Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd
[2006] FCA 205
•3 MARCH 2006
FEDERAL COURT OF AUSTRALIA
Pedra Holdings Pty Ltd v Westfield Shoppingtown Carousel Pty Ltd [2006]
FCA 205Corporations Act 2001 (Cth) s 1335
Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542
PEDRA HOLDINGS PTY LTD, MYRAN HOLDINGS PTY LTD, HENRY AVELING and MARIANNE AVELING v WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD, PT LIMITED, CPM (WA) PTY LTD and CPT MANAGER LIMITED
WAD 104 of 2005NICHOLSON J
3 MARCH 2006
PERTH
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD 104 OF 2005
BETWEEN:
PEDRA HOLDINGS PTY LTD
ACN 064 183 222
FIRST APPLICANTMYRAN HOLDINGS PTY LTD
ACN 009 105 408
SECOND APPLICANTHENRY AVELING
THIRD APPLICANTMARIANNE AVELING
FOURTH APPLICANTAND:
WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD
ACN 060 037 621
FIRST RESPONDENTPT LIMITED
ACN 004 454 666
SECOND RESPONDENTCPM (WA) PTY LTD
ACN 079 927 272
THIRD RESPONDENTCPT MANAGER LIMITED
ACN 054 494 307
FOURTH RESPONDENTJUDGE:
NICHOLSON J
DATE OF ORDER:
3 MARCH 2006
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
1.The sole director/shareholder of the first applicant, Mr Alan Duncan, furnish a written undertaking to the Court that:
(a)he will be personally responsible for the payment of any costs awarded to the first and second respondents against the first applicant to the amount of $50 000 or provide a bank guarantee in the same amount in a form acceptable to the Registrar,
(b)he will not deal with, encumber or dispose of his assets referred to in his affidavit of 18 November 2005 without the leave of the Court, provided if Mr Duncan furnishes a bank guarantee, this paragraph (b) shall not take effect.
2.The sole director/shareholder of the first applicant, Mr Alan Duncan, furnish a written undertaking to the Court that:
(a)he will be personally responsible for the payment of any costs awarded to the third and fourth respondents against the first applicant to the amount of $50 000 or provide a bank guarantee in the same amount in a form acceptable to the Registrar,
(b)he will not deal with, encumber or dispose of his assets referred to in his affidavit of 18 November 2005 without the leave of the Court, provided if Mr Duncan furnishes a bank guarantee, this paragraph (b) shall not take effect.
3.The proceedings of the first applicant be stayed pending provision of the undertaking or bank guarantee in accordance with orders 1 and 2.
4.The notice of motion of the first and second respondents dated 3 February 2005 and the re-amended notice of motion of the third and fourth respondents dated 21 December 2004 be otherwise dismissed.
5.The first applicant pay the costs of the first and second respondents and the third and fourth respondents on the notice of motion and re-amended notice of motion respectively.
6.(a) The respondents file and serve any written submissions on outstanding costs within 10 days.
(b)The applicants file and serve any written submissions in response within 10 days of such service.
(c)The respondents file and serve any written submissions in reply within a further 7 days of service.
7.The matter be listed for directions on 14 March 2006 at 9:15 am.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAD 104 OF 2005
BETWEEN:
PEDRA HOLDINGS PTY LTD
ACN 064 183 222
FIRST APPLICANTMYRAN HOLDINGS PTY LTD
ACN 009 105 408
SECOND APPLICANTHENRY AVELING
THIRD APPLICANTMARIANNE AVELING
FOURTH APPLICANTAND:
WESTFIELD SHOPPINGTOWN CAROUSEL PTY LTD
ACN 060 037 621
FIRST RESPONDENTPT LIMITED
ACN 004 454 666
SECOND RESPONDENTCPM (WA) PTY LTD
ACN 079 927 272
THIRD RESPONDENTCPT MANAGER LIMITED
ACN 054 494 307
FOURTH RESPONDENT
JUDGE:
NICHOLSON J
DATE:
3 MARCH 2006
PLACE:
PERTH
REASONS FOR JUDGMENT
The first and second respondents, by the remaining paragraphs of the notice of motion dated 3 February 2005, seek that the first applicant pay the sum of $50 000 into Court on account of the first and second respondents’ costs in this proceeding. Further, that pending payment of any such sum, the application be stayed. By way of re-amended notice of motion, dated 23 December 2004, the third and fourth respondents bring a like application.
The nature of the proceeding is set out in the first applicant's substituted statement of claim filed on 15 December 2005. That asserts in [1] that the first applicant is and at all material times was a company which was the tenant of Shop 157 in the Food Court located on the first floor of the Galleria Shopping Centre in Morley, Western Australia (‘the Galleria’). It held those premises under certain agreements for lease. It is pleaded that the second respondent was the lessor for a certain period and the fourth respondent for another period.
