Scandi International Pty Ltd (ACN 082 473 747) v Larkfield Industrial Estate Pty Ltd (ACN 006 067 965)
[2017] VCC 215
•14 March 2017
| IN THE COUNTY COURT OF VICTORIA AT MELBOURNE COMMERCIAL DIVISION | Revised Not Restricted Suitable for Publication |
GENERAL LIST
Case No. CI-16-02981
BETWEEN
| SCANDI INTERNATIONAL PTY LTD (ACN 082 473 747) | First Plaintiff | |
| and | ||
| CASUALIFE FURNITURE INTERNATIONAL LIMITED (A Hong Kong Corporation) | Second Plaintiff | |
| v | ||
| LARKFIELD INDUSTRIAL ESTATE PTY LIMITED (ACN 006 067 965) | Defendant | |
| - AND BETWEEN - | ||
| LARKFIELD INDUSTRIAL ESTATE PTY LIMITED (ACN 006 067 965) | Plaintiff by Counterclaim | |
| and | ||
| SCANDI INTERNATIONAL PTY LTD | First Defendant by Counterclaim | |
| (ACN 082 473 747) | ||
| and | ||
| CASUALIFE FURNITURE INTERNATIONAL (A Hong Kong Corporation) | Second Defendant by Counterclaim | |
| and | ||
| JOSEPH (JOE) GUSS | Third Defendant by Counterclaim | |
JUDGE: | HIS HONOUR JUDGE SMITH | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 20 February 2017 | |
DATE OF RULING: | 14 March 2017 | |
CASE MAY BE CITED AS: | Scandi International Pty Ltd (ACN 082 473 747) & Anor v Larkfield Industrial Estate Pty Ltd (ACN 006 067 965); Larkfield Industrial Estate Pty Ltd (ACN 006 067 965); v Scandi International Pty Ltd (ACN 082 473 747 & Ors (Ruling) | |
MEDIUM NEUTRAL CITATION: | [2017] VCC 215 | |
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RULING
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Subject:PRACTICE AND PROCEDURE – APPLICATION FOR SECURITY OF COSTS
Catchwords: Corporate plaintiffs – foreign corporation – whether plaintiffs had insufficient assets within the jurisdiction to satisfy the defendant’s costs in the event that it was successful in the proceeding – whether the plaintiffs’ proceeding was in the nature of a defensive proceeding
Legislation Cited: County Court Civil Procedure Rules 2008; Corporations Act 2001 (Cth); Australian Consumer Law and Fair Trading Act 2012 (Vic)
Cases Cited:Scandi International Pty Ltd (ACN 082 473 747) & Anor v Larkfield Industrial Estate Pty Ltd (ACN 006 067 965) [2016] VCC 1073; Vasiliades v Commissioner of Taxation [2016] FCA 420; Willey v Synan (1935) 54 CLR 175
Ruling: Order for further security for costs.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | Mr J Guss (solicitor) | Joseph Guss, Lawyer |
| For the Defendant | Mr M A McKillop | HWL Ebsworth Lawyers |
| For the Third Defendant by Counterclaim | Mr J Guss appeared in person | - |
HIS HONOUR:
1 By Summons dated 20 December 2016, the defendant seeks an order for further security for costs in an amount of $137,409.46. The plaintiffs oppose the order sought.
2 In its Amended Statement of Claim (ASOC), the plaintiffs allege that:
(a)The first plaintiff (“Scandi”) is the owner of certain goods described in Annexure A;
(b)The second plaintiff (CFIHK) is entitled to demand and recover in its name, certain goods described in Annexure B by reason of the crystallisation of mortgage debentures particularised in paragraph 6 of the ASOC. Those goods are alleged to have been the property of various companies (LHV Pty Ltd (LHV), Holy May Pty Ltd (Holy May), and Casualife Furniture International Pty Ltd (CFIAUS)), which goods had been charged in favour of CFIHK and, in addition, certain goods which had been paid for and shipped to Australia by CFIHK;
(c)The goods were stored in a shed in West Footscray owned by the defendant from 1 October 2013;
(d)The defendant remains in possession of the goods and has wrongfully detained the goods;
(e)The defendant has wrongfully refused to permit the plaintiffs’ agents (Joseph Guss, Marilla Guss and Jason Heydon) to remove the goods from the premises.
