Prudential-Bache Securities (Aust) Ltd v Greatlands Gen Ins Co Ltd
[1999] QSC 130
•17 June 1999
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane
Before Justice Wilson
Writ No.749 of 1998
[Prudential-Bache Securities (Aust) Ltd v Greatlands Gen. Ins. Co Ltd]
BETWEEN:
PRUDENTIAL-BACHE SECURITIES (AUSTRALIA)
LIMITED (ACN 005 382 169)
Plaintiff
AND:
GREATLANDS GENERAL INSURANCE COMPANY
LIMITED (ACN 003 641 834)
First Defendant
AND:
GREATLANDS PTY LTD (ACN 072 574 102)
Second Defendant
Writ No. 1570 of 1999
[Fielding as Liq. for Greatlands Gen. Ins. Co Ltd v Pru-Bache Sec.]
BETWEEN:
ANDREW PETER FIELDING as liquidator for
GREATLANDS GENERAL INSURANCE COMPANY LIMITED
ACN 003 641 834 (IN LIQUIDATION)
Plaintiff
AND:
PRUDENTIAL-BACHE SECURITIES (AUSTRALIA) LTD
(ACN 005 382 169)
Defendant
REASONS FOR JUDGMENT - WILSON J
Judgment delivered 17 June 1999
CATCHWORDS: PROCEDURE - JUDGMENTS AND ORDERS - COSTS - SECURITY FOR COSTS
CORPORATIONS - CONSTITUTION AND LEGAL CAPACITY - EXTERNAL LITIGATION - SECURITY FOR COSTS - application against plaintiff - plaintiff written off or disposed of all assets located in Australia - credible evidence that there is reason to believe plaintiff would be unable to pay defendant’s costs - application against defendant for security for costs of counterclaim - defendant in liquidation - counterclaim defensive in nature.
Beach Petroleum NL & Anor v. Johnson & Ors; Jingellic Minerals NL & Anor v King & Ors (1992) 10 ACLC 525, considered
Warren Mitchell Pty Ltd v Australian Maritime Officers Union & Ors (1993) 11 ACLC 1238, consideredCorporations Law s.1335
Counsel:Mr M. Daubney for the plaintiff in No. 749 of 1998 and for the defendant in No. 1570 of 1999
Mr P. Corkery for the first defendant in No. 749 of 1998 and for the plaintiff in No. 1570 of 1999
Solicitors:Blake Dawson Waldron for the plaintiff in No. 749 of 1998 and for the defendant in No. 1570 of 1999
Nicol Robinson Halletts for the first defendant in No. 749 of 1998 and for the plaintiff in No. 1570 of 1999
Hearing Date: 14 April 1999
IN THE SUPREME COURT
OF QUEENSLAND
Brisbane
Before Justice Wilson
Writ No.749 of 1998
[Prudential-Bache Securities (Aust) Ltd v Greatlands Gen. Ins. Co Ltd]
BETWEEN:
PRUDENTIAL-BACHE SECURITIES (AUSTRALIA)
LIMITED (ACN 005 382 169)
Plaintiff
AND:
GREATLANDS GENERAL INSURANCE COMPANY
LIMITED (ACN 003 641 834)
First Defendant
AND:
GREATLANDS PTY LTD (ACN 072 574 102)
Second Defendant
Writ No. 1570 of 1999
[Fielding as Liq. for Greatlands Gen. Ins. Co Ltd v Pru-Bache Sec.(Aus) Ltd]
BETWEEN:
ANDREW PETER FIELDING as liquidator for
GREATLANDS GENERAL INSURANCE COMPANY LIMITED
ACN 003 641 834 (IN LIQUIDATION)
Plaintiff
AND:
PRUDENTIAL-BACHE SECURITIES (AUSTRALIA) LTD
(ACN 005 382 169)
Defendant
REASONS FOR JUDGMENT - WILSON J
Judgment delivered 17 June 1999
There are four applications for determination in two related actions:
in no. 749 of 1998, an application by the first defendant against the plaintiff for security for costs (filed 25 March 1999);
in no. 749 of 1998, an application by the plaintiff against the first defendant for security for the costs of the counterclaim (filed 12 April 1999);
in no. 749 of 1998, an application by the first defendant that the action be heard together with no. 1570 of 1999 and that evidence in the one be evidence in the other, subject to all just exceptions and objections (filed 25 March 1999);
in no. 1570 of 1999, an application by the plaintiff that the action be heard together with no. 749 of 1998 and that evidence in the one be evidence in the other, subject to all just exceptions and objections (filed 25 March 1999).
The two actions to be heard together
The third and fourth applications are not opposed. I make orders as per paras. 1 and 2 of the respective summonses.
Security for the costs of the claim
In no. 749 of 1998 the plaintiff’s claim arises out of its acquisition on behalf of the second defendant of certain shares. The plaintiff claims that the first defendant agreed that the sum of $1.6 million deposited with the plaintiff by the first defendant would be applied in satisfaction of the second defendant’s debt to the plaintiff. The first defendant refused to make that sum available for the satisfaction of the second defendant’s debt, and the plaintiff has sued for damages for breach of contract, a declaration that it is entitled to apply the money in satisfaction of the debt, and damages for breach of s.52 of the Trade Practices Act 1974.
