T &M Holdings Group Pty Ltd v Hutchinson Telecommunications (Australia) Limited
[2007] NSWLC 23
•06/07/2007
Local Court of New South Wales
CITATION: T &M Holdings Group Pty Ltd v Hutchinson Telecommunications (Australia) Limited [2007] NSWLC 23 JURISDICTION: Civil PARTIES: T &M Holdings Group Pty Ltd
Hutchinson Telecommunications (Australia) LimitedFILE NUMBER: 833/07 PLACE OF HEARING: Downing Centre Local Court DATE OF DECISION:
07/06/2007MAGISTRATE: Magsitrate B A Lulham CATCHWORDS: Contract dispute - Security for costs LEGISLATION CITED: Uniform Civil Procedure Act
Trade Practices ActCASES CITED: Buckley v Bennell Design & Construction Pty Ltd (1974) 1ACLR 301 REPRESENTATION: Mr Turnbull (Counsel for Defendant/Applicant)
Mr T. Liristis (Solicitor for Plaintiff/Respondent)
Truman Hoyle (Solicitors for Defendant/Applicant)ORDERS: The plaintiff is to provide security for the defendant’s costs by paying into court the sum of $20,000 or by otherwise providing security for that amount in a manner satisfactory to the defendant. Until that security is provided, there will be a stay of the proceedings. The security is to be provided before 17 August 2007, on which date the matter is to be listed before the court for consequential orders, or, in the event that the security has not been provided, an order for the dismissal of the proceedings under r 42.21(3); All orders currently in place for the case management of the proceedings are presently stayed until the motion seeking security for costs is determined; Costs follow the event. The plaintiff is to pay the defendant’s costs and disbursements of the motion as agreed or assessed. In default of agreement within 28 days, costs are to be assessed under the Legal Profession Act.
BACKGROUND TO DISPUTE
1 T & M Holdings Group Pty Ltd (T & M Holdings) (hereinafter referred to as either ‘the plaintiff’ or ‘the respondent’) sue Hutchinson Telecommunications (Australia) Limited (Hutchinson) (hereinafter referred to as ‘the defendant’ or ‘the applicant’) for damages. The Statement of Claim alleged that Hutchinson had made representations to T & M Holdings that they could upgrade their three mobile services. T & M Holdings alleged that the defendant failed to honour that agreement. They further alleged that the defendant made false representations and breached s 51(a)(c) of the Trade Practices Act in advertising ‘we now cover 96% of Australia’. T & M Holdings claimed damages for loss and damage of $38,214.52. Hutchinson filed a Defence generally denying that the plaintiff was entitled to any damages, costs and interest.
2 Hutchinson as applicant filed a Motion seeking orders that the plaintiff provide security for the defendant’s costs in the sum of $30,000.00 and seeking that the proceedings be stayed until the plaintiff has complied with that order.
3 The Motion was heard on 10 May 2007. Mr Tony Liristis a former director, appeared for the respondent and Mr Darvall appeared for the applicant. The Motion was heard by Magistrate Reis. The court file indicates that Melissa Palmer, T & M Holdings’ sole director and secretary gave evidence and was cross examined. Mr Liristis also gave evidence and was cross examined.
4 His Honour Magistrate Reiss made the following orders:
- Motion for security for costs adjourned to 7 June 2007 for hearing.
Respondent to file any affidavit to that matter by 22 May 2007.
Foreshadowed Notice of Motion of applicant (to strike out Statement of Claim) and accompanying affidavit to be filed and served on 23 May 2007 in court.
The date for return of subpoenas and to answer Notice to Produce adjourned to 2pm on 23 May 2007.
Affidavit in reply to foreshadowed Notice of Motion to be filed and served by 7 June 2007.
The foreshadowed Notice of Motion was also set down for hearing on 7 June 2007.
Costs of the day reserved for defendant.
5 The learned Magistrate noted the file that he had made the following findings:
- 1. The current Notice of Motion for security of costs was properly served upon the company.
2. Insufficient evidence that the supplementary affidavit for the current Notice of Motion was served upon the company.
3. Leave granted to defendant to serve the plaintiff company the Notice of Motion and accompanying affidavit in court – one copy for Mr Liristis and one for Ms Palmer. That was done.
