| JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA LOCATION : PERTH CITATION : WINDUSS & ASSOCIATES PTY LTD -v- ALLOY STEEL INTERNATIONAL INC [2013] WADC 143 CORAM : PRINCIPAL REGISTRAR GETHING HEARD : 6 SEPTEMBER 2013 DELIVERED : 11 SEPTEMBER 2013 FILE NO/S : CIV 1956 of 2011 BETWEEN : WINDUSS & ASSOCIATES PTY LTD Plaintiff
AND
ALLOY STEEL INTERNATIONAL INC
First Defendant
ALLOY STEEL AUSTRALIA (INT) PTY LTD
Second Defendant
Catchwords: Practice and procedure - Security for costs Legislation: Corporations Act 2001 (Cth) s 1335
(Page 2)
Result: Application dismissed subject to undertakings being given by the directors of the plaintiff
Representation: Counsel:
Plaintiff : Mr T Clavey
First Defendant : Mr A Willinge
Second Defendant : Mr A Willinge
Solicitors:
Plaintiff : Clyde & Co Australia
First Defendant : Ashurst Australia
Second Defendant : Ashurst Australia
Case(s) referred to in judgment(s):
Aon Risk Services Australia Limited v Australian National University [2009] HCA 27; (2009) 239 CLR 175
Attorney-General of Botswana v Aussie Diamond Products Pty Ltd [2009] WASC 299
Australian Quarry Holdings Pty Ltd (in liq) v Dougherty (1992) 8 ACSR 569
BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81
BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339
Bryan E v Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301
Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd [2013] WASCA 66 (S)
Commonwealth v Cable Water Skiing (Australia) Ltd (1994) 14 ACSR 760
Dakin Farms Pty Ltd v Elite Grains Pty Ltd [2012] WADC 43
Darwin Offshore Logistics Base Pty Ltd v Cox [2010] WASC 356
FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241
Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564
Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405
(Page 3)
Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)
Hodder v Town of Port Hedland [2011] WADC 145
Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744
Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306
Jaddcal Pty Ltd v Minson [No 2] [2011] WASC 138
Jordan v Lee [2012] WADC 74
Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377
Meni's Tailoring & Alterations Pty Ltd v Jeanswest Corp Pty Ltd [2003] FCA 1108
Miller v Evans [2010] WASC 127
O'Rouke v P & B Corporation Pty Ltd [2008] WASC 36 (S)
SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309
Smail v Burton; Re Insurance Associates Pty Ltd (in liq) (1975) 1 ACLR 74
Spence Financial Group Pty Ltd v GE Commercial Corporation (Australia) Pty Ltd [2007] WASC 15
Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19
Traeger v Harris [No 4] [2011] WADC 45
Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161
Vicon Services Pty Ltd v BHP Billiton Worsley Alumina Pty Ltd [2012] WASC 109
Western Areas Exploration Pty Ltd v Streeter [2008] WASCA 218
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
YICI Pty Ltd v Sun Wah Marine Products (HK) Co Ltd [No 2] [2010] WASC 27
(Page 4)
1 PRINCIPAL REGISTRAR GETHING: Between 2000 and June 2010 Alan Winduss was a director of Alloy Steel International Inc (Alloy US) and Alloy Steel Australia (Int) Pty Ltd (Alloy AU) and was employed by Alloy AU as its Chief Financial Officer (CFO). Mr Winduss is a principal of Winduss & Associates Pty Ltd (W & A), an accounting practice. Between 2000 and the middle of 2010 W & A provided accounting and business services to Alloy US and Alloy AU. The other director of Alloy US and Alloy AU was a Gene Kostecki.
2 Around the middle of 2010 the relationship between Mr Winduss and W & A, and Alloy AU and Alloy US, was terminated. In June 2011 W & A commenced an action in this court against Alloy AU and Alloy US (the defendants) seeking payment for services it says it rendered to them prior to the termination, which it says remain unpaid. At its highest, W & A's claim is for just over $280,000, plus interest and costs. 3 The defendants have counterclaimed, alleging misleading conduct by W & A relating to the manner in which it disclosed its accrued fees and alleging W & A breached a duty of skill, care and diligence it owed to the defendants. The defendants claim damages of USD $137,772.86 and AUD $32,618.01. 4 The action is listed for a trial commencing 2 December 2013. At this stage, the trial is listed for eight days, though the defendants have been given leave to issue a third party notice to Mr Winduss which may extend the length of the trial. 5 There are two central issues for determination at the trial of the action. The first is whether W & A is entitled to claim for the services the subject of the unpaid invoices pursuant to a general retainer agreement that was said to have existed by no later than 2010 or whether the services the subject of the invoices relate to work done by Mr Winduss in his capacity as a director of each of Alloy US and Alloy AU and the CFO of Alloy AU. The second issue is whether there was a second retainer agreement in April 2007 and, if so, what its terms were. W & A says that there was, and that it was a term of it that W & A could defer invoicing pending a proposed fundraising by Alloy US or a related company. This draws in the sub-issues of whether there was an obligation to account for the work done by W & A under this agreement and, if so, what if any decisions the directors of the defendants made at that time about disclosure of this accrued liability. (Page 5)
6 At a directions hearing on 2 August 2013, the defendants foreshadowed making an application for security for costs against W & A. I directed that this application be filed by 9 August 2013 and listed it for hearing on 23 August 2013, along with an application by the defendants for leave to issue a third party notice to Mr Winduss. The application was not able to be heard on 23 August 2013 due to the other issues being argued. It was listed for hearing on 6 September 2013 with orders for the filing of written submissions. At the hearing on 6 September 2013 I advised the parties that, subject to the directors of W & A formalising certain undertakings made in the affidavits filed in relation to the application, I would dismiss the application, and publish my reasons as soon as I was able to do so.
