//
[2022] WASC 73
General information, not legal advice.
Supreme Court of WA
2022-03-08
Strk J
Original judgment source is linked above.
1 This is an application made by the first to fifth defendants for security for costs pursuant to the Corporations Act 2001 (Cth) s 1335(1). They seek an order that within 14 days the first and second plaintiffs give security for costs of the action up to and including mediation by way of either payment of an amount into court or the provision of an unconditional bank guarantee in favour of the defendants from an Australian trading bank.
2 The application was heard on 10 February 2022 and was opposed by the plaintiffs.
3 For the reasons that follow, I consider that it is appropriate to order that the plaintiffs give security for the defendants' costs.
4 The defendants made their application for security for costs by filing a document titled 'memorandum of proposed orders in relation to security for costs application dated 23 December 2021'. The defendants seek an order that the plaintiffs give security in such amount as the court determines.[1] The application was filed with a memorandum of conferral pursuant to the Rules of the Supreme Court 1971 (WA) (RSC) O 59 r 9(1).
5 In summary, the defendants say that the threshold jurisdictional question has been met, that is, it appears by credible testimony that there is reason to believe that the plaintiffs will be unable to pay the defendants' costs.
6 The defendants further say that the discretion ought to be exercised in their favour as, among other things, the defendants have strong prospects of success such that an adverse costs order against the plaintiffs is likely.[2]
7 At the hearing of the application, the defendants read and relied upon two affidavits of James Barrett, solicitor for the defendants, sworn on 23 December 2021 and 7 February 2022, respectively. Mr Barrett annexed to his second affidavit the defendants' amended draft bill of costs, which is reproduced at sch A to these reasons. At the hearing, counsel for the defendants also relied upon the written outline of submissions filed on 7 February 2022.[3]
8 The plaintiffs read and relied upon four affidavits. The first was the affidavit of Mabel Lai‑Fun Chua, solicitor for the plaintiffs, sworn on 25 January 2022. The plaintiffs also read and relied upon three affidavits sworn by Anthea Huang, the sole director of the first and second plaintiffs, sworn on 27 January 2022, 3 February 2022 and 7 February 2022, respectively. Ms Huang's affidavits contain commercially sensitive information and access to her affidavits is restricted by an order made on 31 January 2022.
9 At the hearing, counsel for the plaintiffs relied upon the written outline of submissions filed on 9 February 2022. The submissions reference commercially sensitive information to which access is restricted by an order made on 31 January 2022.
10 These reasons have been prepared so as to refer to but not disclose the substance of the confidential information protected by the order.
11 In his first affidavit, among other things, Mr Barrett described searches conducted in relation to each of the plaintiffs and attached the same. The searches reveal that:
(a) Ms Huang is the sole director of the first and second plaintiffs, Australian proprietary companies;
(b) the first plaintiff is a wholly owed subsidiary of Braziron Ltd, a company registered in Bermuda;
(c) the second plaintiff is a wholly owned subsidiary of the first plaintiff; and
(d) neither of the plaintiffs own real property in Western Australia, nor do Braziron Ltd or Ms Huang.
12 The searches of the Personal Property Securities Register (PPSR) reveal that:
(a) five security interests are registered as having been granted by the first plaintiff, including a security interest granted in favour of the Australia and New Zealand Banking Group Limited (ANZ), which incorporates all personal property over which the first plaintiff has an interest both at the time the registration is made and after (AllPAAP);
(b) 50 security interests are registered as having been granted by the second plaintiff. Two are AllPAAPs with no exceptions in favour of ANZ and Valimont Irrigation Australia Pty Ltd, respectively. 42 are purchase money security interests granted over particular collateral (PMSI); and
(c) neither Ms Huang nor Brazion Ltd have granted any security interest over personal property owned by them. (I also note that there is no evidence of either owning personal property in Western Australia.)
13 Mr Barrett also attached to his first affidavit correspondence between the parties' representatives by which the defendants expressed concern as to the plaintiffs' ability to satisfy any adverse costs order made against them and requested information as to the assets and liabilities of the plaintiffs, which was not answered.
14 In his second affidavit, Mr Barrett described aspects of the procedural history of the consolidated proceeding. He also deposed to correspondence by which the defendants invited the plaintiffs to provide evidence of any time that had been expended or costs that had been incurred by them which would not otherwise have been expended or incurred had the defendants' application for security for costs been made earlier in time. He deposed that as at the date of his second affidavit, the plaintiffs had not taken up that invitation.
