Ford Motor Company of Australia Limited v Tallevine Pty Ltd

Supreme Court of NSW|2017-11-29|Before: Harrison J

Judgment

HIS HONOUR: By its summons filed on 10 March 2017, Ford Motor Company of Australia Limited seeks, among other orders, a declaration that Tallevine Pty Ltd is guilty of contempt. In essence, Ford contends that Tallevine has breached the terms of Consent Orders made by this Court on 28 October 2015. It is common ground that the Consent Orders gave effect to the terms of a Settlement Deed made between the parties on 16 September 2015.
On 7 August 2017, Tallevine filed what is described as a cross-summons and a cross-claim/points of claim. Tallevine seeks several orders, including orders that the Settlement Deed be set aside and that the Consent Orders be vacated. Tallevine contends, among other things, that it only executed the Settlement Deed and thereafter agreed to the making of the Consent Orders upon the basis of Ford's misleading and deceptive conduct, specifically representations made by Ford at the mediation which induced Tallevine to make the agreement. Those representations are as follows; 1. That Ford had no intention of taking any steps to prevent Tallevine from purchasing new Ford motor vehicles for re-sale from third parties, including authorised Ford dealers (the new vehicle representation). 2. That Ford had no intention to withhold, and would not unreasonably withhold its approval or consent to the appointment of a new Ford franchisee operating from Tallevine's premises (the new franchisee representation). 3. The terms of the 2015 settlement agreement as proposed by Tallevine were understood and accepted by Ford to have the effect of the above representations (the new terms representation).

