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Judgment

1. HIS HONOUR: I am dealing with two notices of motion in proceedings in which the plaintiffs are Wyse & Young International Pty Ltd as first plaintiff, Defined Properties Investment Pty Ltd as second plaintiff, and Wolgan Consulting Pty Ltd as third plaintiff. The first defendant is Mr Corrado Sanna. The second defendant is a company called DCL Construction Company Pty Ltd. The fourth defendant is Mr Domenic Sanna. The fifth defendants are the trustees in bankruptcy of Ms Lepra Sanna. There is a named third defendant called DLD (NSW) Pty Ltd which is deregistered.
2. The plaintiffs move on an amended notice of motion filed on 28 September 2015. They seek an order that ASIC reinstate the registration of DLD (NSW) Pty Ltd pursuant to s 601AH of the Corporations Act 2001 (Cth). They also seek a freezing order against the first to fourth defendants. They also purportedly seek declarations that land in the name of the first defendant and the fifth defendant, being the trustees in bankruptcy of Lepra Sanna, is charged in favour of the second plaintiff, Defined Properties Investment, for payment of moneys outstanding to each of the plaintiffs. It was inappropriate to seek such final relief by way of notice of motion and those claims are not pressed. The notice of motion also sought what was called an order for the cross-vesting of the Family Court jurisdiction to this Court. But again, that application (which was misconceived) was not pressed.
3. In substance on the plaintiffs' application there is the application for reinstatement of the registration of a company which is deregistered and an application for freezing orders against the defendants.
4. For their part, the first, second and fourth defendants seek the provision of security for costs.
5. It has not been easy to understand the nature of the plaintiffs' claims for final relief. The task is not assisted by the proceedings having been wrongly commenced by way of summons rather than by statement of claim. Nor was the substance of the plaintiffs' claims made any easier to understand by the submissions of Mr Foley, solicitor, who appeared for the plaintiffs on the application.
6. The summons seeks declarations that a Cost Agreement dated 21 October 2011 and a Deed of Acknowledgment of Debt dated 24 July 2012 between Wyse & Young International Pty Ltd trading as Wyse & Young Accounting and what was called the first defendant, Ms Lepra Sanna and others, as clients, are valid and subsisting. In fact Ms Sanna is not a defendant. The summons seeks a declaration that a Deed of Loan between the second plaintiff, Defined Properties Investment and DCL Construction Group and DLD (NSW) as borrowers and Corrado Sanna and Lepra Sanna as guarantors, is valid and subsisting. The summons seeks a declaration that what is called a General Security Agreement between Defined Properties Investment as lender and DCL Construction Group and DLD (NSW) as borrowers and Mr Corrado Sanna and Ms Lepra Sanna as guarantors, is valid and subsisting. Next, the summons seeks a declaration that what is called a Saving Fee Agreement between the third plaintiff, Wolgan Consulting Pty Ltd, as principal, and Ms Lepra Sanna as client, dated 15 October 2011, is valid and subsisting.
7. The summons then goes on to seek declarations that a transfer of Lepra Sanna's interest in a property at Copacabana to her husband, Corrado Sanna, was made for the purpose of defrauding creditors and should be set aside. The summons then seeks a declaration to the same effect in respect of what is said to be a transfer of shares in DCL Construction Group from Mr Corrado Sanna to his son Domenic Sanna. It seeks a declaration that the plaintiff (query which one) is entitled to possession and transfer of personal property belonging to the first three defendants pursuant to the provisions of the General Security Agreement dated 26 July 2012. It seeks judgment for possession in favour of the second plaintiff in respect of a property now in the name of Corrado Sanna. It seeks judgment for possession of a property in Green Valley apparently, according to the summons at least, in the names of Corrado Sanna and the fifth defendant, the trustees in bankruptcy of Lepra Sanna. It then seeks orders for monetary relief.
