Oceaneer Marine Brokers Pty Ltd v Sundown Cruiser Sales Pty Ltd
[2021] WADC 21
•25 MARCH 2021
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: OCEANEER MARINE BROKERS PTY LTD -v- SUNDOWN CRUISER SALES PTY LTD [2021] WADC 21
CORAM: DEPUTY REGISTRAR HEWITT
HEARD: 4 MARCH 2021
DELIVERED : 25 MARCH 2021
FILE NO/S: CIV 4666 of 2017
BETWEEN: OCEANEER MARINE BROKERS PTY LTD
Plaintiff
AND
SUNDOWN CRUISER SALES PTY LTD
First Defendant
HORIZON BOATS (QLD) PTY LTD
Second Defendant
GARY WAHLSTEDT
Third Defendant
Catchwords:
Practice and procedure - Application for security for costs - Turns on its own facts
Legislation:
Corporations Act 2001 (Cth), s 1335
Result:
Security required
Representation:
Counsel:
| Plaintiff | : | Mr N D Dillon |
| First Defendant | : | Mr S M Davies SC |
| Second Defendant | : | Mr S Standing |
| Third Defendant | : | Mr S Standing |
Solicitors:
| Plaintiff | : | Hager Grubb & Partners Lawyers |
| First Defendant | : | Greg Carter Barrister & Solicitor |
| Second Defendant | : | Chalmers Legal Studio Pty Ltd |
| Third Defendant | : | Chalmers Legal Studio Pty Ltd |
Case(s) referred to in decision(s):
Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
DEPUTY REGISTRAR HEWITT:
In this matter the applications before me for determination are those of the first defendant by way of chamber summons filed 30 October 2020 and by the second and third defendants on 11 November 2020, each of which seeks the court to make an order that the plaintiff provide security for costs.
The power relied upon to make such an order derives from s 1335 of the Corporations Act 2001 (Cth). That section provides that where it is shown by credible testimony that a plaintiff may not be able to pay the costs of a successful defendant, the court may make such order as it thinks appropriate by way of security for those costs. It is to be noted that the provision provides the court with a discretion and even if the threshold trigger is reached, the court is not thereby obliged to make any such order.
The first point to explore is therefore the information which is before the court which might suggest that the plaintiff is unable to pay any costs order which it might be obliged to meet in the event that it is unsuccessful in this litigation. An examination of the materials which have been placed before me suggest, to my mind, that the plaintiff is a trustee company acting as the trustee of a trust called Oceaneering Marine Trust. It is also immediately apparent that the writ which has been filed contains no indorsement which would be required if the plaintiff were undertaking this action in its capacity as a trustee. Order 6 r 5 of the Supreme CourtRules 1971 (WA) provide:
If the plaintiff sues, or the defendant, or any of the defendants, is sued in a representative capacity, the indorsements shall show, in accordance with such of the indorsements in Form No. 5 as is applicable to the case or by any other statement to the like effect, in what capacity the plaintiff or defendant sues or is sued.
A matter of this kind was considered in Laundry Coin‑Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40-584. A decision of the Federal Government of Australia delivered on 28 June 1985. On that case his Honour Smithers J stated:
It is my view that in the exercise of its discretion the Court should have regard to the capacity in which the applicant carries out its business activities and holds such property as comes to its hands, namely, as a trustee for the Ace Cleaning Unit Trust. It is a company which in pursuance of its duty as trustee may at any time transfer such property to the unit holders of the trust.
