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  4. Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long - [2020] QSC 325

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Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long[2020] QSC 325

Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long[2020] QSC 325

SUPREME COURT OF QUEENSLAND

CITATION:

Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long [2020] QSC 325

PARTIES:

PURE CASTING PTY LTD, ABN 81 921 463 506, AS TRUSTEE FOR THE PURE CASTING UNIT TRUST

(Plaintiff)

v

CRAIG LONG

(First Defendant)

and

ABA PARTNERS QLD PTY LTD ACN 164 280 791

(Second Defendant)

and

MATTHEW FRANCIS VAN MOURIK

(Third Defendant)

FILE NO/S:

BS No 9228 of 2019

DIVISION:

Trial Division

PROCEEDING:

Application

DELIVERED ON:

28 October 2020

DELIVERED AT:

Brisbane

HEARING DATE:

13 October 2020

JUDGE:

Bowskill J

ORDERS:

  1. The application is dismissed.
  2. The applicant (first defendant) pay the respondent’s (plaintiff’s) costs of the application.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – POWER TO ORDER – dispute between the plaintiff and a former director on the basis of allegations of breach of statutory and fiduciary duties owed by him as a director, and allegations of engaging in a dishonest and fraudulent design intending to confer a financial benefit on another company of which he was also a director – whether the court is satisfied there is reason to believe the plaintiff corporation will be unable to pay the first defendant’s costs if ordered to pay them

Uniform Civil Procedure Rules 1999 (Qld), rr 670 and 671

Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143; [2018] QCA 309.

COUNSEL:

C G C Curtis for the applicant (first defendant)

D R Cooper QC for the respondent (plaintiff)

SOLICITORS:

Creevey Russell Lawyers for the applicant (first defendant)

Simpson Quinn Lawyers for the respondent (plaintiff)

