Ian West Indoor & Outdoor Services Pty Ltd (ACN 086 934 434)

Ian West Indoor & Outdoor Services Pty Ltd v Australian Posters Pty Ltd (Civil Claims) [2011] VCAT 2410

1. The respondent's application seeking security for costs is dismissed.

1. On or before 31 January 2012, the applicant provide full and precise details of the representations alleged to have been made as referred to in paragraphs 10 and 13 of the Applicant's Outline of History of Dispute dated 20 August 2009, including:

(a) when, where and by whom the representations were made;

(b) precisely what was said by the person alleged to have made the representation.

1. On or before 31 January 2012, the applicant shall provide full and precise details of the alleged breach of the 2005 agreement, as referred to in paragraph 22 of the Outline, including:

(a) which term of the agreement is said to have been breached;

(b) the facts, acts, matters or things said to give rise to the breach;

(c) full and precise particulars of the loss and damage said to have been suffered.

1. On or before 29 February 2012, the applicant provide:

(a) tax returns;

(b) financial statements;

(c) asset and liability statements

of the applicant for the financial years ended 2003 to 2009 inclusive;

(d) any other financial documents to be relied upon by the applicant in its allegation that it suffered loss and damage.

1. Each party make and file an affidavit as to documents in their respective power or possession relevant to the issues in the application, including any document which may assist or harm that party's case, on or before 29 February 2012.

1. There be a mediation of the application on or before 31 May 2012.

1. The Registrar list the application for hearing (estimate 5 days) upon a date between 1 and 31 July 2012.

1. There be liberty to the parties to apply in respect to the terms of these orders.

1. This is an application brought by the respondent, Australian Posters Pty Ltd (AP) seeking orders:
   • (a) The applicant, Ian West Indoor & Outdoor Services Pty Ltd (West) give security for costs pursuant to s 79 of the Victorian Civil and Administrative Tribunal Act 1998 (the VCAT Act).
   • (b) West provide further and better particulars of its claim.
2. The details of the parties and the nature of their dispute is set forth in a document entitled 'Outline of History of Dispute' dated 20 August 2009 and filed with the tribunal. AP is in the business of providing outdoor advertising for various of its clients. West is in the business of the installing outdoor advertising posters and placards.
3. In approximately 2002, West was approached by AP to carry out installation work in respect of outdoor advertising. In 2003, an agreement was entered between the parties setting out the nature of the work and the contractual conditions to apply. A further agreement was entered in 2004. Each of those agreements provided that either party could terminate the agreement by giving 28 days notice.
4. West alleges in December 2004 various representations were made by AP to West including that:
   • It had long-term contractual employment with AP.
   • A new agreement would be entered to replace the existing agreement.
   • That agreement would be for 12 months but would 'rollover' from year to year thereafter.
   • The agreement would provide security of employment for West and its employees and could be used as a basis upon which to secure lending finance.
5. In a further meeting between the parties in approximately July 2005, West alleges further representations were made along the lines as had previously been made. Based upon the representations, West alleges it was induced to enter the agreement dated 26 July 2005. That agreement provided, amongst other things, that either party could terminate the agreement upon giving 45 days written notice (clause 9.2).
6. Ii is further alleged in a meeting of December 2005, in the course of a formal presentation to West, and other contractors, further representations were made.
7. West alleges the representations made constituted false and misleading representations within the meaning of the Fair Trading Act 1999. In March 2006, AP underwent a corporate restructure, and another company, Jamco Pty Ltd took over work from AP. By document dated May 2006, AP gave notice that the agreement was to be terminated with effect from 7 July 2006. It is alleged staff of West were approached by Jamco Pty Ltd to work for it under the new regime.
8. West seeks orders as set forth in its claim:
   • (a) Orders under section 158 and/or 159 of the Fair Trading Act that -
     • (i) the 2005 agreement be set aside;
     • (ii) alternatively clause 9.2 of the 2005 agreement is varied and as and from the 26 May 2006 such that reference to 45 days is replaced by reference to 2 years; and
     • (iii) AP pay West damages.
   • (b) Further and alternatively damages pursuant to section 159 of the Fair Trading Act.
   • (c) Further and alternatively damages.
   • (d) Interest pursuant to statute.
   • (e) Costs.
   • (f) Such further or other orders or relief as the tribunal deems fit.
9. Various affidavits with exhibits were relied upon by AP:
   • Affidavits of Shane William Dare, sworn 28 October 2009[1] and 27 September 2011.
   • Affidavit of Cyril David Ger, sworn 27 October 2009.
   • Affidavit of Cameron Cross, sworn 29 October 2009.
10. On behalf of the West the following affidavits, together with various exhibits were relied upon:
    • Affidavit of Ian Martyn West, sworn 26 October 2011.
    • Affidavit of Nicholas John Roberts, sworn 26 October 2011.
11. According to the affidavit of Mr Ger, presuming the hearing of the claim would take approximately five days, AP estimates its costs and disbursements upon County Court Scale D as approximately $82,000.