15 Mr Barrett calculated the defendants' costs associated with the proceedings up to and including mediation, which included costs that had been incurred to date and costs estimated to be incurred up to and including mediation. He attached an amended draft bill of costs and explained the basis upon which it was prepared. Among other things, he confirmed that the draft had been prepared on a party/party basis, collectively for all defendants, and by applying the rates prescribed by the Legal Profession (Supreme and District Courts) (Contentious Business) Determination 2020 (WA). Mr Barrett estimated the defendant's total costs to mediation to be $163,430.30 (inclusive of GST).
16 I understand from Ms Chua's affidavit that the defendants had not foreshadowed making an application for security for costs prior to December 2021; that conferral took place between the parties in relation to discovery in the second half of 2021; and between July 2020 and 3 December 2021 the plaintiffs incurred in excess of $100,000 in professional fees and disbursements in respect of the two proceedings, which are now consolidated.
17 Ms Huang's affidavits confirm that the first plaintiff is a wholly owned subsidiary of Braziron Ltd. She also deposed to the cash at bank held by Braziron Ltd in Australia as at the date of her first affidavit.
18 Ms Huang explained that the first plaintiff is not a trading entity and deposed to it holding a modest amount of cash at bank. She also explained that in addition to holding all of the shares in the second plaintiff, the first plaintiff holds all of the issued shares in Advanced Investments Mineraçāo Ltda, a Brazilian company.
19 Ms Huang gave an estimate of the current asset and liability position of the first plaintiff in her affidavit. She included a book net worth of Advanced Investments Mineraçāo Ltda, and attached to her affidavit various documents, including the balance sheet for the first plaintiff as at 30 June 2020. She also disclosed the first plaintiff's secured indebtedness to ANZ, and its indebtedness pursuant to its intercompany loans.
20 As to the second plaintiff, Ms Huang attached to her first affidavit its financial statement as at 30 June 2020 and its 6 month management accounts as at 31 December 2021. Among other things, the management accounts record the second plaintiff's cash on hand as at 31 December 2021 and a modest net profit.
21 Ms Huang also explained that the second plaintiff holds all of the issued shares in SBWA Fabrication and Welding Pty Ltd. The value of that shareholding is not readily apparent on the evidence.
22 The second plaintiff conducts a road barrier contracting business known as Safety Barriers (WA), and as is noted above, is a wholly owned subsidiary of the first plaintiff. The second to fifth defendants held all of the issued shares in the second plaintiff before they were sold to the first plaintiff.
23 The first defendant is an Australian proprietary company which was incorporated in January 2018. The plaintiffs contend that the second defendant caused the first defendant company to be incorporated for the purpose of carrying out a business in Western Australia which was to be substantially the same as and in competition with the business of the second plaintiff.[4]
24 The claims prosecuted by the plaintiffs in the consolidated proceeding are described as follows in the plaintiffs' submissions at pars 4 to 6:
4. The first plaintiff's claims against the second to fifth defendants arises out of the first plaintiff's purchase of all of the issued shares in the second plaintiff (SBWA) from the second to fifth defendants. Prior to the purchase, SBWA carried on a road barrier contracting business known as Safety Barriers (WA), and continues to do so. The plaintiffs plead that the second to fifth defendants agreed not to compete against the business of SBWA for 5 years to 12 December 2022, and seek injunctive relief and damages for breach of that agreement.
5. The first plaintiff pleads in the alternative that the second and fifth defendants engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, causing the first plaintiff to suffer loss in acquiring the shares in SBWA.
6. SBWA's action against the first and second defendant arise from those defendants' misuse of confidential information belonging to SBWA, to compete with SBWA for road barrier work. (footnotes omitted)
25 As to the second plaintiff's claim summarised at par 6 of the plaintiffs' submissions (reproduced above), among other things, it is pleaded that the second defendant accessed the second plaintiff's computerised database and provided information confidential to the second plaintiff to the first defendant.[5]
26 A short chronology of each of the proceedings and the consolidated proceeding was prepared by the plaintiffs and annexed to the plaintiffs' submissions as annexure A. Rather than summarise the procedural history here, for convenience I reproduce the chronology at sch B to these reasons. I had regard to the same in determining this application.
