Tripod Funds Management Pty Ltd v Shao - [2014] NSWSC 1722

Supreme Court

New South Wales

Amendment notes

Medium Neutral Citation: Tripod Funds Management Pty Ltd v Shao [2014] NSWSC 1722
Hearing dates: 28 November 2014
Decision date: 28 November 2014
Jurisdiction: Equity Division
Before: Rein J
Decision:
Motion granted.

Catchwords: EQUITY - Interlocutory application - motion for summary dismissal - where an order for security for costs has been made - where the plaintiff has failed to pay security - where the plaintiff has provided no evidence of ability to provide security - where there is prejudice to the defendant
Legislation Cited: Corporations Act 2001 (Cth)
Cases Cited: Ballard v Brookfield [2013] NSWCA 82
Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541
First Tiffany Resource Corporation v Hill End Gold Ltd [2014] NSWSC 1713
Idoport Pty Limited v National Australia Bank [2002] NSWCA 271
In the matter of AAMAC Warehousing and Transport Pty Ltd (in liquidation) [2014] NSWSC 834
Porter v Gordian Runoff No 3 [2005] NSWCA 377
Re Clarecastle Pty Limited [2011] NSWSC 857
Category: Consequential orders (other than Costs)
Parties: Tripod Funds Management (Plaintiff)
Helen Shao (Defendant)
Representation:
Counsel:
S Psaltis (solicitor) (Plaintiff)
D Krochmalik (Defendant)
Solicitors:
Mercantile Legal Services (Plaintiff)
Levitt Robinson Solicitors (Defendant)

File Number(s): 2014/218678

EX TEMPORE Judgment

In these proceedings, the plaintiff is seeking to recover moneys against the defendant (Ms Shao) as guarantor of a loan made by the plaintiff to a company to which I should refer as "KHD". The defendant, on 5 September this year, served a notice to produce seeking financial documents from Tripod, the plaintiff, and on 6 September, the defendant filed a motion for security for costs. On 26 September, the plaintiff was ordered to provide documents in answer to the notice to produce by 3 October 2014.

It is common ground that no documents were in fact ever produced by the plaintiff. On 13 October, the Court heard the defendants' application for security, and the plaintiff was ordered to pay $45,000 into Court, either as cash or by way of bank guarantee.

On 14 October 2014, the defendant foreshadowed through her solicitors that there would be an application to dismiss the proceedings if the security ordered on 13 October was not paid, see Court Book p 11 which is Exhibit A. I shall refer to the Court Book pages from here on except where there are other exhibits.

The defendant now seeks to have the proceedings dismissed for failure by the plaintiff to provide the security which was ordered to be paid. There is evidence from the defendant of the fact that the plaintiff lodged a caveat on the property in Lane Cove which is her residence, and which she says is inhibiting her from obtaining loans in connection with her business activities.

There is no dispute that Mr Lazar, the sole director of the plaintiff, has been charged with certain offences of a financial nature, and that he has been imprisoned awaiting trial. It is also in evidence that…

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: [2014] NSWSC 1722
Decision Date: 28 November 2014

CaseChat Overview and Summary

In the case of Tripod Funds Management Pty Ltd v Shao, the plaintiff, Tripod Funds Management Pty Ltd, sought to challenge an interlocutory application for summary dismissal made by the defendant, Shao, due to the plaintiff's failure to provide security for costs as ordered by the Court. The matter was heard by Brereton J in the Supreme Court of New South Wales. The key legal issues before the Court were whether the plaintiff's failure to provide security for costs, despite being given ample notice, justified the dismissal of the proceedings, and whether the defendant had suffered sufficient prejudice to warrant such a dismissal.

The Court considered the principles applicable to applications for summary dismissal on the grounds of failure to provide security for costs, referencing Idoport Pty Limited v National Australia Bank and other authorities. The Court noted that if a significant sum was ordered by way of security and the plaintiff failed to satisfy the Court that there was any prospect of complying with the order, the proceedings should ordinarily be dismissed. In this case, the order for security was made on 13 October, and despite the plaintiff being given notice, there was no evidence presented by the plaintiff to show that security would be provided or that steps had been taken to arrange it. Additionally, the Court observed that the plaintiff had not produced documents regarding its financial position as ordered, and there was an application to wind up the plaintiff company, which further indicated its precarious financial situation.

After considering the evidence and the principles, the Court concluded that the plaintiff had failed to comply with the order for security for costs and had not demonstrated any prospect of being able to do so. The Court found that the defendant had suffered prejudice, primarily due to the delay in the proceedings. Given these circumstances, the Court granted the defendant's application for summary dismissal. The plaintiff's proceeding was dismissed with costs.

