US Manufacturing Company v ABB Service [2007] NSWSC 777

New South Wales Supreme Court

CITATION : US Manufacturing Company v ABB Service [2007] NSWSC 777

HEARING DATE(S) : 18 July 2007

JUDGMENT DATE : 18 July 2007

JURISDICTION : Common Law Division

JUDGMENT OF : Associate Justice Harrison

DECISION : (1) The defendant's notice of motion filed 20 December 2006 is dismissed; (2) The defendant is to pay the plaintiff's costs as agreed or assessed.

CATCHWORDS : Security for costs

LEGISLATION CITED : Uniform Civil Procedure Rules 2005 (NSW) - Rule 50.8

CASES CITED : Procorp Civil Pty Limited v Napoli Excavations and Contracting Pty Limited & Ors [2006] NSWSC 205 Transglobal Capital Pty Limited & Anor v Yolarno Pty Limited [2004] 60 NSWLR 143

PARTIES : US Manufacturing Company Pty Ltd - Plaintiff ABB Service Pty Ltd - Defendant

FILE NUMBER(S) : SC 15221/2005

COUNSEL : Mr R Hanrahan - Plaintiff Mr J Stevenson SC with Ms G Wright - Defendant

SOLICITORS : Thomas Booler & Co - Plaintiff Corrs Chambers Westgarth - Defendant

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

WEDNESDAY, 18 JULY 2007

15221/05 - US MANUFACTURING COMPANY PTY LTD v ABB SERVICE PTY LTD

JUDGMENT (Security for Costs) 1 HER HONOUR: By notice of motion filed 20 December 2006, the defendant seeks, firstly, that the plaintiff provide security for the defendant's future costs of the proceedings in the sum of $50,000.00 in a form suitable to the Court within seven days; and secondly, that the proceedings be stayed until such time as security is given. 2 The plaintiff is US Manufacturing Company Pty Ltd (US Manufacturing). The defendant is ABB Service Pty Ltd (ABB Service). For convenience I shall refer to the parties by name. Aside from this motion, there are two outstanding matters to be determined in this Court, namely a notice of motion to adduce fresh evidence and the hearing of the appeal itself. The security for costs is sought for both of these matters. 3 On 10 June 2004, US Manufacturing filed a Statement of Liquidated Claim in the Local Court. The sole director of US Manufacturing is Ms Esme Celik who is the partner of Eddie Dogramaci. Those proceedings concerned a dispute relating to the number of gearboxes delivered by US Manufacturing to ABB Service. US Manufacturing contended that in December 2002 it delivered eight gearboxes. ABB Service alleged that only four were delivered. US Manufacturing further contended that in January 2003 it delivered another eight gearboxes (six being new and two being reconditioned). ABB Service alleged that once again only four were delivered at that time. The place of delivery was a Sydney Water sewerage plant at Winmalee. 4 The matter was initially heard before an Arbitrator in the Local Court on 28 October 2004, and US Manufacturing was unsuccessful. On 7 December 2004, US Manufacturing filed an application seeking a re-hearing. US Manufacturing was unsuccessful, and ordered to pay ABB Service's costs. ABB Service had its costs assessed. The certificates of assessment formed the basis of a judgment against US Manufacturing. On 26 July 2006, judgment was entered in favour of ABB Service in the sum of $36,908.69. That judgment debt has not yet been paid. 5 On 15 September 2006, ABB Service served a Statutory Demand upon US Manufacturing for the payment of the judgment debt. ABB Service submitted that US Manufacturing made no attempt to satisfy the statutory demand, and so ABB Service sought an order that US Manufacturing be wound up on the grounds of insolvency for failing to comply with a statutory demand. 6 On 3 November 2006, before the winding up proceedings were finalised, voluntary administrators were appointed to US Manufacturing. On 23 November 2006, ABB Service's solicitor received a copy of a Notice to Creditors of US Manufacturing, which stated that US Manufacturing had assets with an estimated realisable value of $10,032.00 and unsecured creditors to the value of $521,284.00. The unsecured creditors claims are as follows: (i) trade creditors, $185,550; (ii) Australian Taxation Office $43,308; (iii) related parties – loan Ms Esma Celik $164,426 and loan Mr Eddie Dogramaci $128,000; and (iv) lease shortfall $284. Of the trade creditors, ABB Service is owed around $36,908.69. 7 A Deed of Company arrangement has been entered into whereby the participating unsecured credits are to be paid at 5 cents in the dollar. US Manufacturing had complied with its obligations and has continued to pay $6,000 per month. Mr Dogramaci says that he was working a second job at on weekends and nights to meet this obligation. Mr Dogramaci is the principal witness for US Manufacturing, and he played an active role in these proceedings. 8 US Manufacturing does not own any real property. Ms Celik, the director of US Manufacturing, has not undertaken to pay ABB Service's legal costs. Mr Dogramaci says that, if necessary in the event that US Manufacturing loses this appeal and is ordered to pay further costs, it may be able to call upon other assets held by the company's director, but those assets are not used to finance the company's ordinary business or pay its lawyers. 9 US Manufacturing submitted that it has already suffered losses that make it financially difficult to proceed with this Appeal, whilst ABB Service on the other hand can easily afford to litigate, with this notice of motion designed to force US Manufacturing to expend its remaining resources, defeating its legitimate right to appeal. In other words, if security for costs is ordered, it may be shut out of the proceedings. 10 US Manufacturing submitted that the Local Court did not properly deal with the objective evidence and did not fairly weigh up the probabilities, and that it therefore has an arguable and prima facie case, with reasonable prospects of success. US Manufacturing submitted that an order seeking security for costs will require US Manufacturing to sell its only remaining assets, which will jeopardise future viability.