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[2018] FCA 472
Federal Court of Australia
2018-04-09
Thawley J
Original judgment source is linked above.
Number of paragraphs: 35
Counsel for the Applicants: Mr Condon SC and Mr Sharp
Solicitor for the Applicants: Access Law Group
Counsel for the First, Second and Third Respondents: Mr Sleight
Solicitor for the First, Second and Third Respondents: Neville and Hourn Legal
ORDERS NSD 1507 of 2017
BETWEEN: ERIC SCOTT BRECHER First Applicant
ERIC BRECHER PTY LIMITED Second Applicant AND: BARRACK INVESTMENTS PTY LIMITED (ACN 083 617 421) First Respondent
DELBEST PTY LIMITED (ACN 003 236 502) Second Respondent
MOHAMAD KHALID RASHID (and others named in the Schedule) Third Respondent IN THE INTERLOCUTORY APPLICATION:
AND BETWEEN: BARRACK INVESTMENTS PTY LIMITED (ACN 083 617 412) (and others named in the Schedule) First Applicant
AND: ERIC BRECHER PTY LIMITED Respondent
JUDGE: THAWLEY J DATE OF ORDER: 9 April 2018
THAWLEY J 1 By an interlocutory application dated 1 March 2018 the first, second and third respondents apply for an order for security for costs against the second applicant in the amount of $178,962.00. 2 An application for security for costs had also been made by the fourth and fifth respondents. That application was resolved between the relevant parties and orders were made by consent for the applicants to provide security in the amount of $18,500.00.
background 3 The first applicant is Dr Eric Brecher (Dr Brecher). The second applicant is Eric Brecher Pty Ltd (EBPL). Dr Brecher is the sole director of, and shareholder in, EBPL. EBPL is the trustee of the South Coast X-Ray Unit Trust (the assets of which are the subject of the proceedings) and the Eric Brecher Discretionary Trust (which does not have any assets). 4 EBPL, as trustee of the South Coast X-Ray Unit Trust, owned and operated a radiology practice conducted from leased premises at Dapto, trading as "South Coast X-Ray". In order to acquire and conduct this business, EBPL had entered into certain leases and obtained finance on security. It had borrowed money from Dr Brecher, Medfin Australia Pty Ltd (Medfin) and the Bank of Queensland (BOQ). The Medfin and BOQ facilities were secured, including by a guarantee given by Dr Brecher. EBPL had entered into leases with GE Capital for the lease of equipment and granted security over the leased equipment. 5 The first respondent is Barrack Investments Pty Limited (Barrack Investments). It has two issued shares one of which is registered in the name of Dr Rashid, the third respondent (Dr Rashid). Dr Rashid is a medical doctor. He is a director and shareholder of Romore Pty Ltd (Romore). Barrack Investments is the registered proprietor of land known as "Centre Health Area Building" at Barrack Heights (Barrack Heights Centre). 6 The second respondent is Delbest Pty Ltd (Delbest). It has two issued shares one of which is registered in the name of Mr Rashid. 7 The fourth respondent is Mr Agarwal, who is a lawyer and director of the fifth respondent, Acorn Lawyers Pty Ltd (Acorn Lawyers). The employees of Acorn Lawyers included a solicitor, Mr Musumeci. 8 The sixth respondent is South Coast Medical Imaging Pty Ltd as trustee for the South Coast Medical Imaging Unit Trust (administrator appointed) (ACN 608 363 140) (SCMI). 9 The allegations made by the applicants, as pleaded in the statement of claim, may be summarised for present purposes as follows: (1) Before and during October 2015, Dr Brecher and Mr Rashid discussed the possible establishment of a radiology practice (Barrack Heights Practice) at the Barrack Heights Centre. Dr Rashid represented that there would be work for a radiologist at the Barrack Heights Centre and that a previous radiology tenant had left that centre by reason of a dispute it had had with Wollongong Nuclear Medicine, another tenant in the Barrack Heights Centre. Dr Rashid represented that he had 20 full-time GPs working at the centre and was expanding to 40. He was going to bring in multiple specialists, including five obstetricians and gynaecologists. An additional floor was to be added to the medical centre and Dr Brecher did not have to be concerned about the profitability of the practice to be conducted at the Barrack Heights Centre. (2) In mid July 2015, Dr Rashid showed Dr Brecher plans for the Barrack Heights Centre indicating where the 20 new GPs and specialists would