Supreme Court New South Wales Medium Neutral Citation: Trajkovski v Asiapac Securities Pte Ltd [2015] NSWSC 1432 Hearing dates: 6 August 2015 Date of orders: 08 August 2015 Decision date: 08 August 2015 Jurisdiction: Common Law Before: Harrison AsJ Decision: The Court orders that: (1) In so far as the plaintiffs' notice of motion filed 17 April 2015 is concerned, I make an order that they have leave to amend the summons and points of claim as set out in paragraphs [17] to [37] of its points of claim. Such amended summons and amended points of claim are to be filed and served within 14 days. (2) I decline to make an order that the defendant provide security for costs. (3) So far as the defendant's notice of motion filed 20 April 2015 is concerned, I stand paragraphs [4] to [8] over to a directions hearing before the Registrar at 9.00 am on 29 October 2015. I dismiss the balance of the notice of motion. (4) Costs are reserved. Catchwords: CIVIL PROCEDURE – validity of credit agreement – application to file amended summons – security for costs – threshold issue – relevant considerations under UCPR 42.21(1A) – whether company incorporated in Singapore should be ordered to give security for costs Legislation Cited: Civil Procedure Act 2005 (NSW) Corporations Act 2001 (Cth) Real Property Act 1900 (NSW) Uniform Civil Procedure Rules 2005 (NSW) Cases Cited: Barnes v Addy (1874) 43 LJ Ch 513; (1874) 22 WR 505 Beach Petroleum NL v Johnson (1992) 10 ACLC 525; (1992) 7 ACSR 203 Bell Wholesale Co Limited v Gates Export Corporation (1984) 52 ALR 176; (1984) 2 FCR 1 Equity Access Ltd v Westpac Banking Corporation [1989] ATPR 40-972 Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664 Fitzpatrick v Waterstreet (1995) 18 ACSR 694 Idoport Pty Limited v National Australia Bank Ltd [2001] NSWSC 744 KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 13 ACLC 437; (1995) 56 FCR 189 Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133 Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82 Morris v Hanley [2000] NSWSC 957 Narradine Pty Ltd v Mascot Steel & Tools Pty Ltd [2012] NSWSC 385 Odyssey Financial Management Pty Ltd v QBE Insurance (Australia) Ltd [2012] NSWCA 113 Prynew Pty Limited v Nemeth [2010] NSWCA 94 Whyked Pty Limited v Yahoo Australia and New Zealand Pty Limited [2006] NSWSC 1236 Category: Procedural and other rulings Parties: Helen Trajkovski (First Plaintiff) Paul Trajkovski (Second Plaintiff) Ashlee Holdings Pty Ltd (Third Plaintiff) Asiapac Securities Pte Ltd (Defendant) Representation: Counsel: R Parsons (First, Second and Third Plaintiffs) N Mirzai (Defendant) Solicitors: File Number(s): 2014/140627 Publication restriction: Nil Judgment 1. HER HONOUR: There are two motions before this Court in these proceedings. By amended notice of motion filed 17 April 2015, the plaintiffs seek firstly, pursuant to s 64(1(b) of the Civil Procedure Act 2005 (NSW) that leave be granted to amend the amended summons filed 9 September 2014 and the points of claim filed 27 June 2014 by filing the amended pleadings and secondly, security for costs in relation to their response to the cross claim. 2. By notice of motion filed 20 April 2015, the defendant relevantly seeks firstly, an order that the third plaintiff pay to the defendant, within 28 days, the unpaid balance of the judgment debt in proceedings 2012/144958 Asiapac Securities Pte Ltd v Ashlee Holdings Pty Ltd; secondly, in the alternative, an order that Ashlee Holdings Pty Ltd pay into court, within 28 days, the unpaid balance of the judgment debt in proceedings 2012/144958; and thirdly, an order that the first and second plaintiffs, or alternatively, the third plaintiff, provide security for the defendant's costs by paying into court the sum of $65,000, or such other amount as this Court may determine, or by otherwise providing security for that amount in a manner satisfactory to the defendant. The balance of the motion (paras [4] to [8]) are stood over for mention at a later date. 3. The first plaintiff is Helen Trajkovski ("Mrs Trajkovski") and the second plaintiff is Paul Trajkovski ("Mr Trajkovski"). Mr and Mrs Trajkovski are husband and wife. The third plaintiff is Ashlee Holdings Pty Ltd ("Ashlee"). The defendant is Asiapac Securities Pte Ltd ("Asiapac"). 