//
© 2026 Zoe. All rights reserved.
Zoe is a legal information platform. Always consult the Federal Register of Legislation for authoritative text.
[2026] NSWSC 720
Supreme Court of NSW
2026-06-24
Sirtes J
Original judgment source is linked above.
Source: NSW Caselaw (www.caselaw.nsw.gov.au). Converted to plain text by ZoeLaw. Not the official version.
Medium Neutral Citation: Wilnet Pty Ltd v Smart Laundry Manager Pty Ltd [2026] NSWSC 720
Hearing dates: 19 June 2026
Date of orders: 24 June 2026
Decision date: 24 June 2026
Jurisdiction: Common Law
Before: Sirtes J
Decision: (1) Grant leave nunc pro tunc to the Respondent to file its Cross-Claim.
(2) The Respondent is to pay security for the Cross-Defendant’s costs in the amount of $35,932.75 by payment into Court.
(3) The Cross-Claim is stayed until the Respondent provides the security set out in order (2).
(4) In the event that the security set out in order (2) is not provided within 28 days after the date of this judgment, the Cross-Claim is dismissed.
(5) The Respondent is to pay the Applicant’s costs of the motion.
Catchwords: SECURITY FOR COSTS – corporate cross-claimant – no question of principle
Legislation Cited: Civil Procedure Act 2005 (NSW), ss 56, 57, 58, 59, 60 Corporations Act 2001 (Cth), s 1335 Uniform Civil Procedure Rules 2005 (NSW), r 42.21
Cases Cited: Globus Investments v Williams [2016] NSWSC 613
Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621
Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; [2009] HCA 43
Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302
Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82; [2002] NSWCA 32
Mitchell v Roads and Maritime Services (now known as Transport for NSW) [2022] NSWSC 500
Pioneer Park Pty Ltd (in liq) v Australia and New Zealand Banking Group Ltd [2007] NSWCA 344
Category: Procedural rulings
Parties: Wilnet Pty Ltd (Cross-Defendant/Applicant)
Smart Laundry Manager Pty Ltd (Cross-Claimant/Respondent)
Representation: Counsel:
AJ Munro (Cross-Defendant/Applicant)
Solicitors:
Lewis and Crane (Cross-Defendant/Applicant)
J Ssebabenga (Representing Cross-Claimant/Respondent with leave)
File Number(s): 2026/00026395
By Notice of Motion filed on 13 May 2026, the Plaintiff in these proceedings, Wilnet Pty Ltd, in its capacity as a Cross-Defendant, applies for security for the costs of defending the Cross-Claim. The application is opposed.
It is largely uncontroversial that the Respondent to the motion, and Defendant in the proceedings, Smart Laundry Manager Pty Ltd, would be unable to satisfy an order for security. Neither does there appear to be a dispute as to the amount sought by the Applicant by way of security. The parties join issue on the following issues:
the degree of overlap between the Statement of Claim and the Cross-Claim;
whether an order for security would stultify the proceedings; and
whether an indemnity offered by the Respondent from a related company is sufficient to protect the Applicant.
The Applicant has since 18 August 2025 been the registered proprietor of commercial property (the Property) located in the North Boambee Valley on the outskirts of Coffs Harbour in NSW. The Respondent occupies units 3 and 4 of the Property and conducts a commercial laundry business from the premises.
On 20 January 2026, the Applicant commenced proceedings seeking orders for, inter alia, possession of the Property.
On 8 April 2026, the Respondent filed its Cross-Claim by which it seeks certain damages and equitable compensation. The Applicant, despite filing a Defence to the Cross-Claim, has pointed out that the Cross-Claim was filed without leave. There was also some discussion regarding whether the Respondent had paid the fee for filing the Cross-Claim. Having consulted the Registry, I am satisfied that the filing fee was paid. In circumstances where a Defence has been filed to the Cross-Claim and the requisite filing fees have been paid, I will grant leave for the Cross-Claim to be filed nunc pro tunc.
