T G Australia Pty Ltd v Oudman - [2011] WADC 58

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS

LOCATION: PERTH

CITATION: T G AUSTRALIA PTY LTD -v- OUDMAN [2011] WADC 58

CORAM: PRINCIPAL REGISTRAR GETHING

HEARD: 1 APRIL 2011

DELIVERED : 1 APRIL 2011

FILE NO/S: CIV 3504 of 2009

BETWEEN: T G AUSTRALIA PTY LTD
Plaintiff
AND
ENNO WIEBO OUDMAN
First named Defendant
JANTINA OUDMAN
Second named Defendant

Catchwords:

Security for costs

Legislation:

Corporations Act 2001 (Cth) s 1335

Result:

Application dismissed

Representation:

Counsel:

Plaintiff:     Mr A M Ahern
First named Defendant     :     Mr D A Lenhoff
Second named Defendant    :     Mr D A Lenhoff

Solicitors:

Plaintiff:     Aherns Lawyers
First named Defendant     :     Holborn Lenhoff Massey
Second named Defendant    :     Holborn Lenhoff Massey

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

BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69
Meni's Tailoring and Alterations Pty Ltd v Jeanswest Corporation [2003] FCA 1108
Western Areas Exploration Pty Ltd v Streeter [2008] WASCA 218

PRINCIPAL REGISTRAR GETHING: [This judgment was delivered extemporaneously on 1 April 2011 and has been edited from the transcript.]

By application dated 17 December 2010, the defendants sought an order that the plaintiff provide security for costs in the amount of $40,000.
In support of the application, the defendants filed an affidavit of the first defendant, Mr Enno Wiebo Oudman, dated 17 December 2010, together with a responding affidavit dated 2 March 2011.
The plaintiff filed an affidavit from its director, Ms Giao Quynh Tran, dated 8 February 2011. At the commencement of his submissions, counsel for the plaintiff handed up a second affidavit of one Claire Teresa Tota, who is an articled clerk in the employ of the solicitors for the plaintiff. That affidavit goes to details of two charges in the company extract for the plaintiff. I propose to take this affidavit into account for the purposes of the present decision.
The application takes as its context the plaintiff's claim against the defendants arising out of the purchase of a business previously owned by the defendants knows as Transwest Coach Service. The sale agreement was dated 10 October 2006. The plaintiff alleges a large number of claims against the defendants relating to the transition of the business from the defendants to the plaintiff. In a schedule of damages filed 16 March 2011, the plaintiff assesses its claim as being in excess of $415,000.
Although the defendants have not yet pleaded to the most recent version of the statement of claim, it appears from their earlier defence that the plaintiff's claim is disputed on all fronts.
The law in relation to a security for costs application against the company commences with the Corporations Act 2001 (Cth) s 1335. So far as is relevant, that section provides:
(1)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…

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: [2011] WADC 58
Decision Date: 1 APRIL 2011

CaseChat Overview and Summary

T G Australia Pty Ltd filed an application seeking security for costs against Oudman, the defendant. The dispute arose out of a broader legal action, and T G Australia sought to secure its costs in the event of an adverse outcome. The matter was heard in the Supreme Court of Western Australia. The central legal issue before the court was whether the plaintiff had satisfied the threshold test set out in section 1335 of the relevant legislation. This required the plaintiff to demonstrate a credible reason to believe that there was a real chance the corporation would be unable to pay the applicant's costs if the application were unsuccessful.

The court reviewed the evidence provided by the plaintiff and considered whether it met the 'fairly modest test' as outlined in previous cases. The plaintiff's initial evidence, based on the company's issued and paid-up capital of $100 and the refusal to provide financial information, was deemed insufficient to meet the threshold. However, subsequent evidence presented by the plaintiff's new solicitors, including a detailed affidavit outlining the company's assets and financial position, provided a more comprehensive picture. The court found that the company's assets, including property, vehicles, and goodwill, valued at over $1.9 million, did not support the claim that there was a real chance the plaintiff would be unable to pay costs.

In light of the evidence, the court concluded that the plaintiff had not met the threshold test for security for costs. Consequently, the application was dismissed. The court's decision was based on the overall financial capacity of the plaintiff, which did not support the assertion that there was a real chance the plaintiff would be unable to pay the applicant's costs. The court did not find it necessary to order any costs against the plaintiff as the application was unsuccessful.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The power in s 1335 contains a threshold test (or jurisdictional requirement) as well as a discretion: Western Areas Exploration Pty Ltd v Streeter [2008] WASCA 218 [2], and BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81 [11]. 'The threshold requirement is met if credible testimony establishes that there is reason to believe that there is a real chance, in the events which can fairly be described as reasonably possible', the relevant corporation will be unable to pay the applicant's costs of the application if unsuccessful: Western Areas [3]. The threshold test has been described as a 'fairly modest test': Western Areas [4], Meni's Tailoring and Alterations Pty Ltd v Jeanswest Corporation [2003] FCA 1108 [4]. In ascertaining whether there is credible testimony, the court does no more than judge the quality of the evidence to see if it objectively gives rise to a reason to believe: Western Areas [5]; FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69 [22]. The onus is on the applicant to produce the necessary credible testimony that there is reason to believe the corporation will be unable to pay the costs of an issue: Western Areas [15]. In relation to the evidence as to the plaintiff's financial position, it is appropriate to place this in the context of the correspondence passing between the parties. By fax dated 20 October 2010, the defendants sought details of the financial capacity of the plaintiff to pay an adverse costs order. The defendants specifically sought copies of the financial statements of the plaintiff. By facsimile dated 21 October 2010, the then-solicitors for the plaintiff responded that they were seeking their client's instructions in relation to the request. By fax dated 26 October 2010, the solicitors for the defendants repeated their request for details as to the plaintiff's financial capacity to satisfy an adverse costs order. A follow-up letter was sent on 16 November 2010. The plaintiff changed solicitors during November 2010. The new solicitors responded by a fax dated 17 November 2010 requesting further time to respond. That request was allowed. By letter dated 13 December 2010 the request for provision of the financial information was refused. On 17 December 2010 the present application was commenced. The affidavit in support sworn by Mr Oudman on 16 December 2010 and filed on 17 December is said to found the application based on two facts. The first fact is based on the annexed company search. The issued and paid‑up capital of the company is $100. The second is that the plaintiff had failed to provide a response to a request for information as to its financial capacity. In my view, had there been no further evidence in the proceedings, the evidence of Mr Oudman would not have satisfied the threshold test in s 1335, even taking into account the fact that it is, as I have stated, a modest test. The financial position of the plaintiff is set out in detail in Ms Tran's affidavit. The assets of the company are said to be valued at just over $1.9 million. This includes property valued at $800,000, a fleet of vehicles valued at approximately $840,000, and the goodwill of the business valued at $274,000 as at 30 June 2009.