practice. He represented that the expansion would be completed by the end of 2019 and undertook to find a neutral lawyer to represent both men and the business to be conducted by them from the Barrack Heights Centre. The Barrack Heights Centre would have enough work to justify the applicants' involvement. (3) By late September 2015, Dr Rashid and Dr Brecher had agreed that they would own the Barrack Heights Practice 50% each and would operate under the name "South Coast X-Ray". The new company would take out a loan to fund the establishment of the Barrack Heights Practice. Decisions would be made jointly, profits would be split 50/50 and they would engage the same lawyer to draft the relevant contracts. (4) SCMI was incorporated on 22 September 2015 and Dr Brecher and Dr Rashid were appointed directors. EBPL and Romore were each issued 100 shares in SCMI and 300 units in the SCMI Unit Trust. (5) In around October 2015, Dr Rashid on behalf of himself and SCMI retained Acorn Lawyers to prepare the relevant legal documents and consider the legal structure for the proposed Barrack Heights Practice. Entities in which Dr Rashid had an interest, namely Delbest and Romore, were current or former clients of Acorn Lawyers. This association was not disclosed to Dr Brecher. Acorn Lawyers prepared a number of documents including a "Shareholders Deed", a "Deed of Acknowledgement", a "Services Agreement" between SCMI and Dr Brecher and a "Consultancy Agreement" between SCMI, Delbest and Dr Rashid. It is alleged that the effect of those documents was to advantage the commercial interests of SCMI over those of the applicants and, in turn, Dr Rashid over those of SCMI. This advantaging of commercial interests included that EBPL and Dr Brecher might have to make payments in relation to the existing financing facilities of EBPL notwithstanding that the Deed of Acknowledgement contemplated that SCMI had the right to possession of EBPL's business assets, the subject of that finance and/or security. (6) On around 15 October 2015, Dr Brecher, his partner, Mr Agarwal, Mr Musumeci and Dr Rashid attended a meeting at the premises of Acorn Lawyers. It is alleged that Mr Agarwal made representations to Dr Brecher that: (a) he and Acorn were representing Brecher, Rashid and SCMI and would be performing work for Brecher; (b) the expected turnover of revenue of the [sic] the Barrack Heights Practice would be $5m for the first year, $7.5m in the second year and $10m in the third year; (c) Rashid would take out a loan in the sum of $2.5m, of which up to $1.5m would be used for the fit out and the balance would be spent on equipment; (d) Rashid would be negotiating the new lease for the Barrack Heights Practice, and the rent would be about $25,000.00 per month; (e) the Barrack Heights Practice would be up and running by 15 January 2016; (f) Rashid would recruit new doctors and build up the number of doctors working at CHMC Barrack Heights; (g) (in response to a statement by Brecher that he had put between $500,000 and $600,000 into the practice and he needed to get that loan back) anything in EBPL's account was his and Brecher could take that money at any time. It is alleged that Dr Rashid was present and did not contradict or qualify what Mr Agarwal said. It is alleged that Mr Agarwal gave Dr Brecher a brief summary of the documents he and EBPL were to sign and did not advise Dr Brecher that the effect of the documents was to advantage the commercial interests of others over those of EBPL and Dr Brecher. It is alleged that Dr Rashid did not inform Dr Brecher that Dr Rashid had an interest in Barrack Investments or Delbest, the latter of which would or might undertake the fit out works for the Barrack Heights Practice. It is alleged that Dr Brecher and EBPL executed the documents in reliance on the representations set out above. (7) After 15 October 2015: (a) SCMI, through Acorn Lawyers, began discussions with Medfin to seek to effect an assignment of the Medfin facilities from EBPL to SCMI. These were not novated or assumed by or assigned to SCMI. EBPL and Dr Brecher remained bound by securities given to Medfin and BOQ and in relation to other leases. It is alleged that it was unlikely (when the relevant documents including the Deed of Acknowledgement were drafted and executed) that a financier would refinance all of the obligations of EBPL. (b) SCMI entered into a lease of premises (Barrack