The method by which the parties concerned construct the entities by which their interests are pursued has, no doubt, positive benefits for them, and is a matter for decision by them. But the trust structure does involve that persons dealing with a company playing the part of trustee in the adopted business structure, necessarily deal with an entity, the beneficial ownership of all property in whose hands is in another entity to whom the legal estate therein may be passed at any time. The accountability of such a company for amounts for which it may be legally liable is inherently less stable and reliable than would be the case if it were in business on its own behalf. For reasons mentioned above a creditor with a judgment against the applicant should not normally be restricted to reliance on the applicant's indemnity under the trust deed. …
That case and others were cited with approval by Corboy J in Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 [35(d)] when his honour stated:
Where the only tangible assets of a plaintiff corporation are held in trust and solvency depends on its right as a trustee to an indemnity against the trust property, it is necessary for the court to have in mind the difficulties which a successful defendant would face in attempting to execute on an order for costs: …
On the basis of those decisions it would appear that if the plaintiff is suing in its capacity as a trustee as appears, prima facie there would be a case for requiring the company to give security for costs since there are significant impediments and dangers in attempting to recover trust monies from a trustee company. If indeed the plaintiff is bringing this action in a representative capacity but failed to disclose that to be the case there would be an obvious basis for making a determination that security for costs is required.
If on the other hand the plaintiff is bringing this action in its own capacity, it is necessary to examine its financial circumstances. In that regard, I note that the financial documents which have been placed before the court do not, as far as I can see, disclose any assets which it holds other than its trustee role. In defending these applications the plaintiff has filed materials identifying assets held by the trust as assets to which a successful defendant might have recourse. In the circumstances my view is that the plaintiff cannot have it both ways, it is either acting on its own behalf or as a trustee. The doubt is one which I consider should be resolved against the plaintiff and I conclude that there is credible testimony that the plaintiff, should it fail to succeed in this action, will not have sufficient resources to pay any likely costs order in favour of the defendants. That finding does not, however, mean that a security for costs order is necessarily appropriate.
The principles applying to the exercise of my discretion were outlined in the following passage by Edelman J in Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 to which I would add that the discretion is in truth to be exercised judicially but is otherwise unfettered:
(i)the strength and bona fides of the plaintiff's case;
(ii)the likelihood of the plaintiff being unable to pay the defendant's costs;
(iii)whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
(iv)whether the application for security is oppressive;
(v)whether the award of security would deny an impecunious applicant a right to litigate;
(vi)whether there are persons standing behind the plaintiff who were likely to benefit from the litigation;
(vii)whether the persons standing behind the plaintiff have offered any security or personal undertaking to be liable for the costs, and if so, the form of such an undertaking;
(viii)whether the applicant was in substance a plaintiff or the proceedings were defensive in the sense of directly resisting proceedings already brought or seeking to halt the defendant's self help procedures;
(ix)whether the application for security had been brought promptly;
(x)whether the applicant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour; and
(xi)any factors relating to the public interest.
Many of these matters are irrelevant in the present case and I shall commence my investigation by considering the nature of the claim. Some light on the difficulties which might be faced by the plaintiff are revealed by the most recent statement of claim which has been filed. That document is headed 'Fourth amended further re‑amended statement of claim'. On my interpretation of those words this is the sixth version of the statement of claim which has been filed. If one looks at the document to which I have referred it is possible to see that very little of the original statement of claim remains and the pleading has most of the colours of the rainbow indicating the various amendments which have been implemented as the action progressed. The need to make such wholesale amendments is not of course a necessary indication that there is a fault with the plaintiff's case, but it does indicate that it has taken a great many attempts to hammer the statement of claim into what the solicitors for the plaintiff regard as acceptable form and which they are prepared to take to trial.
The actual case pursued by the plaintiff is for a commission for the sale of a luxury yacht by an overseas company to a local purchaser. It is alleged that entitlement has arisen through the survival of an entitlement to commission even though the plaintiff has ceased to operate its business as a broker and has sold that business to the second defendant. It may well be that the action has a sound basis but I have found it difficult to follow and have formed the impression that it is to an extent speculative.
At an earlier stage in the proceeding the first defendant sought an assurance from the plaintiff that it possessed sufficient assets to cover any costs orders which might be made against it. In response the first defendant was assured that the plaintiff was possessed of at least two assets, the first being a business of considerable value, and the second being of a vessel of considerable value. The total value of the assets so disclosed was over $1 million. Both assets have now been sold and it is not at all clear to me what has become of the proceeds of the sales. There is reason to suppose that part of the proceeds might have been invested in a trust under the control of the plaintiff but that only accounts for a proportion of the money. No information is readily available as to the remainder.
