Rove Estate Pty Ltd v Chomp Excavation and Demolition Pty Ltd
[2020] NSWSC 1839
•16 December 2020
Supreme Court
New South Wales
Medium Neutral Citation: Rove Estate Pty Ltd v Chomp Excavation and Demolition Pty Ltd [2020] NSWSC 1839 Hearing dates: 15 December 2020 Date of orders: 16 December 2020 Decision date: 16 December 2020 Jurisdiction: Equity - Technology and Construction List Before: Stevenson J Decision: Security for costs to be ordered
Catchwords: COSTS – security for costs – where plaintiff a trustee with right of indemnity from trust assets – only current asset of trust an unsecured loan to another trust – whether plaintiff has shown it will have recourse to trustee property
Legislation Cited: Corporations Act 2001 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Binetter v Binetter [2020] NSWSC 552
Funds First Pty Ltd v Owners Corporation Strata Plan 66609 (No 2) [2008] NSWSC 428
Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584
Transocean Capital Pty Ltd v AFSIG Pty Ltd [2006] NSWSC 806
Category: Procedural and other rulings Parties: Rove Estate Pty Ltd atf Lane Cove Estate Trust (Plaintiff)
Chomp Excavations & Demolition Pty Ltd (First Defendant)
Haulbuild Pty Ltd (Third Defendant)
George Abousleiman (Eighth Defendant)Representation: Counsel:
Solicitors:
F Corsaro SC (Plaintiff)
S Mihalatos, Solicitor (First Defendant)
L Pordeli, Solicitor (Third Defendant)
I G A Archibald (Eighth Defendant)
Memcorp Lawyers (Plaintiff)
Mihalatos & Associates (First Defendant)
Concordia Legal (Third Defendant)
Harrington Lawyers (Eighth Defendant)
File Number(s): 2019/381976
Judgment
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The plaintiff, Rove Estate Pty Ltd, is the trustee of the Lane Cove Estate Trust (“the Trust”).
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In July 2018 Rove was the proprietor of a property in Lane Cove West (“the Property”). Rove alleges that on 13 and 14 July 2018 each of the ten defendants entered the Property without permission and disposed of contaminated waste on the Property.
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Rove sues the defendants for trespass and breach of statutory duty and claims damages for the cost of remediating the Property
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The first to fourth defendants are corporations, and the fifth to tenth defendants are individuals whose vehicles allegedly entered the Property.
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Three of the defendants, Chomp Excavation and Demolition Pty Ltd [1] , Haulbuild Pty Ltd [2] , and Mr Abousleiman [3] have filed motions seeking an order that Rove provide security for their costs of the proceedings.
1. The first defendant.
2. The third defendant.
3. The eighth defendant.
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Mr Archibald appeared for Mr Abousleiman, Ms Pordeli appeared for Haulbuild, and Mr Mihalatos appeared for Chomp Excavation.
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Mr Mihalatos informed me that he had only, overnight, obtained instructions to appear for Chomp Excavation.
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Mr Corsaro SC, who appeared for Rove, accepted that the bases upon which each of the applications for security were sought were the same.
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For that reason, I heard the application by Haulbuild and Mr Abousleiman and left, for further consideration, the application by Chomp Excavation.
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Mr Archibald took the running of the application and Ms Pordeli adopted Mr Archibald’s submissions.
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Before me there was debate as to Rove’s prospects in the proceedings. Mr Corsaro submitted that Rove has a strong case and that, based on what is currently known, there is a high degree of probability that Rove Estate will succeed.
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Mr Corsaro informed me that Rove’s case will be that each of the defendants, illegally and without permission, entered the Property and dumped contaminated waste thereon. Mr Corsaro submitted that, at the trial, it would be for the defendants to establish whether, as some of them evidently contend, they had consent to enter the Property and to establish that their activities did not contribute to the damage that Rove says it will demonstrate.
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It is not appropriate that I express any view about these matters, save to say that I am satisfied, as Mr Archibald and Ms Pordeli accepted, that Rove has a good arguable case.
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Debate before me focused on the fact that Rove is a trustee of the Trust and, apart from its right of indemnity against the assets of the Trust, has no assets of substance.
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In particular, it has no real estate as it has now sold the Property and, as I describe below, loaned the proceeds on an unsecured basis to related companies.