8. The first plaintiff, Wyse & Young International Pty Ltd, seeks an order that Mr Sanna, DCL Construction Group and DLD (NSW) pay $136,472 and interest in accordance with the terms of the costs agreement dated 21 October 2011 and a Deed of Acknowledgment of Debt dated 24 July 2012. The summons seeks an order that Mr Sanna, DCL Construction Group and DLD (NSW) pay to the "cross-claimant" a sum of $1,123,333.39 in interest together with interest in terms of the Deed of Loan, together with interest at the rate of 30 per cent per annum. There is no cross-claimant. But I assume that that claim for relief is for payment of sum of $1,123,333 and interest to the second plaintiff, Defined Properties Investment. The summons then seeks an order that Mr Sanna pay Wolgan Consulting Pty Ltd $78,000 and interest in accordance with the terms of the Savings Fee Agreement. There are additional orders sought in relation to the payment of interest and costs.
9. Doing the best I can without the assistance the Court is entitled to expect, it appears that it is the plaintiffs' case that on 21 October 2011 Ms Lepra Sanna signed an agreement with Wyse & Young International in which the customers were named as Corrado and Lepra Sanna and another which is said (I think) to set out the terms on which Wyse & Young International agreed to provide accountancy services to companies associated with the Sannas and perhaps to them personally. I say "I think" because the document is prefaced with a statement that suggests that Wyse & Young International was to assume the role of finance broker. But I was told that that was not the role that the company played and it is not a role for which it seeks payment. I was not taken to the document called 'Deed of Acknowledgment of Debt' but I was taken to a document dated 26 July 2012 called "Deed of Loan" between Defined Properties Investment and four companies, including DCL Construction Group and DLD (NSW), expressed to be made between Defined Properties Investment as lender and those companies, together with two others, as borrower, and with Mr Corrado and Ms Lepra Sanna as guarantors. The document is purportedly executed by the companies and purportedly signed by Mr Sanna and by Ms Sanna. I say "purportedly" because Mr Sanna has deposed that he did not sign the document. The question whether he did sign the document will be an issue for trial.
10. The document provides that the borrower, being the four companies, acknowledges receipt of a principal sum of money, $1,200,000. It then inconsistently states that the principal sum would be advanced upon the last to occur of five stated events. A deed dated 26 July 2012 called a "General Security Agreement Personal Property" is expressed to be made between the same parties, including Mr Corrado Sanna and Ms Lepra Sanna as guarantors. It appears to provide additional security for the proposed loan. The loan was said to be for a period of 30 days at a higher rate of interest of 30 per cent per calendar month.
11. The plaintiffs, through Mr Dimitriou, who is the sole director of each of the plaintiffs, have tendered two mortgages apparently signed by Ms Lepra Sanna and Mr Corrado Sanna dated 26 July 2012 over properties then registered in their names at Glen Hills and Copacabana. The mortgages acknowledge receipt of a principal sum of $1,200,000 although one of the mortgages also refers to the principal sum which the mortgagor undertook to repay as being an amount of $30,000. The plaintiffs say that on 26 July 2012 the sum of $1,200,000 was advanced at the direction, it seems, of Lepra Sanna. Of this amount, $913,473.65 is said to have been paid to Australian Executive Trustees Limited to discharge an existing mortgage, presumably (although I was not taken to any evidence to establish this) in the names of Mr and Ms Sanna. An additional payment of $10,000 was to be paid to Gadens for acting for the mortgagor on the transaction. Amounts of $149,223.39 and $89,286.28 were apparently directed to be paid to Wolgan Consulting as a "saving fee" and to Wyse & Young International in part payment of a fee which was not described in the document. Other amounts said to total in excess of $77,190.23 were said to be payable when the settlement was to take place. It is not clear that those amounts were paid, or by whom they were paid, or that any direction was given for their payment. But they are said to have included further payments to Wyse & Young International.
12. In support of the application for a freezing order, the plaintiffs refer to a transfer dated 8 May 2013 by Lepra Sanna of her interest in a property at Copacabana to her husband, Corrado Sanna, and to a further transfer (which is undated) by Lepra Sanna to Corrado Sanna of her interest in another property which I understand to be a property at Green Valley. It is said these transfers are evidence of an attempt to deal with assets so as to strip them from Lepra Sanna's estate. In some way it is said that this gives rise to an apprehension that Mr Corrado Sanna will take the assets which he received from Lepra Sanna and deal with them in a way which would frustrate the execution of a judgment that the plaintiffs hope to obtain against him. Both transfers are expressed to be made pursuant to s 90C of the Family Law Act 1975 (Cth).
