Prinsloo v Stanton (WA) Pty Ltd

Case [2015] FCA 1081

FEDERAL COURT OF AUSTRALIA

Prinsloo v Stanton (WA) Pty Ltd [2015] FCA 1081

Citation: Prinsloo v Stanton (WA) Pty Ltd [2015] FCA 1081
Parties: CHRISTIAAN ALBRECHT PRINSLOO, PRINWALLA HOLDINGS PTY LTD ACN 089 981 402 and KANDABE PTY LTD ACN 002 355 062 v STANTON (WA) PTY LTD ACN 126 742 498 and QUBE BULK PTY LTD ACN 138 868 756
File number: NSD 848 of 2015
Judge: GLEESON J
Date of judgment: 8 October 2015
Catchwords: DISCOVERY – preliminary discovery application – where scope of discovery agreed – whether prospective applicants to bear costs of preliminary discovery application – whether prospective applicants to pay costs of complying with preliminary discovery orders – whether contingent costs order to be made
Legislation: Federal Court Act 1976 (Cth), s 43(2)
Federal Court Rules 2011 (Cth), r 7.29
Cases cited: Andrews Advertising Pty Ltd v Andrews [2011] NSWSC 244
C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864
Cappuccio v Australia and New Zealand Banking Group [1999] FCA 1188
Dallas Buyers Club LLC v iiNet Ltd (No 3) [2015] FCA 422
EBOS Group Pty Ltd v Team Medical Supplies Pty Ltd (No 3) [2012] FCA 48; (2012) 199 FCR 533
ED Oates Pty Ltd v Edgar Edmondson Imports [2012] FCA 356
J&A Vaughan Super Pty Ltd v Becton Property Group Ltd [2013] FCA 340
Newcrest Mining Limited v Apache Northwest Pty Ltd (No 2) [2008] FCA 1663
Novartis AG v Agvantage Pty Ltd [2012] FCA 160
ObjectiVision Pty Ltd v VisionSearch Pty Ltd (No 3) [2015] FCA 304
Petar v Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142
Re Minister for Immigration and Ethnic Affairs of the Commonwealth of Australia; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622
SmithKline Beecham plc v Alphapharm Pty Ltd [2001] FCA 271
Steffen vAustralia and New Zealand Banking Group Ltd [2009] NSWSC 883
Date of hearing: Determined on the papers
Date of last submissions: 28 August 2015
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 37
Counsel for the Prospective Applicants: Mr D Greenburg
Solicitor for the Prospective Applicants: Ashurst Australia
Counsel for the First Prospective Respondent: Mr M Condon SC with Ms S Tame
Solicitor for the First Prospective Respondent: Judd Commercial Lawyers
Solicitor for the Second Prospective Respondent: Mr MA Easton of K&L Gates

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 848 of 2015
BETWEEN:

CHRISTIAAN ALBRECHT PRINSLOO
First Prospective Applicant

PRINWALLA HOLDINGS PTY LTD ACN 089 981 402
Second Prospective Applicant

KANDABE PTY LTD ACN 002 355 062
Third Prospective Applicant
AND:

STANTON (WA) PTY LTD ACN 126 742 498
First Prospective Respondent

QUBE BULK PTY LTD ACN 138 868 756
Second Prospective Respondent

JUDGE:

GLEESON J

DATE OF ORDER:

8 OCTOBER 2015

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The prospective applicants pay the costs of the prospective respondents, comprising the costs of the application for preliminary discovery (including the argument on…

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Prinsloo v Stanton (WA) Pty Ltd [2015] FCA 1081
Case
[2015] FCA 1081
Decision Date

CaseChat Overview and Summary

In the case of Prinsloo v Stanton (WA) Pty Ltd, the parties were engaged in a dispute relating to the sale of shares in Oztran Aust Pty Ltd, a trucking business. The dispute centred on whether the prospective applicants, the Prinsloo parties, would bear the costs of a preliminary discovery application and the costs of complying with the discovery orders. The primary issue before the court was whether the prospective applicants should bear the costs of the preliminary discovery application and compliance, or if the prospective respondents, Stanton and Qube, should bear these costs. The court had to consider whether a contingent costs order was appropriate in this situation.

