Mimi's Fine Foods Pty Limited v Cimino & Anor

Abuse of process: fresh proceedings making same claims 5In the proceedings instituted on 16 March 2009 (being proceedings 1926 of 2009), the plaintiffs were Mimi's Fine Foods Pty Limited and Mr Andrew Yiasemides. The defendants were Oreste Cimino, Nicola Cimino and Dorothy Cimino. Mimi's Fine Foods and Oreste Cimino and Nicola Cimino are parties to the present proceedings. 6The originating process filed in 2009 claimed the same relief as is sought in the originating process filed in these proceedings, save that one additional claim was made. The principal relief sought were declarations that each of the three defendants breached duties said to be owed pursuant to the Corporations Act 2001 (Cth) or the common law. The particular duties alleged to have been breached were not specified in the declarations sought. The plaintiffs also sought what was called statutory or equitable compensation. 7A further claim was made that the defendants account to Mimi's Fine Foods for such amount as the court might determine in respect of moneys said to have been improperly retained by the defendants at its expense. 8The same relief is sought in the current originating process. The originating process in each proceeding was supported by an affidavit of Mr Yiasemides. Save for the addition of some paragraphs dealing with alleged irregularities appearing in documents Mr Yiasemides deposes were provided to him after 26 June 2009, the affidavits are in the same terms. 9Mr Yiasemides claims that on 13 July 2007 he acquired the shares in Mimi's Fine Foods from his then wife, Dorothy Cimino, and that she appointed him as the sole director of the company. He says that notwithstanding his appointment as director, the affairs of the company were conducted by others, in particular, the first and second defendants, Oreste and Nicola Cimino, and he was unable to obtain proper information in relation to the conduct of its business. He says, in substance, that Oreste and Nicola Cimino used company moneys to acquire supplies of nougat from a company controlled by him, and that that product was sold, but the proceeds of sale not accounted for. 10He says, in substance, that he is not in a position accurately to determine what sales were made, or how much money ought to have been accounted for to the company. He says that the first defendant made admissions about that. He deposes that based on his calculations, a conservative figure of approximately $135,000 exclusive of GST on wholesale basis has not been deposited, or if sales were calculated on a retail basis, then an amount up to $1,038,818.50 was not deposited. That was exactly the same allegation he made in the 2009 proceedings. 11On the application of Dorothy Cimino, the 2009 proceedings were transferred to the Family Court. Oreste and Nicola Cimino became parties to the Family Court proceedings. 12As I have said, on 23 July 2009 the parties reached an agreement that was then embodied in orders that the Family Court made by consent. The orders of the Family Court record that the seventh and eighth respondents (being Oreste and Nicola Cimino) then appeared. The orders record no appearance for Mimi's Fine Foods Pty Limited. However, on the evidence, the person who was the director and sole shareholder of that company either Mr Yiasemides, as he contends, or Dorothy Cimino, as she may have contended, were parties to the agreement. 13Order 7 was that the 2009 Supreme Court proceedings were dismissed with no order as to costs. 14By order 11, Mr Yiasemides granted a release and indemnity to his wife in respect of certain matters. 15By order 10, Dorothy Cimino gave a release and indemnity to Mr Yiasemides in respect of certain matters. 16Order 12 contained a declaration that: "[O] ther than as is specifically provided for in these Orders the parties are solely entitled to the exclusion of the other to all other property, chattels and choses in action of whatsoever nature and kind in the possession of each of the parties as at the date of making of these Orders ." 17During the course of submissions, counsel for the defendants accepted that, because there had been no hearing on the merits, the dismissal of the 2009 proceeding did not prevent the plaintiff from bringing fresh proceedings or claiming the same relief in these proceedings as was claimed in those proceedings. That concession was rightly made ( Civil Procedure Act 2005, s 91; Ferrella v Otvosi [2005] NSWSC 678; (2005) 63 NSWLR 523). 18The question then is whether order 12 precludes Mimi's Fine Foods from instituting these proceedings. As the present application is one for summary dismissal and not for a separate trial of that question, the question is to be approached on the basis that the proceedings should not be summarily terminated as an abuse of process if there is a real question of either fact or law to be determined ( Dey v Victorian Railways Commissioners [1949] HCA 1; (1949) 78 CLR 62 at 91; Coshott v Barry & Beard [2010] NSWSC 1324 at [8]-[14]; Spencer v Commonwealth of Australia (2010) HCA 28; (2010) 84 ALJR 612 at [24]). 19It is far from clear that order 12 precludes the plaintiff from pursuing these proceedings. 20There is nothing to indicate that the consent orders made in the Family Court would not constitute a binding agreement between the parties, and I think it is at least strongly arguable that the agreement would bind Mimi's Fine Foods as well. 21However, there is nothing in order 12 of the agreement which operates as a release of the chose in action that Mimi's Fine Foods asserted in the 2009 proceedings and asserts again in these proceedings. It is consistent with Mimi's Fine Foods maintaining a claim for damages or compensation that the defendants should be " solely entitled " to the " property, chattels and choses in action " in their possession as at date of the Family Court orders. 22The pleaded claims do not include any proprietary claim. It was not then, and is not now, said that the defendants hold assets of Mimi's Fine Foods on trust. The claims made in these proceedings and in the 2009 proceedings are personal claims only. Where the agreement provided for a party to be released, that was specifically provided for. But the only releases given were to the wife and the husband. 23Moreover, as Mr Newton, counsel for the plaintiff, submitted, the agreement provides for the parties to be entitled to existing choses in action. One of the parties to the proceedings was Mimi's Fine Foods and it asserted at that time a chose in action against the defendants. 24Accordingly, I do not consider that the orders made in the Family Court preclude the plaintiff from bringing and maintaining these proceedings.