13. I was referred to an agreement described as a Binding Financial Agreement made between Mr and Ms Sanna and dated 16 December 2011. Mr Foley, who appeared for the plaintiffs, described the agreement as being one simply for the transfer of assets from Lepra Sanna to Corrado Sanna. It is not of that kind. It provides for a mutual transfer of assets and liabilities. It recites that Corrado and Lepra Sanna had separated on 1 March 2011. I understand that that agreement, and what I was told was another agreement made to the same effect, but perhaps in relation to different assets, between the same parties, are attacked as transfers in fraud of the creditors.
14. However, in the course of submissions, Mr Foley said that the plaintiffs did not wish to pursue any claim against the fifth defendants, the trustees in bankruptcy of Lepra Sanna. He also said, and in this respect I think I understand his submission, that it would not substantially affect his clients' position whether such transfers were in fraud of creditors or not. Presumably this is because his clients will seek to execute judgments they hope to obtain against Mr Sanna, and execution of judgments against him would not be assisted by orders requiring the transfer of assets from him to his wife or former wife.
15. As I understand it, it is said that Mr Sanna's participation in the agreements indicates that he is prepared to participate in transactions which are in fraud of creditors, and that this goes some way to demonstrating a risk that he will deal with his assets for the purpose or with the effect of defeating a judgment. The evidence adduced on this application would not justify any such finding. Nothing was adduced on this application to impugn the bona fides of the so-called binding agreement made under the Family Law Act.
16. It was also said that the apprehension that Mr Sanna will deal with assets for the purpose or having the effect of frustrating execution of a judgment can be inferred from his denial of having signed various of the agreements upon which the plaintiffs sue. The plaintiffs read in their own case evidence given by Mr Sanna in earlier proceedings that were dealt with by Darke J (proceeding no. 2015/134669) in which Mr Sanna deposed that the first time he had seen the saving fee agreement was when he obtained a copy of it from his lawyers on 26 February 2015. He denied that he owed any of the plaintiffs money. He denied having signed the saving fee agreement. He denied guaranteeing the obligations of Lepra Sanna.
17. In a later affidavit sworn in these proceedings, Mr Sanna said that he did not sign a direction to pay dated 26 July 2012, nor the mortgages dated 26 July 2012, nor the document dated 26 May 2012 called an appointment letter and costs agreement with Wyse & Young International, nor the costs agreement dated 21 October 2011 for Wyse & Young International, nor the deed of loan dated 26 July 2012, nor the general security agreement of that date.
18. At least, I understand that is what Mr Sanna says when he deposes he did not sign documents at particular exhibits to earlier affidavits. He deposed that he only signed one document for Mr Dimitriou, being an execution page which did not have any other pages attached.
19. Mr Foley submitted that this evidence was demonstrably false, and showed that, in substance, that Mr Sanna was prepared to say anything to seek to avoid his obligations; at least, that is how I understood the submission. Hence he submitted that a freezing order was justified because there should be a real apprehension that Mr Sanna would deal with his assets to put them beyond the reach of a judgment creditor.
20. In an affidavit sworn on 5 August 2015 Mr Dimitriou deposed that he was endeavouring to obtain affidavits from a Thelma Gray and a Salvatore Russo that would depose to the fact that Mr and Mrs Sanna had signed a number of documents which Mr Sanna denied ever having seen or signed, and that he signed the documents in front of those two solicitors. No such affidavit was read on this application.
21. The question whether or not Mr Sanna did sign the agreements which the plaintiffs say he signed is not a matter that can be determined prior to the final hearing. I do not accept the submission that Mr Sanna's affidavit evidence denying signature is so obviously unworthy of credence that it shows a real risk that he would act so as to put assets out of the reach of a judgment creditor.
22. The strength or apparent strength of the plaintiffs' claim is a relevant consideration on an application for a freezing order. An assessment of the strength of the plaintiffs' claims is not made any easier by the way in which this application was presented.
23. I do not accept that it has been shown that the third plaintiff, Wolgan Consulting, has a strong claim, or even a prima facie claim, for recovery of what is called the saving fee under the Saving Fee Agreement, assuming that any of the defendants are bound by that agreement.