Background

In November 2010, Ford conditionally appointed Tallevine as an authorised Ford dealer. In April 2011, Ford and Tallevine executed a standard Ford dealer agreement. Ford dealer agreements are in substantially the same terms for all authorised Ford dealers. Clause 4(1)(g) of the agreement with Tallevine provided that it must not knowingly sell or procure the sale of any new or used Ford vehicle to any person for the purposes of resale as a new or unused vehicle, if that person is not an authorised Ford dealer. Ford insists that its authorised dealers comply with this obligation and sends regular reminders to them about its importance.
On 28 August 2013, Mr Creak, who is a director of Tallevine, together with one of its employees, was convicted of a number of offences, including tampering with odometers, in the Local Court. On 9 September 2013, Ford sent a letter to Mr Creak and Tallevine notifying them of Ford's view that, in light of the convictions and the associated adverse publicity, Ford's best interests would be served if it were to provide Tallevine with a 120 day sale period within which to sell its business to an independent third party to be approved by Ford and that, if no such sale was achieved, Tallevine's Ford dealer agreement would thereafter be terminated.
On 11 October 2013, Tallevine's solicitors wrote to Ford with a counter offer, in broadly similar terms, with some modifications favourable to Tallevine, including an extension of the period to 150 days. On 21 October 2013, Ford and Tallevine executed a settlement agreement largely in the terms originally suggested by Ford. The 120 day period expired on 17 February 2014. The dealer agreement was to terminate automatically on the following business day. The 2013 settlement also included a release from Tallevine in favour of Ford in respect of any claims, actions or demands relating to or in connection with the termination of the Ford dealer agreement.
On 4 February 2014, Ford sent an email to Tallevine's lawyers noting that Ford had not yet received any relevant information from Tallevine regarding any proposed sale of Tallevine's business that would enable Ford to consider whether to consent to such a sale. Between 7 and 17 February 2014, Tallevine provided some information to Ford in respect of a proposal for Maximotion Pty Ltd (now named Fleet Serv) to buy Tallevine's business, with Tallevine's General Manager, John Armstrong, as dealer principal.
On 17 February 2014, Tallevine's lawyers requested an extension of the sale period. On 19 February 2014, Ford informed Tallevine's solicitors that it did not consent to any extension of the sale period and that accordingly the Ford dealer agreement had terminated on that date.
Between 19 February 2014 and 26 May 2014, Mr Creak caused Tallevine to take the various steps demanded by Ford as a result of the termination of the Ford dealer agreement, including removing some Ford signage from Tallevine's premises. In May 2014, having done so, Ford formed the view that Tallevine had not complied with its obligations to cease using Ford's trademarks and other indicia and requested Tallevine to remedy these matters.
On 20 May 2014, Ford commenced proceedings in the Victorian County Court alleging that Tallevine had breached the Ford dealer agreement by continuing to use Ford's trademarks and holding itself out as an authorised Ford dealer.
Between August 2014 and 22 October 2014, Tallevine sent letters to Ford stating that it had taken steps to address the various matters the subject of the County Court proceedings and requesting Ford to consider reinstating Tallevine as an authorised Ford dealer. On 24 October 2014, Ford sent an email to Tallevine advising that it would not do so.
On 2 January 2015, Tallevine served a defence and cross-claim in the County Court proceedings alleging that Ford had engaged in unconscionable conduct in relation to the termination of Tallevine's Ford dealership by not agreeing to extend the sale period. On 6 March 2015, Ford served an amended statement of claim alleging that Tallevine had engaged in misleading and deceptive conduct by reason of its ongoing use of Ford's trademarks (including the RAPTOR trademark) and other indicia on its premises and websites.
On 21 May 2015, Ford and Tallevine attended a mediation of the County Court proceedings at the Office of the Small Business Commissioner in Sydney. The mediation was conducted by Robert Angyal SC and the parties signed a mediation agreement which contained clauses to the following effect: 1. the parties and the mediator will not disclose to anyone not involved in the mediation any confidential or privileged information or document given to them during the mediation unless required by law, except for the purpose of obtaining legal advice, with the consent of the other party to the mediation or to enforce the terms of any settlement agreement arrived at during the mediation through legal proceedings; and 2. other than to enforce the terms of any settlement agreement arrived at during the mediation, the parties and the mediator agreed that statements, views expressed, and suggestions or proposals made in the mediation cannot be used as evidence or relied on in any legal proceedings in relation to the dispute.
Tallevine was represented at the mediation by its then solicitor, Colin Moyle, and Greg Melick SC. The dispute did not settle at the mediation.
On 23 and 26 May 2015, Mr Creak had discussions with Robert Handsaker from Narabri Ford in which Mr Handsaker told Mr Creak that, in response to his expression of interest in purchasing Tallevine's dealership, Ford had been dismissive of his prospects and said that it no longer thought the site was suitable.
On 16 June 2015, Mr Creak had a discussion with Troy TeNana of Gateway Ford in which Mr TeNana told Mr Creak that he would no longer supply Ford vehicles to Tallevine because Ford had indicated to him that it did not want him to do so and Gateway Ford did not want to risk losing its authorised Ford dealership by supplying Ford vehicles to Tallevine.
On 25 August 2015, Cumberland Ford informed Mr Creak that it would no longer supply new Ford vehicles to Tallevine and told Mr Creak that it took this action because Ford had threatened to take away Cumberland Ford's franchise if Cumberland Ford sold vehicles to Tallevine.
On 8 September 2015, and again by telephone on 10 September 2015, Ford and Tallevine attended a further mediation of the County Court proceedings, this time in Melbourne. The mediation was again conducted by Robert Angyal SC and the parties all signed a further mediation agreement in the same terms as before. Tallevine was represented at the mediation by Paul O'Shanassy of Agility Legal (Tallevine's current legal representatives), Robert Dubler SC and Callan O'Neill of counsel. Mr Creak alleges that Ford made false representations to Tallevine at the mediation in respect of Ford's attitude to Tallevine purchasing new Ford vehicles from authorised Ford dealers and the manner in which Ford would approach any application by a third party to be appointed as an authorised Ford dealer at Tallevine's premises. Ford disputes making the representations. As will be apparent, Ford also maintains that evidence of the representations is inadmissible on the basis of without prejudice privilege and the confidentiality provisions of the September 2015 mediation agreement.
