Preston Super Access Pty Ltd v Australian Trade Commission
[2013] FCA 1450
•3 December 2013
FEDERAL COURT OF AUSTRALIA
Preston Super Access Pty Ltd v Australian Trade Commission [2013] FCA 1450
Citation: Preston Super Access Pty Ltd v Australian Trade Commission [2013] FCA 1450 Appeal from: Preston SuperAccess Pty Limited v Australian Trade Commission [2013] AATA 537 Parties: PRESTON SUPER ACCESS PTY LTD v AUSTRALIAN TRADE COMMISSION and ADMINISTRATIVE APPEALS TRIBUNAL File number: NSD 1774 of 2013 Judge: COWDROY J Date of judgment: 3 December 2013 Legislation: Federal Court of Australia Act 1976 (Cth) s 56
Federal Court Rules 2011 (Cth) rr 4.01, 19.01
Cases cited: Bell Wholesale Co Limited v Gates Export Corporation (1984) 2 FCR 1 Date of hearing: 3 December 2013 Date of publication of reasons: 24 December 2013 Place: Sydney Division: GENERAL DIVISION Category: No catchwords Number of paragraphs: 23 Counsel for the Applicant: Mr J Preston, appeared on behalf of the Applicant Counsel for the First Respondent: Mr G Johnson SC Solicitor for the First Respondent: DLA Piper Counsel for the Second Respondent: The Second Respondent did not appear
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1774 of 2013
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: PRESTON SUPER ACCESS PTY LTD
ApplicantAND: AUSTRALIAN TRADE COMMISSION
First RespondentADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE:
COWDROY J
DATE OF ORDER:
24 DECEMBER 2013
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.By 4.00 pm on Wednesday 15 January 2014, the Applicant lodge with the Sydney Registry of the Federal Court of Australia security for the First Respondent’s costs in the sum of $25,000.
2.The security referred to in order 1 be in the form of an unconditional bank guarantee in favour of the First Respondent from an Australian registered bank or a bank cheque.
3.If security is not provided pursuant to orders 1 and 2, the appeal from the decision of the Second Respondent be dismissed.
4.In the event that the appeal is dismissed pursuant to order 3, the Applicant pay the First Respondent’s costs.
5.If security is paid pursuant to orders 1 and 2, the proceeding be listed for directions at 9.30 am on Tuesday 4 February 2014.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
NSD 1774 of 2013
ON APPEAL FROM THE ADMINISTRATIVE APPEALS TRIBUNAL
BETWEEN: PRESTON SUPER ACCESS PTY LTD
ApplicantAND: AUSTRALIAN TRADE COMMISSION
First RespondentADMINISTRATIVE APPEALS TRIBUNAL
Second Respondent
JUDGE:
COWDROY J
DATE:
24 DECEMBER 2013
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The Court made orders in the proceedings following a hearing on security for costs on 3 December 2013. Those orders are as follows:
1.By 4.00 pm on Wednesday 15 January 2014, the Applicant lodge with the Sydney Registry of the Federal Court of Australia security for the First Respondent’s costs in the sum of $25,000.
2.The security referred to in order 1 be in the form of an unconditional bank guarantee in favour of the First Respondent from an Australian registered bank or a bank cheque.
3.If security is not provided pursuant to orders 1 and 2, the appeal from the decision of the Second Respondent be dismissed.
4.In the event that the appeal is dismissed pursuant to order 3, the Applicant pay the First Respondent’s costs.
5.If security is paid pursuant to orders 1 and 2, the proceeding be listed for directions at 9.30 am on Tuesday 4 February 2014.
The reasons for those orders are now provided hereunder.
BACKGROUND
By notice of appeal from a Tribunal filed on 30 August 2013 the applicant challenges the decision of the second respondent (‘the Tribunal’) delivered on 2 August 2013: see Preston SuperAccess Pty Limited v Australian Trade Commission [2013] AATA 537. The Tribunal found that the applicant was not eligible for a grant pursuant to the Export Market Development Grants Act 1997 (Cth). The Tribunal concluded that a new business in respect of which the grant was sought was sufficiently similar to other businesses founded by the sole director of the applicant, namely Mr John Preston, such that the new business of the applicant should be treated as a continuation of the old business. In these circumstances, the applicant was ineligible for a further grant because it did not comply with the Export Market Development Grants (Change in Ownership of Business) Guidelines 2006.
