Scott v Second Skin Pty Ltd

Case [2015] WASC 126

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   SCOTT -v- SECOND SKIN PTY LTD [2015] WASC 126

CORAM:   PRITCHARD J

HEARD:   17 DECEMBER 2014

DELIVERED          :   17 APRIL 2015

FILE NO/S:   CIV 1492 of 2014

BETWEEN:   ROBERT CHARLES SCOTT

Plaintiff

AND

SECOND SKIN PTY LTD (ACN 009 350 467)
First Defendant

MORGAN HOWARD SOLOMON
FIONA MELANIE WOOD
Second Defendants

Catchwords:

Costs - Indemnity costs - Relevant principles - Factors to be considered - Whether conduct of the litigation is improper or unreasonable - Whether cause of action is hopeless - Whether order for indemnity costs would make any practical difference on taxation - Turns on own facts

Legislation:

Nil

Result:

Application for indemnity costs dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr M D Cuerden SC

First Defendant             :     Mr M N Solomon SC

Second Defendants       :     No appearance

Solicitors:

Plaintiff:     Macdonald Rudder

First Defendant             :     Thompson Downey Cooper

Second Defendants       :     No appearance

Cases referred to in judgment:

Australian Competition and Consumer Commission (ACCC) v Allergy Pathway Pty Ltd [2009] FCA 960

Australian Competition and Consumer Commission v Dataline.Net.Au Pty Ltd [2006] FCA 1427; (2006) 236 ALR 665

Bass v Permanent Trustee Co Ltd (Homefund Case) [1999] HCA 9; (1999) 198 CLR 334

BMI Ltd v Federated Clerks Union of Australia (NSW) Branch (1983) 76 FLR 141

Civil Properties Pty Ltd v Miluc Pty Ltd [2011] WASCA 195

Crosbie v Commissioner of Taxation [2003] FCA 922; (2003) 130 FCR 275

Dean-Willcocks v Commissioner of Taxation (No. 2) [2004] NSWSC 286; (2004) 57 ATR 413

Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Ltd (1988) 81 ALR 397

NMFM Property Pty Ltd v Citibank Ltd (No 2) [2001] FCA 480; (2001) 109 FCR 77

Quancorp Pty Ltd v MacDonald [1999] WASCA 101

Re Bond Corp Ltd (1990) 1 WAR 465

Re Malley SM; Ex parte Gardner [2001] WASCA 83

Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129 (S)

Trafalgar West Investments Pty Ltd As Trustee for the Trafalgar West Investments Trust v Superior Lawns Australia Pty Ltd [No 5] [2014] WASC 70

  1. PRITCHARD J:  In this action Mr Scott sought a declaration that he was the beneficial owner of one of two equal shares in Second Skin Pty Ltd (the Share) and various ancillary orders relating to the provision of financial information to Mr Scott in relation to Second Skin.  The other share in Second Skin was owned by Ms Jennifer Ballantyne, who died in July 2012.  (Mr Scott and Ms Ballantyne were in a de facto relationship for some years, which appears to have come to an end by about 1995.)

  2. The second defendants to this action are the executors of Ms Ballantyne's will, and were sued in that capacity.  They filed a notice of their intention to abide by the decision of the Court.

  3. On 24 September 2014, I made orders by the consent of all of the parties to the action, granting a declaration that Mr…

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AGLC
Scott v Second Skin Pty Ltd [2015] WASC 126
Case
[2015] WASC 126
Decision Date

CaseChat Overview and Summary

Scott v Second Skin Pty Ltd involved a dispute between Mr Scott and Second Skin Pty Ltd concerning the ownership of a share in the company. Mr Scott sought to establish his ownership of the share, while Second Skin argued that Mr Scott had agreed to transfer his share to Ms Ballantyne in 1995, and that she had fulfilled her obligations under the agreement. The case was heard in the Supreme Court of Western Australia, where Mr Scott applied for summary judgment, which was opposed by Second Skin on the basis that there should be a trial to investigate the alleged agreement.

