Salon Express Pty Ltd v Dobbiegray Pty Ltd as Trustee for Esaki Family Trust
[2023] WADC 92
•15 AUGUST 2023
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: SALON EXPRESS PTY LTD -v- DOBBIEGRAY PTY LTD as Trustee for ESAKI FAMILY TRUST [2023] WADC 92
CORAM: REGISTRAR JEYAMOHAN
HEARD: 15 FEBRUARY & 19 APRIL 2023
DELIVERED : 15 AUGUST 2023
FILE NO/S: CIV 678 of 2019
BETWEEN: SALON EXPRESS PTY LTD
First Plaintiff
ERG ADMINISTRATION PTY LTD
Second Plaintiff
SALON EXPRESS PROPERTIES PTY LTD
Third Plaintiff
AND
DOBBIEGRAY PTY LTD as Trustee for ESAKI FAMILY TRUST
First Defendant
TANYA ELIZABETH DOBBIE
Second Defendant
MICHAEL DAVID GRAY
Third Defendant
GLOBAL TEAM WA PTY LTD
Fourth Defendant
Catchwords:
Practice and procedure - Application for security for costs - Personal undertaking - Turns on its own facts
Practice and procedure - Pleadings - Application for further and better particulars of statement of claim - Appropriate orders to be made - Turns on own facts
Legislation:
Corporations Act 2001 (Cth), s 1355
Rules of the Supreme Court 1971 (WA), O 25, O 20 r 13Result:
Application for security for costs dismissed
Representation:
Counsel:
First Plaintiff : Mr P G Donovan Second Plaintiff : Mr P G Donovan Third Plaintiff : Mr P G Donovan First Defendant : Not applicable Second Defendant : Ms K M McNally & Mr J M Suttner Third Defendant : Not applicable Fourth Defendant : Not applicable Solicitors:
First Plaintiff : MDS Legal Second Plaintiff : MDS Legal Third Plaintiff : MDS Legal First Defendant : Not applicable Second Defendant : McNally & Co Third Defendant : Not applicable Fourth Defendant : Not applicable Case(s) referred to in decision(s):
Attorney General of Western Australia v President of the Legislative Council of Western Australia [2020] WASC 399
Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82
CBS Records Australia Ltd v Telmark Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270
Charlie Carter Pty Ltd v The Shop Distributive & Allied Employees Association of Western Australia (1987) 13 FCR 413
Darbyshire v Leigh [1896] 1 QB 554
Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658
DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170
EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69
George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56
Green v Wilden Pty Ltd [2005] WASC 83
John Holland Pty Ltd v The Minister for Works [2021] WASC 312
KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Lonsdale Investments v OM (Manganese) Ltd [2009] WASC 188
National Australia Bank Ltd v Rowe [2018] WASC 330
Rowe v National Australia Bank Ltd [2019] WASCA 140; (2019) 56 WAR 1
Sims v Wran [1984] 1 NSWLR 317
Spence Financial Group Ltd v GE Commercial Corporations (Australia) Pty Ltd [2007] WASC 15
Sugarloaf Hill Nominees Pty Ltd v Reward Projects Ltd [2011] WASC 19
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218
REGISTRAR JEYAMOHAN:
Overview and summary
1These proceedings relate to matters arising out of a purported franchise and vendor franchise agreement and a licence to occupy. The matter has a long procedural history since the filing of the writ of summons on 20 February 2019. By chamber summons filed 2 September 2022 the second defendant seeks the following orders:
(a)the plaintiffs do give security for the second defendant's costs of the action in the sum of $209,648, by payment of that amount into court (Security for Costs Application);
(b)the time for the second defendant to make a written request for particulars be extended, pursuant to O 20 r 13(6) of the Rules of the Supreme Court 1971 (WA) (RSC) (Leave); and
(c)the plaintiffs provide further and better particulars to the request for particulars as set out in the second defendant's minute of proposed request for particulars of substituted statement of claim (Particulars Application). An amended minute of particulars was filed by the second defendant on 24 February 2023 (Amended Minute).
2The Security for Costs Application was initially heard on 15 February 2023. At the hearing of that application, matters the subject of the Particulars Application was the subject of further orders with the Particulars Application being heard in full on 19 April 2023.
3For the reasons that follow, I am not satisfied that the second defendant has established to the requisite standard that there is reason to believe that the plaintiffs would be unable to pay the second defendant's costs. The second defendant's application for security for costs is therefore dismissed.
4In relation to the Particulars Application, having had regard to the nature and purpose of each request as against the applicable paragraph(s) of the substituted statement of claim filed 22 June 2022 (SSOC), requests 8, 9, 12, 13, 15, 16, 19, 21, 27, 32 and 33 are not permitted, requests 5, 6, 7 and 17 of the Amended Minute are permitted.
5As to sufficiency of the answers already provided by the plaintiffs to the particulars sought in requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute, I am satisfied that those requests have been adequately answered.
6I set out in Attachment 2 my decision reached in respect of each request the subject of the Particulars Application.
Background
Procedural background
7The proceedings arise out of a purported franchise agreement for a Salon Express hairdressing salon in Wanneroo, and has had a long and complex procedural history in this court. The proceedings were initially commenced by writ of summons filed 20 February 2019 as against the first defendant, second defendant and third defendant. The second defendant entered an appearance on 13 March 2019. The statement of claim was filed on 14 June 2019. An amended statement of claim was filed on 2 November 2020.
8By minute of proposed amended writ of summons (with indorsement of claim) filed 7 February 2022, the plaintiffs proposed the amendment of the writ to name Express Retail Group Pty Ltd and Salon Express Properties Pty Ltd as plaintiffs to the proceedings with Global Team WA Pty Ltd being named as a proposed fourth defendant. A further minute of proposed amended writ of summons (with indorsement of claim) was filed on 22 April 2022 substituting Express Retail Group Pty Ltd with ERG Administration Pty Ltd as the proposed second plaintiff to the proceedings. Following orders made by the court on 9 June 2022, an amended writ of summons was filed on 22 June 2022 naming ERG Administration Pty Ltd as the second plaintiff and Salon Express Properties Pty Ltd as the third plaintiff with Global Team WA Pty Ltd being named as a fourth defendant to these proceedings.
9The present version of the statement of claim is the SSOC.
10By notice of change of representation filed 17 August 2022, McNally & Co represented the second defendant, the second defendant having represented herself in these proceedings prior to then.
11By chamber summons dated 2 September 2022, the second defendant filed the Security for Costs Application and the Particulars Application seeking security for the second defendant's costs of the action in the amount of $209,648 and leave to make a written request for particulars of the statement of claim. The plaintiffs oppose both applications and point out that the applications were brought in excess of some three and a half years of the writ first being filed on 20 February 2019 and the second defendant having first entered an appearance on 13 March 2019.
12The Security for Costs Application was initially heard on 15 February 2023. At the hearing of that application, matters the subject of the Particulars Application was the subject of further orders with the Particulars Application being heard in full on 19 April 2023.
Overview of the plaintiffs' claim
13The plaintiffs' claim as against the defendants can be summarised as follows.