24. The Saving Fee Agreement required the client (Lepra Sanna) to pay "fees". This expression was defined, but not in such a way as to incorporate an obligation to pay what was called a saving fee of 20 per cent of a reduction of a debt owed to Australian Executor Trustees Limited until the date of discharge or refinance of that debt. In any event, it is far from clear to me how any of the other defendants could be liable for that fee.
25. The claim of the first plaintiff appears to be for accountancy services rendered. But the questions whether the accountancy services were rendered, whether they were rendered, to all of the defendants or to some of them, whether the charges were reasonable, and whether they were in accordance with any agreement between the parties, have not been explored. I am unable to form any view as to the strength of that claim.
26. However, so far as the claim of the second plaintiff is concerned, it does appear, albeit on incomplete materials, that it is probable that it advanced moneys which included a payment of $913,473.65 to Australian Executor Trustees Limited, possibly in discharge of debts owed by some or all of the defendants, in addition to Lepra Sanna. The only evidence of repayment of that loan is that approximately $820,000 was repaid on a refinancing through Westpac.
27. I accept that Defined Property Investments has shown a prima facie case for the recovery of at least some amount of its principal that it says has been advanced. How much, if any, interest will be recoverable may be another question.
28. It is not sufficient in order to obtain a freezing order simply for the plaintiff to show that it has a prima facie case, or even to show that the defendant is lacking financial means and may be unable to pay the judgment debt. In this case, the plaintiffs rely upon steps that Mr Sanna has taken since orders were obtained requiring the plaintiffs to remove caveats they had lodged over Mr Sanna's properties.
29. An application for removal of caveats lodged by the current plaintiffs was heard by Darke J on 14 May 2015, and on 18 May 2015 his Honour made orders for removal of the caveats (Sanna v Wyse and Young International Pty Limited (No 2) [2015] NSWSC 581).
30. In an affidavit in the proceedings before his Honour dated 14 May 2015, Mr Sanna deposed that he wanted to pay Boral Limited a debt of $100,000 said to be owed to it, in order to avoid going bankrupt. He said that he had no intention of selling the Copacabana land.
31. At that time, he was prepared to undertake to the Court or to be subject to an injunction, to the effect that he would not enter into a contract for sale of that land without giving the defendant seven days' notice of his intention. He said that, if the caveats were removed, he intended to obtain an overdraft facility with Westpac. He said he would like to obtain a facility of $300,000, and he needed $100,000 to pay Boral Limited.
32. It appears from searches that were made today of the real estate that, after removal of the caveats, Mr Sanna has obtained finance on security of the lands, albeit not from Westpac. A caveat dated on or about 14 September 2015 was lodged by Boral Construction Materials Group Limited, in which it claimed an equitable charge which secured moneys owing or which might become owing by Corrado and Lepra Sanna to it, and stated that the current debt was $200,000. Two caveats dated on or about 30 September 2015 were lodged by Ian B Pastoral Pty Limited, and by that company and a Mr Barry Horne, in which they claimed an equitable interest in the lands under unregistered mortgages to secure loans of $170,000 and $77,895.97.
33. Does the fact that Mr Sanna has given equitable mortgages over the lands to raise funds of that amount indicate that he is proposing to deal with his assets for the purpose of defeating creditors, or is proposing to deal with his assets in a way which would have that effect? I am not satisfied that the evidence does establish those matters.
34. Mr Foley said that he was instructed that there was reason to believe that Mr Corrado was raising moneys in cash on security of his assets with a view to disbursing the cash proceeds received before himself going bankrupt. There was, however, no evidence to that effect.
35. In Frigo v Culhaci (17 July 1998, unreported, BC9803225) the Court of Appeal said (at 16) that: "A plaintiff must establish, by evidence and not assertion, that there is a real danger that, by reason of the defendant absconding or removing assets out of the jurisdiction or disposing of assets within the jurisdiction, the plaintiff will not be able to have the judgment satisfied if successful in the proceedings. There has been much debate as to the precise degree of risk which must be shown … What is clear is that mere assertions that the defendant is likely to put assets beyond the plaintiff's reach will not be enough".
