UK Decorative Coatings Pty Limited v Mirotone Pty Limited

[2004] NSWSC 1074

CITATION:	UK Decorative Coatings Pty Limited v Mirotone Pty Limited [2004] NSWSC 1074
HEARING DATE(S):	13/10/04, 14/10/04
JUDGMENT DATE:	16 November 2004
JURISDICTION:	Equity Division Commercial list
JUDGMENT OF:	Brownie AJ
DECISION:	Motion dismissed.
CATCHWORDS:	Security for costs - Delay
CASES CITED:	Buckley v Bennell Design and Construction Pty Ltd (1974) 1 ACLR 301
PARTIES :	UK Decorative Coatings Pty Limited (ACN 089 117 091) (Plaintiff) Mirotone Pty Limited (ACN 000 041 136) (Defendant)
FILE NUMBER(S):	SC 50013/02
COUNSEL:	Mr P Deakin QC, Mr M Young (Plaintiff) Mr R Beasley (Defendant)
SOLICITORS:	Reid & Vesely (Plaintiff) Cutler Hughes & Harris (Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
COMMERCIAL LIST

Brownie AJ

Tuesday 16 November 2004

50013/02 UK Decorative Coatings Pty Limited v Mirotone Pty Limited

JUDGMENT

1 By notice of motion dated 26 July 2004 the defendant seeks an order that the plaintiff provide security for costs in the sum of $700,000. An uncommonly large volume of evidence was adduced on the application, and in submissions there was careful attention paid to many earlier decisions, but I should say immediately that in my view, there are two sets of circumstances that, considered together, overwhelm all other considerations in the case: the delay which occurred in making the application, and the financial circumstances of the plaintiff and of those who stand behind the plaintiff.

2 The case is an unusual one, in a number of respects. On the plaintiff’s case (which of course might or might not be accepted at trial, in whole or in part), the plaintiff was incorporated for the specific purpose of acquiring and importing into Australia a particular machine at a cost of about $1.8 million, and of using that machine in conjunction with certain lacquers to be supplied to the plaintiff by the defendant, so that the plaintiff might establish a particular business. Before the plaintiff had been incorporated there were detailed negotiations between people who may now be recognised as representing the plaintiff, and representatives of the defendant, and a substantial amount of work was done in anticipation of the events that are the subject of the litigation. On the plaintiff’s case, certain representations were made, and relied upon, and the representations were not properly based. The plaintiff says that as a result it suffered a loss, measured in millions of dollars.

3 This terse summary does not do justice to the richness of the detail of the evidence, limited as it apparently is for the purposes of the motion. The affidavit of the defendant’s solicitor filed in support of the motion referred to 25 lay witnesses and 7 expert witnesses, apparently to be called on the hearing, and the evidence points to some identified issues of a complicated and technical nature, as well as to apparently difficult issues about the measure of the alleged loss.

4 The defendant accepts, as it had to, that its application was made late, but submitted that the reason why the application had been made late was that because it had not been perceived, subjectively, that the matter was as complicated as it is now accepted it is, and therefore that the defendant did not appreciate how great would be the costs that would be incurred.

5 The delay is striking. By the middle of 2001 the defendant can hardly have failed to appreciate that there was a problem. There was correspondence threatening litigation in September 2001, and the litigation was commenced in February 2002. There was a good deal of interlocutory skirmishing, particularly about discovery. The defendant took the view that it would not file or serve any witnesses’ statements until the plaintiff’s case in chief had been completed, and this was done by November 2003. The defendant’s witness statements and experts reports were then filed, in March and April 2004, and on 9 July 2004 the Court fixed the case for trial on 1 February 2005, noting an estimate that the hearing would take 8 weeks. It was after that event that the motion was filed.

6 Delay in making an application for security for costs is always a relevant consideration, and there are many reported decisions to that effect. The defendant does not contest the point. Perhaps the rationale is stated most clearly by Moffitt P in Buckley v Bennell Design and Construction Pty Ltd (1974) 1 ACLR 301 at 309:

“The right to seek security of costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or commits substantial sums of money toward litigating its claim.”

7 As already mentioned, the defendant’s contention is that it did not appreciate the complexity of the case, for a long time. I do not accept that the subjective views of a litigant, or of a lawyer, should be taken to be determinative of cases of this kind, but in any event, and in the circumstances of this case, where there is a mass of evidence on the point, I think that the defendant ought to have appreciated, long before July 2004, that the case was indeed a complicated one, likely to raise difficult questions, and likely to result in a time consuming and expensive trial. Even if the full extent of the complexity had not been appreciated, or not fully appreciated, the defendant should have recognised that the case was a complex one, and that the costs to be incurred would be substantial. On this ground alone, I would dismiss the motion.

8 However, the plaintiff takes another point that seems to me to be unusually powerful. It has led evidence showing the detail of its financial position, and of the financial position of those who stand behind it. The plaintiff’s liabilities exceed its assets by almost $1 million. It has paid about $400,000 on account of the costs of this litigation, and has incurred a liability for a further $200,000 approximately. The affidavit of Mr Caminer, a director of the plaintiff, dated 19 August 2004, when read with the documents exhibited to that affidavit, sets out in detail the steps taken by the plaintiff and by Mr Caminer and his family to finance litigation, in the circumstances of the plaintiff’s impecuniosity. Mr Caminer sold his house for $1,745,000, in order to assist the plaintiff. He described the contributions made by the Caminer family generally, and by other entities controlled by that family. He was not cross-examined upon his affidavit, and there was no other challenge to this evidence, so that there does not seem to be any point in recounting the detail of what he set out, but I record that what he set out is an unusually detailed account, showing that the family has put what appears to be significant financial resources into an effort to keep the plaintiff company on foot, and to support it in this litigation, and that it has now reached the point where it cannot find the $700,000 that the plaintiff seeks, so late in the course of the litigation.

9 Counsel debated a number of other points, but as I said earlier, these two points seem to me to mean that the application is doomed to failure. My decision has been delayed only by the press of other work.

10 I dismiss the motion with costs.

I certify that paragraphs 1 - 10
are a true copy of the reasons
for judgment herein of
the Hon. Acting Justice Brownie
given on 16 November 2004

___________________
Susan Piggott
Associate
16 November 2004

Last Modified: 11/18/2004