Franchise Agreement
14The plaintiffs allege that on or about 21 August 2017, the plaintiffs' predecessor, in title, the fourth defendant, as franchisor, the first defendant as franchisee, and the second and third defendants, as guarantors of the first defendant's obligations, entered into an agreement (Franchise Agreement) by which the fourth defendant granted the first defendant a franchise to operate a Salon Express business (Franchise Business) for an initial term commencing on 28 August 2017 and ending on the day prior to the end date of the then current lease of the premises at Shop 6, Wanneroo Central Shopping Centre, Wanneroo Road, Wanneroo (Premises).
15The terms of the Franchise Agreement are set out in a document titled 'Franchise Agreement Salon Express - Wanneroo' purportedly provided by the fourth defendant to the defendants on or about 21 August 2017 (Franchise Document).
16The plaintiffs allege that on or around December 2017, the first, second and third defendants (Franchisee Defendants) made representations to the fourth defendant to the effect that they had signed the Franchise Document and agreed to be bound by the terms of the Franchise Agreement as set out in the Franchise Document. The plaintiffs allege that between 28 August 2017 and 6 January 2019, in part performance of the Franchise Agreement, the Franchisee Defendants operated the Franchise Business from the Premises.
17The plaintiffs assert that in or around December 2018, the fourth defendant assigned its rights under the Franchise Agreement to the first plaintiff (Franchisor). The plaintiffs allege that by reason of the representations purportedly made by the Franchisee Defendants, and the defendants' conduct in operating the Franchise Business from the Premises, the fourth defendant and the Franchisor expected that a legal relationship on the terms set out in the Franchise Document existed between the Franchisor and the Franchisee Defendants which the Franchisee Defendants would not be free to withdraw from. The plaintiffs allege that the fourth defendant and the Franchisor acted in reliance on that assumption by permitting the Franchisee Defendants to operate the Franchise Business. The plaintiffs allege that the Franchisee Defendants acted to induce the fourth defendant and the Franchisor to hold the assumption by making the representations referred to above and operating the Franchise Business. In these circumstances, the plaintiffs assert that it would be unconscionable to permit the Franchisee Defendants to resile from the Franchisor's assumption and permit the Franchisee Defendants to assert that there is no binding agreement between the parties on the terms set out in the Franchise Document.
18The plaintiffs allege that on or about 6 January 2019, the first defendant voluntarily abandoned the Franchise Business. As a result, by a written notice dated 8 January 2019, the Franchisor terminated the Franchise Agreement pursuant to cl 36.4(c) of the Franchise Agreement and cl 29(1)(d) of the Franchising Code of Conduct, by reason of the first defendant's purported voluntary abandonment of the Franchise Business. The Franchisor alleges loss and damage by reason of the first defendant's alleged conduct in voluntarily abandoning the Franchise Business being royalties and marketing levies outstanding under the Franchise Agreement; amounts outstanding and due to the first plaintiff for goods and services provided by the first plaintiff to the first defendant; costs and expenses incurred by the first plaintiff in taking over the operation of the Franchise Business; legal costs and fees associated with the termination of the Franchise Agreement; the royalty that would have been payable to the end of the term of the Franchise Agreement; the marketing levy that would have been payable to the end of the term of the Franchise Agreement; interest and legal fees associated with the proceedings less the profit that the Franchisor earned.
19The plaintiffs allege that by reason of the terms of the Franchise Agreement, the second and third defendants are liable to guarantee the obligations of the first defendant under the Franchise Agreement. The first plaintiff claims against the first, second and third defendants loss and damage plus interest in respect of the Franchise Agreement.
Vendor Finance Agreement
20The plaintiffs allege that in or around August 2017, the fourth defendant and the Franchisee Defendants entered into an agreement whereby the fourth defendant purportedly agreed to lend the first defendant the sum of $100,000.00 (Principal Sum) to assist with the purchase of the Franchise Business upon vendor finance terms, with the second and third defendants as guarantors of the first defendant's obligations under that agreement (Vendor Finance Agreement). The plaintiff allege that the terms of the Vendor Finance Agreement were set out in a document titled 'VENDOR FINANCE AGREEMENT Salon Express - Wanneroo Central, WA' (Vendor Finance Document) which the fourth defendant purportedly provided to the Franchisee Defendants on or about 21 August 2017. The plaintiffs allege that in or around December 2017, the Franchisee Defendants made representations to the fourth defendant to the effect that they had signed the Vendor Finance Document and agreed to be bound by the terms of the Vendor Finance Agreement as set out in the Vendor Finance Document. The plaintiffs allege that in part performance of the Vendor Finance Agreement: (a) on or about 28 August 2017, the fourth defendant accepted the Principal Sum as part payment of a franchise fee payable pursuant to the Franchise Agreement; and (b) between 1 January 2018 and November 2018, the first defendant made loan payments in accordance with the terms of the Vendor Finance Agreement. The plaintiffs allege that in or around August 2019, the fourth defendant assigned its rights under the Vendor Finance Agreement to the second plaintiff (ERG Admin), to take effect from 30 June 2019. The plaintiffs allege that by reason of the purported representations made by the Franchisee Defendants, and the defendant's conduct in paying the franchise fee using the Principal Sum and making loan repayments in accordance with the terms of the Vendor Finance Agreement, the fourth defendant and the second plaintiff expected that a legal relationship on the terms set out in the Vendor Finance Document existed between the second plaintiff and the Franchisee Defendants which the Franchisee Defendants would not be free to withdraw from. The plaintiffs allege that the fourth defendant and the second plaintiff acted in reliance on that assumption by accepting the Principal Sum as part payment of the franchise fee. Further, that the Franchisee Defendants purportedly acted to induce the fourth defendant and the second plaintiff to hold the assumption by making the representations referred to above, paying the franchise fee in part using the Principal Sum, and making the loan repayments.
21The plaintiffs claim that it would now be unconscionable to permit the Franchisee Defendants to resile from the second plaintiff's assumption and permit the Franchisee Defendants to assert that there is no binding agreement between the parties on the terms set out in the Vendor Finance Document.
22The plaintiffs allege that in or around December 2018, in breach of the Vendor Finance Agreement, the first defendant ceased making loan payments to the second plaintiff, with the balance of the Principal Sum (being $82,454.15) becoming due and payable on 1 January 2019. The plaintiffs claim that by reason of the first defendant's breach, the second plaintiff has suffered loss and damage. The plaintiffs further allege that by reason of the terms of the Vendor Finance Agreement, the second and third defendants are liable to guarantee the obligations of the first defendant under the Vendor Finance Agreement.
Licence to Occupy
23The plaintiffs' allege that in or around September 2017, the third plaintiff entered into an agreement with the Franchisee Defendants for the first defendant to occupy the Premises on the same terms as the head lease held by the third plaintiff, with the second and third defendants guaranteeing the first defendant's obligations under that agreement (Licence to Occupy). The plaintiffs allege that the terms of the Licence to Occupy were set out in a document titled 'LICENCE TO OCCUPY PREMISES - SALON EXPRESS - WANNEROO' that the third plaintiff purportedly provided to the Franchisee Defendants in or around September 2017. Between 28 August 2017 and 6 January 2019, in part performance of the Licence to Occupy, the Franchisee Defendants operated the Franchise Business from the Premises.
24The plaintiffs allege that by reason of the defendants' conduct in operating the Franchise Business from the Premises and paying the rent and other sums payable under the Licence to Occupy, the third plaintiff expected that a legal relationship on the terms set out in the Licence Document existed between the third plaintiff and the Franchisee Defendants that the Franchisee Defendants purportedly would not be free to withdraw from. The plaintiffs allege that the Franchisee Defendants acted to induce the third plaintiff to hold the assumption by occupying the Premises and paying the sums payable under the Licence to Occupy. The plaintiffs allege that in these circumstances, it would be unconscionable to permit the Franchisee Defendants to resile from the third plaintiff's assumption and permit the Franchisee Defendants to assert that there is no binding agreement between the parties on the terms set out in the Licence to Occupy.
Security for Costs Application
25The second defendant seeks an order that the plaintiffs' do give security for the second defendant's costs of the action in the amount of $209,648.
26The Security for Costs Application is brought pursuant to O 25 of the RSC, alternatively pursuant to s 1335 of the Corporations Act 2001 (Cth). The second defendant seeks leave to make the application under s 1335 of the Corporations Act.
Relevant principles
27Order 25 r 1 of the RSC provides:
The court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.
28Examples of the grounds upon which an order for security for costs may be made are set out in O 25 r 2 RSC. Based on the available information, none of those examples are applicable to this application.
29Order 25 r 3 RSC provides:
The granting of security shall be in the discretion of the court, and in determining whether an order should be made the court shall take into consideration -
(a)the prima facie merits of the claim;
(b)what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff; and
(c)whether the normal processes of the court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff.
30The court has an unfettered discretion to order security for costs. The discretion is to be exercised with regard to the circumstances of each particular case.[1] The power to order security is exercised to serve the interests of justice. The discretion to order security is unfettered but must be exercised judicially. 'Special circumstances' do not have to be shown before an order for security for costs is made against an appellant. Ultimately, each case will turn on its own circumstances, and it is not possible to set out an exhaustive list of the relevant considerations.[2]
[1] Spence Financial Group Ltd v GE Commercial Corporations (Australia) Pty Ltd [2007] WASC 15 [33] ‑ [34].
[2] George 218 Pty Ltd v Bank of Queensland Limited [2016] WASCA 56 [42] - [43], [48].
31In Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd,[3] Edelman J listed the 'most commonly cited, non-exclusive factors' which guide the court's discretion:
[3] Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [4].
(i)the strength and bona fides of the plaintiff's case;
(ii)the likelihood of the plaintiff being unable to pay the defendant's costs;
(iii)whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
(iv)whether the application for security is oppressive;
(v)whether the award of security would deny an impecunious applicant a right to litigate;
(vi)whether there are persons standing behind the plaintiff who were likely to benefit from the litigation;
(vii)whether the persons standing behind the plaintiff have offered any security or personal undertaking to be liable for the costs, and if so, the form of such an undertaking;
(viii)whether the applicant was in substance a plaintiff or proceedings were defensive in the sense of directly resisting proceedings already brought or seeking to halt the defendant's self-help procedures;
(ix)whether the application for security had been brought promptly;
(x)whether the applicant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour; and
(xi)any factors relating to public interest.
32The defendants bear the onus of satisfying the court that it should exercise its discretion and order security for costs.[4] The precondition for the exercise of the court's jurisdiction, often described as the 'threshold jurisdictional question' is whether it appears by credible testimony that there is reason to believe the plaintiff corporation will be unable to pay the defendant's costs. As set out by Corboy J in Sugarloaf Hill Nominees:[5]
(a) The section calls for a practical, commonsense approach to the examination of the corporation's financial affairs. It is necessary to make an assessment of the risk that the corporation will be unable to pay ‑ an assessment that will be imprecise. A 'reason to believe' is a low threshold test: Livingspring [15] ‑ [16].
(b) However, the need for credible testimony is an obvious safeguard to ensure that the application is not founded purely upon speculation. To that extent, I agree with the observation of Lee J in Warren Mitchell that 'speculation as to insolvency or financial difficulties likely to confront the corporation will be insufficient to ground the exercise of the discretion' (5).
(c) Determining whether a corporation will be unable to pay involves two considerations. First, it is necessary to fix the time at which the plaintiff's inability, or apprehended inability, is to be assessed. That generally requires an opinion to be formed at the time of judgment and immediately following. Second, it is necessary to identify the range of assets to which recourse might be had for the purpose of enforcing an adverse costs order. Generally, the relevant assets will be those that might be immediately realised and those which could be realised in sufficient time to enable the plaintiff to comply with a costs order in the usual terms: Professional Vending Services Pty Ltd v Christou [2010] FCA 580.
(d) Where the only tangible assets of a plaintiff corporation are held in trust and solvency depends on its right as trustee to an indemnity against the trust property, it is necessary for the court to have in mind the difficulties which a successful defendant would face in attempting to execute an order for costs: Laundry Coin‑Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) ATPR 40‑584 (46,729); BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81 [14] ‑ [15]. In Laundry Coin‑Wash, Smithers J observed that 'indeed, unless some step is taken to alleviate those difficulties it is reasonable and just to treat the applicant company as if it were without assets to meet such a liability' (46,729). Similarly, in Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150, Tadgell J held that the fact that the plaintiff trustee company owned unencumbered real estate, the value of which exceeded the likely costs of an appeal and over which it had a right of recourse as trustee by way of indemnity, did not justify a conclusion that security ought not to be given. The trustee might be required at any time to transfer its legal interest in the unencumbered property to the beneficiaries of the trust or to encumber it: and see BBC Nominees where the observations of Tadgell J in Lagarna were cited with apparent approval by Beech J.
[4] Sugarloaf Hill Nominees Pty Ltd v Reward Projects Ltd [2011] WASC 19 [34(f)] (Sugarloaf Hill Nominees).
[5] Sugarloaf Hill Nominees [35].
33If that condition is satisfied, the court has jurisdiction to make an order for costs, and the question then becomes whether it should exercise its discretion to make such an order.[6]
[6] FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69 (FFE Minerals).
34When determining whether a corporation will be unable to pay, it is necessary to identify the range of assets to which recourse might be had for the purpose of satisfying an adverse costs order. Those assets will generally be those that are immediately realised and those that could be realised in sufficient time to satisfy the costs order.[7]
[7] Sugarloaf Hill Nominees Pty [35].
35Section 1335 of the Corporations Act provides:
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.
36It is well established the consideration of an application for security for costs pursuant to s 1335 of the Corporations Act involves two steps:
1.There is the threshold jurisdictional question as to whether it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the defendant's costs; and
2.If the court is satisfied as to 1, then the court has unlimited discretion as to whether to make an order for security for costs.
37What is required by the court is an evaluation of the evidence led by the applicant for the order to see whether that leads to a reason to believe that the corporation would be unable to pay the costs. There is no evidentiary burden to prove the fact that the company now would not be able to meet a costs order.[8]
[8] CBS Records Australia Ltd v Telmark Teleproducts (Aust) Pty Ltd (1987) 72 ALR 270 [285].