36. In Finn v Carelli [2007] NSWSC 261, Brereton J said (at [5]): "It is important to bear in mind that the jurisdiction to make orders of this type was never intended simply to enable a plaintiff or judgment debtor to obtain security for its judgment in advance of execution, but was firmly founded on the jurisdiction of the Court to prevent abuses of its process by preventing a defendant or judgment debtor from embarking on a course of conduct which would have the effect of defeating the Court's jurisdiction. It also needs to be borne in mind that the mere fact that a judgment may not be satisfied for reasons of impecuniosity does not mean that there is an abuse of process. Indeed, it has been pointed out on several occasions that the prospect of impending insolvency is not a reason to grant a Mareva injunction".
37. In Cardile v LED Builders Pty Limited [1999] HCA 18; (1999) 198 CLR 380, Gaudron, McHugh, Gummow and Callinan JJ pointed out (at [50]) that a Mareva order, or now a freezing order: "is bound to have a significant impact on the property of the person against whom it is made: in a practical sense it operates as a very tight 'negative pledge' species of security over property, to which the contempt sanction is attached." Their Honours went on to say that, "It requires a high degree of caution on the part of a court invited to make an order of that kind."
38. Their Honours went on to point out (at [52]) that another reason for caution is the difficulty associated with the quantification and recovery of damages pursuant to an undertaking as to damages if it should turn out that the order should not have been granted. In this case, Mr Foley has not said that his client gives the usual undertaking as to damages, but I assume that the plaintiffs would give the undertaking. Nonetheless, there is no evidence that they have assets which would be sufficient to satisfy an undertaking as to damages.
39. For all of these reasons, I decline the application for a freezing order and for ancillary relief.
40. I turn then to the application for reinstatement of DLD (NSW) Pty Limited. The plaintiffs claim to be creditors of that company. It was deregistered on 25 August 2013. The application is made pursuant to s 601AH(2) of the Corporations Act which provides: "601AH Reinstatement … Reinstatement by Court (2) The Court may make an order that ASIC reinstate the registration of a company if: (a) an application for reinstatement is made to the Court by: (i) a person aggrieved by the deregistration; or (ii) a former liquidator of the company; and (b) the Court is satisfied that it is just that the company's registration be reinstated."
41. The first thing to be observed is that the order the Court can make under that section is an order that ASIC reinstate the registration of a company that has been reregistered. An order under the section is addressed to ASIC.
42. In this case, although ASIC has been given notice that an application for reinstatement has been made, it is not joined as a party. No doubt that difficulty could be dealt with and the matter deferred if necessary by making an order for the joinder of ASIC, but it is but one more unsatisfactory aspect of the plaintiff's application.
43. More significantly, I am not satisfied that the plaintiffs or any of them are a person "aggrieved by the deregistration" within the meaning of s 601AH(2)(a)(i). To show that a person is aggrieved by the deregistration of the company, it is not enough for him or her to demonstrate that he or she is a creditor of the company. The person must show some real economic interest in the company's being reinstated.
44. Reinstatement of this company would inevitably require its immediate winding up. I return to that question shortly. But unless there is evidence that the plaintiffs could expect to receive some distribution on a winding up of the company, then they do not, in my view, show that they are persons aggrieved (GIS Electrical Pty Ltd v Melsom [2002] WASCA 302; (2002) 172 FLR 218 at [62]).
45. I have said that it is inevitable that the company would have to be wound up immediately if it were reinstated. The company search shows that Ms Lepra Sanna was the sole director of DLD (NSW) Pty Limited and its sole shareholder.
46. Under s 601 AH(5), if a company is reinstated, a person who was a director of the company immediately before deregistration becomes a director again as from the time the Court reinstates the company. But Ms Sanna is a bankrupt. She is not qualified to act as a director. Hence the company should not be reinstated unless it were wound up forthwith.
47. The plaintiffs' application does not include an application for the winding-up of the company. The evidence and processes that would be required before making a winding-up order have not been adduced or carried out.
48. I have said that Mr Foley for the plaintiffs eschewed any claim against the trustees in bankruptcy of Ms Sanna. I was concerned that the application might involve an exercise of jurisdiction in bankruptcy which would require a transfer of the proceedings to the Federal Court, for the reasons stated by the Full Court of the Federal Court in Truthful Endeavour Pty Limited v Condon [2015] FCAFC 70; (2015) 321 ALR 483. But as the claims against the fifth defendants will be dismissed, I do not think that there is any reason to take that course.
