FEDERAL COURT OF AUSTRALIA
Monarch Advisory Group Pty Ltd v Puxty [2021] FCA 341
File number: NSD 951 of 2020 Judgment of: MARKOVIC J Date of judgment: 13 April 2021 Catchwords: PRACTICE AND PROCEDURE – application for security for costs – whether respondents have shown reason to believe that applicant will be unable to meet adverse costs order – where respondents led no evidence as to applicant’s financial position – application dismissed Legislation: Federal Court of Australia Act 1976 (Cth) s 56
Federal Court Rules 2011 (Cth) r 19.01
Corporations Act 2001 (Cth) s 1335
Cases cited: All Class Insurance Brokers Pty Ltd (in liq) v Chubb Insurance Australia Limited [2020] FCA 840
Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371
Beach Petroleum NL v Johnson, M.K. [1992] FCA 136; (1992) 7 ACSR 203
Division: General Division Registry: New South Wales National Practice Area: Commercial and Corporations Sub-area: Commercial Contracts, Banking, Finance and Insurance Number of paragraphs: 44 Date of hearing: 25 February 2021 Counsel for the Applicant: Mr D Mahendra Solicitor for the Applicant: Madison Marcus Law Firm Counsel for the Respondents: Mr M Luitingh Solicitor for the Respondents: Edge Legal Group ORDERS
NSD 951 of 2020 BETWEEN: MONARCH ADVISORY GROUP PTY LTD
Applicant
AND: MR BRETT JAMES PUXTY
First Respondent
MR FRANCIS COGGAN
Second Respondent
ODYSSEY ADVISORY SERVICES ACN 155 549 705
Third Respondent
ORDER MADE BY:
MARKOVIC J
DATE OF ORDER:
13 APRIL 2021
THE COURT ORDERS THAT:
1.The respondents’ interlocutory application filed 8 December 2020 seeking orders for the provision of security for costs by the applicant (Interlocutory Application) be dismissed.
2.The respondents pay the applicant’s costs of the Interlocutory Application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
MARKOVIC J:
Brett James Puxty, Francis Coggan and Odyssey Advisory Services Pty Ltd (Odyssey), the respondents to this proceeding, seek an order that Monarch Advisory Group Pty Ltd (Monarch), the applicant, provide security for their costs of the proceeding in the sum of $125,000. The application is made pursuant to s 56 of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 19.01 of the Federal Court Rules 2011 (Cth) (Rules) or, in the alternative, s 1335 of the Corporations Act 2001 (Cth) (Corporations Act).
BACKGROUND
Monarch was incorporated on 7 February 2012. Tatiana Coulter has been the sole director since the time of its incorporation and is currently its only shareholder.
Monarch commenced operations as a financial planning business on 5 March 2012. It specialises in wealth protection and the provision of insurance solutions for individuals and businesses.
Between 13 March 2018 and 4 April 2019, Consolidated Corporate Pty Limited (Consolidated) was a 50% shareholder of Monarch. Consolidated is the parent company of Madison Marcus Law Firm (Madison Marcus).
Ms Coulter first met Mr Puxty in…
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- Case
- [2021] FCA 341
- Decision Date
CaseChat Overview and Summary
The central legal issue was whether the respondents had discharged their onus of proving, by credible testimony, that there was reason to believe that Monarch would be unable to meet an adverse costs order. The court found that the respondents had not led any evidence about Monarch’s financial position and had not established their basis for believing that Monarch would be unable to pay the costs of the proceeding if they were successful in their defence. The respondents' evidence relied solely on comments made by an employee of Monarch during negotiations and the lack of a response to a letter concerning the filing of this application. The court was not satisfied that this was credible testimony to support the belief that Monarch would be unable to pay the costs.
The court dismissed the respondents' application for security for costs, concluding that the respondents had failed to establish by credible testimony that there was reason to believe that Monarch would be unable to pay their costs if they were successful in their defence. The court further noted that even if the respondents had established such a reason, it would not have been satisfied that the application for security should be granted, given Monarch’s evidence of financial stability. The court ordered that the respondents pay Monarch’s costs of the interlocutory application.
Orders
Orders of the court
1. The respondents’ interlocutory application filed 8 December 2020 seeking orders for the provision of security for costs by the applicant (Interlocutory Application) be dismissed.
2. The respondents pay the applicant’s costs of the Interlocutory Application.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
Thirdly, Monarch submits that the Court does not have any proper evidentiary basis to order any amount of security for costs given the deficiencies in the evidence relied on by the respondents as to the quantum of costs for which security is sought. CONSIDERATION The first issue to be determined is whether the respondents, who bear the onus, have established by credible testimony that there is reason to believe that Monarch will be unable to pay their costs if they are successful in their defence. Having considered the evidence before me for the following reasons I am not satisfied that they have done so. Having regard to the matters set out at [15] above the respondents, who bear the onus on the application, have not led any evidence about Monarch’s financial position. Their evidence goes no higher than to ask the Court to infer that Monarch will be unable to meet an adverse costs order because of comments made by Ms Coulter in two emails when trying to negotiate what seems to be a payout upon Messrs Puxty’s and Coggan’s departure from Monarch and the fact that Monarch did not respond to a letter which referred in closing, after addressing a number of other matters, to the filing of this application if a proposed mediation did not succeed. Based on the evidence before me the respondents have never put to Monarch in correspondence or otherwise their basis for their belief that it will be unable to pay their costs of the proceeding if they are successful in their defence. That being so, it is difficult put any weight on Mr Stols’ evidence that Monarch has not taken any steps to demonstrate an ability to pay its debts as and when they fall due or its ability to pay a substantial costs order. On that basis there is no credible testimony led by the respondents based on which there is reason to believe that Monarch will be unable to pay their costs if they are successful in their defence of the proceeding. Nor, for the reasons set out below and to the extent they are permitted to rely on it, are the respondents assisted by the evidence led by Monarch. Even assuming that the respondents had discharged their burden and established that there is reason to believe that Monarch will be unable to pay the costs of the litigation if unsuccessful, such that the evidentiary onus would then shift to Monarch, I would not be satisfied that the application for security should be granted. Put another way I would be satisfied that Monarch had established a reason why security should not be granted. Monarch relies on a balance sheet, profit and loss statement, BAS statements and bank statements for an account in Monarch’s name showing, most recently, an amount held well in excess of the amount sought by way of security. As at 31 December 2020 Monarch had net assets of $897,343.93. While the respondents raised issues about the reliability of the figures included in the balance sheet they did not seek to cross-examine Ms Coulter about its contents or to otherwise challenge or contradict its contents by other forensic means.