4. Leave granted to applicant to serve Mr Liristis in court a subpoena to produce and to give evidence. That was done.
6 The learned Magistrate disqualified himself from the further hearing of the matter.
7 Before me, Mr Turnbull of Counsel appeared for the applicant and Mr Liristis continued to act for T & M Holdings. I was informed that neither Mr Liristis nor Ms Palmer, nor any other representative for the plaintiff attended the court on return of subpoenas at 2pm on 23 May 2007. As a result, the applicant was unable to serve the foreshadowed Motion and further Affidavit on the respondent. Mr Turnbull said the Notice of Motion and Affidavit had been served. Mr Liristis denied receiving the further Notice of Motion or Affidavit. He objected to my hearing the further motion. I determined the present motion should proceed. The further motion, if required, should proceed as a separate matter even though such course may lead to additional costs.
RELEVANT RULE AND APPLICABLE LAW
8 The relevant rule is r 42.2(1)(d) and the following sub rules as follows:
- R 42.1
- 1. If, in any proceedings, it appears to the court on the application of a defendant:
- (a) ..
(b) ..
(c) ..
(d) That there is reason to believe that a plaintiff, being a corporation will be unable to pay the costs of the defendant if ordered to do so, or
(e) ..
2. Security for costs is to be given in such manner at such time and on such terms (if any) as the court may be order direct.
3. If the plaintiff fails to comply with an order under this rule, the court may order that the proceedings on the plaintiff’s claim for relief in the proceedings be dismissed.
9 The learned authors of Ritchies Practice summarise the applicable legal principles to be that the discretion to order security on the basis of r 42.1.(1)(d) is to be exercised in all the circumstances of the particular case so as to attempt to achieve a balance between ensuring that protection is provided to a defendant and, on the other hand, avoiding injustice to a plaintiff by unnecessarily shutting it out or otherwise stultifying it in the conduct of litigation, Buckley v Bennell Design & Construction Pty Ltd (1974) 1ACLR 301.
10 The Practice indicates that the relevant considerations in the exercise of the discretion include the following:
- 1. Whether the plaintiff’s claim is made in good faith and appears to be reasonably arguable . If the plaintiff’s claim appears reasonably arguable, it is not appropriate to attempt a more detailed assessment of the prospects of success.
2. Whether the plaintiff’s lack of funds has been caused or contributed to by the conduct of the defendant.
3. Whether the making of the order would unduly stultify the plaintiff’s ability to pursue the proceedings.
11 The applicant relied upon the following affidavits:
- Affidavit of Mary Ellen Horvath sworn 12 April 2007
Affidavit of Mary Ellen Horvath sworn 8 May 2007
Affidavit of Mary Ellen Horvath sworn 6 June 2007
12 The respondent relied on the following evidence:
- Affidavit of Tony Liristis sworn 30 May 2007
Affidavit of Andrew Trovas sworn 6 June 2007
Affidavit of Melissa Palmer sworn 6 June 2007
13 I have read the affidavits. I also heard lengthy oral submissions from Mr Turnbull and Mr Liristis. I propose to discuss the evidence under two main considerations namely:
- 1. Whether the plaintiff’s claim is made in good faith and appears reasonably arguable, and
2. The evidence relied upon to establish the belief that the plaintiff will be unable to pay the costs of the defendant if ordered to do so.
14 The plaintiff’s claim appear to rely on the allegation that it had three services with the defendant and that as a result of the defendant ceasing trading with the CDMA Network, the plaintiff cannot use the services and has suffered damage. The plaintiff also alleged a breach of a representation that the defendant covers 96% of Australia. The plaintiff alleged that the defendant failed to do so, and provided a service with poor coverage and one which was interrupted. The Statement of Claim would seem to be reasonably arguable on the face of it. However, it would also appear that the plaintiff may have considerable difficulties in proving damages. Moreover there are some matters arising out of the previous proceedings between the parties which have to be taken into account. It is necessary to discuss those proceedings and their conclusion as they impact on the present consideration as to the arguability of the plaintiff’s claim and as to other relevant discretionary matters.