49. It follows that the balance of the claims for relief in the notice of motion filed for the plaintiffs will be dismissed.
50. I turn then to the defendants' application for security for costs.
51. By their notice of motion filed on 7 September 2015, the defendants sought an order pursuant to UCPR r 42.21(1)(d) or s 1335 of the Corporations Act that the plaintiff (sic) (presumably plaintiffs) provide security for the defendants' costs in the amount of $125,000 or alternatively such other amount as the Court deems fit.
52. Under r 42.21(1)(d), security for costs can be ordered if "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."
53. Under s 1335(1) of the Corporations Act, there is jurisdiction to order security for costs: "Where a corporation is plaintiff in any action or other legal proceeding [and] ... 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 ..."
54. The defendants read an affidavit of their solicitor Mr Kekatos. The affidavit was read without objection. He deposed that: "I am informed and verily believe that the plaintiff corporations do not hold significant assets or have any share capital apart from that reflected in the company search."
55. Although that sentence is in evidence, it can carry very little weight. The sentence would have been rejected if objected to. Mr Kekatos does not depose to the source of his information or belief. He does not descend to any particularity as to why the person who informed him of that matter had the opinion that the plaintiff corporations do not have significant assets.
56. The company searches of the plaintiffs disclose that they have minimal paid up capital of only $2 each. That, of course, says nothing as to their assets or liabilities, although the existence of only a small amount of paid up capital has been regarded as a relevant factor in many of the decisions in this area on whether the threshold requirement is established and in exercise of the discretion to order security if the threshold requirement is established.
57. The information concerning the financial position of the plaintiffs lies with them. Nonetheless, the onus is on the plaintiffs to establish under r 42.21 that there is "reason to believe" that the plaintiffs will be unable to pay costs if ordered to do so, and they are required under s 1335 to produce "credible testimony" that there is reason for such belief.
58. In FFE Minerals Australia Pty Limited v Mining Australia Pty Limited [2000] WASCA 69; (2000) 22 WAR 241 the majority of the Court of Appeal of Western Australia (Pidgeon and Owen JJ) referred to the legislative history of what is now s 1335 of the Corporations Act, and pointed out that the introduction of the requirement of there being "credible testimony" was to relieve the defendant from a burden of proving a fact, albeit a hypothetical fact, that the plaintiff company being a corporation would be unable to pay costs if it were unsuccessful.
59. Their Honours said (at [24]) that in their view, there was no requirement to attempt to define further the expression "credible testimony" and said that the words spoke for themselves. They added: "For the reasons we have set out we are not in accord with one proposition referred to by Lee J in Warren Mitchell Pty Ltd v Australian Maritime Officers' Union when his Honour said (at 1241) 'qualification of the word "testimony" by the word "credible" suggest that evidentiary burden is undertaken by the parties seeking the order'." (at [24])
60. Their Honours went on to say: "We would not see any burden as nothing is sought to be proved. The legislature that first enacted the words, used them to replace words referring to proof and in our view, were dispensing with a requirement to prove a matter. What is required is an evaluation of the evidence led by the applicant to see whether that leads to a reason to believe that the corporation will be unable to pay the costs of the defendant." (at [24])
61. In my view, the evidence in Mr Kekatos' affidavit standing alone is not sufficient to give rise to such a reason to believe, for reasons I have already stated.
62. But the defendants served a notice to produce. It is dated 1 September 2015.
63. It is common ground the notice to produce was served shortly after that date. It sought production from the plaintiffs of their bank statements from 1 July 2014 or records of any moneys held in their name with any financial institutions, bank statements for the quarters ending September 2014 to June 2015, income tax returns either audited or unaudited for the years ending 30 June 2014 and 30 June 2015, copies of profit and loss statements for the period from 26 November 2014 to 15 July 2015 and copies of asset and liability statements for the plaintiffs between 26 November 2014 and 15 July 2015.