27 In addition to the events described in the plaintiffs' chronology, I also note that on 29 June 2021 the plaintiffs filed a reply and their defence to counterclaim; at the request of the defendants, on 2 November 2021 the consolidated proceeding was admitted to the Commercial and Managed Cases List; on 16 November 2021, by the consent of the parties, orders were made to facilitate further conferral in respect of discovery; on 13 December 2021 the plaintiffs filed an amended consolidated statement of claim; and on 20 December 2021, by the consent of the parties, the defendants were ordered to file and serve their security for costs application by 23 December 2021.
28 As to the current status of the pleadings, I note as follows. On 12 January 2022, the defendants requested further and better particulars of the amended consolidated statement of claim; on 27 January 2022, the plaintiffs' solicitors responded to the same; and the pleadings have not closed.
29 The defendants press their application for security for costs pursuant to the Corporations Act s 1335(1). There is no dispute as between the parties as to the principles to be applied in the determination of the application.[6]
30 Under the Corporations Act s 1335(1), the court has the power to order that security be given for the likely costs of a proceeding over which it has jurisdiction. Further, the court has the power to order that any proceeding be stayed until any security ordered is given. The Corporations Act s 1335(1) provides as follows:
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.
31 There is no entitlement to security, nor any predisposition towards an order for security.[7] Rather, as observed by Le Miere J in SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [2010] WASC 309 [9], s 1335 carries both a threshold test and a discretionary test.
33 The onus rests with the applicant to adduce evidence to persuade the court that the corporation in question will be unlikely to be able to meet a future costs order. Such a task includes persuading the court to make a prediction about what the financial position of the corporation will be at the time of the judgment and immediately after.[9] There is no onus on the company to prove its ability to meet an order for costs; the evidential burden rests with the applicant for security.[10]
34 When determining whether a corporation will be unable to pay, it is also necessary to identify the range of assets to which recourse might be had for the purpose of enforcing an adverse costs order. As was observed by Corboy J in Sugarloaf Hill Nominees Pty Ltd v Rewards Projects Ltd [2011] WASC 19 [35(c)], generally, the relevant assets will be those that might be immediately realised and those which could be realised in sufficient time to enable the plaintiff to comply with a costs order in the usual terms.[11]
35 If the threshold condition is satisfied, the court's jurisdiction is enlivened and the question then becomes whether discretion to make an order for security for costs should be exercised.[12] As was observed in Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 5] [2017] WASC 171 [19], where the threshold jurisdiction to award security is made out, this in itself provides a substantial factor in the exercise of discretion in favour of the applicant.
36 The threshold test was discussed in Livingspring Pty Ltd v Kilger Partners [2008] VSCA 93; (2008) 20 VR 377 [15] ‑ [16], as follows:[13]
[15] 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. The section calls for a practical, common sense approach to the examination of the corporation's financial affairs.
[16] 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.
37 Once the court's jurisdiction is enlivened under s 1335(1), there is an unlimited discretion that is to be exercised considering all of the circumstances of the case.[14] While s 1335 does not list the factors that a court may take into consideration once the threshold condition is satisfied, the principles in relation to security for costs are well established.[15] There are a number of cases which have identified factors relevant to the exercise of discretion in awarding security for costs. None of the authorities claim to contain an exhaustive list, and the factors to be considered will vary from case to case.
38 Various factors may be relevant to that exercise of discretion. They may include (but will not be limited to):
(a) the strength and bona fides of the plaintiff's case;
(b) the likelihood of the plaintiff being able to pay the defendant's costs;
(c) whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
(d) whether the application for security is oppressive;
(e) whether the award for security would deny the impecunious plaintiff a right to litigate;
(f) whether there are persons standing behind the plaintiff who are likely to benefit from the litigation;
(g) whether the persons standing behind the plaintiff have offered any security or personal undertaking;
(h) whether the plaintiff is in substance a plaintiff or whether the proceedings are defensive in the sense of directly resisting proceedings already brought or seeking to halt the defendant's self-help procedures;
(i) whether the application for security has been brought promptly;
(j) whether the defendant has any rights which it can exercise against the assets of the plaintiff to satisfy an order for costs in its favour; and
(k) any factors relating to public interest.[16]
39 The judicial discretion in balancing these factors has been described as the balance of justice between two extremes. First, not allowing the defendant to make oppressive use of s 1335, or similar provisions, to prevent the plaintiff pursuing a genuine claim; and, secondly, not permitting the controllers of an impecunious corporation to oppress a defendant by exploiting its incapacity to pay costs.[17]
41 On balance, I am satisfied that the threshold question has been met and the discretion should be exercised to grant the application. I deal with each in turn below.