4. There are two related proceedings, these and proceedings 2012/14958 Asiapac Securities Pte Ltd v Ashlee Holdings Pty Ltd. Both parties' submissions and this judgment should be read in conjunction with the judgment in the other proceedings, Asiapac Securities Pte Ltd v Ashlee Holdings Pty Ltd [2015] NSWSC 1431 ("Asiapac v Ashlee"). This judgment should be read last. The factual background is contained at paragraphs [6] to [51] in Asiapac v Ashlee. 5. Mrs Trajkovski relied on her affidavit dated 9 May 2014. Mr Trajkovski relied on his affidavit dated 27 June 2014. The Trajkovskis also relied on three affidavits of Gabrielle Kara Polczynski dated 27 March 2015, 27 April 2015, and 12 June 2015 and the affidavit of Mario Quintiliani dated 27 April 2015. Asiapac Securities relied on the affidavit of Evelyn Gardis dated 21 May 2015. 6. As I have set aside the default judgment entered in relation to the monetary sum in Asiapac v Ashlee, the orders sought by Asiapac in relation to the unpaid balance of the judgment are not applicable. So far as Asiapac's motion is concerned, the issue for determination is whether Ashlee should provide security for costs. 7. On 9 May 2014, Mr and Mrs Trajkovski commenced these proceedings by way of summons and sought a restraining order in relation to the goods and chattels located at the Bosci Road property. They also claim damages in conversion in relation to these goods. 8. I shall deal firstly with the amendments to the summons and the points of claim and then the parties' applications for security for costs. (1) Leave to amend summons 1. The Trajkovskis and Ashlee seek leave pursuant to s 64(1)(b) of the Civil Procedure Act. It relevantly reads: "64 Amendment of documents generally (cf SCR Part 20, rules 1 and 4; DCR Part 17, rules 1 and 4) (1) At any stage of proceedings the court may order: … (b) that leave be granted to a party to amend any document in the proceedings. …" 1. The Trajkovskis and Ashlee seek to further amend their summons and points of claim. The amendments concern the wrongful detention of goods, the withdrawal of the second caveat, a declaration that Asiapac was "knowingly concerned in breaches of fiduciary duties" owed to Ashlee by Garry Robert Fulton ("Mr Fulton"); and an order that Asiapac pay equitable damages or equitable compensation to Ashlee for loss occasioned by such breaches. These amendments are opposed by Asiapac. Amended points of claim 1. At [7] and [12] the amended points of claim seeks to add: "7. Those of the Goods not damaged remained at Bosci Road ("Remaining Goods") until removed by the Plaintiffs during the period 2 August 2014 to 28 August 2014. 8. The Defendant has claimed to be the holder of a charge interest in the Goods pursuant to a document styled "Credit Agreement" (herein referred to as "Fraudulent Credit Agreement") and dated 5 October 2011 and in particular clause 16.8 of that document. 9. The Fraudulent Credit Agreement was not executed by any of the Plaintiffs and was signed, purportedly on behalf of the Third Plaintiff by one Gary Fulton, without the knowledge or authority of the Plaintiffs. 10. None of the Plaintiffs received any consideration or benefit under the Fraudulent Credit Agreement. 11. The Defendant has made no other claim of right to the Plaintiffs of any entitlement to deal with or detain the Goods." 12. During the period 6 May 2014 to 1 August 2014 the Defendant wrongfully detained the Remaining Goods." 1. At [17] to [37] of the amended points of claim the plaintiffs now plead: 17. By reason of the matters in paragraphs 8, 9 and 10 above, the Fraudulent Credit Agreement is not valid or binding upon the Third Plaintiff at law. Breach of duty 18. About August 2011 Garry Fulton undertook to the Plaintiff that he would make enquiries as to the availability to the Third Plaintiff ("Ashlee") of loan finance for purposes of the Plaintiff. 19. Ashlee provided to Garry Fulton access to knowledge about Ashlee and to documents of Ashlee for the pursuit of the enquiries referred to in paragraph 18 hereof which caused Ashlee to be vulnerable to abuse by Garry Fulton of his position. 20. Garry Fulton thereby came under a fiduciary duty to Ashlee to not make a profit or take a benefit by virtue of his position without the informed consent of Ashlee. 21. In the course of actual or pretended enquiries for the purpose described in paragraph 18. Garry Fulton did and procured the acts and things pleaded in paragraphs 22 and 23 hereof. 