15 The plaintiff commenced two proceedings against the defendant and the defendant’s related corporation Hutchinson 3G Australia Pty Ltd alleging loss and damages arising from breach of mobile service contracts and breach of statutory duties embodied in ss 51AC and 52 of the Trade Practices Act 1974. The matters were heard together at Burwood. There was an unsuccessful application for security of costs by the defendants in those proceedings. The plaintiff claimed the sum of $8,656.52 in each proceedings. The proceedings were heard over three days. At the end of that period Mr Liristis was still giving evidence in chief. The matter was set down for a further two days. The parties settled the matter. Both parties in this application attached the Terms of Settlement to affidavits filed on their behalf. Both claims were settled for a total sum of $15,000. In addition the defendant waived outstanding charges of about $4,800. The Terms of Settlement included a form of release whereby the plaintiff/respondent in these proceedings, unconditionally and irrevocably released and discharged the defendants, including the present applicant/defendant;
- ‘from all claims and liabilities of any nature up to and including the date of these terms but including any costs, whether or not the subject of a court order (including without limitation all matters related in any way to the subject matter of the proceedings, any accounts held by the plaintiff Tony Liristis or Kea Toa Enterprises Pty Ltd) or any of their related corporations or entities and all other claims and disputes between the parties.’
16 The effect of such Terms of Settlement on these proceedings was, I understand, the basis of the further motion.
17 The Terms of Settlement would seem to present difficulties for the plaintiff, but for the purposes of this motion I am satisfied that the claims made by the plaintiff in the Statement of Claim are reasonably arguable, although the claims will face considerable difficulties.
EVIDENCE GOING TO THE INABILITY OF THE PLAINTIFF TO MEET AN ORDER FOR COSTS
18 The applicant/defendant relied on the three affidavits of Mary Ellen Horvath. I do not propose to refer to all of the evidence in those affidavits, but to deal with the matters which I consider to be of most relevance and at the same time to discuss the respondent’s evidence and submissions in relation to those matters.
19 The applicant relies on the company search (Exh.MH1 to Horvath Affidavit 12.4.2007) as evidence that the plaintiff has not, since its corporation on 5 February 2003, filed company accounts with ASIC. Such documents would include the balance sheet and profit and loss accounts. I am satisfied the failure to file any of such documents raises a strong inference based on the court’s experience that the company is not well run, does not attend to its statutory obligations, and at least an inference that the company is not in a strong financial position.
20 The applicant relies on the search (Exh.MH3 to Horvath Affidavit 12.4.07) to prove that the premises 191 Kingsgrove Road, Kingsgrove is owned by Ghabrial Danic. The Certificate of Title refers to a lease to Liristis Holdings Pty Ltd which expired on 1 November 2003 with an option of renewal for five years with one further period of five years. The search refers to a caveat lodged by the plaintiff on behalf of T & M Discretionary Trust trading as Kingsgrove Car Care Centre. The nature of the caveator’s interest in the land was said to be lessee pursuant to lease dated on or about 1 April 2003 and amendments made to the said lease, including option to purchase the land contained in the lease.
21 Mr Liristis (Affidavit 30 May 2007, paragraph 21) claimed that plaintiff/respondent had in its possession the following:
- (a) Fifteen year lease in the premises that the plaintiff where the parent company has been since 1988 the lease is currently valued at $3.8 million.
(b) Deposit of $900,000 on contract for the purchase of the premises which the plaintiff is presently working from, and has been since 1988.
(c) New building and improvements of the plaintiff’s premises in excess of $700,000.
22 Mr Liristis did not produce any documentation at all in support of those assertions. He indicated that the improvements carried out to the property at 191 Kingsgrove Road, Kingsgrove consisted of the construction of a very modern car wash. The applicant produced evidence (Exh.MH7 to Horvath Affidavit 12.5.07) that the business name for Kingsgrove Car Wash is registered in the name of The Serenity Group of Companies Pty Limited. Such documentary evidence casts great doubt as to whether the Kingsgrove Car Wash is owned by the respondent. The beneficial owner of the lease, based on the documents, is T & M Discretionary Trust and not the respondent.
23 Based on the documentary evidence provided by the applicant, I am not satisfied that the lease or the business Kingsgrove Car Wash are assets owned by the respondent.