Heights Premises) at the Barrack Heights Centre with Barrack Investments. Dr Rashid procured that the fit out of the Barrack Heights Premises be undertaken by Delbest. SCMI was charged by Delbest in excess of $1 million and SCMI paid the relevant amount at the direction of Dr Rashid. It is alleged this work could have been undertaken more quickly and at significantly lower cost. The Deed of Acknowledgement had provided that Dr Rashid was authorised to negotiate the terms of the lease of the proposed Barrack Heights Practice with the lessor and to procure the fit out without further approval of the board of SCMI. (c) EBPL transferred the business name "South Coast X-Ray" to SCMI and transferred its employees. It permitted SCMI to use the equipment which EBPL owned or leased, notwithstanding that EBPL remained bound by the terms of the Medfin securities, the BOQ securities and other leasing securities. (8) The Australia and New Zealand Banking Group Limited (ANZ) advanced to SCMI the sum of approximately $1.6 million on terms which required Dr Brecher to execute a guarantee and indemnity in favour of ANZ (ANZ Guarantee). (9) The Barrack Heights Practice commenced providing full services on or about 6 April 2016. It did not generate sufficient revenue to pay overheads and expenses associated with the practice. SCMI continued to make losses and, on 3 July 2017, an administrator was appointed. (10) It is claimed that the Deed of Acknowledgement is void for uncertainty. Clause 3.1 of the Deed of Acknowledgement required EBPL to assign the Medfin securities to SCMI and SCMI to accept such assignment; however, it was not possible to assign the Medfin securities in circumstances where they imposed obligations on EBPL. It is claimed that this has the consequence that the Deed of Acknowledgement is void for uncertainty or, alternatively, that completion never occurred with the result, in either case, that the right and title to the business assets remained at all times with EBPL. (11) It is alleged that Barrack Investments, Delbest and Dr Rashid engaged in misleading or deceptive conduct in the period before and including 15 October 2015 in contravention of section 18 of the Australian Consumer Law (ACL). It is alleged that Dr Brecher and EBPL suffered loss and damage, as follows: i. In the case of EBPL: (a) lost profits; (b) its capital; (c) the value of its business; and (d) the lost opportunity to repay in whole the monies due under the Medfin Facilities, the BOQ Loan, and the All Leasing Securities, or to repay more than anything SCMI caused to pay over 2016 and 2017. ii. In the case of Brecher: (a) as: (i) EBPL ceased trading; and (ii) SCMI did not pay out the Medfin Facilities and the BOQ Loan and the All Leasing Securities or cause them to be repaid as quickly as would have been the case had EBPL continued to trade, he is under a greater financial liability under the guarantees given in support of those facilities; (b) such liability as Brecher has under the ANZ Guarantee; and (c) Brecher has lost income and the opportunity to recover his loans from EBPL. (12) It is also alleged that Dr Rashid, Delbest and Barrack Investments engaged in unconscionable conduct within the meaning of the unwritten law and as otherwise proscribed by section 21 of the ACL. The same particulars of loss and damage are provided as provided in respect of the claimed contraventions of section 18 of the ACL (set out as above). (13) It is alleged that Dr Brecher and Dr Rashid were, in substance, partners who conducted their affairs through corporate entities and that Dr Rashid owed Dr Brecher and EBPL a duty (which was breached) to act in good faith in relation to the formulation and progress of the medical practice to be conducted by SCMI and not to subordinate the interests of Dr Brecher and EBPL to the interests of others. The same particulars of loss and damage are provided as provided in respect of the claimed contraventions of section 18 of the ACL. (14) It is alleged that Acorn Lawyers agreed to be retained by Dr Brecher and EBPL and that the retainer contained a term to the effect that they would exercise reasonable care, skill and diligence. It is alleged that Acorn Lawyers owed Dr Brecher and EBPL duties of a fiduciary nature. It is alleged that the duties arising from the retainer and as fiduciaries were breached with the result that Dr Brecher and EBPL suffered loss and damage.