  1. [1]
    The first defendant applies for an order that the plaintiff provide security for his costs of these proceedings in the amount of $110,000 (or such other amount as the court considers appropriate) in the form of a bank guarantee or other form acceptable to the Registrar.  The application is made under rr 670 and 671(a) of the Uniform Civil Procedure Rules 1999 (Qld), on the basis that the court should be satisfied there is reason to believe the plaintiff corporation will not be able to pay the first defendant’s costs if ordered to pay them.
  2. [2]
    The plaintiff, Pure Casting Pty Ltd, is the corporate trustee of the Pure Casting Unit Trust. It is involved in the business of wholesale jewellery production, providing metal casting services to the jewellery industry.  Pure Casting does not operate in any other capacity.
  3. [3]
    The first defendant, Mr Long, and Mr McCosker were the two directors of Pure Casting from its incorporation in October 2010 and effectively set up the business together.   Mr McCosker is still a director; Mr Long resigned in October 2019.   Mr McCosker’s sister, Ms Baldwin, was appointed as a director of Pure Casting in July 2017.  
  4. [4]
    Mr Long was responsible (he says, with others) for the day to day management of Pure Casting from October 2010 to July 2017.  Mr Long is also the sole director and secretary of another company, Rapid Edge Pty Ltd, which trades as Facet RP.  Facet’s business involved computer aided design of jewellery, and printing of wax models of jewellery, from which the plaintiff, Pure Casting, produced moulds to cast items of jewellery.  Facet provided these services to Pure Casting from about March 2011 to October 2019. 
  5. [5]
    The second and third defendants are an accounting firm and its sole director, respectively, which provided accounting services to Pure Casting, Mr Long and Facet.  These defendants played no role in the application before me.
  6. [6]
    Pure Casting alleges that, in the period from April 2015 to July 2017, Mr Long caused Pure Casting to issue illegitimate invoices, purportedly from Facet to Pure Casting, in the amount of about $1,042,000.  These invoices are alleged to have reflected services not actually provided, exceeded the reasonable value of any services that were provided, in fact reflected the operational expenses of Facet and were intended to prevent Facet becoming insolvent.  That is disputed by Mr Long, who contends that all of the invoices were for services actually provided by Facet. 
  7. [7]
    Mr Long also contends that the arrangement between Facet and Pure Casting, relating to invoices and amounts to be paid, was a matter of agreement with Mr McCosker.   
  8. [8]
    Pure Casting also alleges that Mr Long caused other payments to improperly be made by Pure Casting to Facet, for salaries, rental expenses, Telstra expenses and printers used by Facet. 
  9. [9]
    Pure Casting alleges that by reason of Mr Long’s conduct, as pleaded in the further amended statement of claim, Mr Long was in breach of the statutory duties owed by him as a director of Pure Casting under ss 180(1), 181(1) and 182(1) of the Corporations Act 2001 (Cth), and the fiduciary duty he owed to the company; and that he engaged in a dishonest and fraudulent design intending to confer a financial benefit on Facet.  Pure Casting claims equitable compensation in the amount of just over $1,525,000, together with an order for compensation under s 1317H of the Corporations Act. 
  10. [10]
    Mr Long denies any breach of duty or dishonesty.  In his affidavit filed in support of this application, Mr Long says that after successfully operating Facet’s business for a number of years, he began discussing the establishment of another business with Mr McCosker, which would trade in the casting and production of precious metal jewellery, using the wax models produced by Facet.  That business was Pure Casting.  Mr Long says that Facet’s services were paid for by invoices delivered to customers, but they were discounted, as a way of “injecting more custom” to Pure Casting. 
  11. [11]
    At some stage, Mr Long says he received advice from the second and third defendants to institute a new financial arrangement between Facet and Pure Casting, which involved Facet charging Pure Casting a “flat-rate fee” of $10,000 per week, or $40,000 per month, for Facet’s services.  Facet would then cease invoicing customers, and Pure Casting would perform all invoicing on behalf of both entities.  The purpose of this proposal, according to Mr Long, was to simplify invoicing and administrative arrangements and ensure that Facet was earning enough money to pay its own operating costs. 
  12. [12]
    Mr Long says Mr McCosker agreed to this arrangement, and that it was implemented in an “open and explicit fashion”.  Mr McCosker denies any such agreement and any knowledge of the payments being made to Facet and says that if asked by Mr Long he would not have agreed to such an arrangement, because Facet provided services to Pure Casting worth, on average, only about $1,675 a month.
  13. [13]
    Mr Long says this arrangement came to an end in May 2017, by which time Ms Baldwin had become a director of Pure Casting.  Mr Long says it was agreed that Pure Casting would continue to pay the wages of Facet’s staff, for the services Facet was providing for the customers of Pure Casting (design and wax model printing).
  14. [14]
    The claim against the second and third defendants is on the basis that they either procured or induced Mr Long to breach his fiduciary and statutory duties, or were knowingly concerned in, or involved in, the alleged breach(es), on the basis of advice they are said to have given Mr Long about the invoicing arrangements between Pure Casting and Facet.
  15. [15]
    The proceedings were commenced in August 2019. The statement of claim was substantially amended in May 2020 (CFI 4); and a further amended defence of Mr Long, and amended defence of the second and third defendants, were filed in July 2020 (CFI 7 and 8).  Apart from the present application, the matter has not yet progressed beyond those pleadings.
  16. [16]
    The relevant principles which apply on an application for security for costs are not controversial.  They were recently considered and articulated by the Court of Appeal in Monto Coal 2 Pty Ltd v Sanrus Pty Ltd [2019] 3 Qd R 143; [2018] QCA 309.
  17. [17]
    Rule 670 of the UCPR empowers the court, on application by a defendant, to order the plaintiff to give the security the court considers appropriate for the defendant’s costs of and incidental to the proceeding.
  18. [18]
    The first stage of determining such an application involves consideration of whether a prerequisite for ordering security for costs, under r 671 UCPR, has been shown.  Relevantly in this case, the “threshold question” is whether the court is satisfied “there is reason to believe [the plaintiff corporation] will not be able to pay the [first] defendant’s costs if ordered to pay them” (r 671(a)).
  19. [19]
    In Monto Coal, Gotterson JA (with whom McMurdo JA and Boddice J agreed) referred to the reasoning of Macfarlan JA in Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301; [2014] NSWCA 65 at [16] and [17], where he said:

“[16] The words ‘reason to believe’ acknowledge that on an application for security for costs, as a matter of practicality, a court will not be able to undertake as thorough an examination of the financial position of a plaintiff as it would if an issue as to that arose at a final hearing.  Almost inevitably, the court’s assessment will be a preliminary one based on limited materials.  Nevertheless, for the power to order security to arise, the outcome of the assessment must be that the court considers that there is ‘reason to believe’ that the plaintiff ‘will be’ unable to meet an adverse costs order.  A conclusion that there is a risk that that will, or may, be the case is insufficient.