42 Counsel for the plaintiffs submitted that it was appropriate to consider the combined financial position of the plaintiffs for two reasons. First, there is a substantial common factual and evidentiary matrix relating to each plaintiff's case, such that any costs orders in favour of the defendants are likely to be made against both plaintiffs. Secondly, the shareholder standing behind the second plaintiff is the first plaintiff, itself a party to the proceeding.[19]
43 While I accept that there is a common factual and evidentiary matrix relating to each plaintiff's case, I am not satisfied that there is a complete or substantial overlap in the claims made by the first plaintiff and the second plaintiff respectively, such that any costs orders in favour of the defendants are likely to be made against both plaintiffs.
44 In summary, the first plaintiff claims that the second to fifth defendants agreed not to compete against the business of the second plaintiff for a period of five years and is seeking injunctive relief and damages for breach of that agreement. In the alternative, the first plaintiff pleads that the second and fifth defendants engaged in conduct that was misleading or deceptive, or likely to mislead or deceive, causing the first plaintiff to suffer loss in acquiring the shares in the second plaintiff.
45 The second plaintiff claims against the first and second defendant for their alleged misuse of confidential information belonging to the second plaintiff, to compete with the second plaintiff for road barrier work.
46 The first and second plaintiffs make separate prayers for relief: the first plaintiff seeks rectification, injunctions and damages for breach of contract; the second plaintiff seeks a declaration, injunctions delivery of documents containing confidential information and damages for breach of confidence.[20] There is a prospect that the claims of one plaintiff will succeed and claims of the other fail. There is not so high a degree of overlap of the factual basis of the claims that the probability of a separate order for costs against one plaintiff is unlikely.
47 I accept that the shareholder standing behind the second plaintiff is the first plaintiff, itself a party to the proceeding. However, my assessment of the financial position of each plaintiff is such that the fact that the plaintiffs are related entities does not ameliorate the risk. I have therefore considered the financial position of each plaintiff.
48 Having regard to the evidence before me, I find that there is a reason to believe that each of the first plaintiff and the second plaintiff will be unlikely to be able to meet a cost order. In determining that the threshold question has been met, I weighed the following in the balance.
49 As to the first plaintiff, it is not a trading entity and it holds no real property in the jurisdiction. It has modest cash on hand, significantly less than would be required to meet the defendants' estimate of costs to mediation or the amount I have determined ought to be fixed.
50 Ms Huang's estimate of the current assets and liabilities of the first plaintiff attributes significant value to the first plaintiff's shareholding in the second plaintiff. However, there is no valuation evidence referenced or annexed to Ms Huang's affidavits, and how that value has come to be attributed to the shareholding is not disclosed. In any event, the first plaintiff has secured indebtedness to ANZ and a liability to Braziron Ltd by way of a current intercompany loan of a total amount greater than the value attributed to the first plaintiff's shareholding in the second plaintiff.
51 Further, there is no evidence that the first plaintiff's shares in the second plaintiff would be able to be realised in sufficient time to enable the first plaintiff to comply with a costs order in the usual terms.
52 The first plaintiff's other asset is its shareholding in Advanced Investments Mineraçāo Ltda. I understand Ms Huang's evidence was provided for the purpose of disclosing to the court that there is an asset of the first plaintiff available to meet an adverse costs order against the plaintiffs.
53 There is no evidence of whether and on what basis Advanced Investments Mineraçāo Ltda would make assets or funds available to the first plaintiff. As observed by counsel on behalf of the defendants, Advanced Investments Mineraçāo Ltda is not a party to this proceeding, it is not incorporated in Australia, it holds no assets in Australia and it has not offered security or an undertaking to meet the first plaintiff's obligation to meet an adverse cost order.[21] Further, there is also no evidence that the first plaintiff's shares in Advanced Investments Mineraçāo Ltda would be able to be realised in sufficient time to enable the plaintiff to comply with a costs order in the usual terms.
54 While Ms Huang deposes to Braziron Ltd holding cash at bank in Australia, it has not offered security nor any undertaking to meet the first plaintiff's obligation to meet an adverse cost order. I put little weight on the evidence of Braziron Ltd's local cash holdings when assessing the financial position of the first plaintiff.