38In KP Cable Investments Pty Ltd v Meltglow Pty Ltd[9] Beazley J set out the following well established guidelines which the court typically takes into account in determining applications for the security for costs:
(a)Applications for security for costs should be brought promptly;
(b)The strength and bona fides of the plaintiff's case;
(c)Whether the defendant's application for security is oppressive, in the sense that it is being used merely to deny a plaintiff the right to litigate;
(d)Whether there are any persons standing behind the plaintiff company who are likely to benefit from litigation and who are willing to provide necessary security;
(e)Whether the person standing behind the company have offered any personal undertaking to be liable for the costs, and if so, the form of the undertaking; and
(f)Security will only ordinarily be ordered against a party who is in substance a plaintiff, and an order ought not be made against a party that is defending itself and thus forced to litigate.
[9] KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 [196] - [197].
The evidence relied upon
The second defendant's position
39The second defendant relies on the affidavits of Kathleen Marie McNally sworn 2 September 2022 (First McNally Affidavit) and 1 December 2022 (Second McNally Affidavit) and 19 April 2023 (Third McNally Affidavit). In opposition, the plaintiffs rely on the affidavits of Camilla D'Angelo Radenti sworn 18 October 2022 (First Radenti Affidavit) and 10 February 2023 (Second Radenti Affidavit) and the affidavit of Dean Franks sworn 12 February 2023 (Frank Affidavit).
40I have carefully considered the written submissions filed on behalf of each party, and the submissions made by both counsel for the second defendant, and counsel for the plaintiffs, during the hearings of the Application.
The second defendant's evidence in respect of security for costs
41Ms McNally in the First McNally Affidavit deposed that she is the principal of McNally & Co Pty Ltd, the solicitors for the second defendant and that she is authorised to swear the First McNally Affidavit on behalf of the second defendant in relation to the Application.[10] Ms McNally deposed that each plaintiff is registered in Victoria.[11] Attached to the First McNally Affidavit is a print out of the Salon Express website as at 2 September 2022 and various land and property register searches of the plaintiffs conducted on 22 August 2022.[12]
[10] First McNally Affidavit, pars 1 and 2.
[11] First McNally Affidavit, par 4, Annexure KMM1 - KMM3.
[12] First McNally Affidavit, pars 5 and 6, Annexure KMM4 and KNM5.
42Ms McNally wrote to the plaintiffs' solicitors in relation to security for costs on 24 August 2022 and deposed that based on her experience, she considered the scale costs to trial would be at least $209,648 as itemised in the First McNally Affidavit.[13]
[13] First McNally Affidavit, pars 7 and 8.
43Ms McNally deposed that on 17 August 2022, McNally & Co went on the court record for the second defendant and emailed MDS Legal with the notice and foreshadowed an application for security for cost and request for particulars.[14]
[14] First McNally Affidavit, pars 13, Annexure KMM9.
44Attached to the Second McNally Affidavit are various documents lodged with ASIC for the Parent Company.[15] Ms McNally deposed in the Second McNally Affidavit that the ultimate owners of the plaintiffs and fourth defendant are David Boyd, Dean Franks, Bianca Panozzo and Simon Di Lallo. Ms McNally deposed in the Second McNally Affidavit that her firm conducted searches of the residential addresses set out in the ASIC searches for these four individuals and that with the exception of Mr Franks, the other three individuals named do not appear to own the properties they live in.[16] Attached to the Second McNally Affidavit are various land searches regarding Dean Franks.[17] Ms McNally deposed that the website 'realestate.com.au' estimates the price range for the property located at 35 Latrobe Street, Yokine at between $770,000 and $980,000.[18] Ms McNally deposed that the document entitled 'Franchise Document' at par 9 of the SSOC is 102 pages and unsigned by any party.[19]
[15] Second McNally Affidavit, par 5, Annexures KMM22 to KMM25.
[16] Second McNally Affidavit, par 6.
[17] Second McNally Affidavit, par 7, Annexures KMM26 to KMM27.
[18] Second McNally Affidavit, par 8, Annexure KMM28.
[19] Second McNally Affidavit, par 10, Annexure KMM29.
45Ms McNally in the Third McNally Affidavit further deposed that on 8 March 2022, the court ordered that the then only plaintiff (Salon Express Pty Ltd) provide discovery of all the assignment documents within seven days.[20] Ms McNally deposed that she cannot locate in the plaintiffs' discovery an invoice numbered 1827 which, according to the statement (KMM35) is 'moving OS invoice to ERG Admin Pty Ltd INV 8794'.[21]
[20] Third McNally Affidavit, par 3.
[21] Third McNally Affidavit, pars to 8, Annexures KMM30 - KMM36.
46Counsel for the second defendant submits that the affidavit material shows that the plaintiffs have no assets registered to them. It is the second defendant's position that the second plaintiff will pay the security for costs of all the plaintiffs. However, counsel for the second defendant submits that 'generally one company is under no obligation to pay another company's costs' and there is a risk in terms of whether the company will pay it. Counsel for the second defendant further submits that 'there's clearly intermingling of funds'.
47That is, there is credible testimony that the plaintiff will not be able to pay a costs order. Each plaintiff would be separately liable to the defendant for a costs order if the defendant is ultimately successful.
48Counsel for the second defendant points to the lengthy history of the proceedings, noting that the claim commenced some for years ago in 2019 'with one plaintiff and a very basic contractual claim' and has since (in effect) evolved into a claim involving multiple plaintiffs and claims in contract, under the Australian Consumer Law (Cth) and equity regarding a franchise agreement, a vendor finance agreement and a lease agreement. Counsel for the second defendant submits that the proceedings are complex and points to the long and evolving nature of the claims brought.
49The second defendant submits that an exercise of the court's discretion to award security for costs is supported by the following grounds:
(a)The changing nature of the claims and the progress of the action since 2019;
(b)That the undertaking offered in respect of security is by the second plaintiff only in respect of funds sitting within a bank account that is likely to have claims to it. Further, there is no undertaking any funds in this bank account.
50The second defendant submits that the total amount in dispute across the three claims is approximately $286,004 plus interest and costs. The claims were originally brought by one plaintiff. Counsel for the second defendant submits that over the nearly three years and 139 court documents, the claims have morphed substantially and there are now three separate plaintiff companies with two of the three claims having morphed from contractual claims to 'something' else.
51On the second defendant's view, the second defendant submits that in relation to the first plaintiff's claim against alleged guarantor the second defendant, the first plaintiff will need to prove:
(a)That an email to the third defendant dated 21 August 2017 had a legal effect on the second defendant;
(b)That the fact the first defendant allegedly did certain acts means the second defendant agreed to be bound by a document not sent to her;
(c)That the defendants accepted things (by inference) and that this acceptance by inference meant that there was a contract with the fourth defendant and that this contract was equitably assigned by the fourth defendant to the first plaintiff on an unknown date that - when the plaintiffs were ordered to provide documents in relation to the assignment - the assignment date 'instruction' by jumped by seven months.
52The second defendant submits that the plaintiff companies do not appear to own any real property and that none of owners who are the ultimate 'owners' of the plaintiffs have offered to provide any security as to costs with only an undertaking having been offered by the second plaintiff.