Abuse of process: collateral purpose 25The allegation of abuse of process based on improper or collateral purpose is founded on a letter written by the solicitor for Mr Yiasemides to the solicitors acting for Dorothy Cimino. Mr Yiasemides' solicitors, Paul & Paul Lawyers, wrote on 17 July 2009 that there were serious matters that needed to be addressed if all litigation between the parties were to cease. They alleged that a forensic examination of the MYOB database of Mimi's Fine Foods had concluded that the database had been manipulated when it was in Dorothy Cimino's possession. 26The solicitors observed that no indemnity had been given to the first and second defendants. They then broached allegations that Dorothy Cimino was said to have made concerning threats or harassments by Mr Yiasemides or his son. These allegations were rejected. Paul & Paul Lawyers went on to say that they requested Dorothy Cimino's and the first and second defendants' consent to certain orders. These included that those three persons be restrained from manufacturing any kind of confectionary produce or for coming near certain properties, including Mr Yiasemides' house and a chocolate store and factory occupied by companies he controls. 27The solicitors also proposed that Dorothy Cimino acknowledge that there had been no harassment and that she withdraw AVO proceedings which she had instituted. The solicitors said that if consent to the proposed orders was not given, proceedings would be brought against the first and second defendants. 28Mr Menadue for the defendants submits that by this correspondence, Mimi's Fine Foods, which was and is under Mr Yiasemides control, was threatening to commence these proceedings to obtain a collateral advantage unconnected with the proceedings. 29It is an abuse of process to institute proceedings with a predominant purpose of obtaining a collateral advantage outside the proper purpose for which the proceedings are designed. It is not an abuse of process to bring proceedings for the purpose of pursuing them to a conclusion to obtain whatever entitlement or benefit the law provides if the proceedings are successful. It is not an abuse to pursue a claim which has substance, even though the plaintiff is motivated by personal hostility or the hope of some indirect advantage, or compromise, if the plaintiff does not use fraudulent means. ( Williams v Spautz [1992] HCA 34; (1992) 174 CLR 509; Dowling v Colonial Mutual Life Assurance Society Ltd [1915] HCA 56; (1915) 20 CLR 509; Australian Beverage Distributors Pty Ltd v Redrock Co Pty Ltd [2007] NSWSC 966). 30These proceedings were instituted on 7 October 2010. That is to say, more than a year after the letter written by Mr Yiasemides' solicitor was sent. It is clear from that letter that had Mr Yiasemides' demands been met, he would have agreed not to pursue these proceedings. However, it is not an abuse of process for a party to endeavour to compromise the claim before instituting proceedings, even if the compromise relates to matters which go beyond the scope of the issues or the relief raised in the proposed proceedings. 31I do not infer from the making of that offer that Mr Yiasemides' predominant purpose in pursuing these proceedings is not to bring them to a conclusion, but to obtain an advantage which is outside their scope by coercing his former wife into abandoning other proceedings she has brought in relation to allegations of harassment. Nor do I infer that his predominant purpose in bringing these proceedings is to intimidate or coerce the first and second defendants to accept restraints on their behaviour to which Mr Yiasemides is not otherwise entitled. 32A clear case would need to be established that that was Mr Yiasemides' predominant purpose. This is not shown from the tender of the letter, nor the fact that Mr Yiasemides does not in his evidence on this application specifically address that letter. 33Mr Yiasemides' principal affidavit gives rise to the inference that he is pursuing the proceedings in order to recover for Mimi's Fine Foods moneys which, he says, has been misappropriated. The fact that he offered terms not to bring such proceedings a year before their commencement is not enough to justify a conclusion that that is not his predominant purpose. He was not cross-examined on this point. 34For these reasons, I do not consider that the proceedings should be summarily dismissed. 35There is an issue whether a certificate should be provided by the plaintiff's solicitor under s 347 of Legal Profession Act 2004. Counsel for the plaintiff accepts that the proceedings have to be pleaded. That pleading will establish whether or not the plaintiff is truly claiming damages to which s 347 of Legal Professional Act refers. 36There is no reason to apprehend that if a certificate under that section is required it will not accompany the statement of claim that is to be filed. The proceedings are not invalidly constituted for the arguable want of such a certificate.