The Applicant seeks security in the amount of $35,932.75 pursuant to rr 42.21(1)(d) and (e) of the Uniform Civil Procedure Rules 2005 (NSW) (the UCPR) and/or s 1335 of the Corporations Act 2001 (Cth) (the Corporations Act).
The Court may order a plaintiff to give security if it appears to the Court that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so: r 42.21(1)(d) UCPR. At the commencement of the hearing, Mr Munro, Counsel for the Applicant, added that, given the relationship between the Respondent and a related company, discussed at [17]–[20] and [42]–[48] below, the Applicant also relied upon r 42.21(1)(e) of the UCPR Beauce it may appear that the Cross-Claim was pursued for the benefit of the related company.
Section 1335 of the Corporations Act provides:
“(1) Where a corporation is plaintiff in any action or other legal proceeding, the court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
(2) The costs of any proceeding before a court under this Act are to be borne by such party to the proceeding as the court, in its discretion, directs.”
While the words are different, the operation of the provision is, relevantly, the same as r 42.21 of the UCPR.
Some of the factors to which I may have regard in considering whether to make such an order are contained in r 42.21(1A) of the UCPR. It is not an exhaustive list and I need not have regard to every factor contained in the provision: Globus Investments v Williams [2016] NSWSC 613 at [10]–[11] (Campbell J). In addition to those factors, I must have regard to the principles contained in ss 56–60 of the Civil Procedure Act 2005 (NSW). I consider the following matters contained in r 42.21(1A) of the UCPR to be relevant in determining this matter:
the Cross-Claim’s prospects of success;
the Respondent’s impecuniosity;
the risk of stultification; and
whether the Cross-Claim is defensive.
At the hearing, each party read and relied upon affidavit evidence. The Applicant relied upon the affidavit of the solicitor with carriage of the matter, Mr Paul Crane, dated 13 May 2026. The Respondent relied upon two affidavits of the sole director of the Respondent, Ms Esther Ndagire Ssegawa, dated 13 May and 4 June 2026. Both parties also read and relied upon documents styled “accounts report” and “damages document”, which, I was advised, had been prepared by Ms Ssegawa.
I have also taken into consideration the parties’ written submissions.
It should be noted that for the purposes of the hearing I granted leave to Ms Ssegawa’s husband, Mr Joel Ssebabenga, to appear for the Respondent. I did so, on this occasion, for efficiency and expediency. The Respondent has not retained a solicitor to act on its behalf, and Ms Ssegawa is in Coffs Harbour. Had leave not been granted, this motion either would have been adjourned or proceeded in the absence of any representation for the Respondent. The Respondent’s representation will need to be regularised in the future.
I must first consider whether the Respondent will be unable to pay the Applicant’s costs if ordered to do so. During the hearing, Mr Munro carefully took the Court through the annexures to Mr Crane's affidavit. Those annexures reveal the following.
The Respondent was registered on 24 September 2020 with a paid-up share capital of $100. That shareholding was split between Ms Ssegawa and Mr Ssebabenga 40/60 respectively.
A credit report concerning the Respondent characterises it as a company at a “high” risk of default, with one payment default having already occurred. That default occurred in October 2025 for an invoice due in November 2023 for $1,118.15. Further, the Respondent usually takes 72 days beyond terms to pay its invoices, compared to the industry average of nine days.
There are several companies associated with Ms Ssegawa. A strike off was pursued against one of them, Ellather Financial Services, on 20 September 2023. A bank statement of Yoweri Laundries Pty Ltd (Yoweri), which is a commercial laundry business operating from the Property, reveals a closing balance as at 31 March 2026 of $1,253.99. A bank statement of the Respondent shows a closing balance of $0.64 as at 31 March 2026. The Applicant asserts that the bank statement is the only document provided by the Respondent relating to the Respondent’s financial position.