22. Garry Fulton falsely and fraudulently represented to the Defendant that he was the validly appointed sole director and secretary of Ashlee for the purpose of obtaining loan finance from the Defendant upon the basis that Ashlee would be responsible as borrower and property of Ashlee would be taken as security for the borrowings. 23. Garry Fulton obtained certificates of title to Bosci Road and Devon Road and represented to the Defendant that he was authorized to deal with those properties and certificates of title. 24. Garry Fulton procured that ASIC registers identified him as the sole director and secretary of Ashlee for the purpose of entering into the fraudulent loan agreement and the transaction whereby the mortgages became registered on the title of Bosci Road and Devon Road. 25. Garry Fulton procured payment of $600,000 at his direction by his execution of the loan agreement, mortgages over each of Bosci Road and Devon Road and other documents, associated therewith. 26. By those acts and things, Garry Fulton breached the fiduciary duty pleaded in paragraph 20 hereof. 27. By reason of these matters, Ashlee suffered loss and damage. Particulars (a) Ashlee has suffered judgment in proceedings. (b) Ashlee has suffered the loss of its property, namely Bosci Road and Devon Road. (c) Further particulars will be supplied. 28. The Defendant was aware at all material times that Garry Fulton was seeking to obtain loan finance on behalf of Ashlee as borrower. 29. The Defendant was aware at all material times that Garry Fulton proposed that any such loan finance would be secured by registered mortgage over real property in New South Wales owned by Ashlee, namely Bosci Road and Devon Road and the subject of a loan agreement which purported to grant security to the Defendant over Grasmere Property. 30. As at 14 September 2011 the Defendant was aware that, as at that date, Helen Trajkovski was shown in ASIC's registers as the sole director and secretary of Ashlee. 31. On 14 September 2011 the solicitor acting at that time for the Defendant in relation to the proposed loan to Ashlee drew that matter to the attention of the management of the Defendant and recommended that Helen Trajkovski receive independent legal advice concerning the proposed transaction and that she be required to give a directors guarantee. 32. At all material times from 15 September 2011 the Defendant was aware that subsequent upon that matter being raised by its solicitor the ASIC register was altered on 15 September 2011 so as to identify Garry Fulton as the sole director and secretary of Ashlee. 33. Those were matters which would place an honest person aware of such matters on enquiry. 34. By reason of these matters the Defendant had constructive knowledge of Garry Fulton's said breach of fiduciary duty. 35. The Defendant made no sufficient inquiry in the circumstances above. 36. Notwithstanding the matters pleaded in paragraphs 28 - 33 hereof: (a) the Defendant continued to treat with Garry Fulton as if he were the sole director and/or sole secretary of Ashlee; (b) paid funds in accordance with the direction of Garry Fulton purportedly pursuant to the subject loan agreement; and (c) the Defendant did not pay the loan advances to Ashlee or in accordance with its directions. 37. By reason of these matters the Defendant was knowingly concerned in the breaches of fiduciary duty by Garry Fulton." 1. On 3 September 2014, leave was given for Ashlee to include a claim pursuant to s 74MA of the Real Property Act 1900 (NSW) that Asiapac withdraw the caveat over the Grasmere property. 2. Asiapac does not consent to the amendment for three main reasons. They are firstly, there is, as with the motion to set aside default judgment, no explanation for the plaintiffs' delay in bringing the amendments; secondly, the plaintiffs are issue estopped from attempting to argue these points in light of the 2012 proceedings; and finally, that the proposed amendments are futile in any event. 3. In relation to delay, in Asiapac v Ashlee I have set out a chronology of the Trajkovskis' lack of knowledge of the credit agreement, the existence of the proceedings against Ashlee by Asiapac and the steps they took from when they first became aware of these matters (6 August 2013) to date. So far as these proceedings are concerned, on 6 May 2014, the Trajkovskis say that without prior notice, Michael La Motte ("Mr La Motte"), on behalf of Asiapac, arrived at the Bosci Road property with people from A CMI Waste Management and Raytons Pty Ltd who began removing goods from the premises [16]. On 9 May 2014, these proceedings were commenced. To date, directions have been given and orders made by this Court. 