W. Wehbe Pty Ltd v Caltex Oil (Australia Pty Ltd)

[1987] FCA 143

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	) NSW NO. G.29 Of 1987
)
GENERAL DIVISION	)

BETWEEN: W WEHBE PTY LIMITED

Appellant

AND: CALTEX OIL (AUSTRALIA)

PTY LIMITED

Respondent

CORAM:	WILCOX J
PLACE:	SYDNEY
DATE :	18 MARCH 1987

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The Notice of Motion be dismissed.

Note :	Settlement and entry of orders is dealt with in Order
36 of the Federal Court Rules.

NOT FOR DISTRIBUTION

I N THE FEDERAL COURT OF AUSTRALIA ) )

NEW SOUTH	WALES	DISTRICT REGISTRY	)	NSW No. G.29 of 1987
)

GENERAL DIVISION )

BETWEEN: W WEHBE PTY LIMITED

A p p e l l a n t

AND: CALTEX O I L (AUSTRALIA)

PTY L I M I T E D

R e s p o n d e n t

CORAM :	WILCOX J
PLACE :	SYDNEY
DATE :	1 8 MARCH 1987

EXTEMPORE REASONS FOR JUDGMENT

T h e r e is b e f o r e t h e C o u r t a Notice o f Motion whereby

t h e r e s p o n d e n t t o a p e n d i n g F u l l C o u r t a p p e a l seeks a n o r d e r

t h a t t h e a p p e l l a n t p r o v i d e secur i ty €or costs of t h e a p p e a l .

T h e s u b j e c t matter is one of two matters which were h e a r d

t o g e t h e r b y S h e p p a r d J . I n one case t h e a p p l i c a n t b e f o r e h i s

Honour was a company, W Nehbe P ty L iml t ed . I n t h e o t h e r case

t h e a p p l i c a n t was Mr Wehbe p e r s o n a l l y . S h e p p a r d J d e s c r i b e d

Mr Wehbe i n h i s j u d g m e n t as t h e " a l t e r e g o " of the company .

I t a p p e a r s f r o m d o c u m e n t s b e f o r e me t h a t t h e o n l y two

d i r e c t o r s of t h e company a re Mr Wehbe a n d h i s w i f e .

.

2 .

The company was the franchisee and lessee of a

service station at 7 7 Hume Highway, Chullora. Mr Wehbe

personally was the franchisee and lessee of a service station

at Strathfield. In each case the lessor was the present

applicant, Caltex Oil (Australia) Pty Limited. It appears

that Caltex formed the view that Mr Wehbe had been guilty of

dishonesty in the way in which the Chullora service station

had been conducted. The particular form of dishonesty was

said to be the stealing of distillate owned by Caltex. It was

on the basis of the lessor's view that Mr Wehbe was an

unsuitable person to be conducting a service station owned by

it that notice of termination of the two franchises and

notices of termination of the two leases was given.

Proceedings were then commenced by each of the

company and Mr Wehbe. At the trial before Sheppard J the

significant issue, and I understand the only issue on which

his Honour found against the then applicants, related to the

alleged dishonesty of Mr Wehbe. Sheppard J found that issue

against Mr Wehbe and taking the view, as he did, that Mr

Wehbe's personal dishonesty tainted the fitness of the company

to operate the Chullora site, he made orders favourable to

Caltex in each case. It appears that the orders in the matter

instituted by the company, that is G.357 of 1986, were

pronounced on 30 December 1986. His Honour made certain

declarations and he then made order 5: that tie applicant

give and deliver up to the respondent possession of the

premises at Chullora. By order 6 his Honour granted leave to

3 .

the respondent to issue forthwith a writ for possession of the Chullora premises; but he directed that any such writ lie in

the court office until disposal of any application for a stay

of operation and execution of the writ	if made within a
certain time.

It appears that such an application was made and that

it came before the Chief Judge on 11 February 1987.

Apparently some agreement had been thrashed out between the

parties in the meantime, because on that day the Chief Judge noted certaln undertakings given on behalf of the company and on behalf of Mr and Mrs Nehbe personally, and also an

agreement recorded in Minutes which were attached to the

Eormal order. The only orders made on that day, in respect of

the company's case, were that the costs be reserved and that

the matter, that is the appeal from the decision of Sheppard J

which had apparently been lodged in the meantime, be

expedited.