What issues arise for determination? 7 The defendants seek orders for security for costs pursuant Corporations Act 2001 (Cth) (CA) s 1335, which relevantly provides: (1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, 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 his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given. 8 The power in CA s 1335 contains a threshold test or jurisdictional requirement, and a discretion: Western Areas Exploration Pty Ltd v Streeter [2008] WASCA 218 [2]; BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81 [11]. The threshold requirement is that '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 his, her or its defence': CA s 1335. Once enlivened, the discretion is unlimited or unfettered, though it must be exercised by reference to established principles: Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [5]; Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 [36]; Darwin Offshore Logistics Base Pty Ltd v Cox [2010] WASC 356 [3]; FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241 [21]. 9 There are five issues which need to be considered in order to determine the present application: (a) What is the financial position of W & A? (Page 6)
(b) What are the defendants' likely future costs? (c) Have defendants satisfied the threshold requirement in CA s 1335? (d) What is the appropriate exercise of the discretion in CA s 1335? (e) What are the appropriate final orders?
What is the financial position of W & A? 10 The relevant time at which to consider the financial position of W & A is following judgment after trial. This is because the inquiry in CA s 1335 is directed to whether W & A will be able to pay the defendants' costs if they are successful in their defence, which will not be known until judgment is given: Sugarloaf [35]. There then needs to be some time allowed for costs to be taxed. The trial is listed to commence on 2 December 2013 and will run at least eight days. Based on my experience of cases progressing through the court to trial and taxation of costs, I thus need assess W & A's financial position in approximately 12 months time. 11 The defendants filed an affidavit of Drew Broadfoot dated 9 August 2013 in support of the application. Mr Broadfoot is a solicitor employed by their lawyers. Mr Broadfoot's affidavit contains the following evidence about the financial position of W & A: (a) its paid up share capital is $5,000; (b) it has granted a fixed and floating charge over its assets in favour of National Australia Bank Ltd; and (c) it does not own any real property either in Western Australia or elsewhere in Australia. 12 Prior to commencing the application, the defendants, through their lawyers, sought information from W & A as to its capacity to meet an adverse costs order. W & A did not respond to that request. 13 W & A filed affidavits of its two directors, Mr Winduss (19 August 2013) and Mr Stuart Third (19 August 2013) in opposition to the application. It also filed two affidavits by solicitors employed by its lawyers, Sarah Richards (19 August 2013) and Jessica McLaughlin (19 August 2013). These affidavits contain the following information about the financial position of W & A (all amounts ex GST): (Page 7)
(a) W & A is a chartered accounting practice, and has been since 1 July 2004; (b) its fee income averages in excess of $1 million per year; (c) in the 2012/13 FY its income was $1,242,357, though after expenses it made a loss of $185,570; (d) W & A has assets of around $2m primarily composed of unbilled work in progress and the market value of the fee book; (e) W & A has an overdraft facility with the National Australia Bank of $125,000 which is used to facilitate the business' cashflow; (f) as at 15 August 2013 the overdraft balance was $53,007 DR; (g) W & A has liabilities of $360,000, excluding directors loans; (h) W & A has incurred legal fees of $140,345 since commencement of the proceedings; (i) it has been advised that it will incur a further $45,000 to $50,000 in legal costs up to the conclusion of the trial in December 2013; (j) it holds professional indemnity insurance and is indemnified for its legal costs incurred in the defence of the counterclaim; and (k) fee income is projected to increase in FY 2013/2014 by between 12% and 15%. 14 Both Mr Winduss and Mr Third state their belief that W & A has, and will continue to have through to 30 June 2014, sufficient cashflow and realisable assets of value to pay the defendants' taxed costs of the trial, in the event that it is unsuccessful in its claim. 15 Mr Winduss also states that: (Page 8)
to call on payment or prove a debt in the winding up for these liabilities until the defendants' costs have been paid. 16 Mr Third gives an undertaking in identical terms, though the amount of his director's loan is significantly less. 17 The defendants seek to place some adverse inference on the fact that on 31 March 2013 both directors signed a directors' solvency resolution in which they state that after reviewing the result of the company for the previous year, reviewing the cashflow budgets for the ensuing year and considering the ability of the company to realise assets, the company will be able to pay its debts as and when they fall due. However, this is required pursuant to Corporations Act 2001 (Cth) s 374A. No adverse inference is warranted. 18 The defendants point out that W & A: (a) made net losses of $491,438 in FY 2010/2011, $119,678 in FY 2011/2012 and $185,570 in FY 2012/2013; (b) does not have any realisable assets; (c) has had a negative cash position in its balance sheet for the past two financial years (though, this is simply a reflection of the fact that it operates through a secured overdraft account); (d) has a payment plan in place with the ATO to reduce its Integrated Client Account with the ATO (though this is currently at $45,000, and reducing at a rate of $7,000 per month); and (e) owed $870,000 to its directors as at 30 June 2013. 19 The defendants also call into question whether W & A's overdraft facility will still be in position when any amount of costs becomes due and payable. However, there is no evidence to suggest that it will not continue, so I propose to deal with W & A's financial position on the basis that it will still be in place. 20 The defendants also point out that W & A has incurred legal fees of $99,153.80, which have not been paid, and are included in its creditors of $127,000 as at 30 June 2013 (see paragraph 48 of Mr Third's affidavit). (Page 9)