3 In substance, the plaintiffs seek orders:
(a)That the defendant be restrained from disposing of the goods;
(b)That the defendant give the plaintiffs access to the premises to enable the plaintiffs and their agents to collect the goods;
(c)For costs.
4 The defendant has brought a counterclaim against the plaintiffs and against Joseph Guss. The defendant alleges that:
(a)It is in possession of the goods and is entitled to remain in possession of them until storage fees in respect of those goods are paid;
(b)It is legally entitled to dispose of the goods.
5 In substance, the defendant seeks orders:
(a)Entitling it to sell the goods and apply the proceeds of sale to its unpaid storage fees.
(b)Against the defendants to the counterclaim, for damages.
(c)As against Joseph Guss, for the amount of unpaid storage fees totalling $108,722.65.
6 The above is not intended to be a full outline of the pleadings but merely the substance of the respective claims made by the parties to enable the defendant’s application to be viewed in some context.
7 The proceeding was commenced by the plaintiffs by Writ filed on 12 July 2016.
8 It appears that by Summons dated 11 July 2016, the plaintiffs brought an application before Judge Macnamara seeking, by way of interlocutory injunction, an order that the defendant be restrained from selling certain goods scheduled to be auctioned on 12 July 2016. His Honour made Orders restraining the scheduled sale of those goods until 25 July 2016 upon the plaintiffs undertaking to pay the sum of $7,000 into court. Although his Honour’s Order does not expressly state to what the sum of $7,000 related, the parties appear to agree that it related to security for the defendants’ anticipated costs.
9 The further hearing of the plaintiffs’ Summons was adjourned to 25 July 2016. It is unclear from the documents on the Court file whether the part heard Summons was heard on that or any later date or whether the parties resolved that issue.
10 Soon after, and prior to filing its Defence, the defendant brought an application before Judge Cohen, seeking orders that the plaintiffs provide security for costs and that the proceeding be stayed if they did not do so. The application was brought pursuant to Rule 62.02 of the County Court Civil Procedure Rules 2008 and s1335 of the Corporations Act 2001 (Cth).
11 The application was opposed by the plaintiffs. On 28 July 2016, her Honour ordered that the plaintiffs provide security for costs.
12 Her Honour concluded that she was not satisfied that the plaintiffs were likely to be able to pay an order for the defendant’s costs if the defendant was successful in the proceeding. Further, she found that there were no other circumstances which outweighed that consideration in the case. She was satisfied that an order that the plaintiffs pay security for the defendant’s costs was warranted.[1]
[1]Decision of Judge Cohen: Scandi International Pty Ltd (ACN 082 473 747) & Anor v Larkfield Industrial Estate Pty Ltd (ACN 006 067 965) [2016] VCC 1073 (28 July 2016)
13 With regard to the quantum of such security, the parties relied respectively upon Affidavits sworn by two legal costs consultants. Her Honour preferred the costs estimate of the consultant retained by the defendant. She was advised by counsel for both parties that the hearing, which was scheduled for 26 August 2016, would take up to one day only. Her Honour said:
“… at this stage, with the envisaged conclusion of the litigation being only a month away, but involving, as I have indicated, some intensive preparation and a full day of hearing, [that a reasonable sum to order be paid] is $45,000.”[2]
[2](Supra) at paragraph [44]
14 The sums of $45,000 (as ordered by Judge Cohen) and $7,000 (as ordered by Judge Macnamara) were duly paid into Court by or on behalf of the plaintiffs. The application before me was conducted on the basis that the plaintiffs have already paid a total of $52,000 by way of security for costs. The defendant submits this sum is inadequate in all of the circumstances.
15 The original proposed August 2016 hearing date was vacated and the matter refixed for 7 December 2016. That hearing date was also vacated. The matter is now fixed for hearing on 30 May 2017.