Legislative provisions 10 The interlocutory application is made pursuant to s 56 of the Federal Court Act 1976 (Cth), r 19.01 of the Federal Court Rules 2011 (Cth) and s 1335 of the Corporations Act 2001 (Cth). 11 Section 56 of the Federal Court Act 1976 (Cth) provides: (1) The Court or a Judge may order an applicant in a proceeding in the Court, or an appellant in an appeal under Division 2 of Part III, to give security for the payment of costs that may be awarded against him or her. (2) The security shall be of such amount, and given at such time and in such manner and form, as the Court or Judge directs. (3) The Court or a Judge may reduce or increase the amount of security ordered to be given and may vary the time at which, or manner or form in which, the security is to be given. (4) If security, or further security, is not given in accordance with an order under this section, the Court or a Judge may order that the proceeding or appeal be dismissed. (5) This section does not affect the operation of any provision made by or under any other Act or by the Rules of the Court for or in relation to the furnishing of security. 12 Rule 19.01(1) of the Federal Court Rules 2011 (Cth) provides: A respondent may apply to the Court for an order: (a) that an applicant give security for costs and for the manner, time and terms for the giving of the security; and (b) that the applicant's proceeding be stayed until security is given; and (c) that if the applicant fails to comply with the order to provide security within the time specified in the order, the proceeding be stayed or dismissed. 13 Section 1335 of the Corporations Act 2001 (Cth) 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. … (2) The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.
Relevant principles 14 The purpose of an order for security for costs is to ensure that a respondent, if successful, is able to obtain its costs: GG Australia Pty Ltd v Sphere Projects Pty Ltd (No 2) [2017] FCA 664 at [11], per Markovic J (GG Australia). As was said by Connolly J in Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523 at 530 the purpose is "to protect the party who is brought to court against the possibility that the plaintiff, if unsuccessful, will be unable to meet an order for costs". 15 Where (as here) the application is made in respect of a corporate applicant which is alleged to be unlikely to be able to meet the costs of the respondent, if successful, three issues usually arise (see Street v Luna Park Sydney Pty Ltd [2006] NSWSC 1317 at [5], per Brereton J (Luna Park)): (1) first, whether the ground referred to in the section is established (sometimes referred to as the "jurisdictional issue" in the sense that the Court's discretion to award security for costs is only enlivened once the applicant's inability to pay the respondent's costs, if successful, is established by credible testimony: Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564 at [35]; GG Australia at [17]-[18]; (2) secondly, whether - if the ground is established - an order for security should be made as a matter of discretion; (3) thirdly, the quantum and terms of security to be given. 16 As to the first matter, the relevant issue in terms of s 1335 of the Corporations Act 2001 (Cth) is whether "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". 17 The nature of the statutory test is clear from the statutory language and it is those words which are the best guide to its meaning: Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377 at [13] to [15]; GG Australia at [18] to [21]. 18 The determination of the statutory question of whether there is "reason to believe that the corporation will be unable to pay the costs" invites consideration of two key features: first, the likely quantum of costs of the respondent and secondly, the ability of the applicant corporation to pay costs in that amount. If it appears from credible testimony that the corporate applicant would be unable to pay any amount, for example because it has no assets or other means of meeting any order for costs, then the "jurisdictional issue" may be able to be determined without reference to the likely quantum of costs. However, the position is otherwise if the corporate applicant has some capacity to meet a costs order. As Kunc J noted in Ken Tugrul v Tarrants Financial Consultants Pty Limited ACN 086 674 179 [No 4] [2014] NSWSC 291 at [30] (Ken Tugrul): "There may be no reason to believe that [an applicant] will be unable to pay $50,000 and every reason to believe it will be unable to pay $500,000". 