Maybrook Manor P/L v Beneficial Finance Corporation

[1994] FCA 337

JUDGMENT No. ....S ...,, J ,..?$L,

JN THE FEDERAL COURT OF AUSTRALIA )

J

PEW SOUT H WALES DISTRICT REGISTRY ) NG 626 of 1993

1

DIVISION )

BETWEEN:  MAYBROOK MANOR PTY LIMITED

First Applicant

LEO WILFRED ROTH

Second Applicant

ROTHLANDS PTY LIMITED

Third Applicant

9RANGE MOTOR MARKET PTY LIMITED

Fourth Applicant

KONAWA PTY LIMITED

Fifth Applicant

SIBOA PTY LIMITED

Sixth Applicant

NEVAK PTY LIMITED

Seventh Applicant

QRCADA PTY LIMITED

Eighth Applicant

SWOORAY PTY LIMITED

AUSTRALIA RSQISTRV

Ninth Applicant

KAJC PTY LIMITED

Tenth Applicant

EGNARO PROPERTIES PTY LIMITED

Eleventh Applicant

AND :  BENEFICIAL FINANCE CORPORATION
LIMITED

First Respondent

RECEIVED STATE BANK OF SOUTH AUSTRALIA LIMITED

Second Respondent

'EDERAL COURT OF

BENEFICIAL FINANCE CORPORATION

LIMITED

Cross-Claimant

MAYBROOK MANOR PTY LIMITED

First Cross-Respondent

LEO WILFRED ROTH

Second Cross-Respondent

ROTHLANDS PTY LIMITED

Third Cross-Respondent

QRANGE MOTOR MARKET PTY LIMITED

Fourth Cross-Respondent

KONAWA PTY LIMITED

Fifth Cross-Respondent

SIBOA PTY LIMITED

Sixth Cross-Respondent

PEVAK PTY LIMITED

Seventh Cross-Respondent

QRCADA PTY LIMITED

Eighth Cross-Respondent

SWOORAY PTY LIMITED

Ninth Cross-Respondent

JCAJC PTY LIMITED

Tenth Cross-Respondent

EGNARO PROPERTIES PTY LIMITED

Eleventh Cross-Respondent

CORAM: Burchett J.
PLACE: Sydney
DATE : 19 May 1994

REASONS FOR JUDGMENT

In this matter a notice of motion has been taken out in which two forms of relief are sought - firstly, the striking out of certain paragraphs of the statement of claim, and secondly, an order for security for costs in an amount which has been rather precisely identified, at a figure something over $100,000.

I will deal first with the question of the pleading. The pleading is a lengthy one and quite complex. Amongst other things, it alleges several forms of conduct which are put forward as involving representations in breach of S. 52 of the Trade Practices Act. And in several cases it is also pleaded

- as I read the pleading - that the same conduct amounted to

illegitimate pressure by the first respondent upon the applicants, and that this conduct of the first respondent also constituted intimidation by it of the applicants. Counsel for