[17] The words of the statute and rule are clear and should be applied according to their terms without a gloss being placed upon them.  They were so applied in the last Full Bench decision of this Court applying the provisions, Wollongong City Council v Legal Business Centre Pty Ltd [2012] NSWCA 245…  In that case, Beazley JA (as her Honour then was) (with whom Barrett JA agreed) referred to the onus of the applicant for security as being to establish ‘that there is reason to believe that the other party to the litigation will be unable to pay the costs of the litigation if unsuccessful’:  at [29] and [30].”

  1. [20]
    Gotterson JA adopted that reasoning, observing that it accords with the earlier observations of the High Court in George v Rockett (1990) 170 CLR 104 at 116 as to the meaning of “reason to believe” (at [42]), and held (at [43]) that:

“for a reason to believe that a fact will exist, the objective circumstances must be sufficient to incline the mind towards accepting, rather than rejecting, that the fact will exist.  By way of contrast, the requisite belief is not merely that the circumstance may come in to existence, or that there is some risk that it may.  It is a belief that the fact will come into existence.”  [emphasis in the original]

  1. [21]
    It is for the applicant for security to adduce evidence from which the requisite reason to believe may be deduced and also to persuade the court that such a deduction ought to be made (Monto Coal at [48] and [49]).
  2. [22]
    The phrase “will be unable to pay” does not require that a company have available liquid funds sufficient to meet the costs order on the date the order is made.  The period of time likely to be required for determination, by assessment or otherwise (and allowing for resolution of disputes arising in that process) is to be taken into account.  So also is the opportunity the plaintiff corporation will have within that period to realise non-liquid assets in order to pay the costs as and when they are ultimately determined (Monto Coal at [50]-[52]).
  3. [23]
    On behalf of the first defendant, there is evidence from Mr Dudman, a costs assessor, who estimates that the first defendant’s proper or necessary costs, payable on the standard basis, up to and including the first day of trial, would be about $142,250.[1]  Mr Dudman considers about $20,700 to be a reasonable amount for the work during days two to five of the trial.  What the first defendant seeks is security in the amount of $110,000, or such other amount as considered appropriate by the court.
  4. [24]
    The solicitor for the plaintiff, Mr Creevey, takes issue with the estimate of costs outlined by Mr Dudman, including on the basis that this proceeding involves primarily questions of law, in respect of which there is no point in attempts to mediate, and which would require only a two day trial (not five days, as estimated by Mr Dudman).  Mr Creevey also takes issue with some of the other items identified by Mr Dudman, as either not being necessary at all (for example, the filing of a reply by the plaintiff; expert evidence; and interlocutory applications) or in his view involving a much lower cost.  Mr Creevey’s estimate, including a two day trial, is about $50,000.  
  5. [25]
    Accepting that the matter is at an early stage, and that there are still pleading issues to be ironed out, this seems, with respect, unrealistic.  The issues as they currently appear on the pleadings are not mere matters of law.  The allegations are of very serious misconduct on the part of Mr Long, including dishonesty and fraud, which will no doubt require findings on disputed questions of fact, and in respect of which credit findings may need to be made.  Mr Creevey’s prediction of no interlocutory applications seems highly unlikely, given that the plaintiff has already flagged an application to strike out the first defendant’s defence.  As counsel for the first defendant points out, the plaintiff has already, on the evidence of its accountant, Mr Trickett, incurred about $180,000 in legal expenses, related to this litigation.  To suggest that the first defendant’s costs from now to the end of the trial would be only $50,000 seems highly implausible, in my respectful view. 
  6. [26]
    The evidence adduced by the first defendant in support of his application includes evidence of Mr Long’s belief that Pure Casting was in “poor financial health” as at September 2017, which is the last time he says he had direct involvement in and knowledge of the financial affairs of the company.  Mr Long also says, by reference to Pure Casting’s financial statements for the years 2015, 2016 and 2018 that he believes the company is in a “parlous financial state”.  He also:
    1. (a)
      refers to emails sent to him by Ms Baldwin in August and September 2018 in which she says the company is in a difficult financial position;
    2. (b)
      observes that the jewellery industry generally is in poor shape at present; and
    3. (c)
      comments that in addition to his costs, if unsuccessful in the proceeding Pure Casting will also have to pay the second and third defendants’ costs.
  7. [27]
    One of the matters relied upon by Mr Long is the reference in the 2018 financial statements to a liability owed by Pure Casting to Mr Long, of $96,598, which is recorded as a non-current liability.  Mr Long says this is owed to him in respect of a “gold loan” he made to the company (in 2014), and refers to a letter of demand sent to the company by his solicitor in July 2020.  In that letter,[2] the terms of the “gold loan” are said to include that the loan was to be repaid in specie, rather than by payment of money; and a demand is made for Pure Casting to provide Mr Long with a specific quantity of gold.  Pure Casting, in correspondence, and Mr McCosker, in his affidavit, deny there is a liability to repay the “gold loan” on the basis requested in Mr Long’s solicitor’s letter.  Mr McCosker says he has also loaned gold to Pure Casting over the years.[3]  In that regard, one of the non-current liabilities consistently recorded in the company’s financial reports is “start up gold”, with a value of $95,000, which in more recent years is identified as payable to Steve McCosker.[4]  
  8. [28]
    Another matter relied upon by Mr Long is the liability of $387,260 also recorded in the 2018 financial statements as a non-current liability, owed to a company called E&B Properties Pty Ltd.[5]  Mr Long and Mr McCosker are the directors of this company.  As explained by Mr McCosker, this loan was to provide funds to purchase plant and equipment and cover other general set up costs for the Pure Casting business, when it was established by Mr Long and Mr McCosker in 2010.  In September 2020, Mr Long’s solicitors, stating that they are the solicitors for E&B Properties Pty Ltd, sent a letter of demand to Pure Casting for repayment of this loan.[6]  Mr McCosker disputes the validity of the purported resolution of E&B Properties Pty Ltd, which Mr Long contends was passed, for the company to pursue recovery of this loan and appoint solicitors.[7]   The loan from E&B Properties Pty Ltd, in varying amounts, has been recorded as a non-current liability since at least 2012.[8]
  9. [29]
    More broadly, the financial statements for Pure Casting exhibited to Mr Long’s affidavit show the following:
    1. (a)
      for the year ended 30 June 2015:[9]
      1. a trading loss overall of $54,431.51 (down from the previous in which the company suffered a trading loss of $82,233.38);
      2. assets of $743,327.98 (current and fixed);
      3. current liabilities of $246,817.25 and non-current liabilities of $988,968.80 (including the gold loan from Mr Long and the loan from E&B Properties Pty Ltd);
    2. (b)
      for the year ended 30 June 2016:[10]
      1. a trading loss of $415,469 (significantly increased from the previous year);
      2. assets of $802,036 (current and fixed);
      3. current liabilities of $827,871 (significantly increased from the previous year, largely due to taxation liabilities, as well as loans from a finance company, Mr McCosker and Ms Baldwin) and non-current liabilities of $882,033; and
    3. (c)
      for the year ended 30 June 2018:[11]
      1. a much lower trading loss of $2,352 (the sales in this year being increased from previous years, to just over $3.5 million) (the trading loss in the previous year (2017) also appears to have been much lower than before, at $13,601);