Several invoices from third parties have been included in the court book. Those invoices are addressed solely to Yoweri and not the Respondent. A photograph of the Property shows a large sign on its façade which reads “Yoweri Laundry”.
This combination of factors strongly supports the Applicant’s submission that the business operated at the Property is that of Yoweri and not the Respondent. This gains support from the indemnity proffered by Yoweri. Whether this is a breach of the lease is not a question I need resolve here.
From those matters I find the following:
the Respondent is a company which owns no property, has a paid-up share capital of $100 and almost no money in its bank account;
the Respondent does not appear to operate the business at the Property. It seems to hold the lease whilst the business conducted from the Property is owned and operated by Yoweri; and
there is no evidence to suggest that either Ms Ssegawa or Mr Ssebabenga has significant means.
Based on those findings, I am satisfied that the Respondent is indigent and that there is reason to believe the Respondent will be unable to pay the Applicant’s costs if required to do so.
Proceedings will be characterised as defensive where they are either directly resisting proceedings or seeking to halt self-help procedures: Interwest Ltd v Tricontinental Corporation Ltd (1991) 5 ACSR 621 at 627 (Ormiston J). A cross-claim which resists a claim will generally have substantial overlap with the claim itself. Where a cross-claim is defensive, the cross-defendant is unable to obtain security as to do so would bestow the benefits of security on a plaintiff rather than a defendant.
The Applicant filed a Further Amended Statement of Claim (the FASOC) on 2 April 2026, seeking judgment in the sum of $18,222.43 and possession of the Property. The FASOC records that the Applicant became the registered proprietor on 18 August 2025 on completion of a contract for sale between itself as purchaser and RL Hill Engineering Pty Ltd (the previous registered proprietor) as vendor. The contract for sale was subject to existing tenancies and annexed copies of the leases for units 3 and 4.
The Respondent had entered into a lease with the previous registered proprietor for unit 3, for a three-year term, on 2 December 2020. On 27 July 2021 it entered into a written commercial lease with the previous registered proprietor for unit 4. By the date of the sale to the Applicant, both leases had expired and had become periodic tenancies.
The FASOC records that on 23 April 2024, the previous registered proprietor notified the Respondent that it required rent to be paid by the first day of each month for a three-month “trial period” after which, if it were successful, the parties would enter into a new lease for units 3 and 4.
On 12 June 2025 the Respondent commenced proceedings in the NSW Civil and Administrative Tribunal (NCAT) against the previous registered proprietor asserting an agreement for a new lease of units 3 and 4 and seeking orders that the previous registered proprietor grant a new lease to the Respondent. What occurred in those proceedings is not known to the Court. However, the fact that the NCAT proceedings were instituted against the previous registered proprietor underscored that the Respondent’s grievance is with that entity.
On 26 and 30 August 2025, the Respondent asserted to the Applicant in writing that a new lease of the premises had been agreed with the previous registered proprietor after 14 December 2023 for a term of “three or five years” and that a formal lease was to be prepared by the solicitors acting for the previous registered proprietor.
On 23 September 2025, the Applicant notified the Respondent in writing that it was in rental arrears in the sum of $4,560.77 pursuant to the periodic tenancy and that the Applicant was entitled to terminate the Respondent’s occupation of the premises.
On 4 November 2025, the Applicant issued a written notice of termination of the periodic tenancy and required the Respondent to deliver up possession on or before 8 December 2025.
The FASOC claims, in addition, unpaid rent and outgoings or, in the alternative to unpaid rent, mesne profits.
The Defence filed on 6 February 2026 pleads that the previous registered proprietor made certain representations to the Respondent and that the Applicant “affirmed or ratified the existing tenancy” because it had been informed by the Respondent of the agreement with the previous registered proprietor.
It also pleads an equitable lease and estoppel.