16 The plaintiffs submit that I should ignore the decision of Judge Cohen on the basis that her decision was made prior to the defendant filing its Defence or Counterclaim. Whilst that is correct, I nevertheless adopt the principles to be applied in such an application and set out by her Honour in paragraph 4 of her decision.
17 I accept that Scandi has an issued share capital of $12. It has made no attempt to demonstrate that it has any assets in the jurisdiction other than some of the goods the subject of the dispute. Further, CFIHK is a foreign corporation registered in Hong Kong.
18 Those matters enable the Court to exercise its discretion as to whether to order security for costs.
19 Non-exhaustive and non-decisive factors to be considered in considering the exercise of the Court’s discretion include:
(a) The merits of the plaintiffs’ claim;
(b) Whether the orders sought would frustrate the claim;
(c) Whether the defendant has been the cause of the plaintiffs’ impecuniosity;
(d) Whether there has been delay in the defendant bringing the application;
(e) Whether there are any persons standing behind the plaintiffs who are likely to benefit from the litigation;
(f) Whether the persons standing behind the plaintiffs are prepared to give any personal undertaking to be liable for the defendant’s costs in the event it successfully defends the claim;
(g) Whether the defendant is, in substance, a plaintiff and the plaintiff companies are, in reality, defending themselves from the defendant’s claim.
20 Of the above factors, I do not consider that sub-paragraphs (b), (c), and (d) have relevance here. Whilst there might be some suspicion that Joseph Guss has some interest in the plaintiff companies, I am not satisfied that, currently, there is anything more than a suspicion as opposed to real evidence of this. The plaintiffs submit that sub-paragraphs (a) and (g) do have relevance.
21 The plaintiffs submit that they have a strong case and that this should be taken into account in the exercise of the Court’s discretion as to whether to order security for costs or, as in this case, further security.
22 I have read:
(a) the affidavits of Joseph Guss sworn 11 July 2016, 22 July 2016, 24 July 2016, and 14 February 2017 and the exhibits thereto;
(b) the affidavits of Marilla Suzanne Guss sworn 11 July 2016, 22 July 2016, and 13 February 2017 and the exhibits thereto;
(c) the affidavits of Evan Anthony Stents sworn 20 July 2016, 20 December 2016, and 13 February 2017 and the exhibits thereto;
(d) the affidavits of Robert Maurice Edward Ades sworn 19 July 2016 and 13 February 2017 and the exhibits thereto.
23 In addition, I have read the written submissions filed on behalf of the parties in relation both to the application before me and the wider trial issues.
24 In relation to the plaintiffs’ claim, I am not able to conclude that either of the parties has anything more than an arguable case. I am unable to conclude that the plaintiffs have a case that is of a strength sufficient to interfere with the normal entitlement of a defendant to seek security for costs where the plaintiffs have been shown to either be foreign corporations and/or corporations with uncertain assets within this jurisdiction.
25 Submissions on behalf of the plaintiffs have attempted to paint the issues involved in the plaintiffs’ case as being minimal and relating solely to simple legal matters involving straightforward interpretation of various sections of the Australian Consumer Law and Fair Trading Act 2012 (Vic).I consider that the issues raised in the plaintiffs’ ASOC are of considerable complexity. They raise issues pertaining to who is the owner of the goods in question and who has a right of possession of them, whether the goods are uncollected goods (as defined in the Act), whether the defendant was a bailee, analysis of the alleged conduct of the defendant and any agents of the plaintiffs at various times, analysis of whether some of the goods may have already been removed from the defendant’s storage and which goods remain in the possession of the defendant, the value of any missing goods, and analysis of alleged licence agreements between the parties or any of them.
26 I do not consider that, on the material before me, I am able to meaningfully determine the relative strengths or weaknesses of the cases of the parties with regard to the plaintiffs’ claim.
27 Further, having regard to the pleadings (the ASOC, the Amended Defence, and the Counterclaim) and the affidavit material to which I have previously referred, I do not consider that the plaintiffs’ claim is properly described as of a defensive nature.[3] The claim is effectively:
[3]Vasiliades v Commissioner of Taxation [2016] FCA 420; Willey v Synan (1935) 54 CLR 175 at 184
· The defendant holds goods which are owned by the plaintiffs or to which the plaintiffs are entitled to possession;
· The defendant will not hand them over to the plaintiffs;
· The plaintiffs seek orders compelling the defendant to hand the goods over to the plaintiffs.