53As to the amounts stated in the financial statements the plaintiffs point to, counsel for the second defendant submits that the money held in the bank account is likely to have claims to it. For example, the money held by the second plaintiff appears to be held on trust for various companies including those described as 'Barbershop' and also the first plaintiff. Further, there is no undertaking to keep any funds in this bank account.
54As to any personal undertaking with respect to costs put forward by the plaintiffs, the second defendant's position is that the second defendant will accept a personal undertaking from 'the man standing behind all of the plaintiff companies both as director and a shareholder, Mr Franks'. Mr Franks is the fourth defendant in these proceedings.
The plaintiffs' position
55The plaintiffs rely on the affidavit of Camilla Radenti sworn on 18 October 2022 (First Radenti Affidavit), the affidavit of Ms Radenti sworn on 10 February 2023 (Second Radenti Affidavit) and the affidavit of Mr Franks sworn on 12 February 2023 (Franks Affidavit).
56Ms Radenti deposed that she is employed by MDS Legal Pty Ltd trading as MDS Legal, the lawyers with the plaintiffs, and assist in the conduct of this matter under the supervision of Paul Donovan.[22] Annexed to the First Radenti Affidavit is a copy of the Express Retail Group Pty Ltd (Express Retail Group) consolidated group financial statements for the financial year ended 30 June 2021. Ms Radenti deposed that she is informed by Mr Dean Franks, the Franchise Director of the Express Retail Group, and verily believe that these financial statements represent the most recent financial statements prepared for the Express Retail Group, including its subsidiaries.[23]
[22] First Radenti Affidavit, par 1.
[23] First Radenti Affidavit, par 3, Annexure CDR-1.
57Annexed to the First Radenti Affidavit is a copy of the second plaintiff's special purpose financial statements for the year ended 30 June 2021. Ms Radenti deposed that she is informed by Mr Franks and verily believe that these special purpose financial statements represent the most recent financial statements for the second plaintiff.[24] Annexed to the First Radenti Affidavit is a screenshot of the current cash balance of the bank account of the second plaintiff as at 16 October 2022.[25] The account balance stated in CDR-3 is in the amount of $843,585.69.
[24] First Radenti Affidavit, par 4, Annexure CDR-2.
[25] First Radenti Affidavit, par 5, Annexure CDR-3.
58Annexed to the First Radenti Affidavit is a redacted copy of the Commonwealth Bank account statement for the second plaintiff for the period 1 September 2022 to 30 September 2022. Ms Radenti deposed that the statement has been redacted to remove the individual items on the basis that they are irrelevant to the matters the subject of the second defendant's application and are commercially sensitive.[26] Ms Radenti deposed that she is instructed by Mr Franks and verily believes that the second plaintiff undertakes to pay any costs awarded in favour of the second defendant in the proceedings no matter which of the plaintiffs is ordered to pay those costs.[27] The Second Radenti Affidavit annexes various communications as between the legal representatives of the plaintiffs and the second defendant.[28]
[26] First Radenti Affidavit, par 6, Annexure CDR-4.
[27] First Radenti Affidavit, par 7.
[28] Second Radenti Affidavit, pars 3 to 7, Annexures CDR-1 to CDR-5.
59Mr Franks deposed that he is a director of the first plaintiff, Salon Express Pty Ltd, and the second plaintiff, ERG Administration Pty Ltd and the franchise director of the Express Retail Group.[29] Mr Franks deposed that all three plaintiffs form part of the Express Retail Group, the parent company of which is Express Retail Group Pty Ltd. Express Retail Group is the sole owner of all the shares in all of the companies that comprise the Express Retail Group. Mr Franks deposed that the other members of the Express Retail Group are Express Retail Group Australia Pty Ltd, ERG Properties Pty Ltd, Barbershop Express Pty Ltd, Salon Express National Promotions Fund Pty Ltd, Barbershop Express Promotions Fund Pty Ltd and Global Team WA Pty Ltd. Mr Franks deposed that he is a director of all of these companies, including Express Retail Group Pty Ltd but excepting for Global Team WA Pty Ltd.[30]
[29] Franks Affidavit, par 1.
[30] Franks Affidavit, par 3, Annexure DMF-1.
60The financial statements for the plaintiffs are included with the consolidated financial statements of Express Retail Group Pty Ltd. Mr Franks deposed that the second plaintiff has its own special purpose financial statements, but the other plaintiffs do not produce separate financial statements.[31] Annexed to the Franks Affidavit is a copy of the Express Retail Group Pty Ltd consolidated group financial statements for the financial years ended 30 June 2021 and 30 June 2022.[32] Mr Franks deposed that the contents of these financial statements are true and correct. At the time of the Franks Affidavit, the 2022 financial statements had yet to be signed by the appropriate directors. Mr Franks deposed that he expected that this would occur over the next few weeks and reiterated that he verily believes that the contents of the statements are true and correct.[33]
[31] Franks Affidavit, par 4.
[32] Franks Affidavit, par 5, Annexures DMF-2 and DMF-3.
[33] Franks Affidavit, par 5.
61Annexed to the Franks Affidavit is a copy of the second plaintiff's special purpose financial statements for the years ended 30 June 2021 and 30 June 2022.[34] Mr Franks deposed that the contents of these financial statements are true and correct. At the time of the Franks Affidavit, the 2022 financial statements had yet to be signed by the appropriate directors. Mr Franks deposed that he expected that this would occur over the next few weeks and reiterated that he verily believes that the contents of the statements are true and correct.[35]
[34] Franks Affidavit, par 6, Annexures DMF-4 and DMF-5.
[35] Franks Affidavit, par 6.
62Annexed to the Franks Affidavit is a redacted copy of the Commonwealth Bank account statement for the second plaintiff for the period 1 January 2023. Mr Franks deposed that the document is redacted to remove the individual items on the basis that they are irrelevant to the matters the subject of the second defendant's application and are commercially sensitive.[36] Mr Franks deposed that the second plaintiff undertakes to pay any costs awarded in favour of the second defendant in the proceedings no matter which of those plaintiffs is ordered to pay those costs.[37] Mr Franks further deposed that he would undertake to inform the second defendant's lawyers should the total monies held by the second plaintiff in its bank accounts fall below a total of $210,000 being a sum slightly more than what Mr Franks understands the second defendant is seeking in her Security for Costs Application.[38]
[36] Franks Affidavit, par 7, Annexure DMF-6.
[37] Franks Affidavit, par 8.
[38] Franks Affidavit, par 9.
63Mr Franks deposed that the second plaintiff does not act as a trustee for any entity and none of the assets of the second plaintiff recorded in its financial statements are held on trust for any other entity.[39]
[39] Franks Affidavit, par 10.
64The plaintiffs submit that the applications were brought in excess of three and a half years after the writ was issued (being 20 February 2019) and the entering of an appearance of the second defendant (being 13 March 2019). Further, the applications were not brought by the second defendant until after she received a letter from the plaintiffs' lawyers on 16 August 2022 formally advising that it was the intention of the plaintiffs to enter the matter for trial on 30 August 2022.