The court considered whether the prospective applicants should bear their own costs, given that they had not articulated a precise cause of action against Qube. However, the court found that there was a reasonable basis for a belief that the Prinsloo parties had a prior equitable interest over shares presently held by Qube. The court held that a contingent costs order was appropriate in this case, as there was a real issue as to whether preliminary discovery had been required because the Prinsloo parties had not had access to documents to which they were entitled. The court noted that if the Prinsloo parties held or held shares in Oztran, they should have been able to obtain many of the documents ordered to be produced without approaching the Court and should not be liable for the costs of the application.

The court made a contingent costs order, stating that the prospective applicants would pay the costs of the prospective respondents unless, on or before a specified date, one or more of the prospective applicants commenced substantive proceedings substantially as described in the affidavit. In the event that such action was commenced, those costs would be costs in that action. The court's decision was based on the principle of costs in the cause, as outlined in Petar v Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142 at [21]. The court found that the issues in any prospective proceeding were relatively confined, and the prospective respondents would have the benefit of an order that the prospective applicants pay their costs in the event that proceedings are not commenced within a reasonably short period.

Orders

Orders of the court

1. The prospective applicants pay the costs of the prospective respondents, comprising the costs of the application for preliminary discovery (including the argument on costs), and the costs of complying with the orders for preliminary discovery made on 21 August 2015, unless, on or before 18 December 2015, or such other date as may be directed, one or more of the prospective applicants commences substantive proceedings substantially as described in the affidavit of the first prospective applicant dated 17 July 2015. In the event that such action is commenced, those costs will be costs in that action.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

Each of the parties lodged written submissions in support of their respective positions.Background The application for preliminary discovery was made on 17 July 2015. By affidavit sworn 17 July 2015, the first prospective applicant (“Mr Prinsloo”) gave the following evidence in support of the application:(1)The Prinsloo parties purchased shares in Oztran Aust Pty Ltd (“Oztran”) from Stanton, apparently pursuant to a Share Sale Agreement made on about 14 May 2012. Stanton continued to own the majority of the shares in Oztran. The Prinsloo parties provided substantial consideration for the purchase;(2)Oztran conducted a trucking business at Port Hedland, Western Australia;(3)Mr Prinsloo on behalf of the Prinsloo parties did work to improve the value of Oztran at the request of Brent Stanton (“Mr Stanton”), the sole shareholder and director of Stanton;(4)In early 2013, Mr Stanton told Mr Prinsloo that he would begin looking for a purchaser to acquire Oztran’s business. In January 2014, Mr Stanton told Mr Prinsloo that two parties, including Qube, were interested in acquiring “our operations”;(5)On about 3 June 2014, Mr Stanton told Mr Prinsloo that it had been agreed that Oztran would be sold to Qube and that Qube would be taking over Oztran from 30 June 2014;(6)In about June 2014, Qube purchased 100% of the shares in Oztran. Qube’s annual report for the financial year ended 30 June 2014 states:On 1 July 2014, the Group acquired 100% of Oztran Aust Pty Ltd, Oztran Assets Pty Ltd and Stanton Oztran Pty Ltd together with certain equipment bassets (Oztran). Oztran is a bulk haulage transport business based in Port Hedland Western Australia. The purchase price for Oztran was approximately $25.1 million with a further maximum amount of $9 million in contingent consideration payable subject to Oztran business outcomes and performance thresholds over a 3 year period.(7)After the sale, Mr Stanton failed to provide Mr Prinsloo with any relevant details including the sale price, the dates on which payments were to be made by Qube and how it was intended that the sale proceeds obtained from Qube would be applied;(8)In April 2015, Mr Stanton said that he would get Qube to pay Mr Prinsloo an unspecified amount of money; (9)To date, none of Stanton, Mr Stanton and Qube have paid the Prinsloo parties for their proportion of the shares in Oztran purchased by Qube. Nor have the Prinsloo parties received any dividends in relation to their shares in Oztran. Mr Prinsloo deposed to his belief that the Prinsloo parties may have cause to commence proceedings against Stanton and Mr Stanton to seek damages for breach of contract, misleading or deceptive conduct and breach of trust. He considers that it may also be necessary to bring proceedings against Qube to seek a mandatory injunction requiring Qube to make future payments under its sale contract to the Prinsloo parties rather than Stanton. Mr Prinsloo also gave evidence of substantial efforts to determine whether he has a cause of action against Stanton or Qube including:(a)Multiple unsuccessful attempts to speak with Mr Stanton, in circumstances which led Mr Prinsloo to believe that Mr Stanton was avoiding him;(b)Unsuccessful efforts to obtain information through Mr Stanton’s accountant and lawyers; and(c)Unsuccessful efforts to obtain information through Qube’s lawyers.6 August 2015 hearing