What are the defendants' likely future costs? 21 The defendants have a number of costs orders in their favour, in particular from hearings on 10 June 2013 and 2 August 2013. However, these are either 'in any event' orders or orders for costs thrown away, which will not be able to be assessed or taxed until final orders are made. There is no taxed and unpaid costs order. 22 Mr Broadfoot deposes the following in his affidavit as to the defendants' costs (with my calculations as to GST to facilitate a comparative analysis): (a) the costs incurred as at the date of the affidavit were $310,125.70 ($341,138 incl GST); (b) of this, say, 50% would be recoverable on a party/party assessment, equally $155,062.85 ($170,569 incl GST); (c) the costs through to the end of an 8 day trial will be approximately $366,652 ($403,317 incl GST); and (d) the amount in (c) includes 50 hours work for all future interlocutory applications. 23 Mr Broadfoot does not provide an estimate of how much of the costs in (c) would be taxed off for the purposes of a party/party assessment. 24 In their application, the defendants seek security for costs in the amount of $573,886.34. It is not clear how this amount is calculated. 25 The amount in (c) is justified on the basis of a schedule of future work in which the preparation tasks are itemised. The schedule does not correlate with the items in Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA) Schedule Table B. For example, an amount of $105,105 is itemised for preparation for trial. Item 17 of Table B provides a maximum amount of 120 hours of a senior practitioner's time ($54,120 incl GST) for preparation of a case for trial. 26 The scale limit can be increased by order pursuant to Legal Profession Act 2008 (WA) (LPA) s 280(2). That power is enlivened if 'a court or judicial officer is of the opinion that the amount of costs allowable in respect of a matter under a costs determination is inadequate because of the unusual difficulty, complexity or importance of the matter'. The principles governing the determination of an application pursuant to LPA s 280(2) relevantly include that: (Page 10)
(a) in regard to unusual difficulty, complexity or importance, the court can have regard to whether the work done was appropriate to the significance of the issues that arose in the litigation, to the parties or the public or to the community generally: Miller v Evans [2010] WASC 127 (S)[32]; Heartlink Ltd v Jones As Liquidator of HL Diagnostics Pty Ltd (in liq) [2007] WASC 254 (S)[19]; (b) 'unusual' in LPA s 280(2) qualifies 'difficulty' only and not 'complexity' or 'importance': Cape Lambert Resources Ltd v MCC Australia Sanjin Mining Pty Ltd[2013] WASCA 66 (S)[5]; (c) 'unusual' means unusual having regard to what one might describe as the usual run of civil cases in the Supreme Court and the District Court: O'Rouke v P & B Corporation Pty Ltd [2008] WASC 36 (S) [23]; Dakin Farms Pty Ltd v Elite Grains Pty Ltd [2012] WADC 43 [35]; and (d) the assessment of the question of whether or not there is 'unusual difficulty, complexity or importance' is essentially a value judgment having regard to the court's experience of the particular case and compared to the usual run of cases: O'Rourke [23] - [24]. 27 I do not consider that the present case is one involving unusual difficulty, complexity or importance. The present case is factually detailed, but not complex. The usual run of civil cases in the District Court includes complex medical negligence cases (including ones with eight or more trial days) where the bulk of the evidence is expert medical evidence, and the potential damages in issue run into many millions of dollars. The present case is not of the level of complexity of, say, the trials giving rise to the decisions in Jordan v Lee[2012] WADC 74, Traeger v Harris [No 4] [2011] WADC 45 and Hodder v Town of Port Hedland [2011] WADC 145. I also observe that the amounts in issue in those cases were significantly in excess of the amounts in issue in the present case. The relative complexity of certain personal injuries cases is recognised in item 17 of the scale which removes the scale limit for preparation of a case for trial where the claim is one declared by the court to be a catastrophic personal injury claim. Moreover, in view of the need to ensure proportionality enshrined in Rules of the Supreme Court 1971 (WA) O 1 r 4 and r 4B, it would be difficult to justify raising the scale limit for a case in which the amount of damages claimed was around $280,000. (Page 11)
28 I therefore propose to consider the likely amount of costs of the defendants if they are successful on the basis that those costs are limited by the scale. 29 I am not able to rationalise the costs set out in Mr Broadfoot's affidavit with the relevant scale items and the limits on individual items. 30 The defendants in their submissions were critical of Ms McLaughlin's experience. In my view, this was unjustified. I consider both Ms McLaughlin and Mr Broadfoot equally capable of providing information as to costs. 31 In her affidavit filed on behalf of W & A, Ms McLaughlin calculates the defendants' likely costs if successful at trial on the basis that the relevant scale limit applies. She makes the observation that based 'on the number of hours that the defendants' solicitors intend on undertaking and the number of business days remaining until trial, the combined work done by counsel and the solicitors for the defendant will be more than 10 hours per day, every business day, until 11 December 2013'. 32 Ms McLaughlin's analysis is that (all incl GST): (a) the maximum total costs which the defendants could claim under the applicable scales for the case as a whole after trial is $122,562; (b) the defendants' reasonable recoverable costs on a taxation for the case as a whole after trial would be approximately $88,907.50; (c) the maximum future costs which the defendants could claim under the applicable scales is approximately $74,789; and (d) the defendants' reasonable recoverable future costs on a taxation for would be approximately $54,483. 33 Ms McLaughlin's analysis is based on a five day trial, rather than the eight days listed. This is because, in W & A's submission, the remaining three days will be for the counterclaim. In my view, it is appropriate to undertake the assessment on the basis that if the defendants' are successful, they will receive the costs of the trial as a whole. This is in part based on the fact that, as set out below ([59], [65]), one aspect of the counterclaim is essentially defensive. 34 I agree with the defendants' submission that Ms McLaughlin's estimate is understated as she only allows five hours per day for counsel at trial, whereas a maximum of 10 hours per day is able to be claimed. (Page 12)
35 For the purposes of this analysis, it is sufficient for me to assume that the defendants, if successful, would recover the following amounts on taxation for the work to be done between now and trial (all incl GST): (a) half the scale limit for preparation for trial, at 60 hours x $451, being $27,060; (b) counsel's fee on brief at the maximum of $16,335; (c) counsel's fees for the remaining seven trial days at $3,630 x 7 days, being $25,410; (d) a senior practitioner for 8 days trial at 8 days x $451 x 10 hours, being $36,080; and (e) $20,000 for the existing costs orders and ongoing case management. 36 This totals $124,885, but say, $130,000. This could increase to a maximum of no more than $200,000 for the taxed costs of the entire action. This would include the balance of the scale limit for preparation for trial, which I consider would have already been expended in preparing for the exchange of witness statements. 37 I pause here to observe that the defendants' litigation strategy is not readily apparent. If totally successful, the defendants' financial position will be something like: (a) damages recovered of around $180,000 (USD $137,772.86 plus AUD $32,618.010); (b) taxed costs recovered of, say, $200,000 (including GST); (c) a total recovery of, say, $380,000; (d) costs paid to its lawyers of $676,777 ($744,455 including GST, using Mr Broadfoot's future costs estimates); and (e) a net deficit of, say, $365,000 (with some GST input credits). 38 On this admittedly simple analysis, the defendants would have been over $400,000 better off by paying W & A's $250,000 claim and not defending the action. (Page 13)
