Topcide Pty Ltd v Charter Financial Planning Ltd

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FEDERAL COURT OF AUSTRALIA

Topcide Pty Limited v Charter Financial Planning Ltd [2010] FCA 1151

Citation: Topcide Pty Limited v Charter Financial Planning Ltd [2010] FCA 1151
Parties: TOPCIDE PTY LIMITED (ACN 050 243 788) v CHARTER FINANCIAL PLANNING LIMITED (ACN 002 976 269), PAUL PATRICK ATKINS and MACQUARIE BANK LIMITED (ABN 46 008 583 542)
File number: NSD 347 of 2010
Judge: KATZMANN J
Date of judgment: 25 October 2010
Catchwords: COSTS – security for costs – motions by respondents for security for costs – discretion to order corporate applicant to provide security – Corporations Act 2001 (Cth), s 1335(1) – discretionary factors – whether proceedings properly characterised as defensive
Legislation: Corporations Act 2001(Cth), s 1335
Federal Court of Australia Act1976 (Cth), s 56
Cases cited: Amalgamated Mining Services Pty Ltd v Warman International Ltd (1988) 19 FCR 324 distinguished
Austin, Nichols and Co Inc v Lodestar Anstalt [2009] FCA 1228 cited
Beach Petroleum NL v Johnson (1992) 7 ACSR 203 disapproved
Bell Wholesale Co Pty Ltd v Gates Export Corporation (1984) 2 FCR 1 cited
Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 applied
Farah Constructions Pty Ltd v Say-Dee Pty Ltd [2007] HCA 22, 230 CLR 89 applied
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69, 22 WAR 241 cited
Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664, 208 ALR 564 applied
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744 applied
Instyle Contract Textiles Pty Ltd v Good Environmental Choice Services Pty Ltd [2009] FCA 1422, 181 FCR 360 cited
Jazabas Pty Ltd v Haddad [2007] NSWCA 291, 65 ACSR 276 applied
KP Cable Investments v Meltglow Pty Ltd (1985) 56 FCR 189 applied
Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93, 20 VR 377 applied
Sharjade v Darwinia Estate Pty Ltd [2006] NSWSC 708 considered
Soul Pattinson Telecommunications Pty Ltd v Subex Americas Inc [2009] FCA 651 cited
Travelodge Australia, Re (1978) 21 ACTR 17 distinguished
Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1 applied
Weily’s Quarries v Devine Shipping Pty Ltd (1994) 14 ACSR 186 applied
Willey v Synan (1935) 54 CLR 175 distinguished
Date of hearing: 21 October 2010
Date of last submissions: 22 October 2010
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 65
Counsel for the Applicant: Mr I Griscti
Solicitor for the Applicant: Diamond Conway
Counsel for the First Respondent: Mr M Darke
Solicitor for the First Respondent: Atanaskovic Hartnell
Counsel for the Second Respondent: Mr A Henskens
Solicitor for the Second Respondent: TressCox Lawyers
Counsel for the Third Respondent: Mr D Sulan
Solicitor for the Third Respondent: Johnson Winter & Slattery

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 347 of 2010
BETWEEN:

TOPCIDE PTY LIMITED (ACN 050 243 788)
Applicant
AND:

CHARTER FINANCIAL PLANNING LIMITED
(ACN 002 976 269)
First Respondent

PAUL PATRICK ATKINS

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Details
Case
[2010] FCA 1151
Decision Date

CaseChat Overview and Summary

Topcide Pty Ltd brought proceedings against Charter Financial Planning Ltd, Atkins Financial Services Pty Ltd and Finsec Australia Ltd. The dispute centred on claims of misleading and deceptive conduct and breach of fiduciary duty. The matter was heard in the Federal Circuit Court of Australia. The central legal issue was whether the respondents were entitled to an order for security for costs under the Corporations Act 2001 (Cth), section 1335(1). This required the Court to consider the discretionary factors relevant to such an order, particularly whether the proceedings were properly characterised as defensive.

The Court examined the evidence presented by the respondents, which demonstrated the substantial costs likely to be incurred. Charter Financial Planning Ltd and Atkins Financial Services Pty Ltd provided affidavits and letters showing their concerns about Topcide's ability to meet any adverse costs order. The Court noted that once the jurisdictional basis for an order was established, the burden shifted to Topcide to show why security should be refused or ordered in a lesser amount. Topcide did not provide any financial information or documents to counter the respondents' concerns. The Court concluded that the proceedings were not defensive and that the respondents had demonstrated a need for security. The Court ordered Topcide to provide security for costs in specified amounts within certain timeframes.