65The plaintiffs submit that there is no credible testimony before the court that there is reason to believe that the plaintiffs will be unable to pay the costs of the second defendant if the second defendant is successful. The plaintiffs point to the following matters in support of the plaintiffs' position that the plaintiffs will be able to pay a costs order if the second defendant is successful:
(a)The second plaintiff (ERG Administration Pty Ltd) has significant assets and has the capacity to pay the costs of the second defendant if she is successful, with net assets as at 30 June 2021 of $1,831,276,[40] and a bank balance in its main bank account as at 30 September 2022 of $840,750.58[41] and at 16 October 2022 a balance of $843,389.69;[42]
(b)The second plaintiff has undertaken to pay any costs awarded in favour of the second defendant, no matter which plaintiff is ordered to pay those costs;[43]
(c)The plaintiffs form part of the Express Retail Group. That group conducts very substantial businesses and had total income for the year ending 30 June 2021 of $9,948,423, net profit of $449,732 and net assets of $1,621,767.[44]
[40] Per the second plaintiff's balance sheet as at 30 June 2021 at Radenti Affidavit annexure CDR-2, (page 17).
[41] First Radenti Affidavit, par 6, Annexure CDR-4, page 27.
[42] First Radenti Affidavit, par 5, Annexure CDR-3, page 23.
[43] First Radenti Affidavit, at par 7.
[44] First Radenti Affidavit, Annexure CDR-1, pages 7 - 8.
66The plaintiffs submit that this is not the case of an individual conducting its business affairs by medium of a corporation without assets who is in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The plaintiffs submit that the plaintiffs are part of a large, profitable and actively trading corporate group.
67It is the plaintiffs' position that the proceedings brought by the plaintiffs are complex and have involved technically difficult pleadings and that the plaintiffs' case is strong and bona fide.
68Counsel for the plaintiffs submit that even if the threshold requirement upon the second defendant to provide credible testimony that the plaintiffs will be unable to pay the second defendant's costs if she is successful is able to be met, which is denied, the court's discretion should not be exercised against the plaintiffs. The plaintiffs point to the following matters which counsel for the plaintiffs submits are factors that operate to preclude the court's discretion being exercised in the second defendant's favour:
(a)The second defendant's delay in the bringing of the Security for Costs Application;
(b)That this delay should be considered in the context of the second defendant having opposed past applications by the plaintiffs to extend the entry for trial milestone (including as recently as on 9 June 2022) and, in effect, contending the proceedings should be dismissed due to delay;
(c)The lack of explanation for the lateness of the application.
69Counsel for the plaintiffs further submits that in any event, the quantum of the security sought by the second defendant in an amount of $209,648 is excessive having had regard to the second defendant's draft bill of costs prepared by McNally & Co in calculating the amount of the security sought, the eight items listed and the amounts claimed against each item having had regard to 'similar' type matters in this court.
Determination
The threshold question
70The threshold question requires the defendants to produce credible evidence that there is reason to believe the plaintiffs would not be able to meet any costs order made against them.
71In order to determine that question, a court is required to do no more than judge the quality of the evidence to see if it objectively gives rise to a reason to believe that the plaintiffs will not meet a costs order. This requires an evaluation of the evidence led by the applicant: FFE Minerals.
72As the court observed in Sugarloaf Hill Nominees in applying Professional Vending Services v Christou[45] determining whether a corporation will be unable to pay involves two considerations: First, it is necessary to fix the time at which the plaintiff's inability, or apprehended inability, is to be assessed. That generally requires an opinion to be formed at the time of judgment and immediately following. Second, it is necessary to identify the range of assets to which recourse might be had for the purpose of enforcing an adverse costs order. Generally, the relevant assets will be those that might be immediately realised and those which could be realised in sufficient time to enable the plaintiff to comply with a costs order in the usual terms.
[45] Professional Vending Services v Christou [2010] FCA 580.
73Counsel for the plaintiffs submit that there is no credible testimony before the court that there is reason to believe that the plaintiffs will be unable to pay the costs of the second defendant if the second defendant is successful. The plaintiffs point to the fact that the plaintiffs here are part of a large, profitable and actively trading corporate group and rely on the following in support of that contention:
(a)The second plaintiff (ERG Administration Pty Ltd) has significant assets and has the capacity to pay the costs of the second defendant if she is successful, with net assets as at 30 June 2021 of $1,831,276,[46] and a bank balance in its main bank account as at 30 September 2022 of $840,750.58[47] and at 16 October 2022 a balance of $843,389.69;[48]
(b)The second plaintiff has undertaken to pay any costs awarded in favour of the second defendant, no matter which plaintiff is ordered to pay those costs;[49]
(c)The plaintiffs form part of the Express Retail Group. That group conducts very substantial businesses and had total income for the year ending 30 June 2021 of $9,948,423, net profit of $449,732 and net assets of $1,621,767.[50]
[46] Per the second plaintiff's balance sheet as at 30 June 2021 at Radenti Affidavit Annexure CDR-2, page 17.
[47] First Radenti Affidavit, par 6, Annexure CDR-4, page 27.
[48] First Radenti Affidavit par 5, Annexure CDR-3, page 23.
[49] First Radenti Affidavit, par 7.
[50] First Radenti Affidavit, Annexure CDR-1, pages 7 - 8.
74The evidence of Mr Franks, a director of the first plaintiff, the second plaintiff, and the franchise director of the Express Retail Group, all of which form part of the Express Retail Group, the parent company of which is Express Retail Group Pty Ltd, is that:
(a)Express Retail Group is the sole owner of all the shares in all of the companies that comprise the Express Retail Group;[51]
(b)the other members of the Express Retail Group are Express Retail Group Australia Pty Ltd, ERG Properties Pty Ltd, Barbershop Express Pty Ltd, Salon Express National Promotions Fund Pty Ltd, Barbershop Express Promotions Fund Pty Ltd and Global Team WA Pty Ltd;
(c)that he is a director of all of these companies, including Express Retail Group Pty Ltd but excepting for the fourth defendant, Global Team WA Pty Ltd.
[51] Franks Affidavit, par 1.
75Mr Franks further deposed that he would undertake to inform the second defendant's lawyers should the total monies held by the second plaintiff in its bank accounts fall below a total of $210,000 being a sum slightly more than what Mr Franks understands the second defendant is seeking in her Security for Costs Application.[52]
[52] Franks Affidavit, par 9.
76The Security for Costs Application was not brought promptly. I have considered the Express Retail Group structure in some detail having had regard to the evidence put before this court. An overview of the Express Retail Group's corporate structure is annexed (see Attachment 1). That group structure includes the first plaintiff, the second plaintiff and the third plaintiff.
77I accept that Mr Franks, in his capacity as a director of the first plaintiff, the second plaintiff, and the franchise director of the Express Retail Group, is able to depose as to matters to do with corporate structure of the Express Retail Group. The financial statements for the plaintiffs for the financial years ended 30 June 2021 and 30 June 2022 are included with the consolidated financial statements of Express Retail Group Pty Ltd.[53] Mr Franks has explained that the second plaintiff has its own special purpose financial statements, but the other plaintiffs do not produce separate financial statements.[54] Mr Franks deposed that the second plaintiff does not act as a trustee for any entity and none of the assets of the second plaintiff recorded in its financial statements are held on trust for any other entity.[55]
[53] Franks Affidavit, par 5, Annexures DMF-2 and DMF-3.