28 Whilst the initial application for a restraining order may have had a defensive tone, I do not consider the overall claim is of a defensive character at all.
29 Further, the plaintiffs submit that further security for costs is unnecessary because the value of the goods in question (which goods are within the jurisdiction) is sufficient to satisfy any claim the defendant might have for costs in the event the defendant successfully defends the plaintiffs’ claim.
30 The same or a similar submission was made to Judge Cohen in July 2016. The plaintiffs relied upon the affidavit of Marilla Suzanne Guss sworn on 27 July 2016 on that occasion. In this application, the plaintiffs also rely on a more recent affidavit sworn by Ms Guss on 13 February 2017.
31 For the reasons set out in her decision of 28 July 2016, her Honour was not satisfied as to the value of the retained goods.
32 The plaintiffs allege in paragraph 6 of their ASOC that some of the goods in question were the property of CFIAUS when stored with the defendant in October 2013.
33 Exhibit “RMEA-1B” to the affidavit sworn by Mr Ades on 19 July 2016 is a letter from David Scott of Scott Partners Consulting. Mr Scott states that he was appointed Official Liquidator of CFIAUS on 18 May 2004 and confirms that the winding up of the company was finalised on 27 September 2011. On that basis, it is difficult to accept that CFIAUS was importing any goods into Australia in 2013 or authorising for them to be stored at the defendant’s premises in October of that year.
34 Notwithstanding the contents of the further affidavit of Marilla Suzanne Guss sworn recently, I am unable to determine the realistic value of the goods the subject of the proceeding. The goods have been in storage for a considerable time. Even if they had a landed value in 2013 as alleged by the plaintiffs, I do not consider that such value is necessarily the same or even similar in 2017. Neither the alleged wholesale value or the retail value of the goods appear to have any relevance as to what the goods might realistically be sold for in order to satisfy the defendant’s claim or costs.
35 There is nothing in the material before me to indicate:
(a) that an Order for further security for costs would frustrate the claim;
(b) that the defendant was the cause of any impecuniosity on the part of the plaintiffs;
(c) that there has been undue delay in the defendant bringing this application;
(d) that there are persons standing behind the plaintiff companies who are likely to benefit from the litigation and who have offered any personal undertaking to be liable for the costs of the defendant in the event that it successfully defends the claim brought by the plaintiffs.
36 It follows that I consider that an order for security for costs is appropriate, taking all of the circumstances into account.
Quantum of security
37 The sum of $52,000 has already been paid into Court as security for the defendant’s costs.
38 The defendant’s solicitor, Mr Stents, deposes that its costs to date in defending the plaintiffs’ claim is $121,958, comprising of solicitor’s costs of $96,655, counsel’s fees of $21,381, and general disbursements of $3,921. These figures are said to be costs relating solely to the defence of the plaintiffs’ claim as opposed to the prosecution of the defendant’s counterclaim. Mr Stents has not condescended to inform as to the break-up of those figures. Nor is there any detail provided as to the costs incurred relating to the counterclaim in order that a comparison can be made between the two.
39 Further, Mr Stents deposes that the estimate of additional costs to be incurred by the plaintiffs from the date of the swearing of his affidavit until commencement of the trial are $40,887 based on the tasks set out in paragraph 26 of his affidavit:
· 53 solicitor hours at $310.40 = $16,451
· 64 counsel hours at $381.82 = $24,436.
40 As regards the costs of the trial, the defendant submits the daily costs of the trial will be $7,452, made up of solicitor’s costs of $3,104, counsel’s fees of $3,818, and transcript fee of $530.
41 Mr Stents estimates the hearing of the plaintiff’s claim will take five days and the hearing of the counterclaim, two days.
42 Unsurprisingly, the plaintiffs dispute these estimates.
43 At the time of Judge Cohen’s Order on 28 July 2016, the trial of the proceeding was scheduled to be heard less than a month later, on 26 August 2016. For a variety of reasons the trial date was extended until 7 December 2016 and then again until 30 May 2017.