On 16 September 2015, following further negotiations, Ford and Tallevine executed the 2015 settlement agreement. The 2015 settlement agreement provided that: 1. Ford would serve a statement of claim in either the Supreme Court of Victoria or the Supreme Court of New South Wales that was substantively identical to the amended statement of claim in the County Court proceedings and the parties would then ask the Court to make the Consent Orders, a draft of which was attached to the 2015 settlement agreement; 2. Mr Creak undertook that up until 31 January 2016 he would use his best endeavours to identify persons that he considered suitable to make an application to Ford to be appointed as an authorised Ford dealer at Tallevine's premises and offer to rent those premises to such persons on reasonable commercial terms, subject to Mr Creak's absolute discretion as the owner of the premises as to whether to do so; 3. Ford undertook to consider any application made to it by a person to be appointed as an authorised Ford dealer at Tallevine's premises, whilst retaining an "absolute discretion" as to whether to make such an appointment, but if by 31 January 2016 Ford had not made such an appointment, it would pay Tallevine the sum of $100,000; 4. Ford also undertook for a period of one year (up until 16 September 2016) not to refer to Pennant Hills Auto Traders, Pennant Hills Raptor, Tallevine or Mr Creak by name in any of its Dealer Principal Letters or Dealer Confidential Bulletins or equivalent national communications; 5. The parties acknowledged that they were entering into the 2015 settlement agreement based on their own information and investigations and that the 2015 settlement agreement contained the entire agreement between the parties and set out the only representations relied on by the parties; and 6. The parties released each other from all claims.
On 25 September 2015, City Ford informed Mr Creak that it would no longer supply new Ford vehicles to Tallevine and told Mr Creak that it took this action because Ford had threatened to take away City Ford's franchise if it did so.
On 25 September 2015, pursuant to clause 2.1 of the 2015 settlement agreement, Ford commenced the 2015 Supreme Court proceedings by filing a statement of claim that was substantively identical to the amended statement of claim in the County Court proceedings.
On 8 October 2015, pursuant to clause 2.1 of the 2015 settlement agreement, Ford and Tallevine submitted a draft of the Consent Orders to the Court. On 28 October 2015, the Court made the Consent Orders. The Consent Orders required Tallevine immediately to cease using Ford's trademarks, save for the RAPTOR trade mark, which Tallevine was not required to cease using until 16 September 2016.
On 29 October 2015, Maximotion changed its name to Fleet Serv. At this time, the director of Fleet Serv was Mr Armstrong, Tallevine's General Manager. Fleet Serv's principal place of business was listed with ASIC as Tallevine's premises and Fleet Serv's registered address was and remains the same as Tallevine's registered address.
From about October 2015, Tallevine took steps in purported compliance with the Consent Orders. However, on 26 November 2015, Ford wrote to Tallevine's solicitors alleging that Tallevine had breached them.
On 26 November 2015, Sinclair Ford informed Mr Creak that it would no longer supply new Ford vehicles to Tallevine and told Mr Creak that it took this action because Ford had threatened to take away Sinclair Ford's franchise if it did so.
On 27 November 2015, Heartland Ford informed Mr Creak that it would no longer supply new Ford vehicles to Tallevine and told Mr Creak that it took this action because Ford had threatened to take away Heartland Ford's franchise if it did so.
On 10 December 2015, Mr Creak had a discussion with Eric John Louis of Kloster Ford in which Mr Louis told Mr Creak that Ford had told him in response to his enquiry about acquiring a Ford franchise at Tallevine's premises that no matter how good Mr Louis' proposal might be there was never going to be a Ford dealership at Tallevine's premises whilst ever Mr Creak was involved, even as landlord, and that Mr Creak should not waste his time as there was no prospect of anyone being appointed as an authorised Ford dealer at Tallevine's premises.
On 18 December 2015, after Ford became aware that some authorised Ford dealers were continuing to supply new or unused Ford vehicles to Tallevine, Ford issued a Dealer Principal Letter to Ford's authorised dealers referring to recent incidents of authorised Ford dealers supplying new or used Ford vehicles to non-Ford dealers for the purposes of resale and reminding the dealers that this conduct was prohibited by clause 4.1(g) of the Ford dealer agreement.
Shortly after receiving Ford's 26 November 2015 letter, Tallevine took further steps to seek to comply with the Consent Orders.
On 19 and 21 January 2016, Fleet Serv and Miedecke Motors signed contracts of sale for three new Ford vehicles for secret on-supply to Tallevine, which vehicles were subsequently offered for sale by Tallevine.
On 28 January 2016, Fleet Serv submitted a purchase order to Highway Ford for the purchase of a Ford vehicle for secret on-supply to Tallevine, which vehicle was subsequently offered for sale by Tallevine.
By 31 January 2016, Ford had neither received any request by Tallevine to reconsider any applications submitted prior to 16 September 2015 by a person to be appointed as an authorised Ford dealer at Tallevine's premises, nor any further such applications since the execution of the 2015 settlement agreement on 16 September 2015. Tallevine had also not suggested to Ford that Ford had acted wrongfully by seeking to prevent authorised Ford dealers from supplying Ford vehicles to Tallevine for the purposes of resale.
On 31 January 2016, pursuant to clause 2.3 of the 2015 settlement agreement, Ford paid and Tallevine accepted the sum of $100,000.
On 6 March 2016, Mr Creak was told by Mr Khan, Tallevine's Sales Manager, that Ford had stopped a proposed purchase of Ford vehicles by Tallevine from Pacific Ford.
On 9 April 2016, Port Macquarie/Miedecke Ford informed Mr Creak that it would no longer supply new Ford vehicles to Tallevine and told Mr Creak that it took this action because Ford had commenced an audit of Port Macquarie/Miedecke Ford's sales as a result of Port Macquarie/Miedecke Ford selling Ford vehicles to Tallevine and Ford had warned Port Macquarie/Miedecke Ford off doing so.
On 29 June 2016, Trucks N Toys submitted a purchase order to Highway Ford for the purchase of a Ford vehicle for secret on-supply to Tallevine, which vehicle was subsequently offered for sale by Tallevine.
On 24 August 2016, North Shore Ford sold a Ford vehicle to Fleet Serv for a secret on-supply to Tallevine, which was subsequently offered for sale by Tallevine.
On 10 October 2016, Mr Creak purchased Fleet Serv from Mr Armstrong.
From October 2016, Mr Creak admits that, given Tallevine's difficulties in purchasing new Ford vehicles from authorised Ford dealers, he caused Tallevine to purchase a number of new Ford vehicles through Fleet Serv.
On 27 October 2016, Mr Khan sent an email under the Fleet Serv business and domain names to Titan Ford in which he stated that Fleet Serv were camper manufacturers interested in buying a range of Ford Ranger vehicles over the next 12 months.
On 25 November 2016, Mr Creak was informed by North Shore Ford that it had been told by Ford management not to supply any vehicles to Tallevine under any circumstances.
On 12 December 2016, Mr Creak was told by Anton Swampilia of Private Fleet that Ford had visited him and told him immediately to cease the supply of cars to Tallevine.
On 19 December 2016, Ford again sent a letter to Tallevine's lawyers alleging that Tallevine had breached the Consent Orders.
Between 10 January 2017 and 14 February 2017, Ford and Tallevine exchanged correspondence in relation to Tallevine's alleged breaches of the Consent Orders, in which Tallevine stated that it did not consider that it had engaged in wholesale breaches of the Consent Orders and sought to negotiate the further steps that Tallevine would take in order to comply with them.
On 10 March 2017, Ford commenced these proceedings alleging that Tallevine had acted in contempt of the Court by failing to comply with the Consent Orders.
On 13 April 2017, Tallevine's lawyers wrote to Ford's lawyers stating that Tallevine had taken steps to address a number of the demands made by Ford in the pleadings and the Statement of Charge.
On 19 April 2017, Tallevine's lawyers informed Ford's lawyers that Tallevine intended to challenge the Consent Orders. This was the first time that Tallevine had foreshadowed such a challenge to Ford.
On 8 May 2017, Tallevine served a notice of motion seeking to set aside the Consent Orders. This was the first time that Tallevine had suggested to Ford that it had made the alleged representations.
On 7 August 2017, Tallevine served the cross-claim.

