Supreme Court New South Wales Medium Neutral Citation: Otta International Pty Limited v Asia Pacific Carbon Pte Ltd [2017] NSWSC 780 Hearing dates: 8 June 2017 Decision date: 08 June 2017 Jurisdiction: Common Law Before: Adamson J Decision: 1. Dismiss the notices of motion filed in court by the third and fourth defendants on 8 June 2017. 2. Order the third and fourth defendants to pay the plaintiff's costs of the notices of motion, if any. Catchwords: PRACTICE AND PROCEDURE – SECURITY FOR COSTS – jurisdictional basis not established as evidence to the effect that the plaintiff could pay an adverse costs order – motions dismissed Legislation Cited: Corporations Act 2001 (Cth), s 1335 Uniform Civil Procedure Rules 2005 (NSW) r 42.21 Category: Procedural and other rulings Parties: Otta International Pty Limited (Plaintiff) Asia Pacific Carbon Pte Ltd (First Defendant) Asia Pacific Carbon Pty Ltd (Second Defendant) Peter Kane (Third Defendant) Julie Kane (Fourth Defendant) Representation: T Terei (Director of Plaintiff company, by leave) Third and Fourth Defendants appeared in person Solicitors: English Law (Plaintiff) File Number(s): 2015/220270 Judgment: EX TEMPORE Introduction 1. The third and fourth defendants (Mr and Mrs Kane) have applied for an order for security for costs against the plaintiff. The Court's power to order security for costs 1. There are two bases on which the Court could order security for costs. The first is under Uniform Civil Procedure Rules 2005 (NSW) (UCPR) r 42.21(1)(d): namely, 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 other basis for this Court's jurisdiction to order security for costs is s 1335 of the Corporations Act 2001 (Cth) which provides: "Where a corporation is a plaintiff in any action or other legal proceedings the Court having jurisdiction in the matter may if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, requires sufficient security to be given for those costs and stay all proceedings until the security is given." The evidence in support of the application 1. Mr and Mrs Kane have sworn affidavits in support of their notices of motion which are, in all material respects, identical. The bases on which they allege that the plaintiff will be unable to meet an adverse costs order are set out in their affidavits. 2. The first basis on which they contend that the plaintiff will be unable to meet a costs order is that the plaintiff's former solicitor Mr Sigler served a notice of intention to cease to act on the plaintiff and subsequently filed a notice of ceasing to act. As a consequence, Mr Sigler is no longer the solicitor on the record for the plaintiff. The plaintiff's solicitor on the record is Ms English, who has filed a notice of appearance on behalf of the plaintiff. The third and fourth defendants rely on these notices together with promotional material used by Ms English which indicates that she practises essentially from home at Stanhope Gardens and that she is willing to meet clients in their own homes or also in cafes, if required. Mr and Mrs Kane relied on material from Ms English's website to the effect that she is able to compete on price with other practitioners. Mr Kane, on behalf of himself and his wife submitted that this material constituted a warning sign that the plaintiff was unable to afford the services of a legal practitioner who had offices in the city. He submitted that this material amounted to credible evidence that the plaintiff might be unable to meet an adverse costs order if it was unsuccessful in the proceedings. 3. The other matter on which the defendants rely is that they have undertaken a search of the properties owned by Mr Terei, who is the sole director of the plaintiff. The property title search records that Mr Terei and another person own a property as joint tenants which is subject to a mortgage. Mr Terei in his evidence has said that although the mortgage has been paid out, he has not arranged for a formal discharge of the mortgage. Consideration 1. I regard it as no more than speculation to suggest that the reason for the plaintiff changing its solicitor relates to relative cost. But even if I were prepared to infer that the plaintiff wanted to minimise its costs of expenditure by retaining a legal practitioner who charged at lower rates than the former legal practitioner, this would not of itself provide credible evidence that the plaintiff was unable to meet any adverse costs order if the plaintiff were unsuccessful in the proceedings. 2. There are a number of difficulties with the defendants' reliance on the asset position of Mr Terei. First, Mr Terei is a director of the company and is not a party to the proceedings. There is no evidence to contradict Mr Terei's sworn evidence that the mortgage has been paid out although it has not formally been discharged. As Otta International Pty Ltd is the sole plaintiff, the property owned by Mr Terei is irrelevant to the application unless it were to be put on the basis that neither the company nor the persons standing behind the company could meet an order for costs. 3. The Kane's have adduced evidence that they have made enquiries of Rockcliffs solicitors with a view to retaining Rockliffs to appear on their behalf at the final hearing of the proceedings. The estimate which appears from Mr Kane's affidavit is that the costs that they would incur in the proceedings would be an amount of about $70,000 and they submit that the plaintiff will be unable to pay that amount if the plaintiff is unsuccessful. In his affidavit Mr Terei has noted that the third and fourth defendants have appeared for themselves throughout the proceedings and, accordingly, the legal costs they have incurred to date would be minimal if anything. 4. Even assuming that Mr and Mrs Kane retain solicitors for the hearing and even assuming that the estimate of $70,000 is reliable, the plaintiff has adduced evidence of its financial situation which indicates that it would be in a position to pay an adverse costs order. Mr Terei has annexed to his affidavit a bank statement of the plaintiff which indicates that the plaintiff has about $100,000 to its credit in an account with the National Australia Bank. 5. In all the circumstances, I am not satisfied that the applicants have shown by credible testimony that there is reason to believe that the plaintiff will be unable to pay the costs of the third and fourth defendants if they are successful in their defence of the proceedings. Accordingly, the jurisdictional basis for ordering the plaintiff to pay its security for costs has not been established. 6. There are other discretionary matters which would be relevant had I come to a different view as to this jurisdictional matter and they include the applicants' delay in bringing this application. However, in light of the view to which I have come, it is not necessary to go through the matters which are germane to an exercise of the discretion to determine whether security for costs should be ordered. Orders 1. I make the following orders: 1. Dismiss the notices of motion filed in court by the third and fourth defendants on 8 June 2017. 2. Order the third and fourth defendants to pay the plaintiff's costs of the notices of motion, if any. ********** 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: 15 June 2017