55 Finally, there is no evidence that Ms Huang holds assets available to meet an adverse costs order, nor has she offered any security or undertaking to meet such costs.
56 As to the second plaintiff, Ms Huang deposed to her belief that the financial accounts for the year ended 30 June 2021 have not been prepared, but attached to her first affidavit the financial accounts for the second plaintiff for the year ended 30 June 2020. Ms Huang also attached to her first affidavit a true copy of 6‑monthly management accounts for the second plaintiff as of 31 December 2021, which she said she obtained by generating a report from the second plaintiff's accounting system. Ms Huang deposed that she had been informed by Ms Chiyedzas Svova of BG Perth Advisory (the second defendant's accountant) that the following data had been entered:[22]
(a) all invoices rendered by [the second plaintiff] for work undertaken and expenses incurred up to 31 December 2021;
(b) bank account balances; and
(c) invoices payable by [the second plaintiff].
57 I have given careful consideration to the financial position of the second defendant as disclosed in the accounts attached to Ms Huang's first affidavit.
58 I have had regard to the second plaintiff's cash at bank as at 31 December 2021. I have also considered the total value attributed to the second plaintiff's assets as at 31 December 2021, and the second defendant's total equity position as at 31 December 2021, which provide a basis for concluding that when regard is had to the financial position of the second plaintiff, the threshold question is not met.
59 However, I have also weighed in the balance that the second plaintiff owns no real property. Further, while the second plaintiff hold shares in SBWA Fabrication and Welding Pty Ltd, I note the investment value attributed to the shareholding,[23] and put little weight on the evidence of the second plaintiff's holding of shares in SBWA Fabrication and Welding Pty Ltd when assessing the financial position of the second plaintiff.
60 I weighed in the balance that over 30% of the second plaintiff's total assets are in the form of non-current intercompany and personal loans. I also had regard to the total expenses incurred by the second plaintiff to 31 December 2021 and the second plaintiff's very modest net profit in that period. Albeit that this is an imprecise risk assessment, weighing in the balance all of these matters, I find that by credible testimony, there is a reason to believe that the second plaintiff will be unlikely to be able to meet a cost order.
61 For completeness I note that had I adopted the 'combined approach', the threshold question would not have been answered differently. The matters which grounded my assessment of risk (such as the absence of any security proffered by Braziron Ltd), were not improved by a combined assessment.
62 As observed by Allanson J in Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [2019] WASC 378 [20], the bona fides of the claim and its merits may be considered in the exercise of discretion. However, the court should not embark on a detailed consideration of the merits.
63 Given the relatively early stage of the proceeding and the limited evidence before the court, it is not possible, necessary, or appropriate that I attempt to undertake a detailed evaluation of each plaintiff's case, now prosecuted in this consolidated proceeding.
64 I have had regard to the submissions made by the defendants as to the difficulties with the claims as pleaded.[24] While the plaintiffs' claims are not without difficulties, I accept that each plaintiff has a prima facie case as pleaded against the respective defendants.
65 Having regard to the consolidated pleading and to the submissions of counsel, I find that the merits of the plaintiffs' claims are not so strong as to say that no security is appropriate. Nor are the claims so weak as to weigh the balance heavily in favour of the exercise of discretion.
66 I have considered whether the claims made are bona fide, and there is no evidence that the claims have been made by this proceeding otherwise than in good faith.
67 I have weighed all of these matters in the balance in the exercise of discretion.
68 The court may decline to order security where to do so would stultify a plaintiff's claim. However, while this a powerful factor in the exercise of discretion, it is only one factor.[25]
69 In this case, the plaintiffs have put before the court evidence of their respective assets and liabilities. They do not assert that an order for security will stultify their claims. Although I have found that there is a reason to believe that at the end of the proceeding each of the plaintiffs will be unlikely to be able to meet a cost order, on the evidence it would not appear likely that an order for security will stultify the plaintiffs' claims, particularly an order which contemplated that security be given in tranches.
70 Indications of an application for security that is oppressive include (but are not limited to) where a defendant has made the application as a means to stifle a genuine claim, or where a defendant has conducted its defence in a manner that prolongs the proceeding.[26]
71 The plaintiffs do complain about the defendants' delay in bring the application for security for costs, which I consider below. While there has been delay, the evidence before me does not support an inference that the defendants have made the application for security to stifle the claims of the plaintiffs, nor does the procedural history support a finding that the defendants have conducted their defence in a manner intended to prolong the proceeding. The evidence does not support a finding that the application is oppressive.
