Timelink Pacific Pty Ltd v Major Engineering Pty Ltd

[2005] VSC 207

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMERCIAL AND EQUITY DIVISION

IN THE ADMIRALTY  LIST

No. 4122 of 2005

TIMELINK PACIFIC PTY LTD (ACN 063 714 303)	Plaintiff
v
MAJOR ENGINEERING PTY LTD (ACN 005 432 397)	Defendant

---

JUDGE:	Byrne J
WHERE HELD:	Melbourne
DATE OF HEARING:	3 June 2005
DATE OF JUDGMENT:	17 June 2005
CASE MAY BE CITED AS:	Timelink Pacific Pty Ltd v Major Engineering Pty Ltd
MEDIUM NEUTRAL CITATION:	[2005] VSC 207

---

PRACTICE AND PROCEDURE – security for costs – whether credible evidence the Plaintiff likely to be unable to meet an order for costs.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G.H. Golvan QC	Vadarlis & Associates
For the Defendant	Mr A. Herskope	Kalus Kenny

HIS HONOUR:

1. On 3 June 2005, I dismissed the application of the defendant, Major Engineering Pty Ltd, for an order for security for costs, saying that I would give my reasons later.  These are my reasons. 

1. The event which gives rise to the claim occurred on 28 December 2004 when the maxi-yacht registered under the name “Wild Thing” but commonly known as “Skandia” was leading the fleet to win line honours in the 2004 Rolex Sydney to Hobart Yacht race.  At approximately 1.15 am the yacht suffered a mishap which led to the detachment of its keel, serious damage to its hull, rigging and fittings and to its abandonment by the crew.  The claim of the plaintiff, Timelink Pacific Pty Ltd, is for damages which, as presently formulated, appear to be of the order of $5M. 

1. The case of Timelink as it appears from its amended statement of claim filed 22 April 2005 is that the incident for which I have adopted a neutral term “the mishap”, was the failure of a hydraulic system which was provided in order to control the yacht’s canting keel.  It alleges that the hydraulic system was designed and manufactured by Major Engineering and that, in performing these tasks, Major Engineering did so in breach of contract and negligently.  Most, if not all, of this is put in issue by the defence filed on 26 April 2005.

1. The issue before me turned upon my assessment of the evidence offered as indicating that Timelink had insufficient assets in Victoria to pay the costs of Major Engineering if ordered to do so.

1. In support of the application, Major Engineering relied upon newspaper articles that Grant Wharington, who is described as the “owner/skipper” of Skandia, as saying that they could not afford major repairs and that the yacht was not insured because they could not afford this.  No denial of this has been made. 

1. Next, it is said that a Dunn and Bradstreet search shows that Timelink was incorporated on 2 March 2004 and it has a paid up capital of $2, represented by two shares held by Mr Wharington who is its sole director.  Its assets are subject to a debenture charge given in 2001, prior to its registration, to Westpac Bank which secures a liability to the bank of $1.193M.  A title search shows that Timelink is registered as the owner of a one-half share of land in Certificate of Title Volume 10720 Folio 768, which appears to be a development property at Tyabb and which share is valued at $825,000,  the land, too,  is encumbered by a mortgage in favour of Westpac which is stamped to $3.3M.  None of this was disputed other than a slight difference in the amount owing to the bank.

1. The Dunn and Bradstreet search also discloses four judgments against Timelink for relatively minor sums although only one post-dates May 2001.  This is a judgment dated 16 March 2005 for about $46,000 in favour of Apps Electrics Pty Ltd.  Eric Vadarlis, solicitor for Timelink, deposed that he is instructed that the judgment was entered in default and that the matter has been compromised and the agreed sum recently paid.

1. It seems that Timelink conducts two separate commercial activities:  that of land developer and that of the constructing and racing of ocean going yachts. 

1. In response to the demands of security made in the correspondence between the solicitors, Mr Vadarlis on 26 May provided a number of “financial documents” relating to Timelink.  A good deal of attention was directed to these documents and, in particular to the statement of financial position of Timelink which shows net assets of $465,570 as at 30 June 2004 and $1,082,589 as at 31 December 2004.  These amounts are approximately equal to retained profits from previous trading in each case.  Net profit is shown as $5,911 for the year ending June 2003, $141,734 for the year ending June 2004 and $617,019 for the year ending 31 December 2004.  These net profit figures appear to be largely the product of the building activities of Timelink although there is mention in the accounts of its commercial activities relating to yacht charter and expenses relating to yachting activities. 

1. On the face of it, the financial documents dispel any concern which Major Engineering may have about the ability of Timelink to meet an order for costs.

1. Nevertheless, counsel for Major Engineering challenged such a conclusion.  First, he said that the current statement of financial position shows as an asset $2,135,601 for a yacht.  This is presumably Skandia for which a current valuation of $4.6M was in evidence.  He then pointed out that the evidence before the Court suggested that Timelink was not in fact the owner of Skandia.  First, it is registered in the name of Oliver Wharington, who is the nine year old son of Grant Wharington.  The response offered on behalf of Timelink is that this was done for “good luck” and that Timelink is in fact the owner.  Next, it is said that in the valuation of Skandia, the valuer describes as its owner Mr Grant Wharington.  Looking at the whole of the material I am not minded to give any weight to this description.

1. Next, it was said that an asset valued at $426,119 in the current statement of financial position, namely Receivables, is shown in the notes to be intercompany loans.  This was said to warrant the conclusion that its value might be overstated.  I have no reason to suppose that, notwithstanding this fact, this asset is not correctly valued.

1. Some attention was directed at the hearing to the suggestion put on behalf of Major Engineering that the Timelink claim was likely to fail.  I mention this only to note that I have not overlooked this.  An application such as the present must presuppose that the plaintiff will fail for, otherwise, it will not suffer an order for costs.  This is not a case where it was contended that an order for security would stultify a good claim.  I express no view as to the prospect of success of the Timelink claim.

1. I was, on the evidence, not satisfied that the defendant’s contention was made good.  Accordingly, the application was dismissed.

---