Morris v Harding
[2001] WASC 56
MORRIS -v- HARDING [2001] WASC 56
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2001] WASC 56 | |
| Case No: | CIV:2763/2000 | 2 MARCH 2001 | |
| Coram: | MASTER BREDMEYER | 7/03/01 | |
| 5 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | JEFFREY DAVID MORRIS CHRISTINE IVY MAY HARDING |
Catchwords: | Security for costs Plaintiff living overseas Assets within the jurisdiction |
Legislation: | Rules of the Supreme Court, O 26 r 2(a) |
Case References: | Muschinski v Dodds (1985) 160 CLR 583 Nil |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Plaintiff
AND
CHRISTINE IVY MAY HARDING
Defendant
Catchwords:
Security for costs - Plaintiff living overseas - Assets within the jurisdiction
Legislation:
Rules of the Supreme Court, O 26 r 2(a)
Result:
Application dismissed
(Page 2)
Representation:
Counsel:
Plaintiff : Mr N Jessy
Defendant : Ms T Seaton
Solicitors:
Plaintiff : Durack & Zilko
Defendant : Lawton Gillon
Case(s) referred to in judgment(s):
Muschinski v Dodds (1985) 160 CLR 583
Case(s) also cited:
Nil
(Page 3)
1 MASTER BREDMEYER: This is an application by the defendant for security for costs under O 25 r 2(a) of the Rules of the Supreme Court on the basis that the plaintiff is ordinarily resident out of the jurisdiction. The defendant left Perth in about December 1997 and has lived in the United Kingdom ever since. Residence out of the jurisdiction is a powerful reason for the granting of security for costs. The plaintiff's action, which has not got beyond the writ stage, is for a declaration that he has an equitable interest in the defendant's residence situated at East Victoria Park, on the basis of his financial and non-financial contributions to improvements to the property and of his contributions in repaying loans secured by various mortgages on the property. I understand the claim is for an equitable interest similar to the one considered in Muschinski v Dodds (1985) 160 CLR 583.
2 The defendant has filed an affidavit in support of this application sworn 31 January 2001 and the plaintiff has filed an affidavit in opposition, sworn on 23 February 2001. In addition, with the permission of counsel, I have looked at affidavits filed in two other proceedings between the same parties: CIV 2249 of 2000 and COR 117 of 2000. The plaintiff says that his only assets are in Western Australia. His only assets in the United Kingdom are household and personal effects and a bank account which contains a small sum for his day-to-day living expenses. He says that if ordered to pay security he will not be able to proceed with the action. He states his assets in Western Australia are his interest in Cityside Corporation Pty Ltd ("the company") which owns the assets of a restaurant business known as "Christinas" in East Victoria Park, and an equitable interest in the house at 56 Westminster Street, East Victoria Park. I can ignore the latter "asset". It is not an asset which can be taken in payment of the defendant's costs, if the defendant is successful in this action. Indeed, if the defendant is successful in this action, that means the plaintiff will have failed, which means that he will not have established any interest in that property.
3 The share capital of the company is divided into four ordinary shares and 200 "E" class shares. Two of the ordinary shares are beneficially held by Caystar Pty Ltd, as trustee for the Caystar Trust, as are the 200 "E" class shares. The defendant and the plaintiff beneficially hold one ordinary share each. The plaintiff and the defendant are each members of the class of general beneficiaries of the trust. Both the company and the trust was established to reflect equal ownership of "Christinas" by the plaintiff and the defendant.
(Page 4)
4 The defendant says that the asset of "Christinas" has some value. Under the Articles of Association his share in it cannot be sold without the approval of the defendant and, thus, she can, at least temporarily, block any sale of the share. The parties entered into this restaurant venture jointly, but since December 1997 the defendant has run the business on her own. The latest accounts for the company are as at 30 June 1999. The defendant has not yet had the 2000 accounts prepared. Under the 1999 accounts it shows that the income of the restaurant was $1,684,000 in 1999 and $1,473,000 in 1998. The profit after meeting expenses in 1999 was $23,738.22 and the profit for the previous year was $26,258.99. No dividends have been declared. The balance sheet shows a surplus of assets over liabilities of $30,021.52 for 1999 and $14,828.98 for 1998.
5 The defendant says that the plaintiff's 50 per cent shareholding in the company and in the trust is of no value because the company has a substantial surplus of liabilities over assets. The defendant's solicitors have estimated their costs of this action as $40,000 which I do not regard as unreasonable.
6 The plaintiff obtained a court order for an accountant, Mr Neil Cribb, to inspect the books and records of the company. In doing so he came across a loan, apparently owned by the company, referred to in the general ledger as "Unsecured Loan Account No 3710". He noticed that various payments totalling $115,122 had been paid off this loan in the period 1 July 1997 to 30 June 1999. Details of those repayments are set out in the plaintiff's affidavit. He says those repayments were to the plaintiff's home loan account with BankWest. It therefore appears that company cheques have been used to pay this substantial sum off that loan. In addition, the defendant was ordered to pay the plaintiff's costs arising out of an application in CIV 2249 of 2000. Those costs were taxed at $3,777.43 on 16 January 2001. The defendant paid those costs to the plaintiff's solicitors on 29 January 2001 with a company cheque.
7 The defendant's counsel says that the business is not doing well. The landlord would not renew the lease when it expired in September 2000, so the company is now operating on a periodic tenancy. When the business was purchased both plaintiff and defendant took out personal loans to pay for it. Since the plaintiff left for the United Kingdom shortly thereafter the defendant has been paying off her loans and his loans. I do not see that as an impermissible burden. If they were joint loans taken out to purchase the business it is appropriate that they be repaid with money earned from the business. As to the payment of her personal loan, the defendant's solicitor says that the business loans are secured on her house.
(Page 5)
- I do not think that justifies the use of company money to repay her home loan. I note in the accounts for 1999 and 1998 there are no loans to Mrs Harding, that is, there is no entry whereby she is bound to repay to the company the $115,000 of company money used to pay off her home loan.
8 I am not persuaded by the defendant's evidence, or, rather, lack of it, that the business has no value. I consider it likely that the plaintiff's share in the business has real value. If the defendant succeeds in this case and gets a costs order, she can execute upon it against the plaintiff's share in the company and in the trust and could end up becoming the sole owner of the business.
9 The plaintiff has presented an analysis of the net assets of the company prepared by Mr Morenko Vidovich, the company's accountant, designed to give a figure for a possible payment out of the plaintiff's share in the business. The plaintiff says it was prepared on the defendant's instructions but that is denied. Irrespective of that, it is the views of the well-informed outsider (the accountant) as to the value of the company. It appears to have been prepared from internal evidence in 1998 or 1999. It quotes the defendant as saying that a fair selling price for the business would be between $350,000 to $400,000 and that, after repayment of loans, the net sum would be $120,000. The defendant offered in 1999 to purchase the plaintiff's share for $120,000. He refused. He wanted $200,000.
10 Because I consider the plaintiff has sufficient assets in the form of his interest in the business to cover any prospective award of costs, and those assets are obtainable by the defendant, this application fails. I will order the defendant to pay the plaintiff's costs of the application in any event.
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