The agreement which is referred to in the Chief

Judge's order does not in terms contain a provision permitting

the company to remain in possession of the Chullora sits

pending the determination of the appeal. But this was clearly

the envisagement of the parties. The various undertakings are

consistent only with that view. Since that time Caltex has

apparently permitted the company to remain in possession of the site and it is still conducting the service statlon. I

assume that similar arrangements were made in respect of the

Strathfield site, but I am not directly concerned with that matter.

4 .

I have been informed by counsel that, as a result of

the order for expedition, the hearing of the appeal has been

fixed to commence on 29 April next, with an estimate of two

days.

The application before the Court is made pursuant to

s.533 of the Companies (New South Wales) Code. That section

empowers the Court in a case where a corporation is a

plaintiff in a legal proceeding, if it appears by credible

testimony that there is reason to believe that the corporation

will be unable to pay the costs of the defendant if successful

in its defence, to require sufficient security to be given €or

those costs. The section also confers power to stay all

proceedings until the security is given.

The Notice of Motion filed by C 'altex in this ma tter

seeks, firstly, an order that the appellant provide security

for the costs of the respondent in the appeal: and, secondly,

that in the event that such security be not given in the manner and upon the terms directed by the Court that the

appeal Se stayed, that the stay of the operation of and

execution upon the orders of Sheppard J be dissolved, and that

the applicant be given leave to uplift and serve the writ for

possession presently lying in the Court office in respect of

the premises now known as "Caltex Service Station", 71 Hume

Highway, Chullora.

5.

There are some difficulties about the relief as framed in the Notice of Motion. From the history which I have

recited it appears that there is not any present stay, by

order of the Court, imposed upon the operation and execution

of the orders of Sheppard J. Caltex has stayed its hand

pursuant to an agreement	which it made, and which was the
basis of the undertaking	and agreement tendered to the Chief

Judge on 11 February. Consequently it seems to me that the

second item in the default order which is sought is

misconceived. In relation to the third item, I note that this

would go beyond the express power given by s . 5 3 3 of the Code.

It may be, as Mr Ryan submits, that the Court has power	to
reconsider the whole matter of a stay in the event of a

default in the provision of security and to make an order

which, in effect, cuts across an agreement made between the

parties. This perhaps could be justified upon the basis that

that agreement presupposed that the appeal would proceed and that any failure to provide security casts doubt upon the

accuracy of that supposition. However, it seems to me that I

do not need to consider whether this is a course which is open

to me. In that regard I note that I have not heard Mr Warren

on the matter.

As I see the situation this is not in any event a

proper matter in which to order security €or costs. I say at

once that this is not because I doubt the proposition that

there is reason to believe that the corporation will be unable

to pay the costs of the respondent if it is successful on the

hearing of the appeal. Evidence has been put before the Court

6.

in the form of an affidavit of the solicitor for the appellant

revealing the contents of the most recently filed annual

return of W Wehbe Pty Limited. This is an annual return made

up as at 30 June 1985. It shows total shareholders' funds of $14,064, of which $7,000 is attributed to a premium on lease. It appears that this is the lease of the Chullora Service

Station and, of course, if the appeal fails and the orders

made by Sheppard J are retained, this will have no value. It

will not be assignable. This would mean that, on the basis O E

these accounts, the total shareholders' funds are only $7,064.

Although I think that the estimate put before the Court on behalf of the present applicant of costs of the range of

$20,000 to $25,000 is excessive, considered as an estimate of

taxable party and party costs, It is likely that a bill of

costs for a two day hearing would come in at more than $7,064.

The respondent has put before the Court an affidavit

sworn by Mr Wehbe today which sets out certain items by way of

assets and liabilities. I am not prepared to put any reliance

at all on the figures in that affidavit. Mr Wehbe shows

"client debtors" at $46,500. In the 1985 annual return there

is an item "trade debtors" $9,364. According to Mr Wehbe's

explanation in his oral evidence these refer to the same item.

I would be very sceptical of the assertion that trade debtors

had multiplied nearly four times during that period.

