S and R Richards P/L v Valley Patios and Decks P/L
[2016] NSWDC 22
•15 March 2016
District Court
New South Wales
Medium Neutral Citation: S & R Richards P/L v Valley Patios & Decks P/L & Anor [2016] NSWDC 22 Hearing dates: 14 March 2016 Date of orders: 15 March 2016 Decision date: 15 March 2016 Jurisdiction: Civil Before: Judge Levy SC Decision: 1. The second defendant’s motion for security for costs is dismissed;
2. The second defendant is to pay the plaintiff’s costs of the dismissed motion on the ordinary basis unless otherwise ordered.Catchwords: PRACTICE & PROCEDURE – Second defendant’s application for security for costs Legislation Cited: Australian Consumer Law, s 18 and s 29(1)(h)
Corporations Act 2001 (Cwth), s 1335
Uniform Civil Procedure Rules 2005, r 43.21Cases Cited: Idoport Pty Limited & Anor v National Australia Bank Ltd [2001] NSWSC 744 Category: Procedural and other rulings Parties: S & R Richards Pty Ltd (Plaintiff)
Valley Patios & Decks Pty Ltd (First defendant)
Reachlocal Australia Pty Ltd (Second defendant)Representation: Counsel:
Solicitors:
Dr A Hughes (Plaintiff)
Mr AD Justice (Defendant)
Turnbull Hill (Plaintiff)\
Colin Biggers & Paisley (First defendant)
Watson Mangioni (Second defendant)
File Number(s): 2015/366649 Publication restriction: None
Judgment
Motion seeking security for costs
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By notice of motion filed on 26 February 2016, the second defendant, Reachlocal Australia Pty Ltd, seeks security for costs against the plaintiff in the sum of $75,000, and a related stay, pursuant to Uniform Civil Procedure Rules 2005, r 43.21, or alternatively, pursuant to s 1335 of the Corporations Act 2001 (Cwth).
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The underlying matter at issue is a claim by the plaintiff, S & R Richards Pty Ltd, which supplies building services in the Newcastle area, against two defendants concerning some advertising material placed onto the internet, affecting the plaintiff.
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The claim against the first defendant, Valley Patios & Decks Pty Ltd is that it has made certain representations in the course of trade and commerce, in advertising material accessible through a Google internet search engine, in contravention of s 18 and s 29(1)(h) of the Australian Consumer Law, and which the plaintiff claims was false and misleading. The first defendant denies there was false and misleading conduct on its part. It took no active part in the second defendant’s application for security for costs.
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The plaintiff makes the same claim against the second defendant, and alleges that such claimed contraventions were, to the knowledge of the second defendant, false, and made recklessly without regard to the consequent harm caused to the plaintiff’s reputation, in circumstances where the second defendant stood to make financial gain. The second defendant denies the claimed contraventions, breaches, and effects, and seeks security for costs against the plaintiff.
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The second defendant is concerned that should the plaintiff’s proceedings fail, the plaintiff would not be in a position to pay the second defendant’s costs of defending the proceedings.
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The evidence discloses that the plaintiff is a company with a paid up capital of $1, without real estate holdings, with assets of about $190,000, and liabilities of the order of $31,000. I accept that the relatively short notice timing of the filing of the motion has had a limiting effect on the state of the evidence as to the plaintiff’s financial position. The circumstances leading up to the filing of the motion were that the second defendant had peremptorily sought commercially sensitive financial information from the plaintiff without safeguard as to confidentiality, which resulted in the plaintiff declining to oblige that request. The plaintiff’s motion was then filed. That said, the plaintiff is prepared to proceed on the available evidence.
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The evidence in favour of the motion is not compelling. The plaintiff company continues to trade. There is no evidence other than the first defendant’s amorphous concern that, because of the corporate veil protecting directors from liability, the plaintiff may not be able to meet a possible adverse costs order in favour of the second defendant should the plaintiff’s claim prove to be unsuccessful against that defendant.
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In my view, the significant consideration for determining this motion is that the second defendant has a contractual indemnity from the first defendant regarding the subject matter and outcome of the litigation. That indemnity is identified in paragraphs 30 – 37 of the second defendant’s defence. The second defendant’s ability to invoke and rely upon that indemnity indicates that the second defendant’s concern over its financial risk as to costs incurred in these proceedings is substantially allayed by reason of the existence of that indemnity.
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In my view, the existence of that indemnity provides adequate protection to the second defendant, which obviates the claimed need for the plaintiff to provide security for the second defendant’s costs: Idoport Pty Limited & Anor v National Australia Bank Ltd [2001] NSWSC744, at [47].
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I therefore decline to make the orders for security for costs or to stay the proceedings as sought by the second defendant in its notice of motion.
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Should I be wrong in that conclusion, it remains necessary to observe that the claimed costs of $75,000 are calculated to apply to a distant final hearing, rather than in staged portions leading to that point.
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In that regard, it seems that the second defendant’s costs to date are estimated to be of the order of $12,000, with further estimated costs to mediation, and then to a final hearing, if the mediation were to fail to achieve a resolution of the proceedings.
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If an order for security for costs had been justified, I would have ordered the sum of $12,000, with further staged payments to follow in the event of a failed mediation.
Orders
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I make the following orders:
The second defendant’s notice of motion filed on 26 February 2106 seeking security for costs against the plaintiff is dismissed;
The second defendant is to pay the plaintiff’s costs of the dismissed motion as agreed or assessed;
In the event the costs the subject of order (2) are not agreed, an assessment of those costs may proceed forthwith;
I will hear the parties on the appropriate directions for mediation and further case management.
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Decision last updated: 15 March 2016
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