In relation to this, the evidence of the plaintiff’s accountant, Mr Trickett, is that for this year, if you “add back” in the depreciation expense (which is not an expense in the true sense of money actually spent), the company would actually have made a profit of $31,692.[12]

  1. (ii)
    assets of $700,336 (current and fixed);
  2. (iii)
    current liabilities of $432,992 and non-current liabilities of $1,191,164.
  1. [30]
    The emails from Ms Baldwin to Mr Long in August and September 2018,[13] describing the difficult financial position that Pure Casting was in at that time, make sense having regard to these financial reports.   She refers to having difficulties paying the company’s taxation liabilities, and “Morris and Watson” which I infer is a gold supplier. 
  2. [31]
    In her affidavit filed in relation to the present application Ms Baldwin says that, in the financial year ended (June) 2017, Pure Casting was under the day to day management and control of Mr Long.  She took over from about June 2017.  She notes that in this financial year Pure Casting ran at a loss of $13,601, and says that, but for the “unauthorised expenditures incurred by Mr Long” (including payments totalling almost $440,000 to Facet and almost $35,000 for factoring interest charges), Pure Casting would have made a profit of just over $460,000 (at [21]-[22]).
  3. [32]
    Ms Baldwin makes reference to the loss of only $2,352 in the year ended June 2018, during which time she had taken control of Pure Casting’s finances, noting that in this year there were still factoring interest charges of $12,412.88, and Pure Casting had agreed to continue to pay wages to Facet’s staff in the amount of $260,136.96 (at [23]-[24].
  4. [33]
    The financial report for the year ended 30 June 2019 shows the company had:[14]
    1. (a)
      a trading loss of $112,975;

In her affidavit, Ms Baldwin notes that in this year Pure Casting paid $185,065.31 worth of wages to Facet employees and repaid a loan to Mr McCosker’s company of $112,700 (at [26]).  According to Mr Trickett, if you “add back” in the depreciation expenses, and expenses comprising legal fees relating to this litigation – which he considers appropriate to make a fair comparison of income –  this would produce a net profit of about $79,716 for this financial year (at [17]-[18] of his affidavit).

