Tripod Funds Management Pty Ltd v Shao

Solicitors: Mercantile Legal Services (Plaintiff) Levitt Robinson Solicitors (Defendant) File Number(s): 2014/218678

EX TEMPORE Judgment 1In these proceedings, the plaintiff is seeking to recover moneys against the defendant (Ms Shao) as guarantor of a loan made by the plaintiff to a company to which I should refer as "KHD". The defendant, on 5 September this year, served a notice to produce seeking financial documents from Tripod, the plaintiff, and on 6 September, the defendant filed a motion for security for costs. On 26 September, the plaintiff was ordered to provide documents in answer to the notice to produce by 3 October 2014. 2It is common ground that no documents were in fact ever produced by the plaintiff. On 13 October, the Court heard the defendants' application for security, and the plaintiff was ordered to pay $45,000 into Court, either as cash or by way of bank guarantee. 3On 14 October 2014, the defendant foreshadowed through her solicitors that there would be an application to dismiss the proceedings if the security ordered on 13 October was not paid, see Court Book p 11 which is Exhibit A. I shall refer to the Court Book pages from here on except where there are other exhibits. 4The defendant now seeks to have the proceedings dismissed for failure by the plaintiff to provide the security which was ordered to be paid. There is evidence from the defendant of the fact that the plaintiff lodged a caveat on the property in Lane Cove which is her residence, and which she says is inhibiting her from obtaining loans in connection with her business activities. 5There is no dispute that Mr Lazar, the sole director of the plaintiff, has been charged with certain offences of a financial nature, and that he has been imprisoned awaiting trial. It is also in evidence that he made an application for bail on 31 October 2014 which was refused: see CB p 41. Exhibit 1 shows that Mr Lazar's matter is listed today but it does not reveal the purpose or reason for that listing. 6There is no evidence from the plaintiff, either from Mr Lazar or anybody else on behalf of the plaintiff, detailing what steps have been taken in an endeavour to obtain funds to meet the Court order, and no evidence of any steps which are yet to be taken or proposed to be taken which will produce the funds which were to have been paid on 10 November, but which order was not complied with. 7There is evidence, see Exhibit B, that an application to wind up the plaintiff has been made by a company unconnected with the defendant or KHD, and that the basis of that application is s 459P of the Corporations Act 2001 (Cth). That application was made on 20 November, see p 2 of the document. 8There is agreement in relation to the basic principles which need to be applied in relation to applications of this kind. They were helpfully enumerated by his Honour Einstein J in Idoport Pty Limited v National Australia Bank [2002] NSWCA 271, and they are reiterated in both the submissions of Mr S Psaltis and Mr D Krochmalik, Mr Psaltis appearing for the plaintiff and Mr Krochmalik of counsel for the defendant. 9Those matters are: (1)the period which has elapsed since the security was ordered; (2)the fact that the plaintiff has been on notice to the application for the dismissal; (3)the seeming inability of the plaintiff to further fund the proceedings; (4)the prejudice to the defendant; and (5)the position of the Court. 10As his Honour Einstein J remarked in Idoport, Court, the principles are not exhaustive and: "All relevant circumstances required to be taken into account, including the Court straining wherever practical or consistently with the interests of justice to avoid taking the radical step of denying the plaintiff its day in Court." 11The authorities establish that, if a significant sum is ordered by way of security and the plaintiff with due notice of the dismissal application fails to satisfy the Court that there is any prospect of complying with the order, the proceedings should ordinarily be dismissed: see Porter v Gordian Runoff No 3 [2005] NSWCA 377 and Ballard v Brookfield [2013] NSWCA 82 per Ward JA at [103]. 12So far as the period which has elapsed since security was ordered, it was ordered on 13 October and it is now 28 November. That is not a particularly long period but it is not immediately after the expiry of the order of the time for compliance with the order. In respect of the second factor, notice of application for dismissal, that was made clear to the plaintiff on 13 October. 