[54] Franks Affidavit, par 4.
[55] Franks Affidavit, par 10.
78This evidence is uncontroverted by any of the evidence before the court.
79The second defendant submits that 'generally one company is under no obligation to pay another company's costs' and there is a risk in terms of whether the company will pay it. The second defendant further submits that 'there's clearly intermingling of funds':
That is, there is credible testimony that the plaintiff won't be able to pay a costs order. Each plaintiff would be separately liable to the defendant for a costs order if the defendant is ultimately successful.
80The second defendant bears the onus of satisfying the court that it should exercise its discretion and order security for costs. The threshold jurisdiction question as to whether it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the defendant's costs has not been met. There is no evidence before this court to indicate the existence of uncertainty that may cast doubt as to the Express Retail Group's ability to continue as a going concern. There is similarly no evidence before this court to suggest that the plaintiffs will be unable to pay the second defendant's costs.
81In all of the circumstances of this case, I decline to exercise my discretion to make an order for costs against the plaintiffs.
Conclusion
82The test on an application for security for costs is not that the plaintiff would be unable to pay the defendant's costs, but whether there is reason to believe that the plaintiff would be unable to pay the costs. On the evidence before me, I am unable to conclude that there is reason to believe that the plaintiffs would be unable to pay the second defendant's costs. In these circumstances, the second defendant's Security for Costs Application is dismissed and costs should follow the event.
Second defendant's application for further and better particulars
83The second defendant's original request for particulars comprised of 32 separate requests for particulars and, as to six of those requests required, by reference to a definition of 'the usual particulars', the answering of six separate requests. As such, there are a total of 62 requests. The plaintiffs' position is that the second defendant's request for particulars, in the context of modern case management, is onerous and will involve a disproportionate cost for the plaintiffs to provide answers.
84At the hearing on 15 February 2023, the Particulars Application was adjourned to 19 April 2023 to allow the second defendant time to file an (amended) minute of proposed particulars by 24 February 2023 in accordance with orders made that day.
85In accordance with the court's orders made 15 February 2023, conferral between the parties in respect of the second defendant's request for particulars took place on 2 March 2023 following which the plaintiffs provided the particulars sought in requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute. Those requests pertain to the assignments of the Franchise Agreement and the Vendor Finance Agreement. An amended minute of particulars was filed by the second defendant on 24 March 2023 (Amended Minute).
Leave to bring the Particulars Application
86Order 20 r 13(6) of the RSC requires a written request for particulars to be filed and served within 30 days of the service of the pleadings, unless leave is otherwise provided. On the question of the timing of the Particulars Application, the plaintiffs submit that no explanation has been given by the second defendant for her delay in requesting particulars.
87Whilst the plaintiffs provided the particulars sought in requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute, leave to bring the Particulars Application out of time remained in issue at the hearing of the application. The plaintiffs' position is that:
(a)the second defendant has had the plaintiffs' pleading of its case in a form substantially similar to the substituted statement of claim filed on 22 June 2022 since on or about 30 November 2021 (being the date upon which the document was attached to an affidavit sworn by Helen Burnside), in circumstances where the vast bulk of the particulars sought by the second defendant arise from matters that were clearly pleaded in that version of the pleading;
(b)additional versions of the statement of claim, that were substantially in the same form as the document provided with the affidavit of 30 November 2021, were filed on 7 February 2022 (as a minute of proposed substituted statement of claim filed with a chamber summons of the same date) and 10 March 2022 (which was ultimately rejected for filing for procedural reasons as described in the affidavit of Helen Burnside sworn on 22 April 2022 at pars 31 - 33). The second and third defendants filed a defence to the substituted statement of claim on 15 April 2022 (albeit that the substituted statement of claim had not at that time been regularly filed) and the plaintiffs reiterate that it would seem likely that the second and third defendants had legal assistance with the drafting of that document.
88The court will exercise its discretion to extend the time in light of the principles of positive case flow management and practitioners who do not give notice within the prescribed time may expose their clients to the risk of proceeding to trial without particularisation of their opponents' cases. Given the legally complex and factually dense nature of the pleading, and the fact that the plaintiffs raise no issue of prejudice, I am satisfied that an extension of time to bring this application is warranted.
89Leave is therefore granted.
Legal principles - request for particulars
90A party's obligations in respect of pleadings is set out in O 20 of the RSC. As observed by Hill J in John Holland Pty Ltd v The Minister for Works,[56] relevantly, in their statement of claim or defence, a party is obliged to:
(a)plead a 'statement in a summary form of the material facts on which the party pleading relies for [its] claim or defence, as the case may be, but not the evidence by which those facts are to be proved, and the statement must be as brief as the nature of the case admits' (O 20 r 8);
(b)plead as a material fact the meaning of a document which they contend;[57] and
(c)ensure the pleading contains 'the necessary particulars of any claim, defence or other matter pleaded' (O 20 r 13).
[56] John Holland Pty Ltd v The Minister for Works [2021] WASC 312.
[57] Darbyshire v Leigh [1896] 1 QB 554, 559 cited with approval by Hasluck J in Green v Wilden Pty Ltd [2005] WASC 83 [349].
91The requirements of O 20 r 8 of the RSC were summarised by Vaughan J in National Australia Bank Ltd v Rowe[58] as follows:
The requirements of O 20 r 8(1) should be observed in preparing a pleading. Practitioners may do so confident in the knowledge that a summary statement of the material facts - and only such a summary statement - is what is required by the rules. The true significance of the case management authorities in this area is that it is unnecessary to encumber a pleading with unnecessary particulars, and all the more so evidence, as it is inevitable that there will be subsequent pre-trial disclosure of the evidence to be adduced at trial. A pleading must identify the issues, disclose an arguable claim or defence, and inform the parties of the case to be met. In doing so it should be clear and complete but concise. That standard is not met by over-complicating the pleading.
[58] National Australia Bank Ltd v Rowe [2018] WASC 330 [5] - [6]; endorsed on appeal Rowe v National Australia Bank Ltd [2019] WASCA 140; (2019) 56 WAR 1 [15] (Quinlan CJ); [165] (Murphy JA & Sofronoff AJA).
92The essential requirements for a plea are to define and limit the issues for decision, provide the basis for decisions on relevance for trial, and ensure a fair trial by putting the other side on notice of the case they must meet.[59] A statement of claim must not plead allegations at too high a level of generality. A pleading must be sufficiently particular to conform with one of the primary objects of pleadings, to inform the opposing party the case that it must meet.[60]
[59] EDWF Holdings 1 Pty Ltd v EDWF Holdings 2 Pty Ltd [2010] WASCA 78; (2010) 41 WAR 23 [124] (Buss JA; Owen & Newnes JJA agreeing).
[60] DM Drainage & Constructions Pty Ltd v Karara Mining Ltd [2014] WASC 170 [32] (Beech J); applying Charlie Carter Pty Ltd v The Shop Distributive & Allied Employees Association of Western Australia (1987) 13 FCR 413, 417; Lonsdale Investments v OM (Manganese) Ltd [2009] WASC 188 [5].