4. As previously mentioned, that judgment for the monetary sum in the Asiapac v Ashlee proceedings has been set aside, so the arguments in relation to res judicata and issue estoppel do not now arise. Further, in light of my findings in Asiapac v Ashlee, the conduct of the Trajkovskis and Ashlee did not constitute an abuse of process. 5. So far as the amendments in relation to the alleged wrongful detention of goods at [7] to [12] is concerned, Asiapac submitted that the amendments are unnecessary, embarrassing and misleading in circumstances where this Court ordered that it be restrained from dealing with the "Remaining Goods" (as they are defined by the points of claim) over the period set out and subsequently removed by agreement between the parties. 6. This claim relates to the actions of Asiapac for allegedly retaining the remaining goods for the period from 6 May 2014 to 28 August 2014. 7. On 9 May 2014, this Court made a restraining order in relation to the goods and chattels on the Bosci Road property. Order 3 reads: "3. Upon the plaintiffs giving the usual undertakings as to damages, that the defendant by itself, its servants and its agents be restrained until further order of the Court: (i) from removing, selling, disposing of, charging or otherwise encumbering or dealing with any goods or chattels located at the time of the service of these orders on the land known as xx Bosci Road, Ingleburn, being folio xxx/xxx ("the Land"). (ii) from selling, disposing of, charging or otherwise encumbering or dealing with any goods or chattels that have been removed from the Land by the defendant by itself and/or its servants and agents prior to the service of these orders and remain in the possession, custody or control of the defendant by itself and/or its servants and agents." 1. On 1 August 2014, the parties agreed "upon the defendant giving to the Court the undertaking, the injunction made and entered by the Court on 8 May 2014 is discharged without prejudice to the defendant's right to claim damages under and pursuant to the undertaking as to damages received by the Court in respect of that injunction". Orders were also made for the removal of the goods from the property. There remains an outstanding issue in relation to a three point roller. 2. It is my view that between 9 May 2014 and 1 August 2014, Asiapac was restrained from dealing with any goods or chattels located at the Bosci Road property. In other words the court order prevented Asiapac dealing with the goods and chattels. In these circumstances, the proposed amendments contained in [7] to [12] of the amended points of claim cannot be maintained. Leave to make these amendments is refused. 3. Finally, Asiapac submitted that Ashlee commencing the current proceedings against it is forcing it to incur further legal costs while the balance of the judgment debt remains unpaid. Now, Asiapac says that Ashlee seeks to expand the scope of these proceedings, through its notice of motion to bring further claims under the second limb of Barnes v Addy (1874) 43 LJ Ch 513; (1874) 22 WR 505, and that the costs of defending those actions will be considerable, exceeding $103,000, including the costs of these applications. 4. However, after taking into account that the Barnes v Addy issue is to be argued in the 2012 proceedings in any event, and that Ashlee has suffered prejudice in that it has already lost two of its properties, in the exercise of my discretion I would grant leave for Ashlee and the Trajkovskis to make the balance of the amendments. 5. I grant leave to the Trajkovski's to make the amendments set out at paragraphs [11] to [37] of the proposed amended points of claim. As previously stated, I disallow paragraphs [7] to [12] of the proposed amended points of claim. (2) Security for costs 1. Both parties have sought security for costs. 