19 Where (as here) there are overlapping claims as between individual and corporate applicants and security would not be ordered (or is not sought) against the individual applicant, a respondent should establish the incremental costs which the respondent would incur in defending the proceedings by reason of the claims of the corporate applicant which would not have been incurred in any event by reason of the claims brought by the individual applicant. If it fails to prove the likely incremental costs, it faces the risk of failing to establish the "jurisdictional issue": Ken Tugrul at [30], [51], [54], [55]; GG Australia at [56] - [58]. This is because the principled exercise of the discretion to order security for costs would generally involve security only in the amount of those incremental costs; an order for security "should not extend to providing security for costs which will nevertheless be incurred in dealing with claims brought by those from whom the defendant is not entitled to security": Ken Tugrul at [54]. 20 As to the second issue, the Court is required to exercise its discretion judicially according to the circumstances of each case. However, certain well known considerations commonly arise. It is unnecessary for present purposes to set them out, but a number can be found in Equity Access Ltd v Westpac Banking Corporation (1989) ATPR 40-972, per Hill J and in Hii v Federal Commissioner of Taxation (No 3) (2016) 238 FCR 304 at [10], per Collier J. 21 As to the third issue, the quantum of security is necessarily impressionistic and involves the balancing of the interests of both parties. The Court can bring its experience to bear in assessing an appropriate amount of security, but this does not in any way absolve the applicant for security from discharging its onus of proving the amount of security which would be appropriate. It is also desirable to consider whether there is reason to provide the whole of the security up front, before the respondent in fact incurs portions of the cost referable to the security, or whether the security should be payable in tranches.
First Issue: Is there reason to believe the EBPL will be unable to pay? 22 The second and third respondents relied on an affidavit of Mr Hourn sworn 1 March 2018 which identified and produced the results of searches of ASIC, the NSW Land Registry and the Personal Properties Security Registrar. He stated he was "unaware of the plaintiff's [sic - second applicant's] financial capacity to fund the conduct of these proceedings or meet any costs order … in the event [the first to third respondents were] successful". 23 The applicants relied upon an affidavit of Dr Brecher sworn 21 March 2018. Dr Brecher stated that he, through EBPL, performed reporting services for various radiology practices which generated income of approximately $90,000 per month. As noted above, EBPL is the trustee of the South Coast X-Ray Unit Trust and the Eric Brecher Discretionary Trust. It was not suggested that this income of $90,000 per month was beneficially that of EBPL. 24 It was accepted in written submissions that EBPL was a trustee company (only) and that security for costs will typically be ordered against a trustee company which is unable to establish that recourse to property held by it will be available and adequate to meet a potential costs order, referring to ACN 105 921 962 Pty Ltd v Dominic Wiggett [2012] NSWSC 1526; and see also Luna Park at [9]. 25 The applicants also accepted, in oral submissions, that security would be ordered if the only applicant were the corporate trustee, EBPL. The written submissions contended that an order for security for costs should not be made (for reasons explained below), but that, if an order for security for costs were made, it should only be in the amount of $14,856. It was not contended that EBPL had the capacity to pay that amount. 26 Although the applicants criticised the second and third respondents for not establishing the incremental costs which would be incurred over and above the costs which would be incurred by them in meeting the individual applicant's claim, it was not suggested that the corporate applicant had capacity to meet any costs order from assets owned beneficially by it and it was at least implicitly accepted that it could not. Accordingly, in my view, the "jurisdictional issue" is established, notwithstanding the failure (discussed below) to establish what the incremental costs were likely to be.
