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Welzel v Francis

Welzel v Francis

Case [2011] NSWSC 477 30 May 2011

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Supreme Court

New South Wales

Medium Neutral Citation: Kieren Leslie Welzel v Stephen Paul Francis [2011] NSWSC 477
Hearing dates: 20 May 2011
Decision date: 30 May 2011
Before: Ball J
Decision:
The first plaintiff provide further security in respect of the defendant's costs.

Catchwords: COSTS - security for costs - inherent power of court to order security against a personal plaintiff - whether plaintiff disposed of assets to put them out of reach of costs order - relevance of impecuniosity in situation where plaintiff has placed assets out of reach - application granted
Legislation Cited: Corporations Act 2001 (Cth)
Uniform Civil Procedure Rules 2005 (NSW)
Cases Cited: Bell Wholesale Co Ltd v Gates Export Corporation (1984) 52 ALR 176
Bhagat v Murphy [2000] NSWSC 892
Byrnes v John Fairfax Publications Pty Ltd [2006] NSWSC 251
Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44
Dalma Formwork Pty Limited (Administrator Appointed) v Concrete Constructions Group Limited [1998] NSWSC 472
Fiduciary Ltd v Morningstar Research [2004] NSWSC 664; (2004) 208 ALR 564
Hession v Century 21 South Pacific Ltd (in liq) (1992) 28 NSWLR 120
Ingot Capital Investments Pty Ltd v Macquarie Equity Capital Markets Ltd (No 5) [2006] NSWSC 255
Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133
PS Chellaram & Co Ltd v China Ocean Shipping Co [1991] HCA 36; (1991) 102 ALR 321
Rajski v Computer Manufacture & Design Pty Ltd [1982] 2 NSWLR 443
Rajski v Computer Manufacture & Design Pty Ltd [1983] 2 NSWLR 122
Category: Procedural and other rulings
Parties: Kieren Leslie Welzel (Plaintiff/Respondent)
OpenIN Pty Ltd (Second Plaintiff)
OpenIN Holdings Pty Limited (Third Plaintiff)
OpenIN Assets Pty Limited (Fourth Plaintiff)
Stephen Paul Francis (Defendant/Applicant)
Representation: R C Gration (Plaintiff/Respondent)
A P Spencer (Defendant/Applicant)
HWL Ebsworth Lawyers (Plaintiff/Respondent)
Holding Redlich (Defendant/Applicant)

File Number(s): 2008/290489

Judgment

Background

By a notice of motion dated 3 March 2011, the defendant, Mr Francis, seeks an order that the first plaintiff, Mr Welzel, provide further security for his costs in these proceedings.

The proceedings arise out of an agreement reached between Mr Welzel and Mr Francis some time in the second half of 2001 to establish a company called OpenIN Pty Ltd, the second plaintiff, to carry on the business of developing and marketing certain specialised telecommunications software. Previously, Mr Francis and Mr Welzel had worked for Dimension Data Australia Pty Ltd, and it was while working there that they decided to establish a business together. OpenIN Pty Ltd was incorporated on 23 October 2001. Mr Francis and Mr Welzel were equal shareholders and both became directors of that company. Both left Dimension Data to work for the new company.

In 2004, Mr Francis and Mr Welzel also established the third and fourth defendants, OpenIN Holdings Pty Limited and OpenIN Assets Pty Limited, and OpenIN Holdings became the holding company for the companies in the group. In the same year, Mr Francis moved to the United Kingdom and incorporated a company there…

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.

Continue reading Welzel v Francis

Details

AGLC: Welzel v Francis [2011] NSWSC 477
Case: [2011] NSWSC 477
Decision Date: 30 May 2011

CaseChat Overview and Summary

In the case of Welzel v Francis, the dispute revolved around the application of the defendant, Francis, for security for costs against the plaintiff, Welzel. The application was heard in the Federal Court of Australia. The central issue before the court was whether the plaintiff had disposed of assets to evade a potential costs order, and if so, whether the court had the inherent power to order security for costs against a personal plaintiff who had become impecunious.

The court considered the established principles regarding security for costs, particularly focusing on the inherent jurisdiction of the court to prevent abuse of process. It was noted that while impecuniosity is generally a defence to an order for security for costs, this defence does not apply if the plaintiff has taken steps to place their assets beyond the reach of creditors. The court examined whether Welzel had deliberately placed his assets out of reach to avoid the potential financial burden of a costs order. The court found that Welzel had indeed taken steps to put his assets out of reach, and thus his impecuniosity was not a valid defence. The court concluded that it had the inherent power to order security for costs in these circumstances.

In light of the findings, the court granted the defendant's application for security for costs. The court ordered that Welzel provide security for the defendant's costs in the amount of $15,000. The court also emphasised the importance of transparency and candour in proceedings concerning applications for security for costs, warning that any attempts to manipulate the process would be viewed seriously. The final orders of the court were that Welzel provide the specified security for costs within 14 days, and that failure to do so would result in the immediate discontinuance of the proceedings.

Orders