72 The plaintiffs say there has been a delay and oppose the exercise of discretion on this basis. They complain that security for costs was not foreshadowed prior to December 2021, and the defendants' delay in bringing the application has not been adequately explained. The plaintiffs also say that the delay caused them to suffer prejudice as they incurred in excess of $100,000 in professional fees and disbursements in prosecuting the proceedings and have embarked on an aborted conferral process for discovery.[27]
73 There has been a delay on the part of the defendants in bringing the application. The defendants' application was made more than 16 months after the commencement of the proceeding known as CIV 1788 of 2020, and 10 months after the commencement of the proceeding known as CIV 1104 of 2021. The proceedings were consolidated in April 2021.
74 I also accept that in order to show prejudice it is not necessary for a plaintiff to establish what it would have done differently if the application had been made earlier (although such evidence would be an important consideration in the exercise of discretion); prejudice will generally be regarded as inherent in substantial delay.[28]
75 It is plain that there has been a delay on the part of the defendants in bringing this application, which has not been adequately explained. However, while the two proceedings (now consolidated) have been on foot for a substantial period, the consolidation proceeding is still in relatively early stages. Pleadings have not closed. Until the hearing of this application, the parties had not attended any hearing before the court. While there has been extensive conferral in relation to discovery, discovery has not been given, and there appears much to do before the consolidated proceeding can be entered for trial.
76 While not adequately explained, I would not characterise the defendants' delay in bringing the application as 'substantial' in all of the circumstances. The defendants' delay does weigh against the grant of the application. However, it is not so egregious, nor is the evidence of prejudice so persuasive, as to tip the balance against the grant of security, when all of the circumstances are weighed in the balance in the exercise of discretion.
78 Braziron Ltd holds all of the shares in the first plaintiff, which in turn holds all of the shares in the second plaintiff. Braziron Ltd has not offered any security or undertaking to be liable for costs. The director of the first plaintiff and the second plaintiff, Ms Huang, has not offered any security or personal undertaking to be liable for costs. Neither appear to own any real property in the jurisdiction. These matters weigh in favour of the exercise of discretion to order costs.
79 For completeness, I note that this is not a case where the claims prosecuted by the plaintiffs are defensive in the sense of directly resisting proceedings already brought, or seeking to halt the defendants' self-help procedures.
80 There is no suggestion that the defendants have any rights which they can exercise against the assets of the plaintiffs to satisfy an order for costs in their favour. There are no factors relating to public interest that ought to be weighed in the balance.
81 The threshold jurisdiction question has been answered in the affirmative. Having weighed in the balance all of the matters described above, I am also persuaded by the defendants that the discretion ought to be exercised and an order made compelling the plaintiffs to give security for the defendants' costs.
82 Counsel for both parties addressed the form of security in the event that the threshold question was made out and the balance weight in favour of the court ordering security for costs. It was common ground that if the defendants' application was to succeed, then the provision of security in tranches would be appropriate.[31]
83 I have given careful consideration to the plaintiffs' amended draft bill of costs, to the plaintiffs' submissions in relation to the same, and to the defendants' observations in relation to the amended draft bill.
84 The court does not generally set out to give a complete indemnity for costs to the applicant.[32] In all of the circumstances, is not appropriate that I set out to do so now.
85 In all of the circumstances, I consider that it is appropriate to order that security for the defendants' costs up to mediation be given in the total sum of $70,000. Such order is intended to provide security for the defendants' costs of defending the plaintiffs' claims (now pursued in this consolidated proceeding), including attending to pleadings, discovery, attendance at a strategic conference and attendance at mediation.
86 I have made no allowance at this time for disbursements for expert evidence. At this stage, leave to adduce expert evidence at trial has not been granted. The court can consider ordering that the plaintiffs proffer additional security if this proceeding is not resolved at mediation, or when leave is granted.
87 Subject to hearing from the parties, my preliminary view is that it would be appropriate that the order allow for security to be given by payment into court, alternatively by provision of an unconditional bank guarantee in favour of the defendants from an Australian trading bank. Further, given my observations at [43] to [48] above, the order may be framed so as to require each plaintiff to proffer security in the amount of $35,000. I will hear the parties as to the appropriate form of order, and as to the costs of this application.