93Providing a pleading fulfils its basic functions of identifying the issues, disclosing an arguable cause of action or defence, as the case may be, and apprising the parties of the case that has to be met, the court ought properly be reluctant to allow the time and resources of the parties and the limited resources of the court to be spent extensively debating the application of technical pleading rules that evolved in and derive from a very different case management environment.[61]
[61] Barclay Mowlem Construction Ltd v Dampier Port Authority [2006] WASC 281; (2006) 33 WAR 82 [7].
94The purpose of particulars is to enunciate the issues that are to be tried and to identify the case that has to be met at trial. A party is entitled to a sufficiently clear statement of the opponent's case to enable them to have a fair opportunity to meet it.[62] In considering whether the particulars provided are adequate, it is not a question as to whether a party has adequate knowledge of the actual facts but whether they have adequate knowledge of what the other party alleges are the facts.[63]
[62] Dare v Pulham [1982] HCA 70; (1982) 148 CLR 658, 664.
[63] Sims v Wran [1984] 1 NSWLR 317, 321 cited with approval in Attorney General of Western Australia v President of the Legislative Council of Western Australia [2020] WASC 399 [104].
95The adequacy of the particulars must also be assessed in accordance with current case management principles (including those set out in O 1 r 4A and r 4B of the RSC) and what other orders will be made to define the issues and appraise the parties of the case they have to meet at trial. It is only where the criticism of the pleading will significantly impact on the proper preparation of a case and its presentation at trial that criticisms of pleadings and their lack of particularisation will be 'seriously entertained'.[64]
[64] Barclay Mowlem Construction Ltd v Dampier Port Authority [6] - [8].
96As was noted by Le Miere J in Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6]:[65]
The court discourages disputes relating to pleading issues which consume substantial amounts of time and expense which is often disproportionate to their significance to the just and effective resolution of the case. The approach of the court to pleading disputes must take into account the purposes of pleading. Those purposes relevantly include informing the court and the other parties of the case of the party putting forward the pleading. The contemporary role of pleadings has to be viewed in the context of contemporary case management techniques and pre-trial directions which include the preparation of a trial bundle identifying the documents that are to be adduced in evidence in the course of the trial and the exchange of witness statements and expert reports prior to trial. Nevertheless, the fundamental proposition concerning pleadings is that a party is entitled to be informed about the opponent's case with sufficient clarity to allow that party a fair opportunity to meet the case. The court will intervene if the parties do not identify with reasonable precision just what is and what is not in dispute.
[65] Wright Prospecting Pty Ltd v Hancock Prospecting Pty Ltd [No 6] [2016] WASC 218 [46], cited by Hill J in John Holland Pty Ltd v The Minister for Works.
Second defendant's application for further and better particulars
97In producing the Amended Minute, the second defendant was directed to group the particulars into categories where possible. These categories are as follows:
(a)Second plaintiff's administrative services;
(b)Mr Frank's agency;
(c)Inference;
(d)Alleged guarantors conduct 2017 to 2019;
(e)Alleged grants in 2017 and 2019;
(f)Wife;
(g)Implied representation;
(h)Expectation; and
(i)Knowledge.
98The second defendant submits that as the second defendant is not a party to the alleged assignments (and grants), in the context of (a) no particulars, (b) no documents/discovery and (c) no statements of proposed evidence-in-chief, the second defendant is not in a position to understand the case put against the second defendant and prepare for trial defending these 'bald' allegations. In this context, the second defendant provided lengthy submissions as to the history and nature of the plaintiffs' claims and submitted that the claims pleaded in the SSOC filed 22 June 2022 have little similarity to the claims first brought on 20 February 2019. The second defendant submits that the assignments are in issue and the plaintiffs will have to prove them.
99The second defendant submits that despite the plaintiffs' claims having changed significantly over the past years, only (in effect) a limited amount of informal discovery in related to the 'alleged assignment' was provided in early 2022. By way of example, the second defendant submits that at present the SSOC makes bare allegations of assignment (pars 23 and 48). In each instance it is an allegation of assignment by one company to another. In neither instance have the plaintiffs stated who represented each party when the assignment occurred, the terms of the assignment or even whether the assignment was concluded orally or in writing.
100At the hearing of the Particulars Application, the particulars sought by the second defendant was the subject of submission by counsel on behalf the second defendant and the plaintiffs. The second defendant also questioned the adequacy of the answers the plaintiffs provided in response to the particulars sought in requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute. Those requests pertain to the assignments of the franchise agreement and the vendor finance agreement.
101The plaintiffs essentially object on the basis that the nature of what is asked under those requests are disproportionately onerous, particularly when viewed in the context of the lateness of the requests and principles of modern case management.
102The particulars sought and the submissions put forward by counsel in respect of each request for particulars is summarised in Attachment 2.
Conclusion
103In undertaking this analysis, I have necessarily had regard to the nature and purpose of each request as against each of the paragraphs in the SSOC referred to. Where the pleading states the plaintiffs claim clearly and with sufficient particularity for the second defendant to know the case she is to meet, the pleadings obligations has been met by the plaintiffs. In my view, a number of the particulars requested go beyond a proper request for amplification or clarification of a plea of material fact. This is not a permissible request for particulars of a pleading.
104As to sufficiency of the answers already provided by the plaintiffs to the particulars sought in requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute, that is a different question which I have in any event turned my mind to having considered counsels' submissions at the hearing.
105I set out in Attachment 2 my decision reached in respect of each request the subject of the Particulars Application having had regard to the applicable and the well established principles with respect to the purpose of pleadings.
106In conclusion, requests 8, 9, 12, 13, 15, 16, 19, 21, 27, 32 and 33 are not permitted, requests 5, 6, 7 and 17 of the Amended Minute are permitted.
Costs
107In relation to the costs of the Particulars Application, it is my view that the exercise of the application for further and better particulars resulted in the plaintiffs further particularising the basis of their claim in respect of requests 18A, 18B, 18, 26A, 26B and 26 of the Amended Minute. The plaintiffs elected to do so following the conferral process and my view, as already articulated in Attachment 2, is that the answers provided are adequate. Further, whilst requests 8, 9, 12, 13, 15, 16, 19, 21, 27, 32 and 33 are not permitted, requests 5, 6, 7 and 17 of the Amended Minute are permitted.
108For this reason, it is my view that the appropriate costs order in respect of the Particulars Application be costs in the cause.
Orders
109The orders I make are as follows:
1.The Security for Costs Application is dismissed.
2.The second defendant pay the plaintiffs' costs of the Security for Costs Application, such costs to be taxed if not agreed.
3.The second defendant do have leave to bring the Particulars Application out of time.
4.The Particulars Application allowed in part with the plaintiffs to provide answers to requests 5, 6, 7 and 17 of the Amended Minute within 14 days of the date of this Order.
5.The costs of the Particulars Application be costs on the cause.
6.There be liberty to apply in respect of Order 4.
ATTACHMENT 1
ATTACHMENT 2
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
TA
Court Officer
15 AUGUST 2023
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