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

In reaching this conclusion I note that the cases where a court has expressed disapproval of a contingent costs order did not, so far as I can tell, involve an application for documents evidencing a right to an asset claimed by the applicant, or evidencing dealings with such an asset. Conclusion I will make a contingent costs order.

Ratio Decidendi

Legal Principle Established

Qube’s submissions note that Qube does not accept that the Prinsloo parties have disclosed any cause of action against Qube upon which relief might be granted, or otherwise disclosed any reasonable basis for a belief that any cause of action may exist against Qube. I accept that the Prinsloo parties have not articulated a precise cause of action, but I do not accept that they have not disclosed a reasonable basis for a belief that any cause of action may exist against Qube. In my view, the asserted facts suggest a reasonable basis for a belief that the Prinsloo parties have a prior equitable interest over shares presently held by Qube, which they would be entitled to assert against Qube. In saying this, I do not mean to suggest that the Prinsloo parties do in fact have such a right, only that the requisite reasonable basis test appears to be satisfied.Consideration I am not convinced that each party should bear its own costs of the discovery application because, in my view, those costs should be borne by the Prinsloo parties if, in due course, they decide against commencing substantive proceedings. I am not satisfied that either Stanton or Qube has conducted itself in a manner which would necessarily warrant that they should bear their own costs: they ultimately consented to the application save as to costs. In my view, a contingent costs order (in relation to both the costs of the application and the costs of compliance) is appropriate in this case because, on the current evidence, there is a real issue as to whether preliminary discovery has been required because the Prinsloo parties have not had access to documents to which they are entitled. If it is the case that they hold or held shares in Oztran, they should have been able to obtain many of the documents ordered to be produced (the share certificates being an obvious example, if they exist, and the share sale agreements) without approaching the Court and should not be liable for the costs of the application. However, I am not presently able to adjudicate on the Prinsloo parties’ entitlement to the documents apart from an order for preliminary discovery. Accordingly, I consider the appropriate order to be an order in the nature of costs in the cause: cf Petar v Macedonian Orthodox Community Church St Petka Inc (No 2) [2007] NSWCA 142 at [21]. At present, I do not have reason to believe that a contingent costs order will expose Stanton and Qube to an indefinite delay in recovering its costs. On its currently foreshadowed ambit, the issues in any prospective proceeding are relatively confined and Stanton and Qube will be have the benefit of an order that the Prinsloo parties pay their costs in the event that proceedings are not commenced within a reasonably short period. In reaching this conclusion I note that the cases where a court has expressed disapproval of a contingent costs order did not, so far as I can tell, involve an application for documents evidencing a right to an asset claimed by the applicant, or evidencing dealings with such an asset. Conclusion