security for Costs - no issue of principle
Legislation Cited:	Civil Procedure Act 2005 (NSW)
Category:	Procedural and other rulings
Parties:	Mapeline Pty Limited (ACN 114 995 630) - Plaintiff Craig Anderson - Second Plaintiff Daniela Anderson - Third Plaintiff National Nominees Limited as custodian for Sunsuper Superannuation Fund, and Military Superannuation and Benefit Fund 1 - First Defendant JP Morgan Nominees Australia Limited (ABN 75 002 899 961) as custodian for L.U.C.R.F. Pty Ltd (ACN 005 520 090) - Second Defendant H.E.S.T Australia Limited (ACN 006 818 695) Third Defendant Commonwealth Superannuation Corporation (ABN 48 882 817 243) - Fourth Defendant Sovereign Invest Research Pty Limited (ACN 093 380 477) - Fifth Defendant Raymond Edward King - Sixth Defendant
Representation:	J.B. Simpkins SC with P. Silver - Plaintiffs M.S. Henry SC - First Defendant A. Horvath - Second Defendant M.F. Newton - Third Defendant A.W. Street SC with E.L. Beechy - Fourth Defendant K.C. Morgan - Fifth and Sixth Defendants McLachlan Thorpe Partners - Plaintiffs Arnold Bloch Leibler - First Defendant Curwoods Lawyers - Second Defendant Wotton + Kearney - Third Defendant Henry Davis York - Fourth Defendant Clayton Utz - Fifth and Sixth Defendants
File Number(s):	2013/345670

EX TEMPORE Judgment

1. HIS HONOUR: This is a contested application brought by the six defendants for orders that the plaintiffs provide security for all of their costs of the proceedings, both past and future. Each of the defendants, except for the fifth and sixth, are separately represented.

1. In round figures, the first defendant seeks $45,000 for past costs, and $180,000 for future costs, up to but not including trial. On the same basis, the second defendant seeks $25,000 and $160,000 respectively, the third defendant $35,000 and $149,000, the fourth defendant $55,000 and $160,000 (although including trial), and the fifth and sixth defendants $124,000 and $230,000. This totals $1,163,000.00. These figures are not contested by any evidence from the plaintiffs and, as I have said, except in the case of the fourth defendant, do not include the costs of a trial. A trial with five sets of lawyers will no doubt involve very significant further expenditure.

1. The first plaintiff Mapeline Pty Ltd ("Mapeline"), commenced the proceedings as sole plaintiff by Summons issued on 15 November last year against the first to fourth defendants only. The fifth and sixth defendants were joined by way of an Amended Summons and Commercial List Statement filed in March this year.

1. Mapeline is the creature of Mr Craig and Mrs Daniela Anderson ("the Andersons").

1. Ashington Capital Pty Ltd ("ACPL") (now in liquidation) was trustee of the Ashington Development Fund and the Ashington Development Fund II, both unregistered unit trusts ("the trusts"), established to acquire and develop real property in Australia.

1. ACPL appointed a related company Ashington Management Pty Ltd ("AMPL") (also now in liquidation) as development manager in respect of the real property projects of the trusts. ACPL and AMPL are referred to collectively as Ashington.

1. On 14 April 2014, Ashington was placed under winding up orders and Mr Adam Shepard was appointed liquidator.

1. The first to fourth defendants, whether in their own right or as trustees were investors in the trusts. The fifth defendant was retained by the second defendant to provide investment advice to it and the sixth defendant was a director and employee of the fifth defendant.

1. Mapeline alleges that the first to fourth defendants sought Ashington's retirement, that an agreement was entered into between Ashington and those defendants that Ashington would retire on certain terms and that those defendants breached that agreement as a consequence of which Ashington suffered loss. It alleges that those defendants were represented by the fifth and sixth defendants. Authority is denied and they are sued for breach of warranty of authority.

1. By a deed made on 2 August 2013, the liquidator of Ashington purported to assign to Mapeline, Ashington's causes of action. The deed records in addition to the retirement fee claim, that Ashington had asserted a conspiracy claim of up to $50 M arising out of the retirement. The deed includes a term that subject to advice, Mapeline will pursue the conspiracy claim and will pay to the liquidator 10 per cent of the net tangible benefit it receives by way of a judgment or settlement of both claims.

