Sharjade v Darwinia Estate - [2006] NSWSC 708

CITATION: Sharjade v Darwinia Estate & Anor [2006] NSWSC 708

HEARING DATE(S): 07/07/2006

JUDGMENT DATE :
7 July 2006

JUDGMENT OF: McDougall J at 1

EX TEMPORE JUDGMENT DATE: 07/07/2006

DECISION: See paras [43] and [55] of judgment

CATCHWORDS: SECURITY FOR COSTS - where plaintiff is impecunious and its directors offer to accept personal liability for defendants' costs - whether defendants' conduct is cause of plaintiff's impecuniosity - whether security will stultify litigation - whether directors' offer means that plaintiff should not be ordered to provide security

LEGISLATION CITED: Corporations Act 2001
Uniform Civil Procedure Rules

CASES CITED: Clyde Industries Ltd v Ryad Engineering Pty Ltd (1993) 11 ACLC 325
Epping Plaza Fresh Fruit and Vegetables Pty Ltd v Bevendale Pty Ltd [1998] VSCA 43
Erolen Pty Ltd v Baulkham Hills Shire Council (1993) 10 ACSR 441
Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564
Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744
Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306
K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189
Mantaray Pty Ltd v Brookfield Breeding Co Pty Ltd (1990) 8 ACLC 304
M A Productions Pty Ltd v Austarama Television Pty Ltd (1982) 7 ACLR 97

PARTIES: Sharjade Pty Limited (Plaintiff)
Darwinia Estate Pty Limited (First Defendant)
Commonwealth of Australia (Second Defendant)

FILE NUMBER(S): SC 50024/06

COUNSEL: J Stoljar/K W Dawson (Plaintiff)
J B Simpkins SC (First Defendant)
R P L Lancaster (Second Defendant)

SOLICITORS: Thomson Playford (Plaintiff)
Gadens Lawyers (First Defendant)
Blake Dawson Waldron (Second Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

McDOUGALL J

7 July 2006 Ex tempore (revised 11 July 2006)

50024/06 SHARJADE PTY LTD v DARWINIA ESTATE PTY LTD & ANOR

JUDGMENT (On application for security for costs)

1 HIS HONOUR: The first and second defendants (respectively Darwinia and the Commonwealth, and together the defendants) seek security for costs from the plaintiff (Sharjade) and consequential relief. The defendants rely on UCPR Rule 42.21 and on s 1335 of the Corporations Act 2001.

2 Sharjade acknowledges that it would not be able to meet any costs order that may be made against it, but it says that it should not be ordered to give security for three reasons:

(1) The defendants, it says, caused its admittedly impecunious state.

(2) Any order for security would, it says, stultify the litigation.

3 The debate before me centred on these issues. There was, in addition, a dispute as to the amount of any security that should be ordered. As will become apparent, I am not in a position to resolve this last debate.

Background

4 Sharjade's case is that it was party to an agreement with…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2006] NSWSC 708
Decision Date: 07/07/2006

CaseChat Overview and Summary

The case of Sharjade v Darwinia Estate involved the plaintiff, Sharjade, seeking security for costs from the defendants, Darwinia Estate. The plaintiff, who was impecunious, sought to prevent the defendants from recovering their costs from the plaintiff, instead suggesting that the directors of the plaintiff company accept personal liability for the defendants' costs. The defendants argued that the plaintiff should still be required to provide security for costs, regardless of the directors' offer. The Federal Court of Australia was tasked with determining the legal issues presented by this case.

The primary legal issue for the court was whether the impecuniosity of the plaintiff was caused by the conduct of the defendants. If so, this could potentially negate the need for the plaintiff to provide security for costs. Another issue was whether the plaintiff's impecuniosity was such that ordering security would stultify the litigation, rendering it effectively futile. The court also needed to consider whether the offer by the plaintiff's directors to accept personal liability for the defendants' costs meant that the plaintiff should not be ordered to provide security.

In its decision, the Federal Court found that the plaintiff's impecuniosity was not caused by the conduct of the defendants. The court held that the plaintiff's financial difficulties predated the proceedings and were not a result of the defendants' actions. The court also found that ordering the plaintiff to provide security would not stultify the litigation, as the plaintiff had the ability to fund the proceedings despite its financial difficulties. The offer by the plaintiff's directors to accept personal liability for the defendants' costs was considered, but the court held that this did not absolve the plaintiff of the obligation to provide security. The court ultimately ordered the plaintiff to provide security for costs, but allowed for the plaintiff's impecuniosity to be taken into account in setting the amount of security required.

Orders