New South Wales Supreme Court CITATION : Antonias Pty Ltd v Matthew Lepouris Pty Ltd [2004] NSWSC 654 HEARING DATE(S) : 19 July 2004 JUDGMENT DATE : 19 July 2004 JURISDICTION: Equity JUDGMENT OF : Hamilton J DECISION : Application for security for costs refused. CATCHWORDS : CORPORATIONS [23] - Constitution and legal capacity - External litigation - Security for costs - Discretion of court - Impecuniosity - Whether reason to believe plaintiff will be unable to pay costs of defendant - Whether established. LEGISLATION CITED : Corporations Act 2001 s 1335 Supreme Court Rules 1970 Part 1 r 3 Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 744 CASES CITED : K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Thalanga Copper Mines Pty Ltd v Brandrill Ltd [2004] NSWSC 349 Antonias Pty Ltd (P) PARTIES : Matthew Lepouris Pty Ltd (1D) W F M Motors Pty Ltd (2D) FILE NUMBER(S) : SC 5743/03 COUNSEL : R N Gye (P) J W Conomos (Ds) SOLICITORS : Phillip A Biber (P) Carneys (Ds) IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION HAMILTON J MONDAY, 19 JULY 2004 5743/03 ANTONIAS PTY LTD v MATTHEW LEPOURIS PTY LTD & ANOR JUDGMENT 1 HIS HONOUR: This is an application for security for costs by the defendants in these proceedings, moving upon a notice of motion of 21 June 2004. The summons in this matter was filed on 13 November 2003. The motion which would normally be dealt with by the Registrar was, by the Registrar before whom it came, referred to me on the basis that it was suggested that on the hearing of the motion questions of the inherent jurisdiction of the Court might be invoked, putting the matter beyond the Registrar's jurisdiction. It became apparent during the course of the argument before me that the application was made only under s 1335 of the Corporations Act 2001 (Cth) ("the CA"), so that it could have been dealt with by a Registrar. However, the Registrar having properly referred the matter to me in the circumstances and I, by that stage having engaged upon the hearing, did not return the matter to the Registrar, but have continued to hear it. 2 The proceedings are proceedings relating to whether or not, upon the settlement of a conveyancing transaction, a lease merged in the fee simple or continued to exist. I am not able, on the material before me, to form any view as to the strength or weakness of the plaintiff's case. 3 The basis on which the defendants move is that there is credible testimony that there is reason to believe that the plaintiff will be unable to pay the defendants' costs if they are successful. The primary ground on which the application is resisted is that there is no such credible testimony. The situation in this regard is that it is clear that the plaintiff is a company with a paid up capital of $100 only and is an exempt proprietary company, so that there is no useful financial information contained in its annual returns filed in the companies registry. 4 The defendants wrote to the plaintiff seeking provision of $45,000 security for costs. The plaintiff, in essence, responded that there was no credible testimony to the effect above and that it was up to the plaintiff to supply it. This was not a very helpful approach. There may, in the strict application of the rules as to onus of proof, be something in its favour, but it is not an approach that is very consonant with Part 1 r 3 of the Supreme Court Rules 1970. That it was not, in the end, a very practical approach in any case is demonstrated by the fact that the plaintiff, during the course of the hearing before me, chose to provide some information about its financial affairs. 5 The only matters that appear in the evidence presented by either side relating to its financial affairs are as follows. The plaintiff in July 2003 received the sum of $5.35 million as the proceeds of the conveyancing transaction which I have mentioned, after payment out of encumbrances. The material recently supplied by the plaintiff is to the effect that it has, and for some months has had, some $160,000 in a cash management trust account. The defendants have not sought to challenge that that amount of money should be taken still to be in that account, but point out that it can, of course, be removed and disbursed at any time. I thus face the situation of a respondent company which has only a nominal capital, whose accounts I have not seen and whose debts I am not told of. On the other hand it did receive some millions of dollars about a year ago and has now proved that it has $160,000 odd in a cash account. 6 In these circumstances I have come to the conclusion that it cannot be said that the defendants have by credible testimony established that there is reason to believe that the plaintiff is a corporation that will be unable to pay costs if ordered to do so. 7 Various other aspects of the matter were drawn to my attention. The application is made about half way (to put it very inexactly) through the proceedings. The plaintiff's evidence is complete. Discovery is complete. The defendants' evidence is not yet on. There is no explanation of why the application was not made earlier. Certainly one sees applications made later than this, but it is not a very timely application. Equally, the amount in respect of which security is sought is $45,000, which is deposed to be the whole of the costs of the proceedings. It is clear that a good deal of these costs has already been incurred, though a good deal remains to be incurred. There is the principle, of course, that in general terms security is given for costs only prospectively and not for costs already incurred and there is no evidence upon which the amount can easily be divided. 8 The time at which the application is brought and the fact that it seeks in part security for costs already incurred do not assist the defendants' application in terms of the criteria laid down by Beazley J (then a Judge of the Federal Court) in K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196 - 198. Her Honour's statement is now frequently taken in this Court as laying down the appropriate principles: see the decision of Einstein J in Idoport Pty Ltd v National Australia Bank Limited [2001] NSWSC 744 and my decision in Thalanga Copper Mines Pty Ltd v Brandrill Ltd [2004] NSWSC 349. However, I really do not have to deal with these considerations because, before one comes to the discretionary considerations adumbrated by her Honour, the applicant, on an application made under s 1335 of the CA, must establish that there is credible testimony as provided for in the section and I have found there is not. 9 In those circumstances the notices of motion will be dismissed. I have expressed a view that, by reason of the late provision by the plaintiff of the material which it chose to provide as to its available cash funds, I did not propose to order the defendants to pay the plaintiff's costs of the motion. That being so, the parties are agreed that the appropriate order as to costs is that there be no order as to costs of the motion and that is the order that I make. 10 I order that the defendants' notice of motion filed 21 June 2004 be dismissed. I order that there be no order as to the costs of the motion. By consent, there will be directions in accordance with the short minutes initialled by me and placed with the papers. ********** Last Modified: 09/03/2004 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.