Have the defendants satisfied the threshold requirement in CA s 1335? 39 The threshold requirement in CA s 1335 is that '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 his, her or its defence'. This requires 'an evaluation of the evidence led by the applicant to see whether that leads to a reason to believe that the corporation will be unable to pay the costs of the defendant': FFE Minerals [24]. 'In ascertaining whether there is credible testimony, the court does no more than judge the quality of the evidence to see if it objectively gives rise to a reason to believe': Western Areas [5]; FFE Minerals [22]. The court is to adopt a 'practical, commonsense approach to the examination of the corporation's financial affairs': Sugarloaf [35]. 40 The onus is on the applicant to produce the necessary credible testimony that there is reason to believe the corporation will be unable to pay the costs in issue: Western Areas [15]. The threshold test is, however, a 'fairly modest' test:Western Areas [4]; Meni's Tailoring & Alterations Pty Ltd v Jeanswest Corp Pty Ltd [2003] FCA 1108 [4]. 41 In FFE Minerals Pigeon and Owen JJ declined to define further the expression of the threshold requirement, being content that the words speak for themselves [24]. In Western Areas, Pullin JA took a different approach, stating that [3] - [4]: 42 The threshold test was also discussed by Maxwell P and Buchanan JA of the Victorian Court of Appeal in Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377. Their Honours stated [15] - [16]: The phrase 'reason to believe' is the touchstone of jurisdiction. It requires a rational basis for the belief - and no more. The wording adopted may be contrasted with other familiar formulations such as 'if the court is satisfied that' or 'if in the view of the court it is likely that.' The section requires the making of a judgment, a risk assessment: is there a risk that the corporation will be unable to pay? (It adds nothing, in our view, to say that it must be a 'real risk'.) A risk assessment is, of necessity, imprecise. (Page 14)
The section calls for a practical, commonsense approach to the examination of the corporation's financial affairs. It may be said, with justification, that this is a low threshold. But the test simply reflects the policy of the provision, which is to protect a defendant against the risk of the plaintiff corporation's impecuniosity. The provision equips the court with the means to require that the defendant be secured against that risk. 43 This formulation was adopted by Le Miere J in Vicon Services Pty Ltd v BHP Billiton Worsley Alumina Pty Ltd [2012] WASC 109 [17] and by Corboy J in Sugarloaf [34] - [35]. 44 The defendants have not placed before the court any evidence that would suggest that W & A is in any financial distress, for example, writs lodged, statutory demands issued, creditors demanding payment or sales of assets. There is, however, a payment plan in place to reduce W & A's Integrated Client Account with the ATO, currently at $45,000, and reducing at a rate of $7,000 per month. 45 W & A has an overdraft facility with NAB, of $125,000, with a balance on 15 August 2013 of $53,007. This provides it with the ability to draw down around $75,000 on demand if required to satisfy any costs order. 46 In my view there is a risk that the W & A will not be able to satisfy a costs order made against it in the order of $200,000 in 12 months' time. Three factors, in particular, substantiate this risk: (a) it has made operational losses over the past three years; (b) as at 30 June 2013 it had outstanding unpaid legal fees of around $100,000; and (c) it has a payment plan in place with the ATO to reduce its outstanding liabilities (rather than simply paying the amount outright). 47 I am satisfied that the threshold test in CA 1335 has been established.
What is the appropriate exercise of the discretion in CA s 1335?
Discretion – principles and issues 48 As I have noted, once enlivened, the discretion in CA s 1335 is unlimited or unfettered, though it must be exercised by reference to (Page 15)
established principles: Westonia[5]; Sugarloaf[36]; Darwin Offshore Logistics [3]; FFE Minerals[21]. The circumstances in which the discretion should be exercised cannot be stated exhaustively, and all of the circumstances of the case should be examined: Spence Financial Group Pty Ltd v GE Commercial Corporation (Australia) Pty Ltd [2007] WASC 15 [33]; YICI Pty Ltd v Sun Wah Marine Products (HK) Co Ltd [No 2] [2010] WASC 27 [3]. 49 The defendants bear the persuasive onus to satisfy the court that the discretion should be exercised: Westonia[7]; Sugarloaf[33] - [34]. However, W & A must advance evidence as to any factual matter it wishes to assert in opposition to the application: Sugarloaf[34]. 50 The issues argued before me as being relevant to the application of this discretion in the present case were: (a) W & A's financial position; (b) the merits of W & A's claim and the defendants' defences; (c) the fact that the defendants' have a substantial counterclaim against W & A; (d) the delay by the defendants in making the application; and (e) whether the application was brought for the purpose of stultifying W & A's claim.
Discretion – the financial position of W & A 51 The fact which enlivened the jurisdiction in CA s 1335 - namely that there is reason to believe that W & A will be unable to pay the defendants' costs if successful in their defence - is a 'substantial' or 'most significant' or 'important' factor in favour of its exercise: Westonia[37]; YICI [5]; Sugarloaf[36]; Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3][2011] WASC 161 [11]; Jaddcal Pty Ltd v Minson [No 2][2011] WASC 138 [11]. It does not, however, establish an entitlement, or even a predisposition, in favour of ordering security for costs: Unified[11]. 52 In the present case, the financial position of W & A is not determinative. This is because it is an ongoing business with the ability to generate significant fee income. If the predictions of Mr Third are met, its fee income will increase. I accept the evidence of Mr Third and Mr Winduss that W & A as a business has some market value based on its (Page 16)
average fee income. It has an overdraft facility that it can access if required (at present for an additional $75,000). Thus whilst there is a risk that W & A will not be able to satisfy a $200,000 costs order made against it in 12 months' time, it is also entirely possible that it will be able to pay this debt, and all its other debts, as and when they fall due. 53 In the present case, the financial position of W & A is not a compelling reason for ordering it to provide security for costs.
