FEDERAL COURT OF AUSTRALIA
Professional Vending Services Pty Ltd v Christou [2010] FCA 580
Citation: Professional Vending Services Pty Ltd v Christou [2010] FCA 580 Parties: PROFESSIONAL VENDING SERVICES PTY LTD (ACN 131 189 789) and AMINA & ASFALIA PTY LTD (ACN 010 560 586) v JIM CHRISTOU, AUSTRALIAN AUTOMATIC VENDING COMPANY PTY LTD (ACN 085 423 490) and GAIL CHRISTOU File number(s): VID 854 of 2009 Judge: BROMBERG J Date of judgment: 10 June 2010 Catchwords: COSTS – Security for costs – s 1335 Corporations Act –
corporation not impecunious but may not be able to meet an adverse costs order at the time such order would need to be complied with – Threshold test: is there a reason to believe that the corporation would be unable to pay the defendant’s costs – Discretionary factors: extent of risk of corporation’s inability to meet a costs order and whether unjust to impose an additional financial burden upon the corporation – Security for costs ordered.Legislation: Corporations Act 2001 (Cth) s 1335(1)
Federal Court of Australia Act1976 (Cth) ss 35A(5) and 56
Cases cited: Acohs Pty Ltd v Ucorp Pty Ltd [2006] FCA 1279
Beach Petroleum NL v Johnson (1992) 7 ACSR 203
Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93Date of hearing: 11 May 2010 Date of last submissions: 22 April 2010 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 43 Counsel for the Applicants: Ms E Bennett Solicitor for the Applicants: Donaldson Trumble Lawyers Counsel for the Respondents: Mr M Galvin Solicitor for the Respondents: B2B Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 854 of 2009
BETWEEN: PROFESSIONAL VENDING SERVICES PTY LTD (ACN 131 189 789)
First ApplicantAMINA & ASFALIA PTY LTD (ACN 010 560 586)
Second ApplicantAND: JIM CHRISTOU
First RespondentAUSTRALIAN AUTOMATIC VENDING COMPANY PTY LTD (ACN 085 423 490)
Second RespondentGAIL CHRISTOU
Third Respondent
JUDGE:
BROMBERG J
DATE OF ORDER:
10 JUNE 2010
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
1.The applicant provide security for the first and second respondents’ costs up to and including the first day of trial in the amount of $42,000, to be paid by instalment as follows:
(a) $10,000 by 24 June 2010;
(b) $10,000 by 19 July 2010;
(c) $10,000 by 16 August 2010; and
(d) $12,000 by 13 September 2010.
2.Payments made under Order 1 are to be made and the monies are to be held in a manner agreed to in writing by the first applicant and the first and second respondent on or before 24 June 2010, or if no such agreement is made, in a manner satisfactory to a Registrar of the Court.
3.If the first applicant is in default of a payment required by Order 1 for 14 days or longer, unless the Court otherwise orders, the first applicant’s application shall thereupon be stayed.
4.Orders 2 and 3 of the orders made by Registrar Luxton on 1 March 2010 be set…
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- Case
- [2010] FCA 580
- Decision Date
CaseChat Overview and Summary
In examining the financial circumstances of Professional Vending, the court applied the statutory test outlined in section 1335(1) of the Corporations Act, focusing on whether there was a credible belief that the corporation would be unable to pay the defendant’s costs. The court considered the test for jurisdictional application, which requires a rational basis for the belief that there is a real chance, albeit not necessarily high, that the corporation might be unable to pay the defendant’s costs. The decision in this matter was informed by the precedent set in Beach Petroleum NL v Johnson and Livingspring Pty Ltd v Kliger Partners, where it was held that the phrase ‘reason to believe’ in the statutory provision requires a practical, commonsense approach and a low threshold of risk assessment. The court found that the evidence presented was sufficient to meet this threshold.
Upon reviewing the evidence, the court determined that there was indeed a credible belief that Professional Vending might be unable to pay the defendant’s costs. Therefore, the court ordered that Professional Vending provide security for costs in the sum of $42,000, payable by four instalments. This decision was made to safeguard the defendant against the potential risk of the plaintiff corporation's inability to pay the costs if the defendant were to prevail in the legal proceedings. The court’s ruling was thus based on a careful evaluation of the financial evidence and the statutory requirements for ordering security for costs.
Orders
Orders of the court
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Background
Background to the litigation
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Evidence Before The Court
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Ratio Decidendi
Legal Principle Established
For the reasons which follow, I have determined that Professional Vending should provide security for costs in the sum of $42,000 payable by four instalments.SECTION 1335 OF THE CORPORATIONS ACT The Court has power to order security under s 56 of the Federal Court Act, but the matter was argued before me and is to be resolved under s 1335(1) of the Corporations Act 2001 (Cth) (“the Corporations Act”). That provision provides as follows:(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. As the authorities demonstrate, before the discretion provided by s 1335 is enlivened, a threshold condition for the exercise of the power needs to be satisfied. That jurisdictional condition is whether:…there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful. Courts have often applied the test formulated by Von Doussa J in Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205, as follows:In my opinion the power of the court under s 1335 arises if credible evidence establishes that there is reason to believe there was a real chance that in events which can fairly be described as reasonably possible the plaintiff corporation will be unable to pay the costs of the defendant on the service of the allocatur, if judgment goes against it. This will be so even if in other events which can also be fairly described as reasonably possible the plaintiff corporation would be able to pay the costs. The degree of likelihood of the plaintiff corporation being unable to pay the costs, along with all the circumstances, actual and possible, about its financial position, would be then taken into account in the exercise of discretion, and in framing the orders of the court if the decision is to order security. In Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93 at [12]-[15] Maxwell P and Buchanan JA expressed the view that it would be wrong to substitute a judicial exposition for the words of the statute itself. As their Honours observed, the language of the statutory test is clear and the courts must address the question which the section poses, namely:Is there reason to believe that the corporation will be unable to pay the defendant’s costs? I respectfully adopt and will apply the approach of Maxwell P and Buchanan JA set out at [15]-[16] of their judgment, as follows:15 The phrase ‘reason to believe’ is the touchstone of jurisdiction. It requires a rational basis for the belief – and no more. The wording adopted may be contrasted with other familiar formulations such as ‘If the court is satisfied that ... ‘or ‘If in the view of the court it is likely that ...’ The section requires the making of a judgment, a risk assessment: is there a risk that the corporation will be unable to pay? (It adds nothing, in our view, to say that it must be a “real risk”.) A risk assessment is, of necessity, imprecise. The section calls for a practical, commonsense approach to the examination of the corporation’s financial affairs. 16 It may be said, with justification, that this is a low threshold. But the test simply reflects the policy of the provision, which is to protect a defendant against the risk of the plaintiff corporation’s impecuniosity. The provision equips the court with the means to require that the defendant be secured against that risk. (citations omitted)