The evidence issues

Ford maintains that the cross-claim cannot succeed and should be summarily dismissed. Ford accepts that for this purpose, the Court must consider Tallevine's case at its highest. In an attempt to limit that case, or the evidence that Tallevine might expect to lead in support of it, Ford contends that a critical body of evidence upon which Tallevine proposes to rely is susceptible to exclusion on a number of bases. These are referred to below. In those circumstances Ford seeks an advance ruling on this evidence pursuant to s 192A of the Evidence Act. Section 192A provides as follows: "192A Advance Rulings and Findings Where a question arises in any proceedings, being a question about: (a) the admissibility or use of evidence proposed to be adduced, or (b) the operation of a provision of this Act or another law in relation to evidence proposed to be adduced, or (c) the giving of leave, permission or direction under section 192, the court may, if it considers it to be appropriate to do so, give a ruling or make a finding in relation to the question before the evidence is adduced in the proceedings."
The decision about whether or not to make such a ruling is a discretionary case management decision to be made in accordance with the overriding purpose: NA & J Investments Pty Ltd v Minister Administering the Water Management Act 2000 (No 4) [2012] NSWLEC 120 at [40]. An issue to be considered in this respect is whether substantial inconvenience, expense and even unfairness might ensue if there were to be no indication as to the likely exercise of discretion in advance of the trial: R v TR (2004) 180 FLR 424.
Ford maintains that an advance ruling on the admissibility of the evidence of the alleged representations upon which the cross-claim is based is appropriate in this case because the evidence, if excluded, will mean that the cross-claim "is likely to fall away". That is because the evidence that Ford seeks to exclude is the only evidence of the alleged representations, without which Tallevine will have no basis to set aside the 2015 settlement agreement or the Consent Orders. The release set out in the 2015 settlement agreement provides a complete defence and bar to the balance of the relief sought in the cross-claim.
According to Ford, the cross-claim raises a large number of factual disputes that are likely considerably to extend the length of the proceedings limited to the question of whether Tallevine has breached the Consent Orders to a far longer trial concerned with a wide ranging inquiry into various aspects of the parties' conduct since 2013. That would necessitate a detailed examination of what occurred at the 2015 mediation, including the need to call evidence from people present at the mediation, among others. Ford contends in those circumstances that an advance ruling on the admissibility of Mr Creak's evidence of the alleged representations is plainly consistent with the overriding purpose.
The evidence in question is contained in Mr Creak's affidavits listed in Ford's notice of motion. For present purposes it is only necessary to list the evidence containing the representations upon which Tallevine is said to have relied. That evidence is as follows: "52. During the 8 September 2015 mediation conference held in Melbourne, I was present during conversations in words the following effect: I said: Any deal must include a guarantee of supply of a new Ford motor vehicles and I want a written assurance to this effect. Ford representative said: Yes, we will consider this requirement. … 55. The conversation continued in words the following effect: I said: Any deal must include a guarantee of supply of a new Ford motor vehicles and I want a written assurance to this effect. Ford representative said: Yes, we will consider this requirement. Counsel for Tallevine: If we agree to these terms of mediation and our client is an existing fleet buyer will you block supply of new Fords through the dealer network should our client want to purchase some and provide an obstructed [sic] path to enable our client to sell his business as a going concern trading as a Ford Dealer. David Jefferies said: Of course Tallevine is entitled to purchase cars from the existing Ford dealer network and should there be a satisfactory purchaser we would welcome representation back at Thornleigh. … 62. During the 10 September Teleconference there was a discussion in words the following effect: I said: I want an assurance that there will be no restriction placed upon Tallevine getting supply of new motor vehicles and most particularly the Ranger model. O'Shanassy said: Uninterrupted supply of motor vehicles is implicit in the deed but it needs to be clearer. Wallis or Sullivan said: Yes we understand. We could commit to not making contact with the dealer network for a specified period of time. We have specific communication protocols. O'Shanassy said: So are you suggesting no overt communication about Tallevine when taken in the context of Tallevine's right to purchase new motor vehicles from any Ford dealer as it is entitled to do, given it holds a motor dealer's licence, would ensure that Ford would not block supply to Tallevine? What about informal 'off the record' communications exerting pressure on your dealer network members? Either Wallis or Sullivan said: We would not dignify your last comment with a response suffice to say at Ford we do the right thing."
Ford maintains first that this evidence is inadmissible by reason of the operation of s 131 of the Evidence Act. That section provides relevantly as follows: "131 Exclusion of evidence of settlement negotiations (1) Evidence is not to be adduced of: (a) a communication that is made between persons in dispute, or between one or more persons in dispute and a third party, in connection with an attempt to negotiate a settlement of the dispute, or (b) a document (whether delivered or not) that has been prepared in connection with an attempt to negotiate a settlement of a dispute. (2) Subsection (1) does not apply if: (a) the persons in dispute consent to the evidence being adduced in the proceeding concerned or, if any of those persons has tendered the communication or document in evidence in another Australian or overseas proceeding, all the other persons so consent, or (b) the substance of the evidence has been disclosed with the express or implied consent of all the persons in dispute, or (c) the substance of the evidence has been partly disclosed with the express or implied consent of the persons in dispute, and full disclosure of the evidence is reasonably necessary to enable a proper understanding of the other evidence that has already been adduced, or (d) the communication or document included a statement to the effect that it was not to be treated as confidential, or (e) the evidence tends to contradict or to qualify evidence that has already been admitted about the course of an attempt to settle the dispute, or (f) the proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is in issue, or (g) evidence that has been adduced in the proceeding, or an inference from evidence that has been adduced in the proceeding, is likely to mislead the court unless evidence of the communication or document is adduced to contradict or to qualify that evidence, or (h) the communication or document is relevant to determining liability for costs, or (i) making the communication, or preparing the document, affects a right of a person, or (j) the communication was made, or the document was prepared, in furtherance of the commission of a fraud or an offence or the commission of an act that renders a person liable to a civil penalty, or (k) one of the persons in dispute, or an employee or agent of such a person, knew or ought reasonably to have known that the communication was made, or the document was prepared, in furtherance of a deliberate abuse of a power."
Ford also seeks, in the alternative, an advance ruling pursuant to s 192A of the Act that clauses 19 and 20 of the 2015 mediation agreement preclude Tallevine from relying on Mr Creak's evidence of the alleged representations. Those clauses are as follows: "Confidentiality 19. The parties and the mediator will not disclose to anyone not involved in the mediation any confidential or privileged information or document given to them during the mediation, including the preliminary steps, unless required by law, except for (a) the purpose of obtaining professional advice; or (b) with the consent of each other party to the mediation; or (c) in the circumstances set out in clause 28. In these exceptions, the party must advise the person that the information or document is confidential and will ensure that the person will observe this clause and clause 20. 20. Subject to clause 28, the parties and the mediator agree the following cannot be used as evidence or relied on in any legal proceedings in relation to the dispute: (a) statements, views expressed and suggestions or proposals made in the mediation; (b) documents prepared and produced for the mediation; (c) admissions made in the mediation; and (d) indications made by a party that they are willing to accept a proposal, (e) except where those matters are otherwise not confidential or privileged."
The following clauses of the mediation agreement should also be noted: "22. The mediation and any communications relating to the mediation, with the exception of any settlement agreement executed by the parties, shall be without prejudice, except in the circumstances described in clause 28. 23. The parties may not compel the mediator or OSBC staff or any person present at the mediation or to whom information about the mediation is disclosed to testify in any legal proceedings about confidential or privileged information disclosed during the mediation or communicated to the mediator in confidence, except in the circumstances described in clause 28. 24. The parties may not compel the mediator or OSBC staff or any person present at the mediation or to whom information about the mediation is disclosed to testify in any legal proceedings about confidential or privileged information disclosed during the mediation or communicated to the mediator in confidence, except in the circumstances described in clause 28. … 27. No party will be bound by anything said or done in the mediation unless a written settlement agreement is reached and executed by all necessary parties. A written and correctly executed agreement is binding on all parties to the mediation. 28. Either party may enforce the terms of the settlement agreement through legal proceedings in the Administrative Decisions Tribunal or a court, as appropriate. In the proceedings, a party may use this mediation agreement as evidence and may call the mediator or persons present at the mediation to give evidence limited to the terms of the settlement agreement."
Ford maintains that clauses 19 and 20 of the mediation agreement preclude Tallevine from relying upon Mr Creak's evidence of the alleged representations. Ford contends that there is a strong public policy imperative encouraging parties to endeavour to settle legal disputes without disclosure of communications and to preserve the integrity of mediation agreements signed by them. The September 2015 mediation agreement is such an agreement. Ford submits that, in the absence of any evidence from Tallevine that might either vitiate the mediation agreement or that invokes some competing public policy consideration that outweighs these propositions, clauses 19 and 20 prevail as a matter of contract law to prevent Tallevine from leading the evidence of the alleged representations upon which it seeks to rely.
Finally, Ford seeks in the further alternative an advance ruling pursuant to s 192A of the Act that the evidence of the alleged representations should be excluded pursuant to s 135 of the Act upon the grounds that its probative value is substantially outweighed by the danger that it might be unfairly prejudicial to Ford. Ford relies upon the oft cited passage from Tony Azzi (Automobiles) Pty Ltd v Volvo Car Australia Pty Ltd (2007) 71 NSWLR 140; [2007] NSWSC 375 at [23] where Brereton J decided that settlement offers made during a mediation were inadmissible in an application by a party for indemnity costs. His Honour went on at [27] to say this: "[27] As I have concluded that evidence of what transpired at the mediation is not admissible, it is unnecessary for me to consider the Plaintiffs' alternative argument that it should be rejected as a matter of discretion as unduly prejudicial under Evidence Act s 135, save to record that there is much force in that argument, given that the Plaintiffs embarked on the mediation in the belief, encouraged by the mediation agreement to which all parties subscribed, that evidence could not subsequently be given of anything said or done at the mediation. This argument does not appear to have been considered in The Silver Fox or in Mount Thorley Operations."
Section 30(4) of the Civil Procedure Act 2005 does not apply to the present case as it only applies to court ordered mediations: see Lewis v Lamb [2011] NSWSC 873 at [15].