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

There is evidence, see Exhibit B, that an application to wind up the plaintiff has been made by a company unconnected with the defendant or KHD, and that the basis of that application is s 459P of the Corporations Act 2001 (Cth). That application was made on 20 November, see p 2 of the document. There is agreement in relation to the basic principles which need to be applied in relation to applications of this kind. They were helpfully enumerated by his Honour Einstein J in Idoport Pty Limited v National Australia Bank [2002] NSWCA 271, and they are reiterated in both the submissions of Mr S Psaltis and Mr D Krochmalik, Mr Psaltis appearing for the plaintiff and Mr Krochmalik of counsel for the defendant. Those matters are: As his Honour Einstein J remarked in Idoport, Court, the principles are not exhaustive and: The authorities establish that, if a significant sum is ordered by way of security and the plaintiff with due notice of the dismissal application fails to satisfy the Court that there is any prospect of complying with the order, the proceedings should ordinarily be dismissed: see Porter v Gordian Runoff No 3 [2005] NSWCA 377 and Ballard v Brookfield [2013] NSWCA 82 per Ward JA at [103]. So far as the period which has elapsed since security was ordered, it was ordered on 13 October and it is now 28 November. That is not a particularly long period but it is not immediately after the expiry of the order of the time for compliance with the order. In respect of the second factor, notice of application for dismissal, that was made clear to the plaintiff on 13 October. In relation to the next factor "the seeming inability of the plaintiff to further fund the proceedings", there is, as I have said, no evidence which would support the conclusion that security is about to be or will soon be provided by the plaintiff, and not even any evidence of the steps taken by the company to endeavour to arrange security, either before the time elapsed or after. This view is strengthened by the only evidence concerning Tripod's potentially precarious financial circumstances, it failing to produce documents in relation to its financial position as ordered by the Court, and secondly, the application for winding up to which I referred. Mr Lazar, although he is the director of the company and is in gaol, is not precluded by being in gaol from taking steps to arrange payment. Secondly, he is not a shareholder of Tripod, and there is no evidence from any person connected with Tripod that they have endeavoured to deal with the problem of Mr Lazar's incarceration. Not only that, there is nothing to indicate at present what is likely to occur, should Mr Lazar continue to be incarcerated, either up until the time that he is dealt with in Court, or should he be found guilty of the offences charged, what would happen if he is to remain in gaol. Turning to the prejudice to the defendant, there are several prejudices identified by Mr Krochmalik. The first is delay, a type of prejudice as has been recognised by this Court in another context: see Brereton J in In the matter of AAMAC Warehousing and Transport Pty Ltd (in liquidation) [2014] NSWSC 834 at [32], his Honour referring to higher authority namely: Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 and Re Clarecastle Pty Limited [2011] NSWSC 857 per Ward J at [200] - [215]. I have also made reference to this myself in the context of an application such as this. See First Tiffany Resource Corporation v Hill End Gold Ltd [2014] NSWSC 1713.

Medium Neutral Citation:	Tripod Funds Management Pty Ltd v Shao [2014] NSWSC 1722
Hearing dates:	28 November 2014
Decision date:	28 November 2014
Jurisdiction:	Equity Division
Before:	Rein J
Decision:	Motion granted.
Catchwords:	EQUITY - Interlocutory application - motion for summary dismissal - where an order for security for costs has been made - where the plaintiff has failed to pay security - where the plaintiff has provided no evidence of ability to provide security - where there is prejudice to the defendant
Legislation Cited:	Corporations Act 2001 (Cth)
Cases Cited:	Ballard v Brookfield [2013] NSWCA 82 Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 First Tiffany Resource Corporation v Hill End Gold Ltd [2014] NSWSC 1713 Idoport Pty Limited v National Australia Bank [2002] NSWCA 271 In the matter of AAMAC Warehousing and Transport Pty Ltd (in liquidation) [2014] NSWSC 834 Porter v Gordian Runoff No 3 [2005] NSWCA 377 Re Clarecastle Pty Limited [2011] NSWSC 857
Category:	Consequential orders (other than Costs)
Parties:	Tripod Funds Management (Plaintiff) Helen Shao (Defendant)
Representation:	Counsel: S Psaltis (solicitor) (Plaintiff) D Krochmalik (Defendant) Solicitors: Mercantile Legal Services (Plaintiff) Levitt Robinson Solicitors (Defendant)
File Number(s):	2014/218678