64. The plaintiffs have sought today to have the notice to produce set aside. They submitted that the notice to produce was a fishing expedition, was too wide, and served no legitimate forensic purpose. I thought when that last submission was made that the plaintiffs might be accepting that there was reason to believe that they would be unable to pay costs if they were ordered to do so, but I was told that that was not the case. So there is a clear legitimate forensic purpose for the plaintiffs seeking the documents. There was no evidence that there was any oppression or even real difficulty in the plaintiffs' obtaining the documents.
65. All that was produced, and that belatedly, were some bank statements of which one statement was tendered; it being a statement for the second plaintiff for the period from 1 June 2014 to 24 August 2015. It shows that in that period the second plaintiff conducted an account with the National Australia Bank that was in credit in various amounts that ranged from about $31 to over $130,000, but the credit balances fluctuating, the last credit balance showed a balance of some $10,666.
66. The plaintiffs sought to tender what was called a balance sheet. But it was not a business record. I was told it was prepared today. I infer it was prepared for the purposes of these proceedings. There was no evidence to support it, and I rejected the tender.
67. The result is that the defendants have sought to obtain evidence from the plaintiffs as to their financial position. There was no satisfactory explanation as to why no other documents were produced in response to the notice to produce. It is clear that if the defendants obtain orders for costs in these proceedings, the costs payable may well exceed the amount that might stand as a credit balance in the second plaintiff's account. In any event, there is no affidavit as to what liabilities the second plaintiff or the other plaintiffs might have. In the circumstances, having regard to the nature of the plaintiffs' response to the notice to produce, I am satisfied that requisite reasons to believe have been established.
68. The plaintiffs opposed the provision of security on two other bases. First, it was said that the provision of security could stultify the proceedings. However, there was no evidence that this would be so. In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 the Full Federal Court said (at 4): "In our opinion a court is not justified in declining to order security on the ground that to do so will frustrate the litigation unless a company in the position of the appellant here establishes that those who stand behind it and who will benefit from the litigation if it is successful (whether they be shareholders or creditors or, as in this case, beneficiaries under a trust) are also without means. It is not for the party seeking security to raise the matter; it is an essential part of the case of a company seeking to resist an order for security on the ground that the granting of security will frustrate the litigation to raise the issue of the impecuniosity of those whom the litigation will benefit and to prove the necessary facts."
69. The other objection was that I should be satisfied that at least the second plaintiff was very likely to succeed in the proceedings and obtain an order for costs in its favour. Although I have found that the second plaintiff has demonstrated a prima facie cause of action, I am not able to assess the strength of its claim. That may well be due to the way these proceedings have been constituted. The claims of all three plaintiffs should have been pleaded. It would then be known what defences were raised to the claims and what replies, if any, there might be to such defences. Instead, because of the way in which the case has been presented, I am not able to make that assessment.
70. For these reasons, I will order security for costs and will order security in respect of the claims of all three plaintiffs. I do not accept that security should be ordered for the full amount sought. It appears from Mr Kekatos' affidavit that in his estimate future costs and disbursements including counsel's fees would total approximately $82,800. He makes that assessment on the basis of an estimate of five days of hearing. I agree with Mr Foley that five days of hearing seems somewhat long, but nonetheless the claims are significant, and at least if the case is presented by the plaintiffs in the way in which it was presented today, it may well take that length of time.
71. Considered in the broad, a sum of a further $82,000 for preparation and trial does not seems to me to be excessive, particularly if there are additional interlocutory steps not envisaged in Mr Kekatos' estimates, including adducing of expert evidence, as Mr Foley has foreshadowed. Mr Kekatos deposes that costs incurred to date in these proceedings for his firm come to $10,901.91. Counsel's fees to date in these proceedings total $15,000. The total of these costs is $108,701. It appears that part of the costs for which security is sought are costs of earlier proceedings before Darke J, being proceedings 2015/134669. The file of that proceeding is now closed and I do not think that the plaintiffs are entitled to security for costs orders in their favour in those proceedings.
72. Mr Kekatos deposed that in his experience the percentage of costs recovered on what he called a party-party basis varied from anywhere between 70 to 80 per cent of the actual bill of costs. I accept that evidence. Working from his figures, and applying a discount factor of 25 per cent to reflect a reduction that is likely to be made on assessment, I conclude that security should be provided in a sum of approximately $81,525, which I will round down to $81,500.
73. [Orders accordingly.] 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: 08 December 2015