Swansdale Pty Ltd v Whitcrest Pty Ltd [No 2] - [2009] WASC 179

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: SWANSDALE PTY LTD -v- WHITCREST PTY LTD [No 2] [2009] WASC 179

CORAM: MASTER SANDERSON

HEARD: 9 JUNE 2009

DELIVERED : 25 JUNE 2009

FILE NO/S: CIV 2156 of 2008

BETWEEN: SWANSDALE PTY LTD (ACN 079 005 477)
First Plaintiff
MUNKBERG PTY LTD (ACN 078 824 567)
Second Plaintiff
RUSSMEX PTY LTD (ACN 079 030 550)
Third Plaintiff
AND
WHITCREST PTY LTD (ACN 009 113 473)
First Defendant
ROCHWOOD PTY LTD (ACN 079 005 440)
Second Defendant
MARK JOHN BEESON
Third Defendant
LYNDON EDWARD DYSON
Fourth Defendant
ENDOPINE PTY LTD (ACN 079 030 452)
Fifth Defendant
LUPIN NOMINEES PTY LTD (ACN 008 998 990)
Sixth Defendant

Catchwords:

Practice and procedure - Application to rely on further affidavits - Turns on own facts

Legislation:

Nil

Result:

Application dismissed

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr T Galic
Second Plaintiff             :     Mr T Galic
Third Plaintiff                :     Mr T Galic
First Defendant              :     Mr H R Robinson
Second Defendant         :     Mr H R Robinson
Third Defendant            :     Mr H R Robinson
Fourth Defendant           :     Mr H R Robinson
Fifth Defendant              :     Mr H R Robinson
Sixth Defendant             :     Mr H R Robinson

Solicitors:

First Plaintiff                  :     Galic & Co
Second Plaintiff             :     Galic & Co
Third Plaintiff                :     Galic & Co
First Defendant              :     Haydn Robinson
Second Defendant         :     Haydn Robinson
Third Defendant            :     Haydn Robinson
Fourth Defendant           :     Haydn Robinson
Fifth Defendant              :     Haydn Robinson
Sixth Defendant             :     Haydn Robinson

Case(s) referred to in judgment(s):

BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857

MASTER SANDERSON: On 5 May I published reasons for refusing the plaintiffs leave to rely on two affidavits on the defendants' application to strike out the plaintiffs' claim and alternatively for security for costs. The upshot of that decision was that the defendants' application was to be determined upon the affidavit material it had filed together with any court documents already filed which may have been relevant. After delivering reasons I instructed the parties to provided unavailable dates to my Associate so the matter could be listed for hearing. Prior to the matter being listed the plaintiffs appealed against my decision. Not surprisingly, counsel for the defendants was concerned lest the matter be argued and subsequently any decision vitiated as a consequence of a successful appeal. To further consider how the matter should be handled I held a directions hearing on 4 June. At that hearing, counsel for the plaintiffs indicated that he intended to file an application seeking leave to rely on two further affidavits. These affidavits were additional to the affidavits that were the subject of my earlier decision. The foreshadowed application can best be described as heroic.
On 5 June 2009, the plaintiffs took out a chamber summons seeking the following orders:
1.There be an abridgement of time for service of the summons.
2.The plaintiffs do have leave to rely upon the affidavits of:
(a)Tihomir Galic sworn 28 May 2009; and
(b)Simon James Sidney Chesson sworn 5 June 2009.
3.Such further or other orders as the court thinks fit.
This application and the substantive application were then listed for hearing on 9 June 2009. Both parties were of the view that I should rule on the plaintiffs' application to rely on the additional affidavit evidence before the substantive application was heard. Counsel for each of the parties indicated that were they to lose they would appeal. I indicated to the parties I would provide reasons in writing for my decision.
Before dealing with these two affidavits specifically, it is as well to recall the nature of the substantive application. It is the defendants' application to strike out the plaintiffs' claim as an abuse of process and alternatively, an application for security for costs. The application was supported by an affidavit of Haydn Ross Robinson sworn 29 January 2009. Annexure HRR1 to Mr Robinson's affidavit is a copy of a writ of summons in action CIV 2302 of 2005. There are two plaintiffs in that action ‑ Munkberg Pty Ltd and Swansdale Pty Ltd ‑ the first two plaintiffs in these proceedings. There are six defendants to that action ‑ Endopine Pty Ltd, Lupin Nominees Pty Ltd Gecko Management Pty Ltd, Kahmia Holdings Pty Ltd, Mark John Beeson and Lyndon Edward Dyson. In other words, two corporations Endopine Pty Ltd and Lupin Nominees Pty Ltd which are the first and second defendants in CIV 2302 of 2005, are the fifth and sixth defendants in this application.
On 11 January 2006, the defendants in CIV 2302 of 2005 (which I will refer to as the first action) sought security for costs from the plaintiffs. On 3 November 2006 I published reasons dismissing that application. From that decision, the defendants appealed. The appeal was successful. The Court of Appeal ordered that the respondents (the plaintiffs in the first action) provide security in the sum of $100,000 with liberty to the appellants (defendants) to apply to increase the amount. The position as at the date Mr Robinson swore his affidavit the security for costs had not been provided by the plaintiffs in the first action. It was upon this basis the defendants allege that this present action was an abuse of process and ought be struck out.
As I understand it, it is now common ground that the security for costs in the first action has been provided. Whether I am right or not in my understanding of the position, the payment or non‑payment into court required by the Court of Appeal's decision is a matter of public record. Affidavit evidence one way or the other will not alter the position. While not in any way wishing to foreshadow the result of the defendants' application to strike out the whole of the action, it would be unusual indeed to strike out one action upon the basis of a failure to comply with a requirement in another action to provide security for costs. In reality, this is an application to determine whether or not security for costs ought be provided in these proceedings.
On that application, the defendants start with a considerable advantage. A copy of the transcript of the proceedings before the appeal court appears as annexure HRR3 to Mr Robinson's affidavit. The interchange between the court and counsel makes it plain the court was satisfied that the evidence showed the plaintiffs in the first proceedings would be unable to meet a costs order when called upon to do so and accordingly, an order for security for costs was justified. After all, under s 1335 of the Corporations Act 2001 (Cth) the capacity of a corporation to meet a costs order is the prime consideration. There are other discretionary considerations which may lead to an order for security being refused and each case must be decided on its merits. But it would be naive to suggest that fortified as they are by the Court of Appeal's decision in the first application, the defendants are not in a strong position to have an order for security made in their favour.
In considering whether or not to exercise the discretion to order security, there is no question but that the merits of the plaintiffs' claim are relevant. This was made plain by Anderson J in BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 at 860 ‑ 861. But there are limits as to how far a consideration of the merits of a plaintiffs' claim can take the matter. If the claim was cast iron presumably the plaintiffs would have applied for summary judgment. They did not do so. That necessarily means they concede there is a serious question to be tried. So on the one hand based upon the pleadings it can be agreed that, the plaintiffs have a bona fide case; on the other hand it must be said there is a serious question to be tried. It is difficult to see how the merits of the claim can go much further than that. In the HPM Pty Ltd decision, Anderson J cautioned against too close an examination of the pleadings on a security for costs application. His Honour made plain in that decision ‑ and it has been made plain in many other decisions ‑ that a detailed examination of the merits of the action is not warranted on an application for security for costs.
Nothing in what I have said above should in any way limit the argument to be put when the application is eventually heard. However, it is important to put these two latest affidavits in context, thus allowing an assessment of how important they might be to the ultimate determination of the security for costs application.
Turning then to the affidavits themselves, the affidavit of Mr Galic runs only to five paragraphs. It annexes a copy of the appeal notice in these proceeding presumably to confirm that an appeal has been brought. Importantly, what is annexed to the affidavit (as annexure TG1) is a copy of a letter from Mr Robinson, the defendant's solicitor dated 7 May 2009. That letter attaches financial accounts for two companies and various trusts. The companies are Rochwood Pty Ltd and Whitcrest Pty Ltd. The significance of this letter and the accompanying accounts is referred to in par 2 of Mr Galic's affidavit. It is in the following terms:
The defendants in this matter refused to provide the plaintiffs with financial information that has been requested by the plaintiffs in the period leading up to the hearing of the otherside's application which had been listed before Master Sanderson on 30 April 2009. The information requested appears in letters from the solicitors and accountants for the defendants copies of which have been annexed to and contained in the affidavits of Simon James Sydney Chesson [sic] and my own affidavit sworn 24 April 2009 which the defendants were refused leave to rely upon for the purposes of the defendants' strike‑out/security for costs application.
The affidavit of Mr Chesson sworn 5 June 2009 is longer. It too refers to Mr Robinson's letter and the accompanying accounts. Mr Chesson says that although he has not had an opportunity to consider in detail the financial statements, he is in a position to make some general comments about them. The rest of the affidavit contains those general comments. Without the benefit of detailed submissions, it is somewhat difficult to know at what issue the affidavit is directed. Presumably it goes to the question of the strength of the plaintiffs' case. There is certainly nothing in the affidavit which says anything about the capacity of the plaintiffs to meet a costs order if called upon to do so.
Neither of these affidavits takes the matter any further. Defendants who seek security for costs are required to bring an application promptly. That necessarily means the material available to the court is limited. As a rule, discovery will not have been provided. There may be cases where the materials made available in discovery might be relevant to the issue of the merits of the plaintiffs' claim. But that is beside the point. An application for security for costs is not an occasion to try the action as a whole.
The defendants in this action were entitled to have their application dealt with expeditiously and in conformity with the agreed timetable. In essence, that was the reason why I refused leave to the plaintiffs to rely on further affidavits. The position has not changed. If I were to allow these affidavits into evidence, the defendants may well feel they need to provide answering affidavits. In doing so, they may be acting out of an abundance of caution. However, the last thing they would want is by not filing an answering affidavit, to be seen to be conceding the plaintiffs' position. The result is a pile of affidavits dealing with an issue of limited importance. That surely is in no‑one's interest.
Leave to rely upon these affidavits ought be refused. I will hear the parties as to how the matter ought proceed from this point onwards. The plaintiffs are to pay the defendants' costs of this application including any reserved costs.