Consideration

With respect to the s 131 argument, Tallevine relies, among other of its paragraphs, upon s 131(2)(f) of the Act, contending that the present proceedings are "a proceeding in which the making of such an agreement [being an agreement between the parties in dispute to settle the dispute] is in issue". Without offering a comment upon the likely outcome of the proceedings, in particular the cross-claim, there can in my view be little doubt that Tallevine seeks to challenge the operation of the settlement agreement upon the basis, among several others, that it was induced by the representations relied upon and that for that reason the agreement either did not come into effect or alternatively is unenforceable and should be set aside.
Ford submitted that s 131(2)(f) did not apply. It relied upon Asciak v Australian Secured and Managed Mortgages Pty Ltd [2008] FCA 753. In that case at [31], Goldberg J said this: "[31] In order for subpar (f) to apply, the proceeding which the plaintiff proposes to bring in the Family Court must be a proceeding to enforce the settlement agreement between Ms Asciak and himself or a proceeding in which the making of the settlement agreement is in issue. The plaintiff proposes to bring a proceeding to have the consent orders made by the Family Court on 30 August 2006 set aside. To the extent to which those consent orders are based on an agreement reached between the parties, the plaintiff is seeking to set aside that agreement; he is not seeking to enforce it or put in issue the making of it. Accordingly subpar (f) is of no assistance to the plaintiff."
Tallevine relied upon what was said by McDougall J in Fermiscan Ltd v James [2009] NSWSC 462 at [4] - [11] as follows: "[4] The defendant wishes to read an affidavit sworn by the solicitor who acted for her back in 2006, Mr McCowan. Mr McCowan seeks to give evidence of certain discussions that took place between him and the plaintiffs' solicitor at the time, Mr Toltz, and Mr Carr of the plaintiff. The plaintiffs object, on the ground that if the evidence were admitted, it would be in contravention of s 131(1) of the Evidence Act 1995: That subsection prohibits, among other things, the adduction of evidence of a communication between persons in dispute in connection with an attempt to negotiate a settlement of that dispute. There is no doubt that the material of which Mr McCowan seeks to give evidence falls within s 131(1). [5] However, Mr Wood of counsel, for the defendant, points to s 131(2)(f). Section 131(2) provides that subs (1) does not apply in certain circumstances. One of those is described in paragraph (f): 'The proceeding in which it is sought to adduce the evidence is a proceeding to enforce an agreement between the persons in dispute to settle the dispute, or a proceeding in which the making of such an agreement is an issue.' [6] Mr Wood submits that in these proceedings the plaintiffs are seeking to enforce, against the defendant, those provisions of the deed of release and settlement to which I have referred. In my view, that is plainly correct, as the prayers for relief to which I have referred make plain. In case, for some reason, it is not plain from those prayers for relief, reference may also be made to the Amended Commercial List Statement. That document refers, under the statement of the nature of dispute, to the deed of release and settlement. It says that the current proceedings 'concern further breaches by the defendant of...' that deed. The statement of the issues likely to arise includes: (1) Has the defendant breached any terms of the deed? (para 6); (2) Is the defendant liable to pay the plaintiffs $700,000? (para 7); and (3) What loss have the plaintiffs suffered by reason of the alleged breaches of the deed? (para 9). [7] Mr Wells of counsel, for the plaintiffs, submits that para (f) does not apply. He submits that it applies only where there is a question as to whether an agreement to settle the dispute was made. In support of that submission, he referred to the decision of Goldberg J in Asciak v Australian Secured and Managed Mortgages Pty Limited (2008) 66 ACSR 298. [8] Asciak concerned an agreement to resolve proceedings in the Family Court. Effect was given to that agreement. The plaintiff sought to set aside the consent orders giving effect to it. He wished to say that his consent had been procured on the basis of misrepresentations. In the course of the case, the question arose as to whether evidence of settlement negotiations was admissible. Goldberg J said at 304 [31] that for the paragraph to apply, 'the proceeding which the plaintiff proposes to bring in the Family Court must be a proceeding to enforce the settlement agreement between Ms Asciak and himself or a proceeding in which the making of the settlement agreement is in issue'. I respectfully agree. His Honour then said that the plaintiff was not seeking to enforce or put in issue the making of the settlement agreement; on the contrary, he was seeking to set it aside. Thus, his Honour held, para (f) was of no relevance. [9] If I may say so, I respectfully agree with his Honour's analysis. However, I do not agree with Mr Wells that it has any relevance to the present case. In contrast to the proceeding with which Goldberg J was concerned, this is a proceeding in which, as I have sought to show, the relief claimed by the plaintiffs includes relief that can only be described as enforcement of certain of the provisions of the deed. That includes primary enforcement (injunctive relief and an order for the payment of money) and secondary enforcement (an order for the payment of damages). [10] In my view, the present case falls within s 131(2)(f). [11] I add that quite strange results would follow if the paragraph were to be given the narrow construction for which Mr Wells contended. It is well settled that, in construing an agreement, the court is entitled to have regard to what is often called the factual matrix. The effect of Mr Wells' submission would be to deny such evidence to the court in any dispute that concerned the construction of an agreement made to settle litigation. I do not accept that the legislature intended to bring about this strange consequence."
These decisions seem to me to underscore the fact that each case will ultimately and necessarily turn upon its own facts. If an issue arises as to whether an agreement was induced by fraud or mistake or some other factor that goes to the root of the very existence of the agreement, that is something that touches, or is concerned with, "the making of" the agreement. I respectfully do not agree with the proposition, if Goldberg J was in fact asserting it, that proceedings to set aside an agreement upon the basis of the existence of some fundamental vitiating factor thereby fall outside s 131(2)(f) or can never be proceedings that are concerned with the making of the agreement in question. Tallevine contends that the agreement that Ford in effect seeks to enforce in the contempt proceedings never came into effect because it was induced by Ford's representations. The establishment of those representations may, and on Tallevine's case will, inform the very existence of the settlement agreement and whether it was made in fact. It is difficult in those circumstances to see how these proceedings are not, in part at least, proceedings in which the making of the settlement agreement is in issue. This is not a case in which Tallevine's case proceeds upon acceptance of the fact that the agreement came into existence and that it should be set aside for reasons distant from and unconnected with its original consummation.
It is important at this point to observe that Ford strenuously maintains in essence that Tallevine should not now be entitled, and/or that it will ultimately fail in its attempts, to assert that the settlement never came into effect because of Ford's alleged representations. That is because, according to Ford, the evidence of events after the settlement agreement was executed and the Consent Orders were made demonstrates emphatically that Tallevine acted and operated unambiguously upon the basis that the agreement was legally binding and enforceable, and without a hint or suggestion or complaint to the contrary. Ford brings forward a series of matters that it says demonstrate this clearly. These matters are as follows.
Save for the new vehicle representation, Tallevine knew at all times since no later than June 2015 that Ford had, by its conduct, adopted the consistent position that it would seek to prevent Tallevine from purchasing new Ford vehicles from authorised Ford dealers in accordance with clause 4(1)(g) of the Ford dealer agreement.
Moreover, save for the new franchisee representation, Tallevine knew at all times since no later than May 2015 that Ford had refused to make any commitment to Tallevine with respect to the appointment of a new authorised Ford dealer at Tallevine's premises, other than to consider any application, whilst simultaneously retaining an absolute discretion about whether or not to make any such appointment.
In the three months prior to Tallevine executing the 2015 settlement agreement, it was aware of at least two occasions on which Ford had successfully sought to prevent it from obtaining Ford vehicles from authorised Ford dealers.
Despite being negotiated by experienced lawyers over a number of weeks, with knowledge that Ford had been seeking to prevent Tallevine from obtaining new Ford vehicles from other authorised Ford dealers, the 2015 settlement agreement did not contain any express obligation requiring Ford not to interfere with Tallevine's attempts to obtain new Ford vehicles from authorised Ford dealers. This would have been contrary to clause 4(1)(g) in any event.
Tallevine became aware between signing the 2015 settlement agreement and submitting the Consent Orders of at least one further occasion on which Ford had successfully sought to prevent Tallevine from obtaining Ford vehicles from authorised Ford dealers for on-sale. Tallevine proceeded to facilitate the making of the Consent Orders notwithstanding.
After the Consent Orders were made but before 31 January 2016, there were two further instances of Ford successfully preventing this conduct. Tallevine did not propose or support any application for a new Ford dealer at its premises during this time.
On 10 December 2016, Tallevine became aware of information that suggested that Ford would not approve the appointment of a new authorised Ford dealer at Tallevine's premises under any circumstances.
Tallevine did not make any complaint in the period between the signing of the 2015 settlement agreement and 31 January 2016 suggesting that Ford was acting wrongfully in preventing Tallevine from obtaining Ford vehicles or by not giving proper consideration to new applicants.
From no later than 19 January 2016,Tallevine sought to obtain Ford vehicles by using other business names without disclosing to Ford that they would be supplied to Tallevine, rather than complain to Ford about its restrictive actions.
