Mio Art Pty Ltd v Mango Boulevard Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Mio Art Pty Ltd v Mango Boulevard Pty Ltd & Ors [2018] QSC 31

PARTIES:

MIO ART PTY LTD ACN 121 010 875 as trustee of the Spencer Family Trust

(plaintiff)

v
MANGO BOULEVARD PTY LTD ACN 101 544 601

(first defendant)
and
SILVANA PEROVICH
(second defendant)
and
ROBERT WILLIAM WHITTON as trustee of the bankrupt estate of Silvana Perovich
(third defendant)
and
BMD HOLDINGS PTY LTD ACN 010 093 348
(fourth defendant)
and
TRADITIONAL VALUES MANAGEMENT LTD (IN LIQUIDATION) ACN 055 106 100 (IN ITS CAPACITY AS RESPONSIBLE ENTITY OF THE BLUE DIAMOND DEPOSITS TRUST NO 1 (ARSN 091 948 202)
(fifth defendant)
and
EARNING PTY LTD ACN 118 746 599 (IN LIQUIDATION)
(sixth defendant)
and
ROBERT WINNY
(seventh defendant)
and
COMPENSATION FINANCE (AUSTRALIA) PTY LTD ACN 099 768 877
(eighth defendant)
and
AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION
(ninth defendant)
and
ACN 127 567 373 PTY LTD (IN LIQUIDATION)
(tenth defendant)
and
ACN 128 854 759 PTY LTD (IN LIQUIDATION)
(eleventh defendant)
and
ACN 128 854 768 PTY LTD (IN LIQUIDATION)
(twelfth defendant)
and
STANDARD BUILDERS PTY LTD ACN 121 087 312
(thirteenth defendant)

FILE NO:

1714 of 2011

DIVISION:

Trial Division

PROCEEDING:

Applications for Security for Costs

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

2 March 2018

DELIVERED AT:

Brisbane

HEARING DATE:

11 July 2017, 21 July 2017

Further written submissions received

JUDGE:

Daubney J

ORDERS:

1.  On the application by the plaintiff against the fifth defendant, it is ordered:

     (a)    that within 28 days the fifth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the fifth defendant’s counterclaim up to the first day of the hearing;

     (b)    failing provision of such security within that time, the fifth defendant’s counterclaim against the plaintiff be stayed;

     (c)    liberty to apply;

     (d)    the costs of and incidental to the application for security for costs be reserved.

2.  On the application by the plaintiff against the sixth, tenth, eleventh and twelfth defendants, it is ordered:

     (a)   that within 28 days the sixth, tenth, eleventh and twelfth defendants collectively provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the sixth, tenth, eleventh and twelfth defendants’ counterclaim up to the first day of the hearing;

     (b)    failing provision of such security within that time, the sixth, tenth, eleventh and twelfth defendants’ counterclaim against the plaintiff be stayed;

     (c)    liberty to apply;

     (d)    the costs of and incidental to the application for security for costs be reserved.

3.  On the application by the plaintiff against the thirteenth defendant, it is ordered:

     (a)    that within 28 days the thirteenth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the thirteenth defendant’s counterclaim up to the first day of the…

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Details
Case
[2018] QSC 31
Decision Date

CaseChat Overview and Summary

The matter of Mio Art Pty Ltd v Mango Boulevard Pty Ltd involved several parties engaged in a protracted litigation over a joint venture for the development of land at Mango Hill. The plaintiff, Mio Art, sought security for costs in relation to counterclaims brought by several defendants, including the thirteenth defendant, a company that had been deregistered by ASIC but was later reinstated. The dispute centred on the value of shares in Kinsella Heights Development Pty Ltd, which was owned by the plaintiff and Silvana Perovich, and the obligations under a Share Sale Agreement. The plaintiff argued that the counterclaims were without merit and sought security for costs to prevent an abuse of process. The court had to determine whether the discretionary factors favoured making an order for security for costs, whether a company in liquidation met the threshold test for such security, and whether the costs of the counterclaim were a priority under the Corporations Act.

The court examined the discretionary factors relevant to the exercise of its power to order security for costs, including the merits of the plaintiff’s claim and the prospects of success of the counterclaims. The court noted that the counterclaims were unlikely to succeed and that the plaintiff was entitled to protection against an unjustifiable use of the courts. The court also considered whether the thirteenth defendant, being a company in liquidation, met the threshold test for security for costs. It concluded that the company’s insolvency and lack of trading activity did not necessarily preclude it from meeting the test. Regarding the priority of costs under the Corporations Act, the court found that the counterclaims did not constitute debts for the purposes of the Act, and thus the costs of the counterclaim were not a priority. The court further held that requiring security for costs would not frustrate the counterclaim but rather protect the plaintiff from an unjustifiable use of the legal process.

The court ordered that each defendant provide security for costs in the amount of $70,000 within 28 days, failing which their counterclaims against the plaintiff would be stayed. This decision balanced the plaintiff’s right to protect itself from unjustifiable litigation with the defendants’ right to pursue their counterclaims. The orders were tailored to ensure that the plaintiff was not unduly prejudiced while allowing the defendants the opportunity to provide the required security. The costs of the applications for security for costs were reserved for further determination.

Orders

Orders of the court

1. On the application by the plaintiff against the fifth defendant, it is ordered:

(a) that within 28 days the fifth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the fifth defendant’s counterclaim up to the first day of the hearing;

(b) failing provision of such security within that time, the fifth defendant’s counterclaim against the plaintiff be stayed;

(c) liberty to apply;

(d) the costs of and incidental to the application for security for costs be reserved.