(1) On application of a party to a proceeding, the tribunal may order at any time -

(a) that another party give security for that party's costs within the time specified in the order; and

(b) that the proceeding as against that party be stayed until the security is given.

(2) If security for costs is not given within the time specified in the order, the tribunal may make an order dismissing the proceeding as against the party that applied for the security.

(3) The tribunal's power to make an order under this section in a proceeding is exercisable by -

1. Section 109 of the VCAT Act provides that subject to Division 8, each party bear their own costs in a proceeding. The section further provides that the tribunal may order one party to pay costs of another party if it is satisfied it is fair to do so having regard to a range of criteria set forth in s 109(3).

1. From the submissions of counsel, and the authorities to which I was referred, in my view, the following legal principles apply to this application:
   • (1) The financial viability of the applicant and its capacity to pay any costs order which may be made against it, is the first matter to be considered in a security of costs application. If, based upon credible evidence, there is the real possibility the applicant will have insufficient funds to meet an order for costs, should one be made, then the threshold issue to enable the tribunal to exercise its discretion in determining whether to grant an order for security of costs is met. This issue is effectively a gateway through which AP must pass before the tribunal is called upon to exercise its discretion. If the tribunal is not satisfied that West does not have the capacity to meet any costs order then there is no basis upon which the application should be granted. If the tribunal is so satisfied, then it should go on to consider the criteria relevant to the exercise of the discretion.[2] The financial viability of the company is then a matter which may be taken into account in the exercise of the discretion.
   • (2) Once the threshold issue is passed, then the tribunal has a wide and unfettered discretion which ought be exercised balancing on the one hand the rights of companies of modest financial means to bring proceedings in the tribunal undeterred by the threat of having to provide security for costs, and on the other hand giving protection to litigants against an impecunious company determined to press a claim of little merit without regard to any costs order that may be made against it.[3]
   • (3) If it appears to the tribunal, based upon the pleadings, and any other matter before it, that the application is not bona fide or has little merit or prospect of success, the tribunal may more readily make an order.[4]
   • (4) Section 1335 of the Corporation Act 2001 does not provide VCAT with jurisdiction to bring an application for security of costs. Any such application must be brought pursuant to and abide the provisions of s 79 of the VCAT Act. However, regard may be had to s 1335, and the cases determined thereunder when considering the exercise of the discretion.[5]
   • (5) Regard should be had to the purpose for which VCAT was established, and the manner in which hearings in the tribunal are conducted. The introduction of the VCAT Act was designed 'to achieve expeditious and cost-effective resolution of ... disputes'.[6] The emphasis as to the manner in which hearings are conducted is prompt, efficient and inexpensive disposition of applications.[7] Proceedings are conducted where possible without undue legal formality.[8] Parties are often self-represented. Directors often represent companies. Given these matters, the tribunal should generally be slow to make an order for security for costs as to do so would have the capacity to stifle the ability of companies of modest means to bring proceedings in the tribunal in the reasonable expectation that those proceedings will be determined promptly, efficiently, and at more modest cost than may be the case in the County or Supreme Courts.[9]
   • (6) Section 109 of the VCAT Act provides that subject to that section, each party is to bear its own costs in a proceeding. There is thus a presumption that unless circumstances exist such as are referred to in s 109(3) that each party should bear its own costs. Unless, upon the material before the tribunal, there is a reasonable basis to suggest the party seeking the order for security for costs is likely to be awarded costs, the tribunal ought again be reluctant to make an order.
   • (7) In appropriate cases, the various other factors referred to in Symar[10] may be taken into account. Such matters include:
     • whether the plaintiff's (applicant's) lack of funds has been caused or contributed to by the conduct of the defendant (respondent);
     • whether the plaintiff's (applicant's) proceedings are merely a defence against 'self-help' measures taken by the defendant;
     • whether the making of the order would unduly stultify the plaintiff's (applicant's) ability to pursue the proceedings;
     • the extent to which it is reasonable to expect creditors or shareholders to make funds available to satisfy any order for security which may be made;
     • whether the defendant (respondent) has delayed in making the application for security;
     • whether the plaintiff in question is a true plaintiff or not;
     • whether any cross-action or counterclaim has been mounted and whether the same facts are likely to be canvassed in determining that cross-action or counterclaim.