24 The applicant relied on at least two conversations which Ms Horvath had with employees of the Motor Vehicle Repair Industry Authority. Ms Horvath deposed (para 40 of Horvath Affidavit 8.5.07) that on 8 May 2007 Mr Tony Taplee, director of the Motor Vehicle Repair IndustryAuthority telephoned her to confirm that the plaintiff’s motor repair licence had been cancelled and that Tony Liristis had been permanently disqualified from operating a mechanical repair business. He said that he would never grant a licence to a company if he thought Tony Liristis or his father were still running it.
25 Mr Liristis in submissions said he still had a motor vehicle repair licence and had always retained it. He did not produce a copy of the licence. I am not satisfied that the plaintiff holds a licence. The significance of the disqualification of its licence is that the plaintiff is unable to carry out the business of motor vehicle repairs which it would appear was the company’s business when it was incorporated.
26 The applicant relied on a search of ASIC (Exh.MH25 to Horvath Affidavit 8.5.07) which indicates that there is a strike off action in progress against the plaintiff. Further details of the strike off action was not able to be obtained. Mr Liristis in submissions stated that it was a clerical error. He said previous strike off actions had been clerical errors. It would appear to me that a reasonable inference is that the strike off action may be instituted by ASIC itself as a result of the respondent’s failure to file financial statements, accounts and reports. In any event the presence of an existing strike off action is a matter to be taken into account against the respondent in this application. The strike off of the plaintiff during the proceedings would create enormous difficulties for the applicant in recovering any order for costs against the plaintiff.
27 The applicant relied upon the non-compliance by Mr Liristis and by his accountant with subpoenas served on each of them. In these proceedings the subpoena required production of a number of documents, including financial statement and records of the plaintiff for financial years ending 30th June 2003, 2004, 2005 and 2006, copy income tax returns, registration particulars in relation to vehicles, correspondence between the plaintiff and its accountants, the lease between Danic and the plaintiff on behalf of T & M Discretionary Trust and the Trust Deed establishing the T & M Discretionary Trust. The subpoena was served by mail on 2 May 2007. The documents were not produced at the hearing on 10 May and the date for the return of subpoenas and the notice to produce was fixed at 2 pm on 23 May 2007. The magistrate made a note that a copy of the subpoena had been served on Mr Liristis and on Ms Palmer at court. Orders were made for the service of further documents on Mr Liristis at court on 23 May at 2pm. Neither Mr Liristis nor Ms Palmer nor any representative appeared and no documents were produced. No documents were produced in reply to the subpoena on 7 June 2007.
28 An application for security of costs was made in the previous proceedings at the Burwood Local Court. That application took two days. Similar subpoenas were served on the respondent and Mr Liristis in that matter. The applicant relied on the evidence (Exh.MH15 to Horvath Affidavit 12.4.07) of the proceedings in relation to the proceedings at Burwood. In those proceedings Mr Liristis gave evidence on oath that he could not produce the documents as they were held by his accountant. He told the court the accountant would finalise preparation of the 2006 accounts in August 2006. The documents were not produced.
29 The fact is that in the previous proceedings at Burwood and in these proceedings the plaintiff and Mr Liristis have failed to comply with subpoenas and notices to produce in relation to documents of great relevance and importance to the application before the court. The documents were not produced, notwithstanding the fact that in each proceedings the application was heard by the court over two days. The failure to produce the documents in those circumstances must lead to an inference that the documents would not assist the respondent’s position in this matter.
30 The applicant relied on the failure of the respondent’s accountant Andrew Trovas to supply documents in answer to a subpoena requiring the same documents set out in the subpoena to the respondent. The subpoena requiring production of the documents was served on Trovas on 12 April 2007. Conduct money of $100 was paid. Trovas refused to produce the documents unless $4,500 was paid to him for his costs before production. He was informed (in my view correctly) by the applicant’s solicitors that the current state of law under the Uniform Civil Procedure Act is that:
- i) In the normal case the person receiving the subpoena is obliged to incur the expense of complying with it and then make an application to recover reasonable expenses at (para 9 of Bauhaus Pyrmont Pty Ltd in Liquidation 2006 NSWSC 253), and
ii) It is the usual course that an application under r 33.11 would only be dealt with after the person to whom the subpoena was issued had incurred the expenses for which recovery was sought at (para 5 of Bauhaus Pyrmont Pty Ltd in Liquidation 2006 NSWSC 268).