The proceeding first came before the Court on 25 September 2013. On that day the Court ordered that the applicant file and serve an amended notice of appeal specifying questions of law to be raised on the appeal and provide particulars of all grounds for such appeal by 4 October 2013. The Court also ordered that the first respondent (‘the ATC’) file any notice of objection to competency by 1 November 2013 and that the proceeding be listed for hearing on 25 November 2013.
On 21 October 2013 the ATC filed a notice of objection to competency on the basis that the notice of appeal filed on 30 August 2013 failed to identify any question of law which would arise on the appeal. The ATC sought that the question of competency be heard and determined at the hearing of the appeal on 25 November 2013. On 28 October 2013, the applicant filed an amended notice of appeal.
The proceeding came again before the Court on 31 October 2013. As the amended notice of appeal also appeared to fail to disclose any question of law, the Court ordered that the applicant may file a further amended notice of appeal by 7 November 2013.
Thereafter, the applicant terminated the services of its solicitor. When the matter came before the Court on 12 November 2013 Mr Preston sought to appear for the applicant. The Court explained to Mr Preston that a legal practitioner must appear for the applicant unless leave is granted: r 4.01(2) of the Federal Court Rules 2011 (Cth) (‘the Rules’). Orders were made that the applicant provide to the ATC a statement of its assets, liabilities and details of contracts for work.
At the next directions hearing on Friday 15 November 2013, Mr Preston again sought to appear for the applicant. On that day leave was granted to the ATC to file in court a notice of motion for security for costs. The hearing date for the appeal, being 25 November 2013, was vacated and an order was made that the application for security for costs be heard on 3 December 2013. Mr Preston was informed that on that date it was necessary for the applicant to have legal representation and that if it did not, the hearing would continue ex parte.
Before the Court on 3 December 2013 Mr Preston again sought to appear for the applicant. Mr Preston claimed that he had been unable to obtain the services of a lawyer for the applicant, in part due to their requests for monies to be paid into trust in advance of the hearing. Mr Preston acknowledged that he had not offered to pay funds from his own resources sufficient to meet the solicitor’s costs of appearing on the security for costs application. Despite the absence of a lawyer for the applicant, and the Court’s previous clear direction that such representation was necessary, the Court permitted Mr Preston to participate in the hearing for security for costs.
APPLICATION FOR SECURITY FOR COSTS
This application is brought pursuant to r 19.01 of the Rules and s 56 of the Federal Court of Australia Act 1976 (Cth) (‘the Act’). The application is supported by two affidavits affirmed by Leonard Keith Leerdam on 14 November 2013 and 2 December 2013. They shall be referred to as the first and second affidavits respectively.
The first affidavit attaches a balance sheet of the applicant as at 13 November 2013. The balance sheet was supplied by Mr Preston, and prepared by him. It reveals that the applicant’s liabilities exceed its assets by approximately $64,988.85. The liabilities include a loan from a company known as Norfeld Pty Limited (‘Norfeld’), of which Mr Preston is the sole director and shareholder. The outstanding amount in respect of that loan is over $140,000. A profit and loss statement from 1 July 2013 to 13 November 2013 which is also annexed to the first affidavit records a profit of $121,478.70.
Mr Preston sought to show the solvency of the applicant by reference to the assets of a group of companies for which he alleges to be a director. He claimed to be a director of approximately six companies and that his total assets were approximately $37,000,000 to $38,000,000. Norfeld was particularly prominent in Mr Preston’s submissions. Norfeld is purported to be the owner of a parcel of industrial real estate at Silverwater, New South Wales, valued at approximately $6,000,000, which is subject to an encumbrance of approximately $2,000,000. Furthermore, Mr Preston relied upon a licence agreement dated 25 November 2010 made between Patent Marketing Corporation Pty Limited and a Singaporean company. This information is not relevant, however, to the financial position of the applicant.