1. It was put by AP that West has little if any assets and income and would be incapable of meeting any costs order made against it. In support, the affidavit of the costs expert, Mr Ger, assessed costs and disbursements of the proceeding and a five day hearing at approximately $82,000. While I have some reservations about some of the items of costs referred to in Mr Ger's affidavit, I accept a proceeding such as this would take approximately five days, and the costs and disbursements would be substantial. I accept that it would be necessary to brief junior counsel of significant seniority, and to retain an expert accountant to examine the claim for economic loss.
2. Annexed to the affidavit of Mr Ian West are the company tax returns of West for the years ended 2006, 2007 and 2008. In the 2006 year, the returns show West had a gross income of $324,698 with expenses of $324,747. Its profit for that year was $49. The total assets were valued at $68,383, liabilities at $58,898, leaving shareholders funds of $9,485. In the 2007 year, the income was $160,098 with expenses of $171,976. This indicated a loss for that year of $11,877. Assets were said to be valued at $43,048 and liabilities at $45,441, thus leaving shareholders funds as negative $2,392. In the 2008 year, the gross income was said to be $180,836 with expenses of $186,313. Again there was a loss of $5,477. Total assets were said to be $49,247 and liabilities $49,245.
3. No tax returns nor other financial information were provided for any of the subsequent years. I would have expected more recent financial information to be provided, and I thus draw the inference[11] that had such information been provided, it would not assist West's case. This is despite the claim in Mr Ian West's affidavit[12] that the company in 2009 had a turnover of $200,000 with a similar figure in 2010. There is a rather bland statement from Mr West that his company will be able to meet any costs order made against it. That statement is not substantiated by any material to indicate how a substantial costs order could be met.
4. Mr Cogley, for West, argues that the company will shortly receive payment of costs and disbursements of the recent Supreme Court Appeal in the agreed sum of $30,000 and that this sum should be taken into account in considering the financial viability of West. However, that amount is 'earmarked' for payment of costs and expenses incurred and, in my view, it is not appropriate to take it into account.
5. Considering all the material, I am satisfied, on the basis of credible evidence, that the real prospects are that West will be unable to meet a substantial costs order should that occur. The threshold hold question is thus met and I shall go on to consider whether the discretion to make an order for security of costs ought be exercised.

1. I am satisfied, on the basis of the material before me, that West's case is bona fide and has prospects of success. It is not possible to make a determination on the issue until all the evidence is heard and considered. Much of the case will turn upon the nature and extent of representations alleged to have been made on a number of occasions before the 2005 agreement was entered. West's material alleges representations were made on a number of occasions to the effect that West could expect for the business relationship between it and AP to continue into the foreseeable future. It further alleges that it relied upon such representations to enter the 2005 agreement. Mr Jones points to the 'weakness' in West's case that there is a clear term in the 2005 agreement (as there was in the two earlier agreements) that the agreement could be terminated by either party upon notice. Thus, West will have the considerable burden of proving that the representations were made and relied upon in the face of a clear provision of the agreement. While I accept that such a burden will not be easy to overcome, nonetheless, it may be open to the tribunal to form that view. Mr Jones did not submit that there was no basis upon which West could succeed, only that the case was weak. If West's allegations are made out, it may be entitled to damages pursuant to the Fair Trading Act, or possibly to have the tribunal amend the agreement to provide a longer termination period.
2. In all the circumstances, I am satisfied that West has a bona fide claim and that it has prospects of succeeding.
3. In my view, the tribunal should be slow to grant an order for security for costs even notwithstanding the financial position of West. There is no material before me to suggest that the presumption that each party should bear its own costs will not be followed. I accept that the sum of money claimed is substantial and that some of the legal principles involved complex, nonetheless, much will depend upon the evidence given as to the alleged representations. I further bear in mind the principles underlying the reason VCAT was established, and the manner in which cases are conducted. There is a public policy consideration in ensuring that companies, even those with modest financial means, are able to obtain prompt and effective access to justice through the tribunal without undue emphasis on legal policy and procedures.
4. Bearing in mind the discretion to grant an order for security for costs is wide and unfettered, weighing all the matters to which I have referred, I am not prepared to exercise the discretion in favour of AP. In my view, this is not an appropriate matter to order security for costs. AP's application will be dismissed.
5. In discussion between counsel as to further directional orders, it was generally agreed that further orders be made. I shall make further directions orders as set forth.

[1] The attestation clause is mistakenly dated 28 October 2008.

[2] Livingspring Pty Ltd v Kliger Partners [2008] VSCA 93; (2008) 20 VR 377 at paragraphs 10-17.

[3] Red Earth Building Maintenance Services Proprietary v Dura Australia Constructions [1999] VCAT 54 paragraph 8, Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 at 304.

[4] Sydmar Pty Ltd v Statewise Developments Pty Ltd 73 ALR 289 at 299-30.

[5] East Kew Construction Pty Ltd v Landspec Investments Pty Ltd (Unreported VCAT, O'Dwyer M, 24 January 2001).

[6] Rabel v Eastern Energy [1999] VSCA 103; [1999] 3 VR 45.

[7] Magazzu v Business Licensing Authority (2001) 17 VAR 266.

[8] Kearney v Legal Services Board [2006] VCAT 2303.

[9] See further the Second Reading Speech - Parliamentary Debates - Legislative Assembly - 1998 - Ms Wade (Attorney-General).

[11] Jones v Dunkel (1959) 101 CLR 298.