Second Issue: Discretion 27 The applicants relied upon two reasons why security should not be ordered: (1) First, it was contended that the claims of Dr Brecher and EBPL shared a common factual substratum and substantially overlapped. It was expressly accepted by the applicants that, if they were both unsuccessful, they would be jointly and severally liable for the whole of the costs of the proceedings. It was contended that the respondents were no worse off as a result of the joinder of the corporate applicant and their costs were not significantly increased, if increased at all. This was put as a factor in favour of not ordering security, rather than of itself being determinative of the issue. (2) Secondly, Dr Brecher has offered, and undertakes, to submit to an order to pay any costs that EBPL is ordered to pay to the first to third respondents. This was said to remove any concern arising from the possibility of EBPL being ordered to pay costs which Dr Brecher might not be ordered to pay and which EBPL might not be able to meet. 28 In my view, this is not an appropriate case in which to order security for costs for the following reasons. First, I am not satisfied that there are sufficiently substantial incremental costs over and above what would be incurred in meeting Dr Brecher's claims in any event: Luna Park at [27], [28]; Funds First Pty Ltd v Owners Corporation Strata Plan 66609 (No 2) [2008] NSWSC 428 at [13]. It is evident from the pleading that there is substantial overlap between the claims brought by each and that substantially all of the factual substratum would need to be traversed in the claim brought by Dr Brecher. In my view, the principles referred to in Harpur v Ariadne Australia Limited [1984] 2 Qd R 523 (Harpur) and Luna Park at [26] to [28] apply. In my view, there is no realistic possibility of different outcomes as between the applicants. In particular, it was not demonstrated, as it was in Luna Park, that the defence of the corporate applicant's case substantially increased the complexity and likely cost of the case or its nature. It may be accepted that both applicants have different causes of action and that, if EBPL recovers certain damages, then Dr Brecher will not recover damages reflecting that loss and, indeed, may be unsuccessful in obtaining certain relief. For example, Dr Brecher's financial liability under the guarantees may not be shown to be greater if EBPL is successful in its claim for damages. A not dissimilar situation arose in Harpur, where the company had the claim for compensation rather than the individual shareholders and, if the company failed, the individuals also necessarily failed: at 525. So too, the individual shareholders would not recover damages to the extent the relevant damages were obtained by the company. The real difficulty for the first to third respondents is that, if Dr Brecher had brought his claims alone, or the proceedings were now stayed vis-à-vis EBPL, it would still be necessary to traverse substantially the same facts and issues in the claim brought by Dr Brecher. This weighs heavily against an order for security. 29 Secondly, even if I had been satisfied that there were sufficient areas of dispute which did not overlap, there was no attempt by the first to third respondents to substantiate what the incremental costs would be in respect of that non-overlapping area. The first to third respondents had sought to tender a two page schedule setting out a costs estimate prepared by Mr Hourn and exhibited to his affidavit. This set out hourly rates of the various identified people who would carry out legal work, the estimated number of hours they would work and, in very general terms, the task that they would perform. This provided a total of $298,270 which was reduced to take into account that only 60% of the solicitor client costs were considered likely to be recovered. The second applicant objected to this schedule on the basis that it insufficiently set out the basis for the assumptions contained within it. The parties agreed that the schedule would be received as a submission. However, no attempt was made by the first to third respondents to identify a rational basis to determine from this total estimate what would be the incremental costs of any non-overlapping area or what additional cost would be incurred specifically by reference to the inclusion in the proceedings of the corporate applicant and its claims. 