2. I shall set out the law in relation to security for costs. Then, in relation to each application, I shall deal with three issues, firstly, the threshold issue; secondly, the discretionary matters; and finally, quantum, if appropriate. The law 1. The tests stipulated by s 1335(1) of the Corporations Act 2001 (Cth) and rule 42.21(1)(d) of the Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") are similar: Fitzpatrick v Waterstreet (1995) 18 ACSR 694. Threshold issue 1. The threshold issue under s 1335 of the Corporations Act is whether it appears to the court "by credible testimony that there is reason to believe that [the plaintiff] will be unable to pay the costs of the defendant if successful in its defence". In Beach Petroleum NL v Johnson (1992) 10 ACLC 525; (1992) 7 ACSR 203, von Doussa J stated at 205 that the test is satisfied where: "…Credible evidence establishes that there is reason to believe there is a real chance that in events which can fairly be described as reasonably possible the plaintiff corporation will be unable to pay the costs of the defendant on service of the allocator, if judgment goes against it. This will be so even in other events which can also be fairly described as reasonably possible the plaintiff corporation would be able to pay the costs." 1. This is to be determined by reference to the plaintiff's likely financial position at the time of judgment: Idoport Pty Limited v National Australia Bank Ltd [2001] NSWSC 744 at [58] per Einstein J; Narradine Pty Ltd v Mascot Steel & Tools Pty Ltd [2012] NSWSC 385 at [5] per Black J. 2. UCPR 42.21(1)(d) similarly provides that, if in any proceeding it appears to the court that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, the court may order the plaintiff to give such security as the court thinks fit, in such a manner as the court directs, for the defendant's costs of the proceedings, and that the proceedings be stayed until the security is given. 3. The tests prescribed by s 1335 and UCPR 42.21(1)(d) are premised upon the assumption that the defendant will successfully defend the proceedings: Beach Petroleum at 205. Discretionary matters 1. There are a number of discretionary matters the courts have regarded as relevant considerations, many of which are listed in UCPR 42.21(1A). It relevantly reads: "42.21 Security for costs … (1A) In determining whether it is appropriate to make an order that a plaintiff referred to in subrule (1) give security for costs, the court may have regard to the following matters and such other matters as it considers relevant: (a) the prospects of success or merits of the proceedings, (b) the genuineness of the proceedings, (c) the impecuniosity of the plaintiff, (d) whether the plaintiff's impecuniosity is attributable to the defendant's conduct, (e) … (f) whether an order for security for costs would stifle the proceedings, (g) whether the proceedings involve a matter of public importance, (h) whether there has been an admission or payment in court, (i) whether delay by the plaintiff in commencing the proceedings has prejudiced the defendant, (j) the costs of the proceedings, (k) whether the security sought is proportionate to the importance and complexity of the subject matter in dispute, (l) the timing of the application for security for costs, (m) whether an order for costs made against the plaintiff would be enforceable within Australia, (n) the ease and convenience or otherwise of enforcing a New South Wales court judgment or order in the country of a non-resident plaintiff. …" 1. The discretion to order costs is unfettered, and should be exercised having regard to all the circumstances of the case without any predisposition in favour of the award of security: KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 13 ACLC 437; (1995) 56 FCR 189 at 196. The timing of the application 1. Delay by a defendant is a relevant factor in the exercise of the discretion: see Idoport at [68]. The bona fides of the claim/prospects of success 1. These issues are relevant to the extent that if the claim is not bona fide or clearly has poor prospects then these are matters supporting an order for security. As a general rule, where a claim is prima facie regular on its face and discloses a cause of action, the court should, in the absence of evidence to the contrary, proceed on the basis that the claim is bona fide and has reasonable prospects of success: KP Cable Investments Pty Ltd at 197. The impecuniosity of the plaintiff; and whether the plaintiff's financial position/impecuniosity was caused by the defendant's actions 1. See Lynnebry Pty Ltd v Farquhar Enterprises Pty Ltd (1977) 3 ACLR 133; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; [2004] NSWSC 664 at [85]-[101]. Stultification/whether an order for security would stifle the proceedings 1. A corporate plaintiff seeking to assert stultification must demonstrate that those standing behind the company, who are likely to benefit