out, suggested that illegitimate pressure and intimidation did	the respondents, in seeking to have these paragraphs struck
not identify any cause of action.
However, counsel for the applicants has drawn my attention to Eauiticor~ Financial Services Ltd (NSW) v. gauiticor~ Financial Services Ltd (NZ1 (1992) 29 NSWLR 260, where Giles J. of the Supreme Court of New South Wales dealt with a claim arising out of commercial pressure which was asserted to be illegitimate. As I understand the decision, His Honour held that pressure - even quite severe pressure - of an economic kind or a commercial klnd, would not of ltself be sufficient to vitiate a transaction, but that a case of economic duress could be made out where the pressure inducing an apparent consent consisted of unlawful threats or amounted to unconscionable conduct. He categorised such pressure as illegitimate.
What the applicants in the present case are alleging is that unlawful threats were made against them, in the sense that threats were made to require them to take courses pursuant to a contract which, under the terms of the contract, they were not obliged to take; and that threats were made under the contract that, in effect, amounted to threats of the taking of action under it which the other party was, by its terms, not entitled to take. They wlsh to argue that, within the meaning of the principle discussed by Giles J., those threats amounted to illegitimate pressure, and further, that
drafting of the statement of claim could with advantage have they constituted intimidation. It seems to me that the
more precisely identified those earlier paragraphs setting out the conduct. However there are such earlier paragraphs, and in some of the instances complained of they are clearly identified. Where they are not expressly identified, they are certainly capable, upon a reasonable reading, of being identified by a fairly strong implication from the terms of the document as a whole. I think that this difficulty can readily be met by particulars.
The other matter complained of is that the facts, matters and circumstances, making the pressure illegitimate or constituting it intimidation, are not clearly and comprehensively set forth. Again, it seems to me that this is a matter which can be cured by particulars, and indeed, it is fairly clear from the pleading what, in general terms, the answer to any request would include, though perhaps not everything that it would include can be so perceived. That being so, plainly a request for particulars would be appropriate to ensure that both parties know what is proposed to be alleged in detail.
I should add that it emerged, during the course of argument, that particulars were sought at an earlier time, this statement of claim having been filed last September, and it may be that the particulars which the argument finally
distilled out as being what is really required, have already been sought and supplied. The request and answers were not
available during the argument in court, there having been a change of solicitors on at least one side.
In these circumstances I do not think it is appropriate to strike out the paragraphs complained of, but to leave it to the parties to clarify the particulars. I refrain from making any precise order about the particulars, only because of the uncertainty I have mentioned as to what has already been sought and supplied.
I have also been informed by counsel for the applicants that, in any event, he desires to effect an amendment to his statement of claim. I think it is appropriate to give a general direction that any amended statement of claim covering either any matter that has emerged in argument of this application which, upon further consideration, counsel wishes to cover by amendment, or the other matters he has in mind, should be filed and served within the next 21 days. I fix the period of 21 days by consent, and it will noted that any further evidence will also be filed within the same period, and I will have the matter listed for further directions on a convenient date shortly after 21 days from today, being on 10 June at 9.30 am.
I turn to the question of security for costs. The matter is fairly complex. A number of considerations were identified
various of the cases dealing with security for costs. I during the course of the argument which have been discussed in
should say, at the outset, that I do not think it is appropriate to make an order in a precise figure, down to the last dollar, in the way the motion proposes, since it has been authoritatively laid down that an order for security for costs does not attempt to provide the amount which the party seeking it may be out of pocket, but rather the amount which the court thinks it reasonable to require the other party to provide as security. That may, in a given case, be very much less, and by its very nature is likely to be a round sum.
In this case, however, the matter which seems to me to be of particular importance, among the various matters swaying the court's discretion which have been identified in the cases, is the fact that the person said to be the beneficial owner of the shares in the corporate applicants is himself the second applicant. He has thus pledged his assets in the sense that, if an order for the respondent's costs is made against the applicants generally, he will be responsible notwithstanding any deficiency in the assets of the corporate applicants.
Counsel supporting the motion has pointed out that there is a possibility that no order, in respect of a successful respondent, might be made against the individual, but that an order might be made against one or more of the corporations. However, he has not been able to identify, in argument, a
be said there is a probability of that happening. It seems to concrete situation likely to arise in this case where it can
me that it must be labelled a theoretical possibility. Moreover, it is a possibility which, so far as I am aware, has never been identified, in any of the authorities, as a qualification upon the principle that the court should regard it as a significant matter, weighing against the maklng of an order for security for costs, that the person who stands to gain by the litigation has, as an individual, put himself at risk by joining in the litigation, and has not used his corporation as a stalking horse to avoid personal liability while making a claim.
Several of the other principles which weigh against the making of an order for security for costs have at least some degree of application in the circumstances of this case. In a sense, the application is not wholly lacking in an element of defence to claims made against the applicants, for they are alleged by the respondents to owe a very large sum of money pursuant to financing arrangements out of which the litigation has arisen. The fact that the litigation has arisen out of those arrangements, of course, in itself raises the further question whether it is right to say that the impecuniosity alleged against some or all of the corporate applicants is an impecuniosity arising out of the very matters the subject of the litigation.
However, I return to the matter which, as I said earlier, to be the most important factor swaying my discretion, and seems to me, in all the circumstances of this particular case,
that is the fact that the person beneficially entitled ultimately to the shares in the companies has made himself an applicant. I think he would, in all probability, be required to submit to an order for costs if the corporate applicants were themselves to have such an order made against them. In those circumstances, I exercise my discretion against making any order for security.
The orders I make are that I dismiss the motion; and I order that 50 per cent of the costs of the respondents to the motion be paid by the applicants in the motion, and that as to 50 per cent the costs of the motion be costs in the cause. I adjourn this matter to Friday, 10 June 1994. The exhibits may be handed back.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Burchett.

Associate:

Date: 31 May 1994

Counsel for the Applicants	Mr R.A. Vincent
(Respondents to the motion):
Solicitors for the Applicants	Messrs John R Quinn &
(Respondents to the motion):	CO.
Counsel for the Respondents	Mr M. Cashion
(Applicants in the motion):
Solicitors for the Respondents	Messrs Kemp Strang &
(Applicants in the motion):	Chippindall

Date of hearing:  19 May 1994