UK Decorative Coatings Pty Limited v Mirotone Pty Limited [2004] NSWSC 1074

New South Wales Supreme Court

CITATION : UK Decorative Coatings Pty Limited v Mirotone Pty Limited [2004] NSWSC 1074 HEARING DATE(S) : 13/10/04, 14/10/04 JUDGMENT DATE : 16 November 2004

JURISDICTION: Equity Division Commercial list JUDGMENT OF : Brownie AJ DECISION : Motion dismissed.

CATCHWORDS : Security for costs - Delay CASES CITED : Buckley v Bennell Design and Construction Pty Ltd (1974) 1 ACLR 301 PARTIES : UK Decorative Coatings Pty Limited (ACN 089 117 091) (Plaintiff) Mirotone Pty Limited (ACN 000 041 136) (Defendant) FILE NUMBER(S) : SC 50013/02 COUNSEL : Mr P Deakin QC, Mr M Young (Plaintiff) Mr R Beasley (Defendant) SOLICITORS : Reid & Vesely (Plaintiff) Cutler Hughes & Harris (Defendant)

IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION COMMERCIAL LIST

Brownie AJ

Tuesday 16 November 2004

50013/02 UK Decorative Coatings Pty Limited v Mirotone Pty Limited JUDGMENT 1 By notice of motion dated 26 July 2004 the defendant seeks an order that the plaintiff provide security for costs in the sum of $700,000. An uncommonly large volume of evidence was adduced on the application, and in submissions there was careful attention paid to many earlier decisions, but I should say immediately that in my view, there are two sets of circumstances that, considered together, overwhelm all other considerations in the case: the delay which occurred in making the application, and the financial circumstances of the plaintiff and of those who stand behind the plaintiff. 2 The case is an unusual one, in a number of respects. On the plaintiff's case (which of course might or might not be accepted at trial, in whole or in part), the plaintiff was incorporated for the specific purpose of acquiring and importing into Australia a particular machine at a cost of about $1.8 million, and of using that machine in conjunction with certain lacquers to be supplied to the plaintiff by the defendant, so that the plaintiff might establish a particular business. Before the plaintiff had been incorporated there were detailed negotiations between people who may now be recognised as representing the plaintiff, and representatives of the defendant, and a substantial amount of work was done in anticipation of the events that are the subject of the litigation. On the plaintiff's case, certain representations were made, and relied upon, and the representations were not properly based. The plaintiff says that as a result it suffered a loss, measured in millions of dollars. 3 This terse summary does not do justice to the richness of the detail of the evidence, limited as it apparently is for the purposes of the motion. The affidavit of the defendant's solicitor filed in support of the motion referred to 25 lay witnesses and 7 expert witnesses, apparently to be called on the hearing, and the evidence points to some identified issues of a complicated and technical nature, as well as to apparently difficult issues about the measure of the alleged loss. 4 The defendant accepts, as it had to, that its application was made late, but submitted that the reason why the application had been made late was that because it had not been perceived, subjectively, that the matter was as complicated as it is now accepted it is, and therefore that the defendant did not appreciate how great would be the costs that would be incurred. 5 The delay is striking. By the middle of 2001 the defendant can hardly have failed to appreciate that there was a problem. There was correspondence threatening litigation in September 2001, and the litigation was commenced in February 2002. There was a good deal of interlocutory skirmishing, particularly about discovery. The defendant took the view that it would not file or serve any witnesses' statements until the plaintiff's case in chief had been completed, and this was done by November 2003. The defendant's witness statements and experts reports were then filed, in March and April 2004, and on 9 July 2004 the Court fixed the case for trial on 1 February 2005, noting an estimate that the hearing would take 8 weeks. It was after that event that the motion was filed. 6 Delay in making an application for security for costs is always a relevant consideration, and there are many reported decisions to that effect. The defendant does not contest the point. Perhaps the rationale is stated most clearly by Moffitt P in Buckley v Bennell Design and Construction Pty Ltd (1974) 1 ACLR 301 at 309: