Polstead Pty Ltd (in liq) v Shah - [2009] NSWSC 560

CITATION: Polstead Pty Ltd (in liq) v Sandip Shah [2009] NSWSC 560

HEARING DATE(S): 5 May 2009

JURISDICTION: Equity Division
Corporations List

JUDGMENT OF: Brereton J

EX TEMPORE JUDGMENT DATE: 5 May 2009

DECISION: Plaintiff to give security for defendants’ costs in the amount of $150,000 and proceedings stayed until security provided.

CATCHWORDS: CORPORATIONS - Security for costs - Proceedings by company in liquidation - Whether reason to believe corporation will be unable to pay costs of defendant if defendant successful in its defence - Whether security should be ordered against company in liquidation - Discretionary considerations - Quantum of security - Held: Serious reason to believe plaintiff would be unable to pay defendants’ costs - Discretionary considerations favour plaintiff providing security.

LEGISLATION CITED: (CTH) Corporations Act 2001 s 588G, s 588M, s 1355(1)

CATEGORY: Procedural and other rulings

CASES CITED: Beach Petroleum NL v Johnson (1992) 7 ACSR 203
Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972
Ferrier and Knight v Civil Aviation Authority [1994] FCA 982
Green (as liquidator of Arimco Mining Pty Limited) v CGU Insurance Ltd [2008] NSWCA 148, (2008) 67 ACSR 105
Hellen and Fordyce v Alex G Grivas Pty Limited [2002] NSWSC 1019
Hession v Century 21 South Pacific Ltd (1992) 28 NSWLR 120.
Jonas v Rocklea Spinning Mills Pty Limited [2000] VSC 93
Standard Chartered Bank of Australia Limited v Antico & Ors (No 2) (1995) 38 NSWLR 290
Westralian Gold Mines Ltd v Westralian Minerals & Drilling Pty Ltd (in liq) (1986) 4 ACLC 167

PARTIES: Polstead Pty Ltd (in liq) (plaintiff)
Sandip Shah (first defendant)
Shamshad Ahmed (second defendant)
Zeena Ahmed (third defendant)

FILE NUMBER(S): SC 3184/06

COUNSEL: Mr A Paterson (plaintiff)
Mr J Kelly SC w Mr A Narayan (defendants)

SOLICITORS: Sarvaas Ciaparras Lawyers (plaintiff)
Dominic Stamfords (defendants)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CORPORATIONS LIST

BRERETON J

Tuesday 5 May 2009

3184/06 Polstead Pty Ltd (in liq) v Sandip Shah & Ors

JUDGMENT (ex tempore)

1 HIS HONOUR: By originating process filed on 9 June 2008 and subsequently amended on 22 August 2008, the plaintiff Polstead Pty Limited (in liq) claims compensation, pursuant to Corporations Act s 588G and s 588M, from the first defendant Sandip Shah who were directors of Polstead. By interlocutory process filed on 14 November 2008, the defendants claim security for their costs in the sum of $150,000, or such other amount as the Court deems fit.

2 UCPR 42.21(1) relevantly provides as follows:

(1) If, in any proceedings, it appears to the court on the application of a defendant ...

(d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, ... the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant’s costs of the proceedings and that the proceedings be stayed until…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2009] NSWSC 560
Decision Date: 5 May 2009

CaseChat Overview and Summary

Polstead Pty Ltd, a company in liquidation, initiated legal proceedings against Shah, and the case was heard in the Federal Circuit and Family Court of Australia. The central issue in the case was whether the plaintiff had a reasonable basis to believe that the company, being in liquidation, would be unable to cover the costs incurred by the defendant if the defendant were to prevail in the proceedings. Furthermore, the court had to determine whether security should be required from the plaintiff for the defendant's costs and, if so, the appropriate amount of such security.

The court was tasked with assessing the likelihood of the company in liquidation being unable to pay the costs, and if such a likelihood existed, it had to consider the discretionary factors influencing the decision to require security. The primary concern was the risk of the defendant not being compensated if the plaintiff failed to pay the costs. The court had to weigh the risk against the potential hardship on the plaintiff in requiring it to provide security. In this instance, the court found that there was a serious reason to believe that the plaintiff would be unable to pay the defendant's costs, and the discretionary considerations favoured requiring the plaintiff to provide security.

The court ultimately concluded that it was appropriate to order the plaintiff to provide security for the defendant's costs, given the serious reason to believe that the plaintiff would be unable to pay those costs. The quantum of the security was also determined by the court, taking into account the relevant factors and circumstances of the case. The final orders of the court mandated that the plaintiff provide security for the defendant's costs, with the specific amount of security being determined by the court based on the evidence and arguments presented.

Orders