from the action, are also without means to satisfy an adverse costs order: Bell Wholesale Co Limited v Gates Export Corporation (1984) 52 ALR 176; (1984) 2 FCR 1 at 4 (applied in Whyked Pty Limited v Yahoo Australia and New Zealand Pty Limited [2006] NSWSC 1236 at [16]), Odyssey Financial Management Pty Ltd v QBE Insurance (Australia) Ltd [2012] NSWCA 113 at [15]. Other considerations 1. The Court may also take into account matters peculiar to the particular circumstances of the case: Equity Access Ltd v Westpac Banking Corporation [1989] ATPR 40-972. Another consideration is whether a person standing behind the company has offered a relevant undertaking in relation to costs and, if so, the nature of that undertaking: KP Cable Investments Pty Ltd at 197-198 and Prynew Pty Limited v Nemeth [2010] NSWCA 94 at [39] and [40]. (1) Asiapac's application for security for costs 1. Asiapac seeks security for costs in the initial amount of $70,000, with liberty to apply for additional security for costs at a later stage of the proceedings, against firstly, Ashlee Holdings; and secondly, Mr and Mrs Trajkovski in relation to defending the amended summons. Asiapac's submissions were written before the default judgment had been set aside, when the amount of the judgment debt was still owing so some of those submissions are no longer applicable. 2. Ashlee and Mr and Mrs Trajkovski oppose the order for security for costs. They have submitted that an order for security for costs will stultify their proceedings, which are being brought bona fide, and that Asiapac seeks to avoid a determination on the merits at final hearing. 3. Mr and Mrs Trajkovski make a claim for damages for conversion concerning the goods that were stored at the Bosci Road property. Mrs Trajkovski is a director of Ashlee and also sues in her personal capacity in relation to the conversion of goods claim. Mr Trajkovski sues in his personal capacity only. The threshold jurisdiction test Ashlee 1. Ashlee is not a current trading entity. Ashlee's only source of revenue was derived from the rental income it received from renting the Devon Road and Bosci Road properties to the family business. Those properties have now been sold. Ashlee does not have a business telephone number in the white or yellow pages directories and has not have a business web page. The ASIC extract indicates that Ashlee's last annual return was lodged in 2002. So far as Ashlee is concerned, its only asset is the Grasmere property, which is secured by a registered mortgage to the Bendigo and Adelaide Bank. Asiapac also claims a caveated charge over the Grasmere property. It is common ground that Ashlee will be unable to pay the costs of Asiapac if Asiapac is successful in its defence (s 1335 of the Corporations Act). In these circumstances, the threshold jurisdiction test has been satisfied. 2. The financial position of Mr and Mrs Trajkovski is outlined at [34], [36] and [37] of Mrs Trajkovski's 9 April 2014 affidavit. It is as follows: "34. My husband and I have insufficient funds to pay the mortgagee in fact we have no money at all and we have a mortgage on our family home for which we are the guarantor. We do not have the ability to borrow to pay out the mortgagee. … 36 There is a lot of stock, timber, metal products, machinery and equipment stored at the Bosci Road premises. Mr La Motte has already sold an unregistered truck that belongs to my husband Paul, for $300.00 which my husband believes has a value of about $8,000.00. He sold our boat and has given away numerous other items and sold machinery, for a fraction of what they are worth. He has now given out boat back to us and allowed us to take some items from the property which he had put in a container. 37. It is our estimate that there are items worth many thousands of dollars which belong to us personally and form part of the stock and equipment for our business Pegs R Us stored at the Bosci Road premises. Ashlee Holdings Pty Ltd also owns some equipment at those premises." 