Complaint is made of the delay in bringing the present application. The writ was filed on 20 December 2017 and amended on 25 January 2018, the amendment being to add a third defendant. The amendment was not authorised by order of court and the writ so amended was irregular. Notwithstanding the irregularity the defendants filed appearances and the irregularity cured. Thereafter the action proceeded with the filing of defences and a succession of adjournments of directions hearings. On 6 July 2018 the plaintiff filed its third version of the statement of claim and amended defences were filed thereafter.
By 1 September 2018 the first defendant filed an application for summary judgment. By October that summons was amended and by 4 December 2018 heard by a registrar and dismissed. From that point the plaintiff further amended the statement of claim, the defences were amended accordingly and contribution proceedings between the defendants commenced. The action was entered for trial on 29 March 2019. A pre-trial conference was held on 1 July and the matter adjourned to a listing conference.
On 15 July the plaintiff further amended its statement of claim leading to further amendments to the defences.
On 4 December the plaintiff further amended its statement of claim leading to further adjournment of the listing conference. By 30 December 2019 the plaintiff further amended its statement of claim and on 24 February once again introduced amendments to the statement of claim which prompted further amendments to the defences and requests for further and better particulars which were answered on 7 May 2020.
On 22 May 2020 the matter again came on for a listing conference at which the plaintiff's amended pleading filed 24 February was approved, the defendants were given leave to amend responsively and the balance of orders sought by the plaintiff adjourned to a special appointment.
On 2 June 2020 the plaintiff filed an application to adduce expert evidence that application being dealt with by a consent on 13 July 2020. Thereafter the present applications for security were filed. These matters were conducted against a background where by email dated 16 July 2019 the first defendant had been told by the solicitors for the plaintiff (after referring to two specific assets valued together at over one million dollars) 'there are more than sufficient realizable assets of the plaintiff available to meet any adverse costs order …'
Based on that advice the first defendant (and presumably the second defendant) saw no need to make the present application. The plaintiff however sold the boat and the business which comprised the majority of the value held by the plaintiff without notice to the defendants, which prompted them to bring the present applications.
In those circumstances I can see no valid criticism against the defendants due to their delay in bringing the applications and no reason to deny the applications on the basis of delay. I am reinforced in that view when I consider the disruption within the court caused by COVID-19 and the delays which that created.
The plaintiff has made a number of suggestions as to how security might be provided including a personal undertaking by Mr Arnup which contains no details of his financial circumstances save for the fact that he is the proprietor of what appears to be a residential property jointly with his wife. A joint share in a piece of land is not readily executed against. The first step would be the registration of a PSSO, the next an auction of the property by the bailiff, and the likely outcome of such an auction is likely to be a very low price given the fact that any would‑be purchaser would have to deal with a co‑tenant if it wanted to achieve occupation. The other alternative would be to go to the Supreme Court seeking a division or sale order which is not an attractive prospect. Realistically therefore, unless the co‑tenant was to join with Mr Arnup in offering the property as a security, it is not an attractive proposition. Again, another suggestion that a property owned by the Kobra Fishing Unit Trust be charged by its trustee as a security again appears to me problematic and creates all the difficulties and dangers associated with executing against trust assets. Of all the suggestions which have been put forward by the plaintiff by way of giving security, none to my mind are satisfactory. They all present the possibility of tedious and expensive litigation to attempt to realise the monies necessary to satisfy a costs order. As far as I can see, the only satisfactory means of giving security in this case is by way of a cash deposit, a bank guarantee, or a charge over a piece of property given by all those who are on the title to that property, none of whom are trustees.
As to the quantum of security the plaintiff has estimated its recoverable costs at $100,000 and I think that to be a reasonable estimate of the costs which each applicant would recover if that applicant was successful. As to the manner of security I am open to suggestion but feel those mentioned in the preceding paragraphs are the most suitable.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
MEB
Associate
25 MARCH 2021
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