Sch A - the defendants' amended draft bill of costs
Action commenced against the first, second and third defendants by Writ of Summons and Statement of Claim
Defence filed (alleging that restraint of trade was unreasonable, contrary to public policy and void)
Plaintiff filed Amended Statement of Claim (seeking an order for rectification of the Share Sale Agreement dated 13 December 2017)
The first plaintiff filed Supreme Court CIV 1104 of 2021 against the second to fifth defendants
Order that the fourth and fifth defendants be joined in CIV 1788 of 2020
Defence to Re‑amended Statement of Claim and counterclaim filed
Order consolidating Supreme Court CIV 1104 of 2021 with CIV 1788 of 2020
Defence to Consolidated Statement of Claim and counterclaim filed
Orders requiring the parties by their respective solicitors and/or counsel confer in relation to orders for discovery
Respective parties filed memorandum of proposed discovery orders
Letter from Lavan Legal to M 6:8 Legal seeking security for costs
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
[2] Defendants' submissions pars 33 ‑ 39.
[3] ts 2 ‑ 4 (10 February 2022). Counsel did not read pars 15 or 16 of the defendants' submissions.
[4] Amended consolidated statement of claim filed 13 December 2021, par 21.
[5] Amended consolidated statement of claim filed 13 December 2021, par 22.
[7] Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [2019] WASC 378 [17], citing Bryan E Fencott and Associates Pty Ltd v Eretta Pty Ltd [1987] FCA 102; (1987) 16 FCR 497.
[8] Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 5] [2017] WASC 171 [16].
[9] LexisNexis, Ford, Austin & Ramsay's Principle of Corporations Law (at 20 October 2021) [4.053.27].
[10] LexisNexis, Ford, Austin & Ramsay's Principle of Corporations Law (at 20 October 2021) [4.053.27].
[11] Citing Professional Vending Services Pty Ltd v Christou [2010] FCA 580.
[12] SAS Global Forrestdale Pty Ltd v Samsera Pty Ltd [10] (Le Miere J) citing FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69; (2000) 22 WAR 241 [21].
[13] Which passage was cited with approval by Le Miere J in SAS Global Forrestdale Pty Ltd [11].
[14] Unified Pty Ltd v The Cancer Council Western Australia Inc [No 3] [2011] WASC 161 [10].
[15] See Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [5] ‑ [6]; George 218 Pty Ltd v Bank of Queensland Ltd [2016] WASCA 56 [41] ‑ [48].
[16] Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [6].
[17] Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [14], citing Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301. See also Erolen Pty Ltd v Baulkham Hills Shire Council (1993) 10 ACSR 441, 453.
[18] Crosswest Corporation Pty Ltd v Allstrike Enterprises Pty Ltd [2014] WASC 27 [14].
[20] Amended consolidated statement of claim filed 13 December 2021, pages 24 ‑ 25.
[22] Affidavit of A Huang sworn 27 January 2022, par 11.
[23] Affidavit of A Huang sworn 27 January 2022, page 59, annexure AH7.
[24] Defendants' submissions, pars 34 ‑ 39.
[25] Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [51]; see also Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 [92] ‑ [93].
[26] Jaddcal Pty Ltd v Minson [No 2] [2011] WASC 138 [15]; Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [31].
[27] Plaintiffs' submissions, par 20; affidavit of M Chua sworn 25 January 2022, pars 10 ‑ 11; ts 33 (10 February 2022).
[28] Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 [23], citing Green v CGU Insurance Ltd [2008] NSWCA 148; (2008) 67 ACSR 105 [57].
[29] Phoenix Eagle Co Pty Ltd v Tom McArthur Pty Ltd [52].
[30] Sunlea Enterprises Pty Ltd v Pollock [2014] WASC 91 [84], citing Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542, 545.
[31] ts 33 (10 February 2022); defendants' submissions, pars 13 ‑ 14; plaintiffs' submissions, par 22.
[32] Australian Reliance Group Pty Ltd v Coverforce Insurance Brokers Victoria Pty Ltd [No 5] [22], citing Brundza v Robbie & Co (No 2) [1952] HCA 49; (1952) 88 CLR 171, 175.
(2008) 20 VR 377
(1952) 88 CLR 171
(1987) 16 FCR 497
(2000) 22 WAR 241