1. The onus now falls on Ashlee and the Trajkovskis to satisfy this Court that an order for security for costs should not be made. 2. So far as Mr Trajkovski is concerned, he has no money at all. It is a general rule that poverty is no bar to a litigant. However, as noted in Melville v Craig Nowlan & Associates Pty Ltd [2002] NSWCA 32; (2002) 54 NSWLR 82 at 108 and Morris v Hanley [2000] NSWSC 957 at [11]-[12], the general rule is not absolute. The general rule is balanced against any abuse of process, so as to prevent plaintiffs from litigating without responsibility. It is my view that Mr Trajkovski's claims are not an abuse of process and the general rule should prevail. I decline to make an order that Mr Trajkovski provide security for costs. Discretionary matters The bona fides of claim and prospects of success 1. For reasons given earlier in this judgment and in Asiapac v Ashlee, I accept that Ashlee and the Trajkovskis' claims are brought bona fide and have reasonable chances of success. The impecuniosity of the plaintiffs/whether there are persons standing behind the company willing to provide security 1. As previously stated, these proceedings involve firstly, an alleged fraud by a third party, Mr Fulton, in relation to a credit agreement, and whether or not Asiapac through Mr La Motte had constructive knowledge of that fraud. The Trajkovskis did not receive the benefit of any funds from the alleged fraudulent transaction. As a result of the alleged fraud, the properties at Bosci Road and Devon Road that had been held by Ashlee, have now been sold by Asiapac. Ashlee does not have any funds. 2. The approach to be adopted where directors proffer an undertaking or guarantee is set out in Prynew Pty Limited v Nemeth, where Beazley JA stated at [39] and [40]: "39 In KP Cable Investments v Meltgow, I took the view that Gentry Bros v Wilson Brown & Associates did not stand for the proposition that once the shareholders or others standing behind the company agreed to be responsible for any judgment for costs of an impecunious corporate plaintiff, the purpose of s 1335 had been fulfilled. (This was the view of the case taken by Powell J in Erolen v Baulkham Hills Shire Council (1993) 10 ACSR 441.) Rather, as I stated, at [63], I understood the judgment of Cooper J in Gentry Bros to stand for the proposition that: "…the offer of security by way of a guarantee from the directors or shareholders or other persons interested in the outcome of the litigation was a factor, which could be decisive in a given case, to be considered in determining whether any other persons interested in the outcome of the litigation was a factor, which could be decisive in a given case, to be considered in determining whether any other form of order for security for costs should be made. In my opinion, this is the correct approach to take when such an offer has been made." 40. I do not consider the view I expressed in KP Cable Investments v Meltglow to be out of accord with what was said by the majority in Epping Plaza v Bevendale …, I endorse that view." 1. Mrs Trajkovski, as director of Ashlee, has not proffered an undertaking as to costs. I accept that she has no funds. Whether the plaintiffs' financial position/impecuniosity was caused by the defendant's actions 1. The actions of Mr Fulton caused the plaintiffs' impecuniosity. It is alleged that Mr La Motte had constructive knowledge of Mr Fulton's fraud. It is difficult to say whether or not Ashlee and the Trajkovskis' impecuniosity was caused by Asiapac's actions, so I will regard it as a neutral factor. Stultification 1. Counsel for Ashlee submitted that Ashlee's only remaining asset is the Grasmere property, which is where the Trajkovskis reside and if security for costs were to be ordered it would stultify the proceedings. As there is no recourse to other funds, I accept that if an order for security for costs is made, it would stultify these proceedings. Conclusion 1. So far as the other matters are concerned, it is common ground that there has been no significant delay in Asiapac bringing this application for security for costs. There has not been an admission or payment into Court, the delay in commencing proceedings has been explained but I accept that Asiapac has incurred costs to date in defending these proceedings which have not been paid. Any order for costs if made is enforceable in Australia. There is no public importance in these proceedings. 