31 Mr Trovas swore an affidavit dated 6 June 2007. He confirmed his stance that he was not prepared to produce the documents without payment of his fees of $4,500 notwithstanding the correct advice given to him. His failure to produce the documents does not assist the respondent.
EVIDENCE OF TONY LIRISTIS
32 Mr Liristis relied on an affidavit sworn 30 May 2007. He referred to the previous proceedings in the Burwood Local Court and set out the Terms of Settlement. He deposed that on 7 May 2007 the respondent had served a Notice to Produce on the applicant. Mr Turnbull indicated that no call had been made on that Notice on 10 May. No person attended at the return of subpoena date on 23 May. Mr Turnbull said that if a call was made for the documents, they would be produced. A call was made and the documents were produced. Mr Liristis deposed that he had sought the approval of the court to include this claim in the previous claim, but such application had been opposed by the solicitors for the applicant.
33 Mr Liristis deposed that the plaintiff has in its possession the following unencumbered assets:
- (a) Fifteen year lease in the premises that the plaintiff, where the parent company has been in since 1988. The lease is currently valued at A$3.8 million. (written as deposed to)
(b) A contract to build the American Pontiac SVR 400 super car in Australia for the American market. Contract worth in excess of A$6 million, commencing 1 August 2007.
(c) Motor vehicles in excess of $500,000.
(d) Plant and machinery in excess of $300,000.
(e) Deposit of $900,000 on the contract for the purchase of the premises which the plaintiff is currently working from and has been since 1998.
(f) New building and improvements of the plaintiff’s premises in excess of $700,000.
34 I have already dealt with Mr Liristis’s statement regarding the lease and the motor vehicles and the work to the premises. Mr Liristis has not produced one skerrick of evidence to support any of his assertions.
35 The applicant has satisfied me on the balance of probabilities that an order for security of costs should be made in this matter. I am satisfied the order is required to secure justice between the parties. I am satisfied that it is unlikely that the plaintiff will be able to meet an order for costs in the event that the plaintiff is unsuccessful in its proceedings. The evidence relied upon by the respondent in opposition to the application, does not satisfy me that the plaintiff is likely to be able to meet a order for costs if made against it. Its evidence in relation to the company’s financial position was most unsatisfactory. No documents were produced in support of the statements made, and the evidence produced by the applicant raised considerable doubts, that the assets relied upon by the respondent are in fact owned by the respondent. I am not satisfied on the balance of probabilities that the respondent owns such assets.
36 The plaintiff did not allege that the making of the order would unduly stultify the plaintiff’s ability to pursue the proceedings.
37 The plaintiff did not allege in this application that the defendant’s conduct had caused or contributed to any lack of funds of the plaintiff.
38 The applicant relies on the evidence of Mary Ellen Horvath in seeking that the order for security of costs be in the sum of $30,000. That would appear to be a large amount to defend proceedings in the Local Court. However, the evidence in this matter and in the previous proceedings relied on by both parties, would support the proposition that matters involving Mr Liristis will take considerably more time than usually is the case for matters of this nature. The evidence establishes that the two claims in the Burwood Local Court each for $8,600, proceeded for three days with Mr Liristis still giving evidence in chief. Applications for security of costs are normally heard in this court within thirty minutes. This application proceeded before another magistrate for the whole day, and before me proceeded from about 11am to 4.30pm. My own view is that the hearing will probably last longer than three to four days. The application for security for costs at Burwood took two days. I consider the charge out rates to be considerably higher than appropriate charge out rates for the Local Court. I propose to require the respondent to provide security in the sum of $20,000.
39 I make the following orders:
- 1. The plaintiff is to provide security for the defendant’s costs by paying into court the sum of $20,000 or by otherwise providing security for that amount in a manner satisfactory to the defendant. Until that security is provided, there will be a stay of the proceedings. The security is to be provided before 17 August 2007, on which date the matter is to be listed before the court for consequential orders, or, in the event that the security has not been provided, an order for the dismissal of the proceedings under r 42.21(3).
2. All orders currently in place for the case management of the proceedings are presently stayed until the motion seeking security for costs is determined.
40 I propose the following order for costs:
- Costs follow the event. The plaintiff is to pay the defendant’s costs and disbursements of the motion as agreed or assessed. In default of agreement within 28 days, costs are to be assessed under the Legal Profession Act.
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