1. Mr Anderson personally guaranteed repayment of borrowings by Ashington from Westpac bank. Mr Anderson and Westpac settled, amongst others, on terms that Mr Anderson consented to judgment in the amount of $5 M and judgment was duly entered. An additional term was that Westpac took security over the choses in action comprising the retirement fee claim and the conspiracy claim. It covenanted with Mr Anderson not to enforce the judgment on conditions, including the making by the liquidator of monthly instalments of $25,000 commencing on 28 November 2013 and ending on 20 February 2014. Not all instalments have been paid and Westpac now is presumably at liberty to enforce. Mr Anderson thus has a current liability to Westpac somewhere in the region of $5 M.

1. By further deed made on 27 May 2014, Mapeline purported to distribute to the Andersons, as an asset of a trust, the causes of action against the first to fourth defendants. The deed records that Mapeline is the trustee of a unit trust constituted by a unit trust dated 20 December 2013 of which the Andersons are the sole holders of units. The deed records that the defendants had made applications for security for costs which Mapeline would be unable to pay and that Mr Anderson had concluded that continued pursuit by Mapeline of the cause of action was not in the best interest of the Andersons, and that they had requested Mapeline to bring the trust to an end and to distribute to them, as its sole asset, the cause of action.

1. On 20 June 2014, after a contested hearing in respect of which no reasons were required or given, I gave leave for the Andersons to become second and third plaintiffs in the proceedings by way of a further Amended Commercial List Statement.

1. It is possible to state in the briefest terms why I have concluded in the exercise of my discretion, that the plaintiffs should not be ordered to provide any security for costs at this time. In reaching this conclusion, I have had regard to the overriding purpose specified in s 56 of the Civil Procedure Act 2005 (NSW), namely the just, quick and cheap disposition of the real issues in the proceedings.

1. As to Mapeline, I am satisfied that it is without any means at its disposal to provide security. At the outset the defendants conceded this. Although a submission was made that there had not been candid disclosure by Mr Anderson of Mapeline's resources, and that the concession had been wrongly made. I am satisfied that it was correctly made.

1. As to the Andersons, they will bear a personal liability for any order in favour of the defendant for costs of the proceedings if the case fails. They are the persons who will principally, if not exclusively, directly benefit from a successful outcome. There is no logical reason in this case to distinguish between the Andersons and their alter ego, Mapeline, for present purposes.

1. True it is that Westpac and the liquidator may derive a benefit because Mr Anderson may be able to discharge his debt to Westpac and the liquidator may benefit by the payment of a modest percentage of any verdict, but the evidence falls far short of establishing that the plaintiffs are suing, not for their own benefit but for that of Westpac and the liquidator.

1. More importantly, I am satisfied that the plaintiffs are all impecunious and lack resources, direct and indirect, to the extent that any order for security will stultify the proceedings.

1. Mr Anderson was cross-examined (although only briefly as I permitted only brief cross-examination) and he was challenged. For present purposes, I am satisfied that he and his wife lack the resources at the same time both to prosecute these proceedings and to put up any security. They have had some assistance from friends and they owe a significant amount in legal fees already. I do not consider that any lack of candour, with respect to Mr Anderson's assets and liabilities and certainly not any which would warrant an inference that assets or resources which would enable the provision of security to be made are being hidden, has been established.

1. In reaching my conclusion, I have taken into account, that the plaintiffs' claims do not on an initial impression appear to be easy, and that there will certainly be a sustained challenged to the efficacy of the chain of title upon which their claims rest. I am, however, satisfied that their claims have sufficient foundation that they cannot at this stage be regarded as frivolous or more bound to fail than succeed. I do not consider that these proceedings, in any sense, are being prosecuted vexatiously.

1. After further discussion with counsel his Honour made the following orders:

1. The defendants' Notices of Motion for security for costs are dismissed with costs. Notwithstanding anything to the contrary in the Practice Note which governs proceedings in this list, the costs are neither assessable nor payable until the conclusion of these proceedings at first instance.

1. By 10 October 2014 the plaintiffs are to provide the defendants with a verified statement of their assets and liabilities. This affidavit is not without leave of the Court to be used for any purpose other than an application for security for costs which the defendants might be advised to make. Any such application may be brought without the necessity for filing any further motion. Upon notice that it is intended to be brought, the defendants have liberty to relist and move on the Notices of Motion previously filed notwithstanding their dismissal today.

1. Stand the matter over for directions to 24 October 2014.

1. The defendants have liberty to give notice, as earlier contemplated, that they wish their Notices of Motion to be re-listed on that day.

1. Trial fixed for hearing on an estimate of eight days to commence on 30 March 2015.

1. The Usual Order as to Hearing.

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Decision last updated: 07 July 2014