2. Further, like Ashlee, the Trajkovskis have not received any benefit from the alleged fraudulent transaction, their claim is brought bona fide and has reasonable chances of success. Mrs Trajkovski has not proffered an undertaking as to costs. It is my view that if I make an order for security for costs, it would stultify these proceedings. The Trajkovskis have discharged their onus of proof. In my view the matters referred to above fall in favour of the Trajkovskis. So, in the exercise of my discretion, I decline to make an order that Ashlee or Mr and Mrs Trajkovski provide security for costs to Asiapac. (2) Ashlee and the Trajkovskis' application for security for costs 1. Ashlee and the Trajkovskis submitted that the fact that Asiapac is a foreign company with no demonstrable assets within Australia is sufficient to satisfy a costs order and that security ought be ordered against it. Ashlee seeks security for the costs for defending Asiapac's cross claim. 2. It is common ground that Asiapac is a company incorporated in Singapore. Asiapac's registration in Singapore includes its status as a dormant company since 2011 (report of Mr Ho). Under Singapore laws, that means effectively that no income has been accrued or expenses paid since 2010. According to counsel for Ashlee and the Trajkovskis, this must mean that Asiapac has not engaged in any business activities on its own behalf, beneficially, since 2010. 3. Asiapac has put on evidence as to its capacity to meet an adverse costs order. As at 31 December 2011, the balance sheet of Asiapac shows that it held total cash assets exceeding $155,000; receivables exceeding $6,338,000; total current assets and total assets, exceeding $6,493,000; total liabilities of $6,398,000, including an unsecured, interest free and repaybable on demand investor loan of $6,328,000; and net assets exceeding $95,000. 4. The solicitor for Asiapac deposed that Asiapac would be able to pay that amount of costs from its Australian based assets if the Trajkovskis were successful in their defence of the cross claim in these proceedings. Mr La Motte says that cash assets exceeding $200,000 are located within Australia and that Asiapac has little or no liabilities. 5. The evidence supplied by Asiapac of its capacity to pay comprises bank statements from two bank accounts, one with Standard Chartered in Singapore, the other with Westpac in Australia. The bank statements show that funds pass through those accounts from time to time. I have examined the recent bank records of Westpac and large amounts pass through it each month. However, counsel for Ashlee and Trajkovskis submitted that there is no history of stable balances, or term deposits. 6. Counsel for Ashlee also submitted firstly, that little is known of the business activities of Asiapac; and secondly, that Asiapac evidently engages in transactions such as the subject transaction. The reasons for its registration in Singapore, when it operates in Australia, are not revealed. The transaction giving rise to these proceedings appears to have been funded by a composite amount consolidated through the trust account of Irdi Lawyers (Riverlord Holdings Pty Ltd t/a Irdi Lawyers) from a number of sources; and finally, the beneficial interest in these funds is not evident. 7. Counsel for Asiapac submitted that the basis of the claim is peculiar in circumstances where Ashlee and the Trajkovskis have failed to pay any of the costs orders, or any part of the cost orders, made in favour of Asiapac on 21 January 2013, 29 January 2013 and 19 August 2014 or the costs of enforcing the judgment pursuant to s 137 of the Civil Procedure Act and UCPR 39.47. Counsel for Asiapac submitted that any costs order made against Asiapac should at least be offset by costs orders made payable by Ashlee to it. 8. While I accept that Asiapac is registered in Singapore, nevertheless, I am satisfied that it is in a position to pay the costs of Ashlee and the Trajkovskis claims, should they be successful. Hence, the threshold issue has not been satisfied so I decline to order that Asiapac provide security for costs. The Court orders that: (1) In so far as the plaintiffs' notice of motion filed 17 April 2015 is concerned, I make an order that they have leave to amend the summons and points of claim as set out in paragraphs [17] to [37] of its points of claim. Such amended summons and amended points of claim are to be filed and served within 14 days. (2) I decline to make an order that the defendant provide security for costs. (3) So far as the defendant's notice of motion filed 20 April 2015 is concerned, I stand paragraphs [4] to [8] over to a directions hearing before the Registrar at 9.00 am on 29 October 2015. I dismiss the balance of the notice of motion. (4) Costs are reserved. ********** 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. Decision last updated: 08 October 2015