On 8 April 2026, the Respondent filed its Cross-Claim. To some extent, it repeats the matters raised in its Defence. The Respondent contends that it entered a new lease arrangement with the previous registered proprietor upon which it relied to its detriment. There is some attempt to connect the Respondent’s dealings with the previous registered proprietor to the Applicant when the Cross-Claim asserts:
“22. During the period from July to August 2025, the Cross-Claimant expressly notified the Cross-Defendant’s agents of its rights, interests, and position in respect of the [Property], and formally requested that the matter be resolved prior to any acquisition of the [Property].
- Notwithstanding the above, and with full knowledge (actual and/or constructive) of the Cross-Claimant’s interests, the Cross-Defendant proceeded to complete the purchase of the premises.”
It is on that basis that the Respondent asserts an equitable lease, proprietary estoppel, unjust enrichment, unconscionable conduct and various claims for loss and damage. The loss and damage comprise the following:
wasted expenditure;
lost lease opportunities;
operational inefficiencies;
increased labour costs;
equipment and linen damage; and
loss of profits and expansion.
Even apart from the somewhat novel nature of the Respondent’s claim, I consider there to be little overlap between the FASOC and the Cross-Claim. The Applicant claims that it purchased the Property knowing there was a tenant. The Cross-Claim seeks not only to establish an unwritten tenancy agreement with the previous registered proprietor which creates an interest in the Property, but also that the Applicant is bound by that interest.
Even though there are consequences for the Applicant’s claim if the Cross-Claim succeeds, that is not in itself “overlap” for the purposes of the principles which govern the imposition of security for costs.
Further, I consider that the Cross-Claim has limited prospects of success. The identity of the party which has suffered the loss is problematic. The Applicant makes submissions, by reference to documentation, that the losses pleaded in the Cross-Claim are not losses suffered by the Respondent but, rather, by Yoweri, the company which actually operates the commercial laundry. I agree. In my opinion, the Respondent’s Cross-Claim fails properly to disclose a cause of action against the Applicant. This is also problematic with regard to any overlap between the Cross-Claim and FASOC. Any loss suffered by Yoweri is irrelevant to the claim.
Having found that there is minimal overlap between the claim and Cross-Claim, and that any such overlap is insignificant, I consider that the Cross-Claim is “offensive” and any overlap is no impediment to an order for security.
The risk of stultification and a party’s impecuniosity are factors to which I may have regard under rr 42.21(1A)(f) and (c) of the UCPR. A party who claims that an order for security would unduly stultify the proceedings bears the onus of proving that contention, and if proven, it is a powerful factor to be taken into account in deciding whether an order for security is appropriate: Li v State of New South Wales [2013] NSWCA 165 at [45]–[46] (Ward JA, Macfarlan and Gleeson JJA agreeing).
Impecuniosity weighs against the making of an order for security but is not an absolute barrier: Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; [2009] HCA 43 at 118 [91] (Heydon J). It is not uncommon for an order for security to be made against an impecunious litigant where some additional factor supports that course: Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82; [2002] NSWCA 32 at 108–109 [102] (Stein JA, Heydon JA and Young CJ in Eq).
However, neither impecuniosity alone nor the mere risk of stultification is sufficient to demonstrate that an order for security will stultify the proceedings: Pioneer Park Pty Ltd (in liq*) v Australia and New Zealand Banking Group Ltd* [2007] NSWCA 344 at [51] (Basten JA). A plaintiff who relies on such a risk must adduce candid and detailed evidence of their financial position: Live Board Holdings Ltd v Cody Live Pty Ltd [2017] NSWCA 302 at [90] (Bathurst CJ, Leeming JA and Barrett AJA).
It is clear from the matters set out at [14]–[21] that the Respondent is itself impecunious. However, during the hearing, Mr Ssebabenga tendered a document styled “Deed of Indemnity and Litigation Support” (the Deed) dated and filed on 19 June 2026. Recital “B” of the Deed asserts:
“B. Yoweri Laundries Pty Ltd conducts business from the same premises and has a substantial commercial interest in the continuation of the proceedings.”