44 After July 2016, the defendant filed a Counterclaim which broadened the conflict between the parties. Amongst other matters, the defendant brought allegations of misleading and deceptive conduct against Joseph Guss personally and as agent for the plaintiffs. The additional complications and costs associated with the counterclaim are not to form the basis for the security for costs sought by the defendant. It is only entitled to security for costs of and incidental to its defence of the plaintiffs’ claim.
45 The plaintiffs amended their Statement of Claim on 26 July 2016. The defendant filed a Defence to that Amended Statement of Claim on 17 November 2016. With the exception of the filing of that document, and costs associated with consideration of the plaintiffs’ amended pleading and the response to it, I am not satisfied that the defendant has demonstrated that it has incurred further costs that relate to the defence of the plaintiffs’ claim as opposed to its counterclaim, notwithstanding the contents of paragraph 21 of Mr Stents’ affidavit sworn on 20 December 2016. My view on this may have been different if he had provided any sort of break-up of the figures set out by him. In this regard, I note that the adjournment of the trial on 8 December 2016 resulted in a separate order that the plaintiffs pay the defendant’s cost thrown away by reason of that adjournment. Those costs thrown away should not be taken into account in calculating the appropriate amount to be ordered by way of security for costs.
46 Rather, I consider that additional costs incurred by the defendant in respect only of the plaintiffs’ claim would be limited to consideration of the Amended Statement of Claim and the filing of a defence to it. I do not consider that such costs would exceed an amount of approximately $5,000.
47 As to the estimate of further costs that the defendant is likely to incur between late December 2016 and the commencement of the trial (now scheduled for late May), I do not accept the estimates of 53 solicitor hours and 64 counsel hours. The substance of the plaintiffs’ claim has not altered from late July 2016.
48 I am prepared to allow solicitor’s hours as follows:
· Directions Hearings – 4 hours
· Second mediation – 6 hours
· Preparation for trial (over and above preparation that would have been carried out for the trial scheduled for 7 December 2016) – 8 hours.
A total of 18 hours @ $310.40 = $5,587.
49 I am prepared to allow counsel’s hours as follows:
· Directions Hearings – 10 hours
· Second mediation – 6 hours
· Preparation for trial (over and above preparation that would have been carried out for the trial scheduled for August 2016) – 8 hours.
A total of 24 hours @ $381.86 = $9,165.
50 The total for solicitor and counsel is $14,752.
51 I accept that the daily trial costs are likely to be just under $7,500. The security previously allowed by Judge Cohen included such an allowance for a one-day trial.
52 The plaintiffs submit that their claim involves a relatively simple point of law and will be heard in a day or less. I do not agree. I consider that the legal issues are complex and that legal argument will, even with the assistance of written submissions, take at least a day.
53 In addition, I consider there is likely to be considerable oral and documentary evidence as to the ownership of the goods in question, who imported the goods and who, if any of the parties, are entitled to claim possession of the goods. I assess the time at trial likely to be occupied by the plaintiffs’ claim, as opposed to the counterclaim, to be not less than two days.
54 Her Honour commented on the likely need for counsel to have to prepare significant written submissions in defence of the plaintiffs’ claim. It does not appear to me that an adequate allowance was made for the preparation of such submissions and I am prepared to allow a further sum of $5,000 for such.
55 Accordingly, I shall allow for two days of trial – at $7,500 for each of two days, plus $5,000 for written submissions, less the amount previously allowed for in the Order of Judge Cohen ($7,500), a net amount of $12,500.
56 It follows that I consider that is appropriate to order that the plaintiffs pay the sum of $32,250 by way of further security for the costs of the defendant.
57 I shall order that such sum be paid into Court by 31 March 2017, in default of which the plaintiffs’ claim shall be stayed until further order of the Court.
58 The plaintiffs should pay the defendant’s costs of the Summons.
59 I have annexed to these reasons a draft of the Orders that I intend making. Should any of the parties wish to make any submission as to the form of such Orders (as opposed to the substance of them), they should submit short written submissions as to form by 4.00pm on Wednesday, 15 March 2017.
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