Significantly, on 31 January 2016, Tallevine accepted payment of $100,000 from Ford pursuant to clause 2.3 of the 2015 settlement agreement upon the basis that Ford had not appointed a new authorised Ford dealer at Tallevine's premises. That money has not been repaid or tendered for repayment to Ford. Thereafter, Tallevine became aware of further instances of Ford successfully preventing it from obtaining vehicles from authorised Ford dealers.
(I note in passing that Tallevine maintained before me that the amount of $100,000 received by it from Ford was not a payment made pursuant to the settlement agreement but was instead a part payment of money otherwise and independently owed to it by Ford. That contention seems to me to be demonstrably and patently wrong. That is for a number of reasons, not the least of which is an entry in Tallevine's chronology, provided to me by counsel, which indicates in clear terms that on 31 January 2016 "Ford paid Tallevine $100,000, as required by Settlement Deed".)
Tallevine then took steps between the making of the Consent Orders and March 2017 to comply with those orders without any suggestion or complaint that Ford had acted wrongfully or that it had been misled in any way in entering into the 2015 settlement agreement or in agreeing to the Consent Orders. In fact, no complaint was made until 8 May 2017, or approximately two months after Ford commenced these proceedings.
Ford maintained that these matters were all inconsistent with it having made the alleged representations, any suggested reliance upon them by Tallevine or any claim by Tallevine that Ford had somehow repudiated the 2015 settlement agreement. On the contrary, Ford maintained that these matters indicate clearly that Tallevine has acted in accordance with the agreement and has unequivocally affirmed its validity.
In my opinion, s 131(2)(f) of the Evidence Act applies to the evidence upon which Tallevine seeks to rely. I put to one side the question of whether or not Ford's claims that Tallevine should be punished for contempt amount to proceedings to enforce an agreement between Ford and Tallevine, in the sense that Ford's complaints are a function of its attempts to enforce Tallevine's compliance with the Consent Orders. That issue was not addressed by the parties and it is not appropriate to deal with it here. There was, by way of contrast, detailed argument on the question of whether or not Tallevine's cross-claim is a proceeding in which the making of the settlement agreement is in issue. I have already indicated my view that it is. Whatever view one might take about the strength or otherwise of Tallevine's cross-claim, particularly having regard to its post contractual conduct, I am not inclined to rule that the evidence of the representations cannot be adduced.
It is unnecessary in the circumstances to consider the other paragraphs of s 131(2) upon which Tallevine has placed emphasis.
With respect to the operation and effect of clauses 19 and 20 of the mediation agreement, I do not consider that it is appropriate to give a ruling or make a finding before the evidence in Tallevine's cross-claim, with the potential exclusion of which those clauses may be concerned, is adduced in the proceedings. Once again, Ford is not unreasonably concerned that the integrity and sanctity of the confidential mediation process is imperilled by Tallevine's attempts to lead evidence of what might have been said by Ford's representatives in the mediation. That has unsatisfactory consequences that are both particular to this case, but more generally as well. However, once again without offering an opinion on the likely success of Tallevine's claims, they direct attention to whether or not the settlement agreement may have been vitiated by Ford's conduct at the mediation.
It is in my view extremely regrettable that all of Tallevine's evidence in this respect has not been served on Ford. For reasons that are both difficult to understand or accept, Tallevine has only served evidence on the issue of Ford's alleged representations from Mr Creak. It has purported in some curious way to have reserved its position upon whether it will or may choose to serve evidence from others who were in attendance at the mediation. So much appears from a letter dated 27 July 2017 from Agility Legal Pty Ltd to Lander & Rogers in the following relevant terms: "We refer to our previous advice of our intention to adduce corroborative evidence from other attendees (mediator, solicitors and/or counsel) at the September 2015 mediation and subsequent negotiations. However, in light of: (a) the lack of evidence or other statement by your client to date of the nature of any contest by your client of our client's allegations as to the course of the mediation and subsequent negotiations; (b) the likelihood that any contest will not be material given the continued conduct of your client's case by counsel who participated in the relevant conversations, and (c) the significant inconvenience, cost and potential delay of procuring such evidence; we advise that we now intend to rely on Mr Creak's previously served evidence of these conversations alone in chief and if any material emerges from your client's evidence necessitating corroborative evidence from our client, to deal with it by way of reply to your evidence."
Lander & Rogers replied by letter dated 3 August 2017 as follows: "1. We refer to your letter dated 27 July 2017. 2. If we understand your letter correctly, it is your client's intention to rely upon the evidence of Mr Creak alone as its evidence in chief in support of the foreshadowed Cross-Summons and Points of Claim. You state that the rationale for this is: (a) the lack of evidence or other statement by our client to date of the nature of any contest in respect of your client's allegations; (b) the likelihood that any contest will not be material; (c) the significant inconvenience, cost and potential delay of procuring such evidence. 3. We make the following preliminary comments in response to your letter: (a) It is premature to assert that there is no contest in respect of your client's allegations regarding the course of the mediation and subsequent negotiations, or that any contest is likely to be immaterial. Our client's position in respect of the threatened Cross-Summons and Points of Claim has not, for obvious reasons, yet been articulated in detail. However we have made clear in our correspondence since 19 May 2017 that the threatened claim is fanciful, without foundation and doomed to fail; including for reasons that any evidence of what was said during the course of the mediation, is inadmissible. The 'material contest' will be set out in our client's defence to any Cross-Summons and Points of Claim. (b) We are surprised by your suggestion that obtaining evidence other than that of Mr Creak will be inconvenient or causative of delay. Your client has had more than ample opportunity to investigate, prepare and obtain evidence from other attendees at the mediation. We struggle to accept your assertions regarding cost and delay in circumstances where: (i) On 19 April 2017 you represented to the court and to us that such facts and evidence gathering exercises have been underway since prior to that date. (ii) You have done so in the context of seeking further time to prepare your client's 'Appeal' in respect of the orders made in October 2015. You have also done so at each of the directions hearing since 19 April 2017, when seeking further time to file and serve your client's evidence generally. (iii) Both you and your counsel have stated, in no uncertain terms, that an affidavit of either Mr O'Neill or Mr O'Shanassey had been prepared and would be served. (iv) It is therefore reasonable to assume that the task of gathering that evidence has been significantly completed. (c) If your client files its threatened Cross-Summons and Points of Claim, we will write to you separately regarding: (i) our client's entitlement to security for costs, of which we have already put you on notice; and (ii) the obvious conflict that arises by reason of your firm acting on behalf of your client in the proceedings. 4. We will otherwise respond more fully to your letter following receipt of your client's foreshadowed Cross-Summons and Points of Claim, which is required to be filed and served today."
It remains to be seen whether Tallevine will seek to adduce further evidence of what transpired at the mediation from other attendees, or whether it will be permitted to rely upon it if it does. One could be forgiven for thinking that Tallevine would by now have provided all of the available evidence that might have been of assistance to its case, rather than run the risk that this other material might not be admitted, either because Tallevine is splitting its case or for some other reason of fairness.
For present purposes, however, the inconvenient prospect, however frail, that Tallevine's evidence will or may ultimately include statements that Ford presumably would maintain are inadmissible by reason of clauses 19 and 20 of the mediation agreement, means that an advance ruling on the admissibility of Mr Creak's evidence about what occurred at the mediation is presently inappropriate. It would, for example, be problematic if I were to rule upon the admissibility of Mr Creak's evidence and the trial judge formed a different view about the admissibility of the evidence that Tallevine has foreshadowed it will lead "in reply". The final resolution of these issues will also necessarily have costs consequences that are not capable of any principled resolution from this distance.
Finally, s 135 of the Evidence Act is as follows: "135 General discretion to exclude evidence The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party, or (b) be misleading or confusing, or (c) cause or result in undue waste of time."
Ford maintains that Mr Creak's evidence should be relevantly rejected at this stage of the proceedings because of what is described as "the tenuous basis" for the allegations, particularly in the light of the factual matters referred to earlier in these reasons. An advance ruling pursuant to s 192A of the Act is sought.
It is also my opinion that it would not be appropriate at this stage to "refuse to admit" the evidence in question. I have taken into account what was said by Crispin J in R v TR (2004) 180 FLR 424 at [6] and by Gaudron J in TKWJ v The Queen (2002) 212 CLR 124; [2002] HCA 46 at [43]. Having regard to the current status of these proceedings, there is no certainty that there will not be further evidentiary and procedural developments that might helpfully inform the question of the probative value of the evidence in question. I accept that Ford is concerned that there may be an undue waste of time if a decision about Mr Creak's evidence is not made now. In my opinion, as attractive as that suggestion may appear, it would not be fair to Tallevine to make a peremptory decision about the evidence at this time.

