Lima Orthopaedics Australia Pty Ltd v Proactive Ortho Pty Ltd [2021] NSWSC 1014

Supreme Court New South Wales

Medium Neutral Citation: Lima Orthopaedics Australia Pty Ltd v Proactive Ortho Pty Ltd [2021] NSWSC 1014 Hearing dates: 6 August 2021 Decision date: 12 August 2021 Jurisdiction: Equity - Commercial List Before: Stevenson J Decision: Order to be made for security for costs of cross-claim Catchwords: COSTS – security for costs – application by cross-defendant for security for the costs of the cross-claim – common ground that cross-claimant will be unable to pay costs if unsuccessful – whether cross-claim in substance defensive – where delay in bringing application Legislation Cited: Competition and Consumer Act 2010 (Cth) Cases Cited: Bevwizz Group Pty Ltd v Transport Solutions Pty Ltd [2008] NSWSC 1399 Category: Procedural rulings Parties: Lima Orthopaedics Australia Pty Ltd (Plaintiff/Cross-Defendant/Applicant) Proactive Ortho Pty Ltd (Defendant/Cross-Claimant/Respondent) Representation: Counsel: D Farinha (Plaintiff/Cross-Defendant/Applicant) S Philips (Defendant/Cross-Claimant/Respondent)

Solicitors: Hogan Lovells (Plaintiff/Cross-Defendant/Applicant) Betar Lawyers (Defendant/Cross-Claimant/Respondent) File Number(s): 2020/317630

Judgment 1. By Notice of Motion filed on 6 July 2021, the plaintiff/cross-defendant, Lima Orthopaedics Australia Pty Ltd seeks security for the costs of the Cross-claim brought against it by the defendant/cross-claimant, Proactive Ortho Pty Ltd, in the sum of $372,539.91. 2. There is no dispute that there is reason to believe that Proactive will be unable to meet a costs order, were it to be unsuccessful on its Cross-claim and that, accordingly, the Court's jurisdiction to make an order for security for costs is enlivened. 3. The question is whether, as a matter of discretion, I should decline to make such an order. 4. Lima is engaged in the business of selling and distributing devices, instruments and related products for the treatment of musculoskeletal disorders. 5. Proactive is in the business of promoting and marketing medical products in Sydney, Campbelltown, Bowral and to identified surgeons in Goulburn. 6. By an Agency Agreement dated 20 September 2017, Lima engaged Proactive as its agent to sell its products in that territory. 7. It was a term of that agreement that Lima could terminate the agreement if Proactive committed a breach of any "Special Condition" of the agreement, including a condition that Proactive achieve specified minimum sales during certain periods. 8. On 1 October 2020, Lima purported to terminate the agreement on the basis of Proactive's alleged breach of the condition requiring it to achieve sales at a nominated level for "End of Year 3". Proactive accepts that it did not achieve the requisite levels of sales for "Year 3" but contends that overall, for years one to three, it achieved the requisite number of sales. Proactive alleges for that reason, and by reason of an alleged implied term of the agreement that Lima act in good faith and cooperate, there has been no breach of the agreement. 9. Lima commenced these proceedings on 6 November 2020 seeking a declaration that it had validly terminated the agreement, an injunction that Proactive be restrained from purporting to hold itself as Lima's agent and orders for delivery up of various records. 10. Proactive filed a Response on 27 November 2020 and then an Amended Response, Cross-Summons and Cross-Claim List Statement on 7 December 2020. 11. Proactive's pleadings have evolved since then, including, recently, by adding a claim under s 21 of the Australian Consumer Law [1] alleging that Lima has engaged in unconscionable conduct. 12. The parties have exchanged evidence. Orders have been made for the exchange of categories of documents for disclosure and, according to Proactive, the matter is very nearly ready for allocation of a hearing date.