Discretion – merits 54 The merits, or probability of success, of W & A's claim is a relevant factor: Intercraft Cabinets Pty Ltd v Sampas Pty Ltd (1997) 18 WAR 306, 316 - 318;SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309 [33] - [34]; Sugarloaf[36]; Westonia[28]. However, as Corboy J observed in Sugarloaf, there are limits to its relevance [36]: There are obvious and practical limits on the extent to which an assessment can be made of the substantive merits of the plaintiff's claims and the defendant's defence. The court will generally not be required to investigate in considerable detail the likelihood or otherwise of success in the action… 55 On the same issue, in Gentry Brothers Pty Ltd v Wilson Brown & Associates Pty Ltd(1992) 8 ACSR 405, Cooper J observed: (416): Ordinarily in my view the likelihood or otherwise of success in the proceedings ought not to be investigated on an application for security for costs ... There may be circumstances where the merits are clear or where the claim cannot succeed in point of law or is not brought bona fide. Should that occur, regard will be had to those circumstances. However, those cases in my view are the exception to the ordinary rule. 56 In its amended substituted statement of claim filed on 31 July 2013, W & A asserts that: (Page 17)
(c) by a second agreement in April 2007 ('April Agreement'), Alloy AU and W & A agreed that W & A would provide the services of Mr Winduss who was to assume 'operational administration and marketing functions' for Alloy AU; (d) payment of W & A's fees for services provided under the April Agreement could be deferred until a raising of funds by public offering of shares in a company related to one of the defendants; (e) from April 2007 to June 2010, W & A provides services to Alloy AU in accordance with the April Agreement, which Alloy AU knew about and accepted; (f) pursuant to the General Retainer W & A provide accounting services to Alloy US for the financial quarters ending 31 March 2010 and 30 June 2010, which services Alloy US accepted; (g) pursuant to the General Retainer W & A provide accounting services to Alloy AU for the financial quarters ending 31 March 2010 and 30 June 2010, which services Alloy AU accepted; (h) in or about July or August 2010, the defendants terminated the General Retainer and the April Agreement; (i) in August 2010, W & A sent an invoice to Alloy US for $30,580 for the services in (f); (j) in August 2010, W & A sent an invoice to Alloy AU for $34,540 for the services in (g); (k) in December 2010, W & A sent an invoice to Alloy AU for $217,343.50 for services rendered pursuant to the April Agreement; (l) Alloy US has not paid the invoice in (i); and (m) Alloy AU has not paid the invoices in (j) and (k). 57 The relief sought by W & A is a claim in debt for the payment of the amounts in (i), (j) and (k), totalling around $280,000. In the alternative, it claims in restitution for a reasonable amount for the services the subject of the invoices in (i), (j) and (k) which it says Alloy US and Alloy AU, respectively, knew about and accepted. (Page 18)
58 In its amended substituted defence and counterclaim filed 9 August 2013, the defendants say by way of defence that: (a) Mr Winduss has been a director of W & A since 2001; (b) Mr Winduss owed W & A a duty in equity to avoid any actual or potential conflict between obligation owed by him to W & A and personal interests or any other duty; (c) Mr Winduss is a shareholder of W & A; (d) as a director of Alloy AU, Mr Winduss owed it a fiduciary duty to avoid any actual or potential conflict between the obligations owed by him to Alloy AU and personal interests or other duty; (e) Mr Winduss beneficially owned the one issued share in Alloy AU; (f) by reason of (e), at all material times Mr Winduss had a personal interest in Alloy AU; (g) Mr Winduss was employed by Alloy US pursuant to a written agreement; (h) Mr Winduss performed the role of executive director of Alloy AU, having primary responsibility for commercial, financial and administrative matters; (i) Mr Winduss represented that he would spend between 60% and 80% of his time, during the relevant period, on his duties as executive officer to Alloy US; (j) Alloy AU paid Mr Winduss a salary from 1 July 2004 to 30 June 2010; (k) in or about October 2000, Alloy US issued shares of common stock in Alloy US pursuant to three consulting agreements to three different companies controlled by Mr Winduss for services provided by Mr Winduss; (l) in the period from September 2003 to August 2010 W & A prepared certain accounts and statutory forms and lodged certain statutory forms (Alloy Retainer); (m) in the period from September 2004 to June 2010 the defendants each received from W & A certain invoices and paid them; (Page 19)
(n) there was no General Retainer agreement as alleged by W & A; (o) during the period from May 2000 to 30 June 2010 Mr Kostecki and Mr Winduss, as directors and executive officers of Alloy US and Alloy AU, considered different options for funding the operations of Alloy US and Alloy AU, including issuing shares, and otherwise does not admit the plea in relation to the April Agreement; (p) in relation to the April Agreement, to the extent that Mr Winduss performed services for Alloy AU, those services were provided pursuant to his contract of employment; (q) around the middle of 2010 a representative of Alloy US and Alloy AU advised W & A that they would no longer request the services of W & A, to which Mr Winduss responded by terminating the arrangement between them; (r) they received the invoices, but deny any obligation to pay them; (s) by reason of the matters in (b) to (k) above, W & A is estopped from claiming any amounts inconsistent with the position the defendants would not be charged by W & A for any work performed by Mr Winduss himself; (t) the accounting and management records of Alloy AU for the relevant period do not record any contingent liability for work performed pursuant to the April Agreement; and (u) from its conduct, W & A represented to each defendant that Alloy AU was not liable, and would not become liable, for the services the subject of the invoice for the April Agreement. 59 By way of counterclaim, the defendants say that: (a) the representation that Alloy AU was not liable, and would not become liable, for the services the subject of the invoice for the April Agreement was misleading and deceptive, or likely to mislead or deceive, in breach of Trade Practices Act 1974 (Cth) s 52 (now Australian Consumer Law s 18 (Schedule 2 of the Competition and Consumer Act 2010 (Cth)); (b) the representation was misleading and deceptive, or likely to be so, because, contrary to the representation, W & A was accruing fees to charge to Alloy AU and did charge Alloy AU those fees; (Page 20)
(c) if it is liable for the services the subject of the invoice for the April Agreement, it will have suffered loss and damage by reason of the representation in (a); (d) a material, but implied, term of the contract Alloy Retainer was that W & A would exercise 'the standard of skill, care and diligence which a reasonable person would expect from a professional accountant'; (e) W & A owed each defendant a common law duty of care; (f) W & A breached the obligations in (d) and (e) by failing to facilitate the lodgement of United States tax returns with the IRS by Alloy US for the years 2003 and 2006 through 2009; (g) W & A breached the obligations in (d) and (e) by failing to communicate clearly in writing, or at all, Alloy AU's alleged accruing liabilities for the services the subject of the claim for April Agreement; (h) by reason of (g), Alloy US and Alloy AU lost the opportunity to instruct W & A to immediately cease performing the services the subject of the claim for the April Agreement; (i) Alloy AU will suffer loss in the amount of any liability to W & A in relation to the subject of the claim for the April Agreement; (j) Alloy US suffered loss and damage in the amount of US$137,772.86 by way of penalties to the IRS and advice taken in relation to its exposure to penalties from the IRS and the Illinois tax department; (k) W & A breached the obligations in (d) and (e) by failing to facilitate the lodgement of FBT returns with the ATO on behalf of Alloy AU for the years 2003 through 2010; and (l) Alloy AU suffered loss and damage in the amount of $32,618 by way of general interest charges from the ATO. 60 Where a claim is regular on its face and discloses a cause of action, then, in the absence of evidence to the contrary, the court will proceed on the basis that the claim is brought in good faith and is arguable: Intercraft, 316 - 318;Westonia[28]. Where, like the present case, the facts are in dispute, it is difficult for the court to express a view on the merits or probability of success of the claims made by a plaintiff: (Page 21)
SAS Global [34]; Westonia [27]. All I am able to conclude in the present case is that the claims brought by W & A are regular on their face and disclose arguable causes of action. The facts pleaded are not inherently implausible. There is no evidence before me to the effect that W & A's claims are not brought in good faith. 61 Likewise, I am of the view that the defences and counterclaims of the defendants are regular on their face and disclose, respectively, arguable defences and causes of action. On the material before me, there is nothing suggesting that the defences or counterclaims have a sufficiently high prospect of inevitable success such that I should give them weight in determining whether to grant security for costs. As I stated above [5], there are two central issues in the action. The issues are both factual. The final result in the action will depend on the suite of evidence ultimately placed before the trial Judge and the findings of fact made. 62 On the materials available to me, I am satisfied that both W & A's claim and the defendants' defences and counterclaims appear to be being pursued in good faith and raise issues which will need to be determined at trial. There is nothing in either W & A's claim, or the defendants' defences or counterclaims, that would weigh one way or the other in favour or against the making of an order for security for costs on this ground. The merits of W & A's claim is thus a neutral factor: Fiduciary Ltd v Morningstar Research Pty Ltd(2004) 208 ALR 564 [37] - [39].
Discretion – counterclaim 63 The existence of the counterclaim does, however, raise another discretionary consideration. The relevance of a counterclaim to an application for security for costs was discussed in detail by Le Miere J in SAS Global in the following terms, which I respectfully adopt [36] - [41]: 36 There are many decisions that deal with the issue of whether or not it is appropriate for the court to make an order for security for costs against the plaintiff in circumstances where it is also a cross-defendant pursuant to a cross-claim brought by the defendant. In Sydmar Pty Ltd v Statewise Developments Pty Ltd Smart J affirmed the principle that the decision to order security was unfettered and then listed a number of factors which he considered to be relevant to the exercise of the discretion to grant security. Among those factors was the following: Whether substantially the same facts are likely to be canvassed in determining the action and the cross action. The court would be slow to allow a situation where the action is stayed because of the inability to provide security (Page 22)
but the cross action covering substantially the same factual areas proceeds (300). That dictum was considered by Bleby J in Ewing International Ltd Partnership v Ausbulk Ltd [2009] SASC 202. Bleby J made three observations about that dictum. The first is that Smart J offered no authority for that proposition. However, the proposition has been affirmed in many subsequent cases, some of which I will refer to. Bleby J's second observation is that Smart J's dictum needs to be read in the context of the facts of that case. Of the cross-claim in that case Smart J later observed: By reason of the complexity of the matters raised in the cross-claim, the time it will take to hear them and the amount claimed, the cross-claim is now the dominant part of the proceedings. The plaintiff's claim, while important to it, is, in the overall picture of the hearing time and the amount claimed, of minor importance (302). Thirdly, Bleby J observed: … the proposition, on its face, represents a misunderstanding of what this court decided in John Arnold's Surf Shop Pty Ltd (in liq) v Heller Factors Pty Ltd (1979) 22 SASR 20. That is that one of the relevant factors against ordering security for costs is where a plaintiff is, in reality, a defendant. Ausbulk in this case, is a defendant in the arbitration. Although it has a cross-claim, it was open to the judge below to conclude that it was effectively a cross-claim by way of defence only, being based on Ewing's alleged breach of contract, the very substance of Ausbulk's defence in Ewing's claim. Such a defensive counterclaim does not preclude a defendant from obtaining an order for security [25]. The principle referred to by Smart J was considered by Rolfe J in Dalma Formwork Pty Ltd (administrator appointed) v Concrete Constructions Group Ltd [1998] NSWSC 472. Rolfe J said: In circumstances where the claim and the cross-claim arise out of the same, or essentially the same, factual matrix this, in my opinion, is a very important consideration. It has been frequently and consistently said by Judges sitting in this Division that an order for security will not generally be made in such circumstances, in the exercise of the Court's discretion. It would, in my view, be quite wrong to preclude a party from litigating matters by way of a defence to a cross-claim merely because that party has been the initial institutor of the proceedings. The conduct of the other party may have forced the allegedly impecunious party to take the litigious initiative, whilst not constituting misconduct. Put simply if CCG seeks to recover any part of the debt the issues raised by Dalma in its claim would be available to it as a defence, and there has never been any suggestion that a party could be precluded from (Page 23)
(Page 24)
claim. Accordingly, if the action were stayed because of the plaintiff's inability to provide security, the same factual issues would nevertheless have to be canvassed in order to determine the counterclaim. In my view, a Court should be slow to allow that situation to come about. I do not consider there is anything in the circumstances of this case that would justify the prospect of such a result. In my view, this is not an appropriate case to order security for costs. Neither the plaintiff nor those who stand behind it are in a position to provide security. On the evidence, the effect of an order for security would be to stifle the plaintiff's claim. In addition, as the matter stands, substantially the same factual ground will have to be covered in the determination of both the claim and the counterclaim [41] - [42]. In Health Information Pharmacy Franchising Pty Ltd v Khoo [2010] FCA 438 the principle was referred to by Yates J in circumstances where the respondents had stated that they were prepared to give an undertaking to the court not to prosecute their cross-claim against the applicant should the principal proceeding be stayed for failure to provide security, and to withdraw their cross-claim should the principal proceeding be dismissed for failure to provide security. Yates J said: The importance of this lies in the fact that, where the claim and cross-claim arise out of the same or essentially the same factual matrix, an order for security will not generally be made as a matter of discretion. This is because it would be unjust to allow the situation to arise where a principal proceeding is stayed because of an inability to provide security but a cross-claim proceeds covering substantially the same factual area: Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289 at 300; Concrete Constructions Pty Ltd v Dalma Formwork Pty Ltd (admin apptd) [1999] NSWCA 16 at [24]; Reinsurance Australia Corporation Ltd v HIH Casualty and General Insurance Ltd [2003] FCA 803 at [84]-[92]; Total Development Supplies Pty Ltd v GRD Building Pty Ltd [2008] FCA 844 at [30] - [35]. This situation is avoided by the giving of an undertaking of the kind foreshadowed by the respondents [72]. 64 In the present case, there are two parts to the counterclaim (which I have summarised above [59]). Both arise out of the same factual matrix, namely the provision of services by W & A to the defendants throughout 2007 to 2010. 65 The first part of the counterclaim is based on the alleged representation by W & A that Alloy AU was not liable, and would not become liable, for the services the subject of the April Agreement. This is essentially defensive in nature and could not be continued as a standalone (Page 25)
action in the absence of W & A's claim as the damage which is an essential element of the claim is the liability to pay for the services the subject of the April Agreement. 66 The second part of the counterclaim is for breaches of duties of skill, care and diligence by W & A in the preparation of certain Australian and United States taxation returns. Damages in the order of AUD $180,000 are claimed. If W & A's claim was stayed, the defendants could still pursue this part of the counterclaim. Such an outcome would be unjust. The defendants have not given an undertaking of the kind described above [63] not to prosecute this aspect of the counterclaim should W & A's claim be stayed due to an inability to provide security for costs. 67 However, a further relevant consideration is that there is no evidence that the making of an order for security for costs (either in the amount sought or the amount I consider appropriate, being $200,000) would stultify the ability of W & A to continue with the action.
Discretion - delay 68 An application for security for costs must be made promptly: YICI[6]; Idoport Pty Ltd v National Australia Bank Ltd[2001] NSWSC 744 [70]. Delay in making the application is a significant factor against the exercise of the discretion: Attorney-General of Botswana v Aussie Diamond Products Pty Ltd[2009] WASC 299 [21] - [24]. The 'further a plaintiff has proceeded in an action and the greater the costs it has been allowed to incur without steps being taken to apply for an order for costs, the more difficult it will be to persuade the court that such an order is not, in the circumstances, unfair or oppressive': Bryan E v Fencott & Associates Pty Ltd v Eretta Pty Ltd(1987) 16 FCR 497, 514; Attorney-General of Botswana[23]. This is for at least two reasons. The first is that a late application, without explanation, offends modern case management principles: Attorney-General of Botswana[14] - [24]. The second is that it will generally be unjust to permit a defendant who stood by and allowed the plaintiff to work on their case to ask for security after expenses had been incurred: Idoport[70]; Smail v Burton; Re Insurance Associates Pty Ltd (in liq)(1975) 1 ACLR 74, 75. 69 On the other hand, evidence of delay does not necessarily render the application fatal on its own: Idoport [70]. Rather, the passage of time is merely one factor to be taken into account during the balancing exercise undertaken by the court: Idoport[70]; Commonwealth v Cable Water Skiing (Australia) Ltd(1994) 14 ACSR 760, 762. (Page 26)
70 The defendants' assert that there is no relevant delay. Rather, they assert that W & A's case, and the management of the case as a whole, took on an entirely new complexion when amended earlier this year. The two new aspects of W & A's case were: 71 This in turn led to new defences based on estoppel and misleading or deceptive conduct. This broadened the nature and scope of the issues in dispute in the action, and consequently discovery and the relevant factual inquiries. The amendments led to the court vacating the trial then due to commence in June 2013 and increasing it from five to eight days. 72 In my view, the amendment of the statement of claim does not provide a sufficient justification for a delay in making an application for security for costs. The evidence presented by the defendants in support of its assertion that W & A did not have the ability to meet any costs order was publicly available, and could have been placed before the court soon after the action was commenced. The amendments do not change the amount claimed by W & A, which remains around $280,000. The defendants have to date spent over $300,000 in defending this claim. I am not told why, in particular given this level of costs, an application for security for costs could not have been made earlier. Further, there is no evidence of financial distress in the affairs of W & A that could act as a catalyst for commencing an application for security for costs at this late stage (eg a writ lodged by an unpaid creditor). 73 In my view, this is a case in which the delay of the applicant should weigh heavily against the exercise of the discretion to order security for costs. This is for the reasons set out above: this is a late application, without adequate explanation for the delay, something which offends modern case management principles; and it would be unjust in the present case to permit the defendants, who stood by and allowed W & A to work on its case, to ask for security after expenses had been incurred. The defendants' have had ample opportunity to bring an application for security for costs, and have not adequately explained their failure to do so: Aon Risk Services Australia Limited v Australian National University[2009] HCA 27; (2009) 239 CLR 175 [102], [103], [112]. (Page 27)