Summary dismissal

Ford maintained that an order pursuant to UCPR 13.4 "would seem to be uncontroversial" if advance rulings pursuant to s 192A of the Act were to be made. Without accepting the accuracy of that assertion, it is unnecessary to consider it further.
Ford nonetheless maintained that summary disposal of the cross-claim was appropriate as Tallevine's prospects of making out its allegations concerning what took place at the mediation and its claims that the settlement agreement and the Consent Orders should be set aside were "so low".
The obvious difficulty with that submission is that it admits of the possibility that Tallevine's claims might succeed. I accept that, on one view, having regard to the evidence to which Ford has drawn my attention, that Tallevine's prospects of establishing that the representations were made in the first place or that it relied upon them in the second place could be described as slim or improbable. The test that I am required to apply is somewhat different.
Ford is required to demonstrate that the case against it is "so obviously untenable or manifestly groundless as to be utterly hopeless": Attorney-General v Wentworth (1988) 14 NSWLR 481 at 481. Various other judicial and academic formulations to similar effect do not derogate from that proposition.
The three main principles to be applied are as follows: 1. The Court's discretion to order summary dismissal is one that must be exercised with "exceptional caution": General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125; [1964] HCA 69 at 129. 2. A party is ordinarily to be permitted the opportunity to place his or her case before the Court in the customary way, and after taking advantage of the usual interlocutory processes. For a summary dismissal to occur there needs to be a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way: Agar v Hyde (2000) 201 CLR 552; [2000] HCA 41 at [57]. 3. The discretion should only be exercised if it is clear that there is no real question to be tried: Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87; [1983] HCA 25 at 99; Dey v Victorian Railways Commissioners (1949) 78 CLR 62; [1949] HCA 1 at 91; Webster v Lampard (1993) 177 CLR 598; [1993] HCA 57.
In my opinion, Ford has failed to bring its application pursuant to UCPR 13.4 within these principles. At one level, there may be a high degree of probability about the outcome of the proceedings on the cross-claim. It is not possible, however, to elevate that prospect to degrees of certainty. There is undoubtedly a real question to be tried. I accept that from Ford's evidently frustrated perspective, the landscape may appear clearer. I am required to approach the matter from a somewhat different, judicial perspective.

Particulars

The issue concerning particulars was ultimately not argued before me.