Indeed the only information of substance provided to the Court with respect to the applicant was an alleged, but not evidenced, contract with an international construction company, and a credit balance of $22,000 in the applicant’s bank account. Mr Preston did not suggest, or offer, prior to the hearing that the applicant should pay this sum by way of security for costs.
Mr Preston submitted that the amounts which were contained in the balance sheet and profit and loss account were variable and could be adjusted. However, he did not suggest that the financial information which he had provided to the ATC concerning the applicant was incorrect. Other statements from the Bar table by Mr Preston were also confusing. For example, he maintained that the applicant had no employees, yet when it was pointed out to him that, according to the balance sheet of the applicant, it had a liability for payroll tax, he stated that such liability arose because the company had employed some employees approximately nine months previously. Further, he stated that all his companies had managers. When asked whether the applicant had a manager he stated that it did not.
The correspondence attached to the first and second affidavits indicates that the applicant has not provided to the Court, as requested on 12 November 2013, its tax return for last year, nor has its verified its profit and loss statement provided to the Court. Further, the statements from the Bar table made by Mr Preston do not give the Court any confidence that the profit and loss statement and balance sheet for the applicant truly reflect its financial position.
It follows from the evidence supplied by Mr Preston that the applicant is potentially insolvent. Accordingly, the ATC has established that in the event that an order for costs was made against the applicant, it is unlikely that the applicant would be able to pay its debts.
Mr Preston sought to negotiate a compromise with the ATC concerning the application for security for costs. To this end he provided an undertaking dated 14 November 2013. It is not apparent from the document whether the undertaking is given on behalf of Norfeld or on behalf of the applicant. The document seeks to undertake that Norfeld would not call upon its loan to the applicant ‘until this matter is fully settled’. Further, it asserts that the applicant has funds of $25,000 available to pay any fees payable ‘after cost assessment or as ordered by the court’, and purports to guarantee that no additional debt will be incurred by the applicant. Due to the vague nature of the document, the Court pays little regard to it. Different considerations might have arisen if, for example, Mr Preston had offered a personal guarantee.
The Court has afforded great latitude to Mr Preston in allowing him to appear on three occasions and to make statements on behalf of the applicant, including submissions at the hearing in respect of the application for security for costs. There is no claim by the applicant that it is impecunious, nor that the ATC might be responsible for the applicant being unable to meet an order for costs, nor that the payment of security for costs would operate to frustrate the litigation. In any event, the applicant has not led evidence that its shareholders, being those who stand to benefit from the litigation should the applicant be successful, are impecunious: see Bell Wholesale Co Limited v Gates Export Corporation (1984) 2 FCR 1 at 4.
Mr Preston made a submission from the Bar table that he had sought legal representation from several solicitors. However, he said that the respondent’s application for security for costs had resulted in their refusal to represent the applicant unless monies were paid into their trust account on account of costs. This argument is of little weight. Even if the submission is accepted, such a request is not unusual especially in circumstances where a claim appears prima facie to be weak. Further, Mr Preston has provided no satisfactory explanation for his refusal to pay such solicitors despite the success of the numerous companies which he purportedly controls.
In making an order for security for costs in its discretion under s 56 of the Act, the Court is not imposing punishment. Rather, the Court does so to secure an appropriate sum to meet the ATC’s costs in the event that the applicant is ordered to pay the ATC’s costs.
One of the factors to be considered by a court is the apparent strength or weakness of a claim or defence. In this instance, the Court has repeatedly expressed its concern that the amended notice of appeal fails to disclose a question of law to be determined, but rather simply seeks to take issue with the findings of fact made by the Tribunal. Accordingly, the prospects of the applicant succeeding must presently be considered to be weak.
The amount of security sought by the ATC is $25,000. The first affidavit shows how this amount was arrived at. The Court considers such sum to be realistic. Further, the Court takes into consideration the fact that in the event that the appeal is unsuccessful, the prospect of recovery of the costs incurred by the ATC would be remote in view of the acknowledged asset and liability position of the applicant.
For these reasons the Court has ordered, inter alia, that the applicant provide security in the amount of $25,000.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Cowdroy. Associate:
Dated: 24 December 2013
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