Security for costs 37The plaintiff accepts that it may be unable to meet an order for costs if costs are ordered against it. It accepts that it is financially impecunious. The jurisdiction to order security for costs is not in issue. The plaintiff submits that the court in its discretion should not make an order for costs because its impecuniosity has been caused by the conduct of the defendants about which it complains. 38Consideration relevant to making an order for security for costs were considered by Beazley J (as her Honour then was) in KP Cable Investments Pty Ltd v Meltglow Pty Ltd [1995] FCA 76; (1995) 56 FCR 189 at 196 to 198. I will not repeat them all. 39One ground on which security may be opposed is if the plaintiff has a bona fide claim which will be stultified by the making of an order for security for costs. In Bell Wholesale Co Limited v Gates Export Corporation (No. 2) (1984) 2 FCR 1, the Full Court of the Federal Court said that security should not be refused on this ground unless the company establishes that those who stand behind it and who will benefit from the litigation, if it is successful, are also without means. In this case the person standing behind the plaintiff is Mr Yiasemides. There is no evidence of his means. He has not proffered an undertaking to be liable for any costs orders made against the plaintiff. 40I accept that there is a separate principle that security for costs may be refused where it can be seen that the plaintiff's impecuniosity is caused by the defendant's conduct. In the present case, Mr Yiasemides deposes that, for reasons he gives, the defendants have deprived Mimi's Fine Foods of an amount ranging anywhere from approximately $135,000 plus GST to over $1 million. However, that evidence falls short of establishing that the plaintiff's impecuniosity was caused by the defendants. There is no evidence as to plaintiff's financial position before the alleged misconduct of the defendants. 41Moreover, Mr Yiasemides' evidence has not been tested and involves, it seems to me, a degree of speculation. 42This is an appropriate case for an order for security for costs. I accept that security should be ordered in stages and it is appropriate to make an order for security for costs in an amount up to trial, with liberty for the defendants to apply to increase that amount. 43The defendants' solicitor, Mr Alexander Law, estimates the defendants' costs of the proceedings to be in the order of $209,600. He provides a breakdown of that estimate. It is difficult for a solicitor and for the court to make a reliable estimate of costs, given the nature of court proceedings. It seems to me from Mr Yiasemides' affidavit that there will be a degree of investigation required, including, no doubt, the issues of subpoenas to third parties; perhaps many third parties. 44Mr Law's estimate was not challenged, save in one respect, and appears to me, if anything, to be conservative. Part of his estimate of costs includes an amount of $25,600 for the cost of this application. I do not regard that estimate as conservative. In any event, it should not be included in the amount for which security is to be provided. Mr Law estimates approximately $100,600 as being the costs of a trial. 45In other words, he estimates about $75,000 as the costs of preparation up to hearing, although I expect that part of the estimated costs of hearing would be the barrister's costs of preparation. I think an amount of security of $70,000, given the nature of the case, up to but not including the costs of hearing, would not be excessive. I will make an order for security in that amount.

Orders 46I order that the plaintiff file and serve a duly verified statement of claim by 25 March 2011. 47I order that the defendant file and serve a verified defence by 27 April 2011. 48Any reply should be filed and served by 6 May 2011. 49I stand the proceedings over to the Corporations List before the Corporations List Judge on 9 May 2011. 50I order that para 1 of the plaintiff's interlocutory process filed on 3 November 2010 be dismissed. 51I order that by 25 March 2011 the plaintiff provide security for the defendants' costs of this proceeding by way of a bank guarantee issued by an Australian bank, and otherwise to the satisfaction of the Registrar, in the sum of $70,000. 52I note that the amount of security for costs in the preceding order does not include security for the costs of hearing and that the defendant has liberty to apply for further security for costs of the hearing. 53I will not make an order at this stage for a stay of the proceedings pending provision of security for costs. If security is not provided, the defendants can apply then for a stay. 54I give liberty to the defendants to apply on seven days' notice for a stay of the proceedings if security is not provided. 55I order that the costs of the interlocutory process be the plaintiff's costs in the proceedings. The exhibits may be returned but should be held by the parties' solicitors pending further order. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 15 March 2011