13In relation to the next factor "the seeming inability of the plaintiff to further fund the proceedings", there is, as I have said, no evidence which would support the conclusion that security is about to be or will soon be provided by the plaintiff, and not even any evidence of the steps taken by the company to endeavour to arrange security, either before the time elapsed or after. 14This view is strengthened by the only evidence concerning Tripod's potentially precarious financial circumstances, it failing to produce documents in relation to its financial position as ordered by the Court, and secondly, the application for winding up to which I referred. 15Mr Lazar, although he is the director of the company and is in gaol, is not precluded by being in gaol from taking steps to arrange payment. Secondly, he is not a shareholder of Tripod, and there is no evidence from any person connected with Tripod that they have endeavoured to deal with the problem of Mr Lazar's incarceration. Not only that, there is nothing to indicate at present what is likely to occur, should Mr Lazar continue to be incarcerated, either up until the time that he is dealt with in Court, or should he be found guilty of the offences charged, what would happen if he is to remain in gaol. 16Turning to the prejudice to the defendant, there are several prejudices identified by Mr Krochmalik. The first is delay, a type of prejudice as has been recognised by this Court in another context: see Brereton J in In the matter of AAMAC Warehousing and Transport Pty Ltd (in liquidation) [2014] NSWSC 834 at [32], his Honour referring to higher authority namely: Brisbane South Regional Health Authority v Taylor [1996] HCA 25; (1996) 186 CLR 541 and Re Clarecastle Pty Limited [2011] NSWSC 857 per Ward J at [200] - [215]. I have also made reference to this myself in the context of an application such as this. See First Tiffany Resource Corporation v Hill End Gold Ltd [2014] NSWSC 1713. 17Further, not only is there prejudice of that general kind, there is actual specific prejudice in that the defendant has a caveat lodged on the title of her home, and I cannot see any basis why she should have to await some indefinite period for the plaintiff to arrange for the security to be paid, and even less so when there can be no firm expectation of that occurring. 18Mr Krochmalik also pointed out, although it was not listed as a matter by Einstein J, if one looks at prejudice to the plaintiff, the plaintiff is not automatically precluded from bringing proceedings in the future, should these proceedings be struck out. The plaintiff would however have to pay any costs orders made against it as a condition of commencing fresh proceedings. 19I turn now to the question of the position of the Court. I think this is a reference to the general need for efficient administration of extensive numbers of cases and the fact that if proceedings are not dismissed they will sit in the list, with potential re-listings whilst the plaintiff tries, if it was going to try, to obtain the security. Mr Psaltis did point out, that the Court could, as an alternative, give a further time for the plaintiff to provide security, failing which, if it did not provide the security in that time, then there would be an automatic dismissal of the proceedings which would ameliorate to a considerable degree concerns of that kind. 20In relation to other factors, I did refer to the fact that the plaintiff's claim against the defendant was as guarantor of the loan. The foundation of that claim according to pleadings was an alleged default by KHD. The defendant actually has put on evidence before me of Mr Reynolds who worked for Tripod at the time, which evidence tends to support the defendant's claim that there was not in fact any default. I do not rely on that to any significant degree, other than to note that Tripod's claim has not been shown to be a particularly strong claim. 21I should also note that towards the end of submissions, Mr Psaltis sought in effect for this motion to be adjourned to some future date. As Mr Krochmalik pointed out, no application was made on 14 November when this matter was last before the registrar, and no application was made when I commenced hearing the motion for an adjournment. 22On my view, an adjournment is not appropriate. All that really is to be considered is whether further time should be allowed to the plaintiff to possibly arrange security. 23In my view, there is insufficient material to provide any confidence to the Court that that is likely, and particularly having regard to the prejudice of the caveat, and I think this is a case in which no further time should be allowed. 24Accordingly, orders should be made dismissing the proceedings, and the plaintiff should pay the defendants' costs of the proceedings including this motion.