“1. Indemnity
Yoweri Laundries Pty Ltd irrevocably indemnifies [the Respondent] against any costs order made by the Supreme Court of New South Wales arising out of proceedings 2026/00026395.”
“That is the material which we had to hand until an hour or so ago. We were then served with what is exhibit 2 which purports to be a deed of indemnity between the [Respondent] and Yoweri Laundries. The difficulty with this, your Honour, is considering we were only served with this couple of hours ago, simply not had the time to conduct any proper investigations into the financial capacity of Yoweri Laundries Pty Ltd. We don't know, for example, whether it has outstanding encumbrances. There are references to numerous invoices made out to that company. We don't know to what extent that company's borrowed money to finance that machinery. We don't know what sort of security the financiers may have over that entity, and we are really in no better position in terms of security for my client's costs to know whether that deed of indemnity will do anything at all to protect my client or those costs.” (Emphasis added.)
I agree that little is known about Yoweri’s capacity to satisfy a future costs order.
The approach to potential orders for security against litigants indemnified by third parties that would benefit from the litigation was set out by Justice Ball in Mitchell v Roads and Maritime Services (now known as Transport for NSW) [2022] NSWSC 500, where his Honour stated at [13]:
“In circumstances where the proceedings are being brought partly for the benefit of a litigation funder, but it is not possible to determine how easy or difficult it will be to enforce any costs order against the litigation funder, it is appropriate that the funder should provide security, which will be the effect of an order for security in this case.”
“Yoweri Laundries Pty Ltd conducts substantial business operations from the same premises. Yoweri Laundries continues to trade profitably and maintains business banking facilities. Yoweri Laundries has agreed to indemnify and supported [the Respondent] [for] any Court order made in [these] proceedings. Deeds of indemnity. ... The Court may take that support into account when assessing whether there is a real risk that any future costs order would be unsatisfied.”
The evidence in this matter and Mr Ssebabenga’s submission strongly indicate that the proceedings are being pursued for the benefit of Yoweri, which operates the laundry business.
It is true that I may take the Deed into account when assessing the risk that the Respondent would be unable to satisfy a future costs order, and I have done so. However, I must be concerned not with the present time but a future time when any costs order would become payable.
If the Cross-Claim were unsuccessful and an order made that the Respondent pay the Applicant’s costs at some time thereafter, an amount would need to be paid. How the Respondent would enforce an indemnity given by Yoweri is unclear. Yoweri has not given any undertaking to the Court. I am concerned by the possibility that if the Applicant succeeds in the substantive matter and it becomes necessary for Yoweri and the Respondent to operate from separate premises, one or both of those businesses might not remain viable or could become unable to pay costs because of the cost of relocation.
The Respondent has not adduced sufficient evidence to establish that an order for security would stultify the proceedings. Further, I am not satisfied that the indemnity proffered by Yoweri, at the heel of the hunt, mitigates the risk of the Respondent being unable to pay a future costs order.
In circumstances where, as I have already found, the Respondent is impecunious, no proper provision has been made for costs to be paid by a third party, and the Cross-Claim appears rather novel, it is appropriate to award security in favour of the Applicant.
I make the following orders:
Grant leave nunc pro tunc to the Respondent to file its Cross-Claim.
The Respondent is to pay security for the Cross-Defendant’s costs in the amount of $35,932.75 by payment into Court.
The Cross-Claim is stayed until the Respondent provides the security set out in order (2).
In the event that the security set out in order (2) is not provided within 28 days after the date of this judgment, the Cross-Claim is dismissed.
The Respondent is to pay the Applicant’s costs of the motion.
Wilnet Pty Ltd
Smart Laundry Manager Pty Ltd
(2009) 239 CLR 75
(2002) 54 NSWLR 82