2. On the application by the plaintiff against the sixth, tenth, eleventh and twelfth defendants, it is ordered:

(a) that within 28 days the sixth, tenth, eleventh and twelfth defendants collectively provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the sixth, tenth, eleventh and twelfth defendants’ counterclaim up to the first day of the hearing;

(b) failing provision of such security within that time, the sixth, tenth, eleventh and twelfth defendants’ counterclaim against the plaintiff be stayed;

(c) liberty to apply;

(d) the costs of and incidental to the application for security for costs be reserved.

3. On the application by the plaintiff against the thirteenth defendant, it is ordered:

(a) that within 28 days the thirteenth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the thirteenth defendant’s counterclaim up to the first day of the hearing;

(b) failing provision of such security within that time, the thirteenth defendant’s counterclaim against the plaintiff be stayed;

(c) liberty to apply;

(d) the costs of and incidental to the application for security for costs be reserved.

Background

Background to the litigation

The thirteenth defendant is a company which was deregistered by the Australian Securities and Investments Commission (“ASIC”) in 2011. It was reinstated on 10 January 2017. It is not in issue that the thirteenth defendant is insolvent and does not trade.Background This proceeding has been before the courts on many occasions over the years, and other judges have comprehensively described the background. For present purposes, it is sufficient to recite the following brief overview. At its heart, the litigation is a dispute arising from a joint venture for the development of land at Mango Hill, north of Brisbane. The land is owned by Kinsella Heights Development Pty Ltd (“Kinsella”). As at July 2003, the issued capital of Kinsella was held as follows:- 50 shares owned by Richard Spencer (“Spencer”) (the former trustee of the trust of which the plaintiff is now trustee), and- 50 shares owned by the second defendant, Silvana Perovich (“Perovich”). In July 2003, Spencer (as trustee of the Spencer Family Trust) and Perovich entered into a Share Sale Agreement (“SSA”) by which they each agreed to sell 25 shares to the first defendant, Mango Boulevard Pty Ltd (“Mango Boulevard”). Mango Boulevard was, and is, a subsidiary of the fourth defendant, BMD Holdings Pty Ltd (“BMD”). BMD guaranteed Mango Boulevard’s performance of the SSA. The SSA provided a mechanism for the timing of payments for the shares purchased under the SSA. Without descending into the detail which is ascertainable from other judgments, the assessment of the amount payable for the shares in Kinsella has been the subject of this extended litigation. Moreover, the SSA provided for a process of valuation, culminating in an arbitration to determine the value. In June 2005, Spencer (as trustee) and Perovich borrowed some $1.55 million from the fifth defendant. To secure that borrowing Spencer (as trustee) and Perovich assigned their entitlement to receive funds pursuant to the SSA to the fifth defendant. In April 2006, the fifth defendant obtained judgment against Spencer and Perovich for about $2.1 million. Following that, the fifth defendant then, in February 2007, made demand on the corporate guarantees which had been provided by BMD. BMD, by its then solicitors, denied liability to pay under the guarantee because there had been no default by Mango Boulevard in payment of moneys under the SSA. This was because on 6 February 2007 BMD had paid just over $1 million into Court, that being the balance then owing under the SSA. In any event, in August 2007 both Spencer and Perovich were declared bankrupt. Just prior to his bankruptcy, Spencer was replaced as trustee of the Spencer Family Trust by the plaintiff (“Mio Art”). The arbitration provided for by the SSA has been conducted, and awards have been made by the arbitrator. In summary, the land was valued under that arbitration at about $50 million, and the plaintiff consequently asserts that it is entitled to be paid some $10 million by Mango Boulevard and BMD. The arbitral awards are now the subject of separate litigious challenge.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In respect of each of the applications, therefore, I will fix the quantum of security to be provided for the costs of the counterclaim at $70,000.Conclusion Accordingly, there will be the following orders:1. On the application by the plaintiff against the fifth defendant, it is ordered:(a)that within 28 days the fifth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the fifth defendant’s counterclaim up to the first day of the hearing;(b)failing provision of such security within that time, the fifth defendant’s counterclaim against the plaintiff be stayed;(c)liberty to apply; and(d)the costs of and incidental to the application for security for costs be reserved.2.On the application by the plaintiff against the sixth, tenth, eleventh and twelfth defendants, it is ordered:(a)that within 28 days the sixth, tenth, eleventh and twelfth defendants collectively provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the sixth, tenth, eleventh and twelfth defendants’ counterclaim up to the first day of the hearing;(b)failing provision of such security within that time, the sixth, tenth, eleventh and twelfth defendants’ counterclaim against the plaintiff be stayed;(c)liberty to apply; and(d)the costs of and incidental to the application for security for costs be reserved.3.On the application by the plaintiff against the thirteenth defendant, it is ordered:(a)that within 28 days the thirteenth defendant provide, in a form satisfactory to the Registrar, security in the sum of $70,000 for the plaintiff’s costs of and incidental to defence of the thirteenth defendant’s counterclaim up to the first day of the hearing;(b)failing provision of such security within that time, the thirteenth defendant’s counterclaim against the plaintiff be stayed;(c)liberty to apply; and (d)the costs of and incidental to the application for security for costs be reserved.

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.