The substituted statement of claim also pleads that the first respondent is and at all material times was a licensed real estate agent acting as the second respondent's agent and that the second respondent was the trustee of the Westfield Morley Trust and the owner of the land known as the Galleria. It further pleads that the third respondent is and at all material times was a licensed real estate agent acting as the fourth respondent's agent and that the fourth respondent was, from about 1 July 2003, the owner of the Galleria. The tenancy in respect of which the first applicant brings the application is said to have endured from 27 September 1994 through various different agreements until 31 August 2004.
The substituted statement of claim also pleads that there were material changes to the Galleria and it is in respect of those changes and their effect on the first applicant that the proceeding is brought.
The first applicant claims that had the first and second respondents informed the first applicant that they were considering materially changing the Galleria in or about December 1996, it would have taken steps to sell its business earlier and thereby prevented or reduced any loss suffered from or about late 1998.
The first claim which is relied upon is that there was a breach of the Trade Practices Act 1974 (Cth) (‘TPA’) in that the first respondent failed to inform the first applicant that the first and second respondents were considering making material changes to the Galleria and so engaged in conduct which was misleading or deceptive or likely to be so contrary to s 52 of the TPA by operation of s 51A.
It is further alleged that the second respondents breached the 1997 lease.
Additionally, it is pleaded that the second respondents breached the obligation not to derogate from the grant. Also, it is pleaded that the fourth respondents also breached the 1997 lease and the previously mentioned section of the TPA.
The application by all the respondents is brought in reliance on s 1335 of the Corporations Act 2001 (Cth) and the Federal Court Rules. That requires the Court to see if there is ‘credible testimony’ that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in the defence and as a result that security is required.
The first and second respondents rely upon the affidavit of M/s O'Brien, sworn 3 February 2005 and the affidavit M/s Pow, sworn on 1 March 2006. Additionally, in the submissions for the first and second respondents as to quantum, reliance is placed on the affidavit of Mr Shanahan, sworn on 4 February 2005.
The third and fourth respondents rely on the affidavit of Mr Shanahan and a further affidavit of his sworn on 27 February 2006.
The first applicant relies on the affidavit of Mr Duncan, sworn on 18 November 2005. From that affidavit it appears that the sole asset of the first applicant was the business trading at the Galleria. It is said that in September 1994 the value of that business was $486 813. Offers were received to purchase the business in September 2000 for $450 000 and in July 2004, for $150 000. It is the diminution in the value of the business which the first applicant seeks by way of the proceeding I have outlined to recover against the respondents. The affidavit also states that the only liability of the first applicant is a contingent liability being a claim by the fourth respondent for unpaid rent of approximately $42 000.
Mr Duncan is the sole director and shareholder of the first applicant. His affidavit states that he owns jointly with his wife, a family home valued at approximately $450 000 and mortgaged in the sum of approximately $105 000 with furniture and personal items valued at $50 000. His interest therefore in the home, he values at $200 000 net of liabilities. Additionally, he says he has a one third in a business with no liabilities and a value of $150 000, of which his interest would be $50 000. In sum total then, he avers that the total value of his assets net of liabilities is $250 000, excluding the value of the claim in the current proceedings in respect of the former business, that of the first applicant.
It is common to all parties that the Court must consider two questions. The first is the threshold question of whether there are grounds for the belief that the first applicant will be unable to pay the costs of the respondents who brought these notices of motion if they are successful in their defence. The second is, if the answer to the first question is in the affirmative, whether an order for security of costs should be made and if so, on what terms.
There can be no dispute here as to the threshold question being answered in the affirmative, and that is not seriously in any way disputed by the first applicant itself. It has a paid up capital of $2 in addition to the evidence given by Mr Duncan, the respondent companies have not been able to locate any assets of it within Western Australia. Mr Duncan's affidavit implies it is no longer trading. There is evidence that, in the evidence of Mr Shanahan, that the solicitor for the first applicant has not provided any details of assets when requested to do so. In addition, legal costs have been incurred in these proceedings to date.
Viewing the evidence of Mr Shanahan and the evidence of Mr Duncan, it is clear that the threshold question should be answered in the affirmative.
In determining the discretionary question, there are as the submissions before me state, a number of matters to which to have regard.
The first is whether the first applicant's claim is bona fide and not a sham. There is no suggestion it is a sham. It is conceded by the respondents that the first applicant has an arguable claim, that is, in the sense that no strike-out action is pursued in relation to it. There was some argument addressed to whether the claim had a reasonably good prospect of success but, in the circumstances before me, I consider it as sufficient for me to say that the claim is arguable and in that sense, has a reasonably good prospect of success. It is not necessary for me to further engage in the merits, nor is it necessary or desirable that I do so to resolve these applications.
One issue to which it is necessary for the Court to give consideration to is whether the application for security is being used oppressively to try and stifle a genuine claim. Taking the claim in the manner which I have outlined, it is argued by the first applicant that there would be oppression of the first applicant, or the director/shareholder of it, if it was subject to an order for payment into Court in respect of each of the applications for that to occur.