Discretion – oppression 74 A relevant factor for the court to consider in the exercise of the discretion to grant security for costs is whether the application is oppressive and brought for the purpose of stultifying W & A's claim: Westonia [30]; Jaddcal [15]; Australian Quarry Holdings Pty Ltd (in liq) v Dougherty (1992) 8 ACSR 569, 573. 75 W & A submits that the timing of the defendants' application requires 'close and careful scrutiny by the court' as: (a) the amount of costs apparently incurred is unreasonable and oppressive having regard to the scale of costs applicable to the taxation of costs in the District Court; (b) the amount of costs apparently already incurred would suggest that very little is required by the defendants to prepare for hearing and yet the defendants’ evidence suggest that the costs allegedly to be incurred for preparation of trial is significantly and 'wildly' excessive having regard to the stage of the proceedings, the live issues in dispute, the scale of costs and the general jurisdiction of the District Court; (c) the delay in making the application to a time close to trial; (d) the defendants' ability to absorb costs ; and (e) the defendants' late application to broaden the issues by applying to join a third party. 76 W & A submits that, by reasons of these matters, it is possible to infer that the application for security for costs is being brought to stifle the litigation rather than to protect the interests of the defendant. 77 W & A further submits that to allow an order for security for costs in the amount sought by the defendants, given the amount claimed, would 'render the primary action commercially impracticable'. It says that it is relevant to consider whether or not it would be unreasonable, 'in practical commonsense terms', to give security if the debt is comparatively small compared to the security sought: BPM Pty Ltd v HPM Pty Ltd (1996) 131 FLR 339, at 344 - 345. 78 Given the amount of security claimed by the defendants is so disproportionately excessive compared to the scale limits and the amounts in issue, I can understand why W & A calls into question the purpose or (Page 28)
motive of the defendants in bringing the application in the terms sought. However, I have already determined that the amount sought is excessive and set an amount of costs which I consider appropriate for the purposes of determining the application. There is thus no question of the defendants being entitled to security for costs in the amount claimed. 79 As to the other matters identified by W & A, I do not have any evidence as to the defendants' ability to absorb costs, other than the fact that they have to date paid out to their solicitors an amount in excess of the amount claimed by W & A. As to the timing of the third party notice, I am of the view that the catalyst for the issues raised in the third party notice was the amendments to the statement of claim earlier this year which split W & A's initial claim into two contracts and raised the issue of the deferral of the billing of the fees for services provided under the April 2007 agreement. I have dealt separately with the issue of delay. 80 Further, there is no evidence from those standing behind W & A that the making of an order for security for costs, whether it is in the amount sought or a lower amount, would stifle the ability of W & A to continue with its claim. 81 On this basis, I do not propose to, nor need to, consider further the purpose of the defendants in bringing in the application in the terms sought.
Discretion - application 82 In exercising its discretion the court will be concerned to achieve a balance between ensuring the defendant is adequately and fairly protected, and avoiding injustice to an impecunious plaintiff company by unnecessarily shutting it out or prejudicing it in the conduct of the litigation: Westonia [5]; Sugarloaf [31]; Unified [10]; Spence [38]; Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301, 304. If security is to be provided, the court is not required to order such security as will provide a complete and effective indemnity for costs: Sugarloaf[80]; Gentry (415). 83 In my view, with one caveat, it is not appropriate to order the imposition of some form of security for costs in the present case. This is because: (a) whilst there is a risk that W & A will not be able to pay an order for costs against it in the order of $200,000 in 12 months time, it is also entirely possible that it would be able to do so; (Page 29)
(b) the merits of W & A's claim is a neutral factor; (c) that part of the counterclaim brought by the defendants in which they seek damages in the order of $180,000 arises out of the same factual matrix as the claim, and could continue to be litigated even if W & A's claim was stayed; and (c) I do not consider that the amendments to the statement of claim in April this year constitute a sufficient explanation for the delay in bringing the application for security for costs. 84 The caveat is that the financial position of W & A as I have described it is based on undertakings by the directors, contained in their affidavits, not to claim amounts owed to them ahead of any claim for costs made against W & A in the present action. This provides a sufficient additional buffer in the financial position of W & A to make it inappropriate, in light of the other factors I have identified, to order further security for costs to be provided.
What are the appropriate final orders? 85 The appropriate final orders to give effect to what I have set out above, are orders that that upon the directors of W & A formally providing to the court undertakings in terms set out in their affidavit, the defendant’s application for security for costs be dismissed. The broad form of the orders should be along the following lines: 1. unless by 25 September 2013 Alan Charles Winduss and Stuart Alexander Third each executes, file and serves on the defendants an undertaking to the court in terms of the attached draft, the plaintiff's claim herein be stayed; 2. in the event that the plaintiff's claim herein is stayed pursuant to the order in paragraph 1, the trial listed to commence on 2 December 2013 be vacated with the plaintiff to pay the defendants' costs thrown away be reason of the vacation in any event; 3. in the event that the plaintiff's claim herein is stayed as at 2 December 2013: (a) the plaintiff's claim herein be dismissed, with the plaintiff to pay the defendants' costs of the action to be taxed if not agreed; (Page 30)
(b) there be judgment for the first defendant against the plaintiff on the claims giving raise to the losses set out in paragraphs (a) and (b) to the particulars to paragraph 58 of the counterclaim for damages to be assessed and costs to be taxed; (c) there be judgment for the second defendant against the plaintiff on the claims in paragraph (c) to the particulars to paragraph 58 of the counterclaim of the counterclaim for damages to be assessed and costs to be taxed; (d) the balance of the counterclaim be dismissed; and (e) there be liberty to apply as to the assessment of the damages; and 4. in the event that the undertakings in paragraph 1 are given: 86 I have directed the parties to confer on the precise terms of the undertaking. 87 There needs to be liberty to apply in relation to the undertakings because, as the defendants point out in their submissions, the undertakings may clash with the duties of Messrs Winduss and Third as directors of W & A. 88 I have adjourned the application to the existing directions hearing on 24 September 2013, and will, if necessary, settle the final form of the order and undertaking at that hearing. I will also hear from counsel as to the appropriate costs orders.
|