The Court's reasoning was grounded in the statutory discretion provided under section 1335(1) of the Corporations Act 2001 (Cth) and the case law cited. The Court balanced the need to protect the respondents from potential financial loss against the public interest in ensuring that proceedings are not unnecessarily hindered. The orders made were designed to provide adequate security while allowing the proceedings to continue, subject to compliance with the specified conditions.

Orders

Orders of the court

1. In the motion filed by the first respondent:

(1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $135,000 within 28 days of the date of this order and in the sum of $66,360 not less than 28 days before the date fixed for hearing.

(2) The applicant is to pay the first respondent’s costs of and incidental to the motion.

(3) In the event that security is not given in accordance with order 1, the proceeding on the applicant’s claim for relief from the first respondent is stayed.

(4) Liberty is granted to the first respondent to apply for additional security on five days’ notice to the applicant.

2. In the motion filed by the second respondent:

(1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $102,000 within 28 days of the date of this order and in the sum of $73,000 not less than 28 days before the date fixed for hearing.

(2) The applicant is to pay the second respondent’s costs of and incidental to the motion.

(3) In the event that security is not given in accordance with order 1, the proceeding on the applicant’s claim for relief from the second respondent is stayed.

(4) Liberty is granted to the second respondent to apply for additional security on five days’ notice to the applicant.

3.

In the motion filed by the third respondent:

(1) The applicant is to give security by payment into Court or by an irrevocable bank guarantee issued by an Australian bank in the sum of $60,000 within 28 days of the date of this order and in the sum of $55,000 not less than 28 days before the date fixed for hearing.

(2) The applicant is to pay the third respondent’s costs of and incidental to the motion.

(3) In the event that security is not given in accordance with order 1, the proceeding on the applicant’s claim for relief from the third respondent is stayed.

(4) Liberty is granted to the third respondent to apply for additional security on five days’ notice to the applicant.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

Once the jurisdictional basis for an order is made out, the evidentiary burden shifts to the applicant to show why security should be refused or ordered in a lesser amount than is sought: Idoport at [62]; Fiduciary Ltd v Morningstar Research Pty Ltd [2004] NSWSC 664, 208 ALR 564 (“Morningstar”) at [35]-[36] per Austin J. Of course, the legal burden always remains with the moving party (here the respondents) to establish that the orders sought should be made: Livingspring at [19]-[22].The evidence on the motions The evidence each respondent adduced is similar. In substance it shows that costs for each of them are likely to be substantial. It also shows that Topcide has a paid up share capital of $2; the Commonwealth Bank of Australia (“CBA”) has a registered charge securing an unspecified amount of money against the assets Topcide holds as trustee for the “McCarten Investment Trust”; Topcide owns no property in NSW (though it owns a parcel of land in rural Victoria, the value of which is unknown); and it has declined invitations to provide documents showing that it has the means to pay the respondents’ costs. Charter’s motion is supported by an affidavit of Larissa Pickford, a partner in the firm of Atanaskovic Hartnell, and the solicitor on the record for Charter in the proceeding. On 6 July 2010 Atanaskovic Hartnell wrote to Michael Mazzone, a partner of Diamond Conway, Topcide’s solicitors, flagging their concern that Topcide may not be in a position to meet any order for costs, pointing out what was disclosed by the public records, and seeking copies of company accounts for the last two financial years, any interim or management accounts prepared in the period from 1 July 2009 to date and any document upon which Topcide relies to evidence its ability to meet any adverse costs order. Ten days later Mr Mazzone replied rather tersely:The financial accounts for the years ended 2009 and 2010 have not yet been finalised. Accordingly at this time copies cannot be provided as requested.Further, nothing in this email acts as an admission that our client is unable to meet an adverse costs order. It appears from a second letter from Charter’s solicitors to Mr Mazzone, dated 20 July 2010, that on 16 June 2010 it issued a notice to produce. Apparently, some documents were produced in answer to the notice. In that letter the firm, amongst other things, reminded him of the scope of the request in the 6 July letter, drawing his attention to the parts that seemed to have been overlooked. There was no response to that letter. Topcide confined its evidence to the assessment of the amount of security and Mr Griscti, its counsel, made no submissions on the question of whether security should be ordered. Atkins’s motion is supported by two affidavits of Alistair Little, a solicitor in the firm of TressCox Lawyers who acts for Atkins. His second affidavit attached a further breakdown of the estimate of costs to his client attached to the first affidavit and revised the total down by $200 to $232, 300. Atkins also read a third affidavit which merely corrected a typographical error in the second one. Mr Little’s first affidavit discloses that he wrote to Mr Mazzone on 14 July 2010 seeking certain documents, including current financial information detailing Topcide’s financial position, foreshadowing an application for security for costs. Another of TressCox’s solicitors chased up the request on three occasions but Mr Mazzone never replied to the letter and never supplied the information.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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