In the affidavit reference is made to a Mercedes Benz motor vehicle said to be worth $30,000. It appears from Mr

Wehbe's oral evidence that he has had this vehicle for about

7 .

five years. I assume in his favour that it is in fact a

vehicle to which the company has some rights -- rather than

himself personally -- but it also appears from his evidence that it is encumbered. He was unable to say whether this was

pursuant to a lease agreement or a hire purchase agreement	but
whichever it is there are payments being made to the

Commonwealth Bank. I note that in the annual return of 30

June 1985 the only motor vehicle referred to is given a value

of $2,500. I am not at all persuaded that the Mercedes Benz

should be regarded as an asset of the company having anything

like the claimed value.

In regard to the liabilities it is really impossible to form a judgment as to whether they are correctly stated.

For what it is worth I note that the disclosed overdraft account in the affidavit -- of $15,000 -- is about half that shown in the 1985 annual return, a figure which is much the

same as in the 1984 annual return. It is, O E course, possible

that the overdraft has been reduced but I am not impressed

with Mr Wehbe's evidence and I would place very little

reliance upon it. I think that the saEer course is to look at

the filed returns, which were made up by the company's

accountant, and on the basis of that evidence the only

conclusion that one could draw would be that there is reason

to believe that the corporation would be unable	to pay the
costs of the appeal.

0 .

However, the reason why I decline the application is

that it seems to me that no additional exposure to costs will

be incurred by the present applicant whether or not the

company's appeal proceeds. I have already indicated that

there were two matters before Sheppard J. He found in favour

of Caltex in respect of both of them. They related to two

separate service stations, each of which no doubt has a value

to a lessee. Notices of Appeal were filed in each matter.

The evidence in regard to each matter is identical. It is

true, as Mr Ryan points out, that the main "action", that is

the events described in the evidence and which were the

foundation of the complaint of dishonesty, took place at

Chullora rather than at Strathfield but Caltex's whole point

was that the acts of Mr Wehbe at the Chullora Service Station,

a service station operated by the company, were such as to

demonstrate his unfitness to be concerned in holding a

franchise on any site; whether personally or through a

company. It was for that reason -- and as I understand it

that reason only -- that Caltex successfully submitted to

Sheppard J that he ought to uphold the termination by Caltex

of the Strathfield licence. As I suggested to counsel during

argument, it matters not at all where the events occurred.

The question for debate at the appeal will be whether his

Honour was justified in coming to the conclusions, adverse to the company's appeal that issue will have to be considered in

regard to the appeal by Mr Wehbe personally relating to the

Strathfield site. Counsel frankly conceded that there would

not be a single dollar of expenditure which would be incurred

9.

if the two appeals went ahead which would not also be incurred

if Mr Wehbe's personal appeal was the only one which was

litigated.

Serious findings have been made against Mr Wehbe and

I have reached an adverse view in regard to the evidence which

he has put before the Court this morning. But the discretion

to order security for costs is not one to be exercised in any

punitive fashion. The discretion is given to the Court to

enable it to protect a party against whom proceedings are

taken from the necessity to outlay money in resisting those

proceedings which it would not otherwise have to outlay and

which it might not recover if the proceedings should fail. In

the present case Caltex is going to have to spend money in

resisting the one appeal, being the identical money which It

would have to spend in resisting two appeals. Under those circumstances it seems to me that it would be incorrect to

require the furnishing of security for costs.

The fact of the matter is that, in terms of the risk which it will have to undertake, Caltex will be no worse off

,

if this order is refused than if it is granted. I say that on

the assumption that, if the order were granted, the security

would not be furnished and the action would simply be stayed.

Under these circumstances I do not propose to accede

to the application and I dismiss the Notice of Motion.

10.

I certify the nine (9)

preceding pages to be a true copy of

the Reasons for Judgment of

his Honour Mr Justice WilCOX.

Associate: B-43 3

Date: 1 April 1987

In the Notice of Motion:

Counsel for the Applicant: Mr D E Ryan

Solicitors €or the Applicant: Moore & Bevins

Counsel for the Respondent: Mr D L Warren

Solicitors for the Respondent: Karavias, Katralis,

Vosnakis & CO

Date of hearing: 18 March 1987