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The question is whether there is reason to believe that Rove Estates will be unable to pay the defendants’ costs if ordered to do so. [4]
4. Uniform Civil Procedure Rules 2005 (NSW) r 42.21(1); and see also s 1335(1) of the Corporations Act 2001 (Cth).
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Where:
“…a plaintiff is a trustee and its only asset is its right of indemnity as trustee against the trust assets, an applicant for security will be taken to have satisfied the onus of establishing that there is reason to believe that the plaintiff will be unable to pay a costs order if so ordered, unless the plaintiff can establish that it will have recourse to property or assets held by it on trust.”[5]
5. Funds First Pty Ltd v Owners Corporation Strata Plan 66609 (No 2) [2008] NSWSC 428 at [5] (Brereton J); and the authorities to which his Honour referred.
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And:
“… a trustee company which desires to resist an order for security for costs should establish that recourse to property held by it or for it will be available to the party against whom it has brought its action and be adequate, at the appropriate time, to meet the possible liability for costs.”[6]
6. Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584 at 46,731 (Smithers J) cited with approval in Transocean Capital Pty Ltd v AFSIG Pty Ltd [2006] NSWSC 806 (Barrett J) at [35]; and see also more recently Binetter v Binetter [2020] NSWSC 552 at [15] (Beech-Jones J).
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Rove Estate is entitled to indemnity from the assets of the Trust. [7]
7. Clause 75 of the Unit Trust Deed of 1 August 2012.
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The Trust draft accounts for 30 June 2020 show trading income from “sale of goods” [8] of some $46.6 million, from which the Trust has undistributed income of some $22.3 million.
8. Evidently, the Property.
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The draft balance sheet for the Trust at 30 June 2020 shows total equity of some $20.25 million which is substantially comprised of current assets of “Loans – Related Parties” of some $20.45 million.
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Draft accounts for the Trust at 7 October 2020 show that the “Undistributed Trust Income” is now negative $10,662 [9] and that its net equity is some $20.245 million represented in substance by “Loans – Related Parties” of some $20.44 million.
9. Mr Corsaro submitted that the reduction since 30 June 2020 was by reason of the sale of the Property
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The related party to whom the Trust has made the loan represented by this asset is Demian Commercial Pty Ltd, as trustee for the Demian Commercial Trust.
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Demian Commercial also has a right of indemnity against the assets of the Demian Commercial Trust. [10]
10. Clause 11.2 of the Deed of Settlement of 29 June 2018 establishing that trust.
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As at 30 June 2020 the Demian Commercial Trust had undistributed Trust income of some $2.25 million.
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According to its balance sheet it has a total equity of some $1.95 million with current assets being “Loans – Related Parties” of some $204 million (comprising loans to a large number of parties) and current liabilities of “Loans – Related Parties” of some $202 million being liabilities to a large number of other parties.
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Mr Corsaro submitted that this evidence shows that there was a “conglomerate” of companies that, taken together, had very substantial assets.
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This may be so. But were Rove to be unsuccessful in these proceedings, and were the defendants to obtain an order for costs, those costs would only be recoverable if Rove chose to exercise its right of indemnity under the Trust and, in turn, if Demian Commercial chose to exercise its right of indemnity under the Demian Trust.
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It was for Rove to show, in these circumstances, that it “will” have recourse to the Trust assets to which I have referred.
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As I suggested to Mr Corsaro in argument, it may have been open to Mr Demian to give the Court an assurance that he would cause Rove, and Demian, to exercise their rights of indemnity to ensure that any costs orders were satisfied.
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No such undertaking is forthcoming.
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In those circumstances, I am satisfied that Haulbuild and Mr Abousleiman have satisfied their onus to show there is reason to believe that Rove Estate will not be able to pay a costs order if so ordered.
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Haulbuild sought security in the sum of $98,512.50. Mr Abousleiman sought security in the sum of $99,975. There was no challenge before me of those figures.
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Accordingly, I propose to order that Rove provide such security to those parties.
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The parties should now confer and agree on the appropriate orders to give effect to these reasons.
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So far as concerns Chomp Excavation’s application for security, I invite the parties to confer and endeavour to agree on the means by which that application may be resolved without further consideration by the Court.
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Endnotes
Decision last updated: 16 December 2020
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