Mastec Australia Pty Ltd v Trident Plastics (SA) Pty Ltd
[2016] FCA 1448
•25 November 2016
FEDERAL COURT OF AUSTRALIA
Mastec Australia Pty Ltd v Trident Plastics (SA) Pty Ltd [2016] FCA 1448
File number: SAD 237 of 2016 Judge: WHITE J Date of judgment: 25 November 2016 Catchwords: PRACTICE AND PROCEDURE – application for security for costs – applicant a trustee company – evidence that it conducts a substantial business – insufficient evidence that the applicant may be unable to pay the respondents’ costs in the event that the respondents succeed.
Held: application dismissed.
Legislation: Corporations Act 2001 (Cth) ss 197, 1335(1) Date of hearing: 25 November 2016 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Category: Catchwords Number of paragraphs: 14 Counsel for the Applicants: Mr B Roberts SC with Mr B Doyle Solicitor for the Applicants: Johnston Withers Counsel for the Respondents: Mr L Merrick with Mr M Fleming Solicitor for the Respondents: Norman Waterhouse ORDERS
SAD 237 of 2016 BETWEEN: MASTEC AUSTRALIA PTY LTD (ACN 097 056 329)
First Applicant
MICHAEL JOHN BRIXTON
Second Applicant
AND: TRIDENT PLASTICS (SA) PTY LTD (ACN 069 540 601)
First Respondent
STEEN LESLIE SAURBREY
Second Respondent
JUDGE:
WHITE J
DATE OF ORDER:
25 NOVEMBER 2016
THE COURT ORDERS THAT:
1.The interlocutory application filed 9 November 2016 is dismissed.
2.The Respondents are to pay the Applicants’ costs of and incidental to the interlocutory application of 9 November 2016.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
EX TEMPORE REASONS FOR JUDGMENT
WHITE J:
I am dealing with an application for security for costs.
By proceedings commenced on 18 August 2016, the first applicant, Mastec Australia Pty Ltd (Mastec), and its director, Mr Brixton, the second applicant, seek relief in respect of alleged conduct of the first respondent, Trident Plastics (SA) Pty Ltd (Trident), and one of its directors, Mr Saurbrey, the second respondent, in relation to the manufacture and distribution of mobile garbage bins. Mastec has been a manufacturer of such bins since at least 2003, and Trident since at least 2014.
The applicants plead various causes of action, which were summarised by Mr Merrick for the respondents as follows:
(1)a group of claims concerning the procuring of breaches of contract, breaches of confidential information and a breach of fiduciary duty;
(2)a group of claims arising under the Australian Consumer Law, in particular, misleading or deceptive conduct, and claims of passing off;
(3)trademark infringement; and
(4)accessorial liability.
It is apparent from the applicants’ statement of claim that it is Mastec which seeks the principal relief in the proceedings, and that Mr Brixton’s involvement is of a more incidental, and perhaps, formal kind.
The trial of the liability aspects of the applicants’ claim is to commence on 5 December 2016 with an estimate that up to five days may be required.
On 9 November 2016, the respondents filed an application seeking an order that the applicants provide security in the sum of $293,405 for their costs. The applicants oppose such an order, but in doing so take no point about the time at which the application for security was made in relation to the imminent trial. Nor, apart from some quibbles, do the applicants take any point about the amount of security sought.
Mastec’s principal basis for opposition to the application for security is that the respondents’ have not shown the threshold matter required by s 1335(1) of the Corporations Act 2001 (Cth). That section authorises a court to require a plaintiff company to provide security when it appears by credible testimony that there is reason to believe that the company will be unable to pay the defendant’s costs if the defendant is successful in his, her or its defence.
The principles relating to the exercise of the Court’s power under s 1335(1), are well known and it is not necessary to rehearse them presently. Instead, it is desirable to come immediately to the matters to which the parties referred, bearing upon whether or not there is credible testimony giving cause to believe that the applicants, in particular Mastec, will be unable to pay the respondents’ costs in the event that they succeed.
The respondents point to the evidence which indicates that Mastec has a paid up capital of only $100, to an absence of evidence that it owns in its own name assets of a substantial kind, that it is a trust company, and that little has been provided to the Court by way of evidence of the trust’s assets, the right of indemnity of Mastec as trustee against those assets, and matters of this kind. They point, in addition, to the fact that the records of the Australian Securities and Investments Commission concerning Mastec show that a deed of charge has been lodged in respect of its assets, and no details concerning that charge have been provided. The respondents also submit that the evidence that the applicants have available a substantial overdraft, with significant capacity within that overdraft, does not of itself provide any assurance as to the applicants’ ability to meet their costs should they succeed.
Despite these matters, I am not satisfied that the threshold condition required by s 1335(1) has been satisfied in this case. A number of matters, to my mind, warrant the conclusion that the threshold requirement has not been established.
First, I take into account that Mastec, on the evidence available presently, is a well‑established company. It is not of recent origin. As I indicated earlier, it has been trading since at least 2003, and the evidence of Mr Brixton indicates that it has a substantial business. Secondly, I take into account that that business is continuing without any indication that Mastec’s position is deteriorating. Thirdly, I take into account that Mastec has a substantial overdraft (the amount of which need not be mentioned in these reasons), a factor which of itself is an indication of Mastec’s substantial operation.
It is true that Mastec has chosen not to put detailed evidence before the Court concerning its asset position. It undoubtedly could have provided more evidence, including a balance sheet. However, the most recent tax return for the trust of which Mastec is the trustee, indicates that it traded not only profitably, but very profitably, in the 2015 financial year. The tax return has been treated as a confidential exhibit, and so I will not mention the figures contained in that tax return in these reasons. However, I think it fair to say that on any view the trading income and the net income of Mastec in the 2015 financial year was substantial. Secondly, the tax return includes a short form balance sheet, from which it can be inferred that the trust has a considerable excess of assets over liabilities, and a considerable excess of trade debtors over trade creditors.
I have taken into account that Mastec is a trustee and that no details of Mastec’s right of indemnity under the trust deed have been provided. That is not a matter to which I attach significant weight. The ordinary expectation is that an entity would assume a trusteeship only if it had a right of indemnity. Such a right is, of course, provided by the law in any event, and would need to be positively excluded. Even if positively excluded, creditors of the trust would have recourse under s 197 of the Corporations Act.
For these reasons, therefore, I have concluded that the respondents have not established the threshold requirement set out in s 1335(1) of the Corporations Act. That being so, I decline to order security.
The application of 9 November 2016 is dismissed. There will also be an order that the respondents pay the applicants’ costs of and incidental to the interlocutory application of 9 November 2016.
I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 1 December 2016
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