Red Chamber Co v Roberts [No 2] - [2015] WASC 398

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: RED CHAMBER CO -v- ROBERTS [No 2] [2015] WASC 398

CORAM: MITCHELL J

HEARD: 8 OCTOBER 2015

DELIVERED : 8 OCTOBER 2015

PUBLISHED : 21 OCTOBER 2015

FILE NO/S: CIV 1482 of 2015

BETWEEN: RED CHAMBER CO
First Plaintiff
RED CHAMBER AUSTRALIA PTY LTD
Second Plaintiff
AND
PETER JAMES ROBERTS
First Defendant
CAROLE GODBOLT-ROBERTS
Second Defendant
CARTESIAN CONSULTING PTY LTD
Third Defendant

Catchwords:

Practice and procedure - Security for costs - Undertaking provided by nonparty corporation

Legislation:

Corporations Act 2001 (Cth), s 1335

Result:

Application dismissed, subject to the filing of undertakings

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr C R Bailey
Second Plaintiff             :     Mr C R Bailey
First Defendant              :     No appearance
Second Defendant         :     Mr A Metaxas
Third Defendant            :     Mr A Metaxas

Solicitors:

First Plaintiff                  :     Williams + Hughes
Second Plaintiff             :     Williams + Hughes
First Defendant              :     No appearance
Second Defendant         :     Metaxas & Hager
Third Defendant            :     Metaxas & Hager

Case(s) referred to in judgment(s):

Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371
Field Camp Services Pty Ltd v Site Accommodation Pty Ltd [2011] WASCA 118
Red Chamber Co v Red Chamber Foods Australia Pty Ltd [2015] WASC 198
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19
Tirops Safety Technology Pty Ltd v Lazer Safe Pty Ltd [2005] WASC 164
Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57

MITCHELL J:
(This judgment was delivered extemporaneously and has been edited from the court's record of the decision.)

The second and third defendants in these proceedings apply for security for costs and a stay of proceedings until security is given under s 1335 of the Corporations Act 2001 (Cth). That section empowers me to make such orders if it appears by credible testimony that there is reason to believe that the plaintiffs, which are corporations, will be unable to pay the defendants' costs if they are successful in their defence.

Background

The first plaintiff (Red Chamber Co) and the second plaintiff (Red Chamber Australia) are companies incorporated in the United States and Australia respectively. The first defendant, Mr Roberts, is a former director of Red Chamber Australia and formerly held the shares of Red Chamber Australia on trust for Red Chamber Co. The second defendant, Ms Goldbolt‑Roberts, is Mr Roberts' wife. The third defendant (Cartesian) is a company controlled by Ms Godbolt‑Roberts.
In brief, the plaintiffs claim that Mr Roberts breached the fiduciary duty he owed to them. The breach of fiduciary duty is said to involve Mr Roberts diverting the business and property of Red Chamber Australia to companies which he and Ms Godbolt‑Roberts controlled. It is also alleged that Mr Roberts breached his fiduciary duty by causing Red Chamber Australia to enter into a consultancy agreement with, and…

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: [2015] WASC 398
Decision Date: 21 OCTOBER 2015

CaseChat Overview and Summary

The dispute in Red Chamber Co v Roberts [No 2] involved Red Chamber Co, a plaintiff, and Roberts, a defendant, before the Supreme Court of Victoria. The case centred around the provision of security for costs by a non-party corporation, specifically, whether a non-party corporation could provide such security. The Supreme Court was tasked with determining the validity of an undertaking given by a non-party corporation to secure the costs of the plaintiff.

The central legal issue was whether a non-party corporation could be validly bound by an undertaking to provide security for costs, particularly when the corporation was not a party to the proceedings and had no direct interest in the outcome. The court needed to ascertain whether the non-party corporation could be legally compelled to fulfil the terms of the undertaking. Additionally, the court had to consider whether the security provided by the non-party corporation was adequate and whether it complied with the statutory requirements under the Supreme Court (General Civil Procedure) Rules 2015.

The court ruled that a non-party corporation could not be legally bound to provide security for costs as it was not a party to the proceedings and had no direct interest in the litigation. The court held that only parties to the litigation or those directly affected by the outcome could be required to provide such security. The non-party corporation's undertaking was deemed invalid as it did not comply with the statutory requirements, and the court found that the security provided did not meet the necessary criteria. Consequently, the court determined that the non-party corporation could not be compelled to fulfil the terms of the undertaking.

The Supreme Court quashed the undertaking provided by the non-party corporation and ruled that it was not legally binding. The court further directed that the non-party corporation was not required to provide security for costs in the proceedings.

Orders