Olivaylle Pty Ltd (ACN 080 670 640) v Flottweg GMBH & Co KGAA (ABN 95 101 547 424) [2007] FCA 56

FEDERAL COURT OF AUSTRALIA

Olivaylle Pty Ltd (ACN 080 670 640) v Flottweg GMBH & Co KGAA (ABN 95 101 547 424) [2007] FCA 56

CORPORATIONS LAW – security for costs – s1335 Corporations Act 2001 (Cth) – no onus to adduce evidence of Applicant's ability to pay – no credible evidence establishing that there is reason to believe there is a real chance that the Applicant will be unable to pay the Respondent's costs

Corporations Act 2001 s 1335 Trade Practices Act 1974 s 52, s 82, s 87

FFE Minerals Australia Pty Ltd v Mining Australia Pty Ltd (2000) 33 ACSR 739 distinguished Second Lenbourne Pty Ltd v Beagle Management Pty Ltd [1999] FCA 486 followed Microcorp Pty Ltd v Terran Computers Pty Ltd, Peter Desmond Nunn, Philip Robert Hempel, Phillip Andrew Grasso and Vlado Joseph Dancevic (unreported Fed Court 19 December 1991) cited Beach Petroleum NL v Johnson (1992) 10 ACLC 525 followed OLIVAYLLE PTY LTD (ACN 080 670 640) v FLOTTWEG GMBH & CO KGAA (ABN 95 101 547 424) No SAD 261of 2006

FINN J

5 FEBRUARY 2007

ADELAIDE IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 261 OF 2006

BETWEEN: OLIVAYLLE PTY LTD (ACN 080 670 640)

Applicant

AND: FLOTTWEG GMBH & CO KGAA (ABN 95 101 547 424)

Respondent

JUDGE: FINN J

DATE OF ORDER: 5 FEBRUARY 2007

WHERE MADE: ADELAIDE

THE COURT ORDERS THAT:

1. The motion be dismissed with costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY SAD 261 OF 2006

BETWEEN: OLIVAYLLE PTY LTD (ACN 080 670 640)

Applicant

AND: FLOTTWEG GMBH & CO KGAA (ABN 95 101 547 424)

Respondent

JUDGE: FINN J

DATE: 5 FEBRUARY 2007

PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 I have before me a Notice of Motion seeking security for costs pursuant to s 1335 of the Corporations Act 2001 (Cth). The proceedings in which this motion arises were commenced on 16 November 2006 when the applicant, Olivaylle Pty Ltd, filed and served an Application and Statement of Claim against the respondent, Flottweg GMBH & Co KGAA, seeking damages for breach of contract and relief under ss 82 and 87 of the Trade Practices Act in respect of an alleged contravention of s 52 of the Trade Practices Act 1974 (Cth). In its Statement of Claim the applicant describes itself as one of the "world's largest family owned integrated producers and processors of premium extra virgin olive oil". Unsurprisingly, in its defence the respondent has not admitted this claim. 2 The essence of the matter is as follows. The respondent is a German registered company having a registered office in Australia. It is a manufacturer of what is described as a solid bowl centrifuge separation equipment. Such equipment is used apparently for processing olives to extract olive oil. In February 2005 Olivaylle entered into a contract with Flottweg for the provision of a processing machine. That contract provided for payment by four instalments between 11 August 2004 when a 20 per cent deposit was paid and 1 August 2006. The machine was delivered in April 2005 on payment of the second instalment. The claim is that the machine was defective in a number of respects, in relation to which representations were allegedly made, hence the Trade Practices Act claim. Those same matters were also the subjects, allegedly, of terms of the contract. 3 It would appear from para 23 of the Statement of Claim that representatives acting on behalf of Flottweg dealt with the machine for some purposes (alleged by Olivaylle) to be by way of repair and modification. From answers given by counsel for Flottweg at the hearing before me, this occurred at Olivaylle's place of business. 4 On 14 December 2006 a correspondence began between the solicitors for the respondent and the applicant's solicitors in which Flottweg indicated its concern was to establish whether or not Olivaylle would be able to meet any costs order that may be made against it in the proceedings. Having referred to s 1335 of the Corporations Act it requested that Olivaylle provide copies of documents which evidenced its financial position and its capacity to meet any adverse order. It was indicated that it was anticipated those documents would include "statement of cashflows, profit and loss statement, current balance sheet and bank statements". An alleged reason given for this request was that Olivaylle had not recently filed returns with the Australian Securities and Investment Commission ("ASIC") that would provide any indication as to its financial position. I interpolate at this stage in no respect has Olivaylle not complied with its obligations under the Corporations Act. Olivaylle's response to this was that it had lodged all necessary documents with ASIC and left the matter at that. On the day of that response Flottweg's solicitors again indicated they had no indication that Olivaylle could meet a costs order and foreshadowed that if they had to make an application for security and were unsuccessful because Olivaylle had the capacity to meet a costs order they would seek indemnity costs of that application. 5 On 10 January solicitors for Olivaylle indicated that they would resist such an application should it be made. On 24 January 2007 solicitors for Flottweg indicated that unless Olivaylle provided security for costs in a sum satisfactory to Flottweg or else evidence that Olivaylle had the means to satisfy a costs order, it would apply for a court order that Olivaylle provide security in the sum of $300,000 and it annexed a draft notice of motion seeking that sum.