Security for costs

Ford seeks security for its costs of defending the cross-claim. The order is sought pursuant to UCPR 42.21(d) and (e) and s 1335 of the Corporations Act 2001.
Tallevine sues on its cross-claim as trustee for the Thornleigh Trading Trust. It has paid up share capital of $100. It does not own any real property in New South Wales. Mr Creak's evidence is that Tallevine has "limited financial resources". It has not responded to numerous invitations from Ford to put forward evidence that it is capable of meeting a costs order in Ford's favour. Ford submits that these matters are sufficient to establish that there is reason to believe that Tallevine will be unable to pay Ford's costs of the cross-claim if ordered to do so.
Ford also submits that the factors relevant to whether the Court should exercise its discretion to order security, which are set out in rule 42.21(1A) of the UCPR, are in favour of an order for security.
First, with respect to UCPR 42.21(1A)(a), Tallevine has low prospects of success. Secondly, with respect to UCPR 42.21(1A)(b), Tallevine's conduct calls the genuineness of its cross-claim into question. Thirdly, with respect to UCPR 42.21(1A)(c), Tallevine has not put forward any evidence to contest Ford's case that it is impecunious. Fourthly, with respect to UCPR 42.21(1A)(d), there is no basis to suggest that Tallevine's impecuniosity has been caused by Ford. Fifthly, with respect to UCPR 42.21(1A)(e), the cross-claim cannot be regarded as effectively defensive. For example, even if Tallevine were to succeed in having the Consent Orders set aside, that would not amount to a defence to Ford's allegations of contempt. In any event, the cross-claim seeks substantive relief, including declarations, injunctions and damages that are based on allegations of fact that are separate to those made by Ford in the contempt proceedings. Sixthly, with respect to UCPR 42.21(1A)(f), Tallevine has not led any evidence to suggest that an order for security for costs would stifle the cross-claim. Seventhly, with respect to UCPR 42.21(1A)(i), Tallevine has delayed in bringing the cross-claim for almost two years, in which time it has accepted the benefit of the 2015 settlement agreement, including the payment of $100,000 from Ford. Eighthly, with respect to UCPR 42.21(1A)(j), the costs of the cross-claim will be substantial. Ninthly, with respect to UCPR 42.21(1A)(k), the security sought by Ford is proportionate to the importance and complexity of the subject matter of the cross-claim. Finally, with respect to UCPR 42.21(1A)(l), there can be no suggestion that Ford has delayed in bringing its application for security for costs.
In the above circumstances, Ford has submitted that the discretionary factors weigh strongly in favour of an order that Tallevine ought to provide security for Ford's costs of the cross-claim.
Ford seeks security in an amount of $200,000. Ford's evidence indicates that the reasonable costs that Ford is likely to incur in defending the cross-claim are in the order of $385,000. However, Ford has sought an amount of $200,000 as security for its costs in order to seek to avoid substantive debate as to the quantum of security.
Ford contended that this case was analogous to the circumstances dealt with by Barrett J in Transocean Capital Ltd v AFSIG Pty Ltd (2002) 202 FLR 270; [2006] NSWSC 806. In that case his Honour said this: "[29] The defendants contend that security for costs should be ordered because, on the basis of 'credible testimony' (to use the words in s.1335(1) of the Corporations Act), there is reason to believe that the plaintiff will be unable to pay the costs of the defendants if they are successful in their defence. That is the first stage of the inquiry upon an application such as this. If reason so to believe is found, the court moves to the second and discretionary question of whether security should be ordered. [30] The defendants point to two particular matters emerging from the evidence: first, that the plaintiff is a newly formed company that has an issued capital of $30.00; and second, that it sues as a trustee. [31] The evidence of the first matter comes from an ASIC search annexed to an affidavit of the defendants' solicitor. The search shows that the plaintiff was registered on 5 July 2005 and that it has on issue 30 ordinary shares on which a total of $30.00 is 'paid/taken to be paid'. The shares are shown as held, in parcels of 15, 10 and 5, respectively, by three proprietary companies each of which is shown as holding the shares non-beneficially. [32] Evidence of the plaintiff's trustee status comes from the statement of claim where it is said, first, that the plaintiff is the trustee of the Transocean Capital Unit Trust; and, second, that the plaintiff, as trustee of the Transocean Capital Unit Trust, has been, since 5 July 2005, 'part of a group of companies known as the Transocean Group which conducts a boutique investment banking and corporate advisory business and which, amongst other things, provides corporate finance and capital raising services to emerging businesses'. [33] The plaintiff has not placed before the court any evidence of its financial position or of any express right of indemnity it enjoys as trustee. It has been content to meet the security for costs application on the ground mapped out by the defendants. It says, quite simply, that the evidence about a paid up share capital of $30.00 and the plaintiff's trustee status 'establishes nothing' and that the idea that the plaintiff does not have the capacity to meet an adverse costs order flies in the face of the very subject matter of the proceedings - in essence, that the defendants solicited the plaintiff as an investor of $2 million in their project. [34] I refer, in this connection, to observations of Smithers J in Laundry Coin-Wash Nominees Pty Ltd v Dunlop Olympic Ltd (1985) 7 ATPR 40-584. His Honour said (at p.46,729): 'Where the only tangible assets of an applicant company are held in trust for another entity and its solvency depends on its right as trustee to indemnity against that entity it is necessary for the court to have in mind the difficulties which a successful respondent would face in attempting to execute in respect of an order for costs. Indeed, unless some step is taken to alleviate those difficulties it is reasonable and just to treat the applicant company as if it were without assets to meet such a liability.' [35] Smithers J also said (at p.46,731): 'I have concluded that an applicant being a trustee company which desires to resist an order for security for costs should establish that recourse to property held by or for it will be available to the party against whom it has brought its action and be adequate, at the appropriate time, to meet the possible liability for costs.' [36] This approach was accepted and adopted by Tadgell and Cummins JJ in Lagarna Pty Ltd v Bridge Wholesale Acceptance Corporation (Australia) Ltd [1995] 1 VR 150. In that case there was evidence that the party against which security was sought in the Court of Appeal (a defendant) was a trustee and that it held, as trustee, substantial real estate assets, some of which were unencumbered. The company's paid up capital was $3.00. In ordering security for costs, Tadgell and Cummins JJ said: 'It was contended for the defendants that in order for security for costs of the appeal should be refused because [sic] holds unencumbered real estate the value of which exceeds the likely cost of the appeal and over which it has a right of recourse as trustee by way of indemnity. These facts, however, by themselves seem scarcely to meet the plaintiff's contention. The solicitors for the plaintiff have sought to inspect the trust deed under which Lagarna is constituted trustee but it has not been produced to them and it was not in evidence before us. For all that appears the trustee may, and I am prepared to assume that it would, be required at any time to transfer its legal interest in the unencumbered property to the beneficiaries of the trust or to encumber it.' [37] Also instructive is the judgment of Goldberg J in Second Lenbourne Pty Ltd v Beagle Management Pty Ltd [1999] FCA 486. I quote from paragraph [18] of the judgment: 'The evidence discloses that each applicant has a paid up capital of $2. It is not disputed that each applicant is a trustee company so that it has no other assets. On this ground alone I consider that there is credible testimony that there is reason to believe that the applicants will be unable to pay the respondents' costs if the respondents are successful. Assuming that the applicants have a right of indemnity out of the relevant trust funds which they administer is it necessary to consider what is the position of those trust funds.' [38] Goldberg J went on to refer to the evidence about the trust assets and their substance. [39] In the present case, the defendants have shown the two matters to which I have referred: first, that the plaintiff has a paid up capital of $30.00 only; and, second, that it is a trustee. In the absence of countervailing evidence, those matters alone must be taken to represent 'credible testimony' of the plaintiff's likely inability to pay the defendants' costs if the defendants are successful. The plaintiff has not sought to adduce evidence of the relevant trust instrument and its provisions as to indemnity. Nor has the plaintiff sought to show the extent of the trust assets that may be available in support of any indemnity. It has been content merely to observe that the defendants were willing to regard it as a good source of the $2 million they required for investment purposes. But, of course, there is a great difference between the plaintiff's own ability to obtain funds if and when it needs them for deployment in its business and the ability of a creditor of the plaintiff to force the plaintiff to obtain and disgorge funds when the creditor seeks to enforce a right to be paid."
There are in my opinion no significant differences between that case and the present. It is not contested that Tallevine's paid up capital is meagre or that it sues as a trustee.
Ford has not been guilty of delay in bringing this application. Tallevine's financial position has not been caused by anything done by Ford. The application for security cannot be considered to be oppressive, particularly having regard to the arguable weaknesses in Tallevine's case. No one standing behind Tallevine, such as Mr Creak, has come forward with any offer of support or indemnity. The cross-claim is not merely defensive. That is so for the clear and obvious reason that Tallevine seeks to set the whole settlement agreement aside. The fact that the outcome on its cross-claim might arguably inform discretionary considerations in the contempt proceedings is of little significance in my view. These matters satisfy me that an order for security should be made.
Ford's evidence suggests that its reasonable costs of defending the cross-claim will amount to $385,570. Tean Kerr, a solicitor at Lander & Rogers, who gave evidence in his affidavit affirmed on 2 November 2017 supporting that calculation, was not cross-examined upon that estimate. Kerrie-Anne Rosati, the principal of DGT Costs Lawyers, whose expert opinion Tallevine relied upon, was unable to conclude with any degree of accuracy what costs would be likely to be incurred by Ford in defending the cross-claim. Ms Rosati was also not cross-examined upon her detailed affidavit sworn 24 October 2017.
Ford suggests that the sum of $200,000 is in the circumstances a more than reasonable sum for Tallevine to provide by way of security. Ms Rosati was unable to comment upon the reasonableness of that estimate. Ms Rosati did, however, express the opinion that the complexity of the issues on the cross-claim appeared to be quite high, and that that was a recognised legislative indicator of the costs that might be allowed.
It is never possible precisely to determine the amount of costs that a party might incur in litigation that is pending. Doing the best I can I consider that Tallevine should in this case be required to provide security in an amount of $150,000.

Staying the Consent Orders

Tallevine contends that the enforcement of the Consent Orders before the final outcome of its cross-claim is known will have a tendency to cause irreparable harm. It maintains in such circumstances that, as a matter of discretion, Ford should be prevented from taking any steps in accordance with the settlement agreement or the Consent Orders that might ultimately frustrate or negate Tallevine's success on its cross-claim.
I disagree. First, Tallevine has operated for some time in a way that could be characterised as compliance with the Consent Orders. Its latter day attempts to distance itself from the Consent Orders is patently responsive to the contempt proceedings. Secondly, in a related sense, Tallevine has delayed in seeking this relief. The Consent Orders have to a considerable extent been complied with on both sides. It would be inappropriate now to enjoin the performance of some only of the orders to the extent to which they may remain to be performed. Thirdly, Tallevine has offered no undertaking as to damages as the price of the injunction that it seeks. Fourthly, Ford's actions in furtherance of the enforcement of the Consent Orders have in practical terms fallen into abeyance to the extent that it has chosen to seek what amounts to a judicial determination of Tallevine's liability for allegedly disregarding the orders. Tallevine is in such circumstances the author of its own destiny to the extent that it considers that it can successfully defend the contempt proceedings based upon the approach to the Consent Orders that it has taken to date.

Costs

Ford and Tallevine each sought costs. The orders I propose are that their respective motions should be dismissed. The context in which these motions have been determined is essentially Tallevine's cross-claim. It seems to me that the parties' respective liability for the costs of the proceedings before me should therefore follow the event upon the cross-claim.

Orders

In these circumstances I consider that the following orders should be made: 1. Subject to order 2, dismiss the plaintiff's notice of motion filed on 7 September 2017. 2. Order that the defendant provide security for the plaintiff's costs referable to its defence of the cross-claim in the sum of $150,000. 3. Dismiss Tallevine's notice of motion filed on 6 October 2017. 4. Order that the costs of the motions shall be the costs in the proceedings on Tallevine's cross-claim.

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Judgment (11 paragraphs)

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