The plaintiff is an Australian company within an international insurance group. It is owned by Prudential Securities Group Incorporated, which is itself a subsidiary of the Prudential Insurance Company. Since November 1998 the plaintiff has been in a “wind down process”. It has disposed of or written off all its assets located in Australia. On 21 January 1999 its solicitors wrote to the solicitors for the first defendant advising that as a result of the sale of the Australian assets it would be necessary to transfer the fund in question from the Austrust Cash Deposit Fund account where it had been held to a nominee account known as “Pru-Bache Nominees Pty Ltd”. The solicitors for the first defendant agreed to this but raised the question of security for costs.
On 15 March 1999 the solicitors for the plaintiff advised that their client was not willing to provide security for costs; that if the first defendant was successful in its counterclaim its costs would be met by Prudential-Bache Securities from funds held in Hong Kong; and that it would be maintaining some assets in the jurisdiction for at least another 18 months which would be sufficient for the first defendant to execute against if necessary. The solicitors for the first defendant raised a number of queries two days later but these have been unanswered.
According to one of the plaintiff’s directors, Helen G Barnhill, the plaintiff is maintaining a bank account with Citibank in Sydney which contains and will continue to contain sufficient funds to meet its debts as and when they fall due. However, she has not disclosed the balance of the account. She has described the procedure for the maintenance, processing and payment of invoices.
The court has power to order security for costs pursuant to s.1335 of the Corporations Law and as an inherent power. Section 1335(1) provides:
“Where a corporation is plaintiff in any action or other legal proceedings, 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.”
The jurisdiction is enlivened by there being credible evidence that there is reason to believe that the plaintiff would be unable to pay the defendant’s costs. In Beach Petroleum NL & Anor v. Johnson & Ors; Jingellic Minerals NL & Anor v King & Ors (1992) 10 ACLC 525 at 527, von Doussa J said:
“In my opinion the power of the Court under s. 1335 arises if credible evidence establishes that there is reason to believe there is 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 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 to be taken into account in the exercise of the discretion, and in framing the orders of the Court if the decision is to order security.”
See also the decision of Lee J of the Federal Court in Warren Mitchell Pty Ltd v Australian Maritime Officers Union & Ors (1993) 11 ACLC 1238.
The threshold test posed by s.1335 has been passed. The disposal of Australian assets, the dependency on funds from Hong Kong to meet the costs of the counterclaim (and presumably also those of the claim), the failure to disclose the balance of the Citibank accounts and the failure to respond to the queries raised by the first defendant’s solicitors on 17 March 1999 all give rise to reason to believe that the plaintiff would be unable to pay the defendant’s costs if the defence were successful.
The court then has an unfettered discretion whether to order security, and if so, in what amount and in what form. That there is credible evidence sufficient to enliven the jurisdiction is itself a relevant factor in the exercise of that discretion. The plaintiff’s assets (the extent of which has not been disclosed) will be at some undisclosed off shore location or locations. Those factors in themselves are sufficient to persuade me that the plaintiff ought to be ordered to give security for costs.
Both the plaintiff’s solicitor and the first defendant’s solicitor have estimated the length of trial at three days. There is a counterclaim, but from my perusal of the pleadings, it seems unlikely that it would add significantly to the length of the trial. The solicitor for the first defendant has estimated his client’s costs on a party and party basis to date at $14,101 and the further costs including a three day trial on a party and party basis at $45,000. His client seeks security in the full amount of $59,101.
In my view it is appropriate to order security up to and including the first day of the trial in the sum of $50,000, and to give liberty to apply for further security thereafter.
I will hear counsel on the form of the order and on the question of costs.
Security for the costs of the counterclaim
The counterclaim is essentially defensive in nature. It repeats and relies upon the allegations in the defence. Then it refers to a deed executed by the plaintiff and the first defendant in or about November 1997 by which they acknowledged that they were in dispute about the $1.6 million and agreed that pending resolution of the dispute the amount should stand to the credit of an account of the first defendant with the plaintiff subject to the terms of the deed. Counsel for the first defendant has said that the reference to this deed does not give rise to a separate basis of the counterclaim. The pleading goes on to allege that “in the premises pleaded in the defence” the plaintiff has no claim over the deposit in respect of any indebtedness by the second defendant to the plaintiff and that “in the premises” the amount of the deposit and accrued interest constitutes a debt due and owing by the plaintiff to the first defendant. There is an allegation (as there is in the defence) that the transaction was an insolvent transaction within the meaning of s.588FC of the Corporations Law, and a claim that accordingly it was voidable. The first defendant is seeking judgment for the amount of the deposit and interest and (in effect) declaratory relief.
The first defendant is in liquidation. By its pleading it has itself raised its insolvency. Hence the jurisdiction in s.1335 of the Corporations Law is enlivened. However, given the defensive nature of the counterclaim, and the fact that it is unlikely to increase the length of the trial appreciably, in the exercise of my discretion I would dismiss the application for security for the costs of the counterclaim.
I will hear counsel with respect to the costs of that application.
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