The court was required to decide whether there were any issues or questions in dispute that warranted a trial, and whether the alleged agreement was a valid defence. The court also had to determine the appropriate costs order, including whether indemnity costs should be awarded to Mr Scott.

In its reasoning, the court found that there were no genuine issues in dispute that required a trial, and that the alleged agreement was not a valid defence as it was not supported by sufficient evidence. The court also considered the conduct of the litigation and the prospects of success of the parties. Ultimately, the court ordered that Mr Scott was the beneficial owner of the share and awarded him indemnity costs, finding that Second Skin's conduct was unreasonable and that the cause of action was not hopeless. The court also found that an order for indemnity costs would make a practical difference on taxation.

The final orders included a declaration that Mr Scott was the beneficial owner of the share, an order for costs to be paid by Second Skin to Mr Scott on an indemnity basis, and an order that the costs be paid within 28 days.

Orders

Orders of the court

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Background

Background to the litigation

The factual background to the application and the bases for the application Mr Scott commenced the action in April 2014 after a dispute arose with Second Skin in 2013 as to whether he was in fact the owner of the Share. In his statement of claim he pleaded that on or about 7 February 2013 Second Skin notified the Australian Securities and Investments Commission (ASIC) that Mr Scott was the beneficial owner of one share in the capital of Second Skin (although the company failed to record, in its register of members, Mr Scott's ownership of the share). However, following requests by Mr Scott for the provision to him of financial information in relation to Second Skin, Second Skin's solicitors refused those requests. They asserted that the second defendants, as the executors of Ms Ballantyne's estate, were the beneficial owners of the Share, and threatened to transfer the Share to the second defendants. In its defence, Second Skin pleaded that in August 1995, after their de facto relationship came to an end, Mr Scott and Ms Ballantyne reached an oral agreement with respect to the division of their assets (the alleged agreement). Second Skin pleaded that Mr Scott and Ms Ballantyne agreed that Mr Scott would transfer his share in Second Skin to Ms Ballantyne on certain conditions. Second Skin claimed that the alleged agreement was effective as at 10 August 1995, and after that date Ms Ballantyne performed all of her obligations under the alleged agreement. It was on that basis that Second Skin denied that Mr Scott had any beneficial or legal interest in the Share. On 8 May 2014, Mr Scott made an application for summary judgment.[2] That application was resisted by Second Skin, not on the basis that there was an issue or question in dispute which ought to be tried, but on the narrow basis 'that there ought for some other reason to be a trial of [Mr Scott's] claim'.[3] The submission advanced by counsel for Second Skin was that Second Skin did not have evidence on which it could positively assert the existence of the alleged agreement, sufficient to enable the Court to be satisfied that 'leave to defend should be granted in the usual way'.[4] Instead, counsel submitted that there was evidence that suggested the possibility of an agreement by which Mr Scott assigned his interest in the Share to Ms Ballantyne in around 1995, and that in all of the circumstances, Second Skin should be given the opportunity to investigate further whether the alleged agreement had been reached.[5] [2] Rules of the Supreme Court 1971 (WA) O 14 r 1(1).[3] Rules of the Supreme Court 1971 (WA) O 14 r 3(1).[4] ts 57 (8 September 2014).[5] ts 10 - 11 (8 September 2014). The basis for the approach taken by Second Skin was as follows. It was not disputed that:1.the share capital of Second Skin comprises two shares;2.one share had always been held by Ms Ballantyne and now forms part of her estate;3.the Share was initially held by Second Skin's accountant, Mr Ronald Magerl, on trust for Mr Scott; and4.ASIC extracts record Mr Scott as holding the Share both legally and beneficially from 8 February 2013, but that the register of members maintained by Second Skin did not record Mr Scott as a shareholder.[6] [6] Submissions of first defendant in opposition to summary judgment, dated 3 September 2014 [8].

Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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