30 The applicants noted that the schedule contained entries for work in connection with expert evidence with respect to the second applicant and this informed its submission that, if security were ordered, it should only be in an amount of $14,856. I am not satisfied that the expert evidence would not be required in the case brought by Dr Brecher. The expert evidence was said to be likely to be required to establish loss of profits of EBPL. However, on the claim brought by Dr Brecher, he has suffered losses or contingent losses as a result of entering into the various arrangements, and procuring EBPL to enter into those arrangements, which requires him to establish that EBPL is worse off than it would have been if it remained at the Dapto premises and had not entered into the new arrangements. I am not satisfied that the costs associated with expert evidence would be materially increased by reason of the claims brought by EBPL. In any event, the evidence adduced and the schedule received as a submission does not provide a sufficiently reliable basis to quantify any such increase. 31 I note that, if the only basis for an order for security for costs was a relatively small additional cost associated with expert evidence a question would arise whether, particularly having regard to s 37M of the Federal Court Act 1976 (Cth), the application should be granted. Significant time and expense is associated with applications of this kind and one would not ordinarily expect to see them being fully ventilated over small amounts in otherwise substantial litigation. If the incremental costs are properly identified by the party seeking security this focuses attention on whether the incremental costs justify the application being made, and is also conducive to the parties being able to reach a practical solution thereby saving costs and reducing delay. 32 Thirdly, the provision of the undertaking by Dr Brecher weighs in favour of refusing an order for security for costs: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 197F-198B, 202-204; Jazabas Pty Limited v Haddad (2007) 65 ACSR 276 at [74], [78]-[80] per McClellan CJ at CL (with whom Mason P agreed). The value of that undertaking is obviously relevant: Austcorp Project Number 20 Pty Ltd v LM Investment Management Ltd (in liq) [2014] FCA 1371 at [33]. Dr Brecher's evidence included that he owns valuable assets in Australia ($281,000), valuable assets in the United States (US$2 million) and I draw the inference he is able to access substantial income in light of the reporting services he performs for EBPL. Dr Brecher has lived in Australia since 2012, now with his partner, has worked professionally in Australia, was granted permanent residency in Australia in 2015 and has substantial business interests and activity in Australia. 33 Finally, there are no factors which weigh heavily in favour of granting security. It is not suggested that the proceedings will be stultified if security is ordered; indeed, it is likely that they would not be. However, a mere capacity to provide security is not a reason to order it. It is said that the assets of the South Coast X-Ray Trust are not being chanced in the litigation although it is that Trust which stands to benefit substantially if the applicants are (or EBPL is) successful. That may be accepted, but it is not the principal issue, certainly on the statutory question in s 1335 of the Corporations Act 2001 (Cth). The principal issue is the ability of the corporate applicant to pay an order for costs if unsuccessful, not whether the Trust which benefits is chancing its assets. If the respondents fail to establish that there are incremental costs (or the amount of them) which should be the subject of an order for security, it is of little importance who stands to benefit. Nor is this a case in which an individual is refusing "to come out from behind the skirts of the company" (Harpur at 532) but exposing a respondent to a large potential bill of costs; Dr Brecher is chancing his assets even if the South Coast X-Ray Trust is not. Further, Dr Brecher has undertaken to meet EBPL's costs and that undertaking is of value. 34 It is not necessary to consider the third issue, namely the quantum of security. 35 For these reasons, the interlocutory application is dismissed. I was asked to reserve costs of the interlocutory application. I make the following orders: (1) The interlocutory application is dismissed. (2) The proceedings are listed for argument on costs (in the absence of agreement between the parties) and for a case management hearing at 9am on 13 April 2018. I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.
SCHEDULE OF PARTIES NSD 1507 of 2017 Respondents Fourth Respondent: ASHUTOSH AGARWAL Fifth Respondent: ACORN LAWYERS PTY LIMITED (ACN 160 356 490) Applicants in the Interlocutory Application Second Applicant: DELBEST PTY LIMITED (ACN 003 236 502) Third Applicant: MOHAMAD KHALID RASHID
Brecher
Barrack Investments Pty Ltd
(2004) 208 ALR 564
(2016) 238 FCR 304
(1995) 56 FCR 189
(2008) 20 VR 377