However, it is also conceded by the first applicant that such oppression would not exist if an undertaking was sought by the Court for payment of costs to an appropriate amount. That issue arose because it had been sought by the respondents from the first applicant and had not been forthcoming, that is, sought in terms that it would be given by a third party, namely, the director/shareholder, Mr Duncan. There is therefore, through that means, something which could not be open to the argument of oppression.
The Court must also consider whether the first applicant's want of means has been brought about by conduct of the first and second respondents. Mr Duncan's affidavit entitles me to conclude that he asserts that the first applicant's want of means has indeed been brought about by the conduct of the first and second respondents. The veracity of that claim, of course, remains to be tested in Court but it is the assertion which he makes. It is not however, an assertion which has any application in respect of the director/shareholder, Mr Duncan himself.
I must also consider whether there has been any delay in the application for security. In my view, given the history of the proceeding and its transfer from the Federal Magistrate's Court where it was wrongly instituted, I do not consider there is any factor of that nature to weigh.
The respondents drew to my attention the decision in Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542. That was a decision of Clarke J in the Supreme Court of New South Wales. There his Honour said at 545:
‘It must be observed however in this respect that the mere fact that the plaintiff is financially unable to provide security does not lead inevitably to the conclusion that the making of an order will stultify the plaintiff's claim. There is a line of authority, commencing with the unreported decision of Yeldham J, in Tullock [sic] v Walker (8 December 1976) standing for the proposition that if the personnel behind the corporate plaintiff, or other parties who will benefit if the plaintiff succeeds, are financially able to provide adequate security then it is, generally speaking, inappropriate to refuse an order.’
In that decision his Honour ordered the director to furnish a written undertaking to assume personal responsibility for the payment of any costs awarded to the defendants and in addition ordered that the plaintiff provide security in the sum of $10 000.
Although each of the respondents were initially prepared to accept the possibility of an undertaking ordered by the Court, in closing submissions the first and second respondents resiled to some degree from that position. However, those respondents were prepared to accept that if the undertaking required the person giving it to not make any material variation in the undertaking ordered without the leave of the Court, the difficulty which was perceived in an unsupervised undertaking would no longer exist.
There is some difficulty in the evidence over the quantum but I accept the submissions of counsel for the third and fourth respondents that if any undertaking or security is to be ordered then the Court should do its best with the evidence before it. That evidence is particularly the evidence of Mr Shanahan, dated because of the time at which it was given and perhaps the fact that it does not take account of costs on the Federal Magistrates Court scale at an earlier time. Generally, if particularity were to be insisted upon it would be necessary for all that affidavit evidence to be updated. However, I am satisfied that, doing as counsel for the third and fourth respondents urge I should do, I should, from the knowledge of the litigation, arrive at a decision which reflects not only the evidence but also the likelihood of the cost of the litigation presently before the Court.
Counsel for the first applicant submitted that if there was to be any limitation in dealing with assets placed on the director/shareholder if an undertaking were ordered from him, that should be limited to a fixed sum. I see that as entailing certain difficulties of supervision and I would not accede to that proposal.
Considering all of the matters which I have outlined and having in mind that this is essentially a case where, as was put by counsel for the first applicant, a small business which believes it has a claim for a loss seeks to bring it against the operators of the large establishment in which it was previously situated, I do not think that discretion should be exercised in favour of a payment into Court as the notices of motion each seek. That would have a very harsh effect on the first applicant and arguably, would be subject to the oppressive condition which was contended for by the first applicant.
However, I am also persuaded that I should in general follow the dicta of Clarke J in Yandil where there is a director and shareholder with the capacity to give an undertaking to the Court along the lines of that ordered by Clarke J in that case. In my view, the Court should order that in each response to each of the motions that the director/shareholder, Mr Duncan, undertake to the Court in writing that he will personally be responsible for the payment of costs awarded to the first and second or third and fourth respondents up to the sum of $50 000. I consider that sum is a realistic assessment of the evidence and the circumstances of the proceeding. I do not think that in addition it is appropriate in the circumstances of these applications to order payment of any additional amount into Court.
In addition, the written undertaking would be subject to the condition that Mr Duncan, giving the undertaking will not seek to deal with the assets which are the subject of his affidavit sworn on 18 November 2005 in any material way without seeking the leave of the Court.
I certify that the preceding twenty-nine (29) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Nicholson. Associate:
Dated: 10 March 2006
Counsel for the Applicants: A Rumsley Counsel for the First and Second Respondents: HO Moser Solicitor for the First and Second Respondents: Watts & Woodhouse Counsel for the Third and Fourth Respondents: SP Crabb Solicitor for the Third and Fourth Respondents: Clayton Utz Date of Hearing: 3 March 2006 Date of Judgment: 3 March 2006
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