  1. (b)
    assets of $649,717 (current and fixed);
  2. (c)
    current liabilities of $482,797 and non-current liabilities of $1,203,715.
  1. [34]
    The profit and loss statement for the year ending 30 June 2020[15] shows a profit of $7,408.  In this financial year Pure Casting continued to pay wages to Facet staff (of just over $49,900); had a tax debt to the ATO of $181,884; and its sales decreased about $200,000 from the previous year.  Ms Baldwin attributes this to the dispute between Pure Casting and Mr Long and the initial impacts of COVID-19 (at [27]-[28]). 
  2. [35]
    The company has also been receiving the Job Keeper payment since April 2020 (identified in the profit and loss statement as “other income”), which Mr Trickett says ceased at the end of September (at [21]).
  3. [36]
    Ms Baldwin also exhibits a profit and loss statement for the period 1 July 2020 to 8 October 2020, generated by the accounting system used by the company.  She says that shows a profit of $192,952.38.  Mr Trickett exhibits a profit and loss statement for the period 1 July 2020 to 30 September 2020 which shows a net profit of $144,374.  This figure includes, as “other income” (which I take to be the Job Keeper payment) $111,947.
  4. [37]
    Ms Baldwin also says that as a result of strategies she introduced, when she took control of Pure Casting’s finances (outlined in paragraph 19 of her affidavit, including employing staff to do work the company had previously been outsourcing to subcontractors for more than it charged its clients) “Pure Casting has significantly improved financially”, and she estimates that there will be a profit of about $350,000 this year (at [29]-[32]).   Mr Trickett says a reasonable estimate of the total profit for the financial year 2020/2021 would be $260,000 (at [22] of his affidavit). 
  5. [38]
    For the purposes of this application, to the extent there are differences between them, I proceed on the basis of Mr Trickett’s evidence in relation to the matters referred to in the two preceding paragraphs, given his role as the plaintiff’s (external) accountant. 
  6. [39]
    In addition, Ms Baldwin says that Pure Casting has about $144,000 cash available in its bank accounts, and about $149,873 worth of stock.
  7. [40]
    Ms Baldwin deposes to being a director and shareholder of a number of other companies, either alone or in partnership with other people, and says that if required, “funds could be loaned from these companies to pay an order for security for costs” (at [39]).  Mr McCosker also deposes to being a director and shareholder of a number of other companies, either alone or in partnership; and also says that if required funds could be loaned from these companies to pay an order for security for costs (at [43]-[44] of his affidavit).  In each case, it seems reasonable to infer that what they meant to say was “to pay an order for costs”, rather than an order for security for costs.  However, no undertaking is proffered.
  8. [41]
    Ms Baldwin deposes to her belief that Pure Casting would be in a position to meet a costs order, of about $140,000 “from its own funds and from funds which can readily be provided by the directors” should these proceedings be unsuccessful (at [40]).   Mr Trickett says, assuming a trial were to commence in the next six to 12 months, he considers that the plaintiff would have the ability to meet an adverse costs order up to the sum of $150,000.  
  9. [42]
    In relation to the non-current liabilities, as at 30 June 2019 (as to which see Ms Baldwin’s affidavit at [34]-[35]), it seems that they are all connected in some way with Mr Long, Mr McCosker or Ms Baldwin.  Apart from a loan to Rockhampton Wholesale Jewellers, which has now been repaid, the non-current liabilities comprise:
    1. (a)
      the gold loan from Mr Long – discussed above;
    2. (b)
      a loan from the Alan Rowen Family Trust of $230,000 – Ms Baldwin refers to her role in relation to the Alan Rowen Family Trust trading as Wards Electrical, from which she says she could borrow $900,000 to pay a (security for) costs order;
    3. (c)
      a loan from E & B Properties Pty Ltd of about $364,000 – discussed above;
    4. (d)
      a loan from Facet of $6,267;
    5. (e)
      a loan from McCosker Investments of about $351,000 – of which Ms Baldwin is the sole director, and Ms Baldwin and Mr McCosker are the shareholders, and from which Ms Baldwin says she could borrow $500,000 to pay a (security for) costs order;
    6. (f)
      a loan from Mr McCosker of $25,000 and a loan of “start up gold” from Mr McCosker, given the value $95,000.
  10. [43]
    The first defendant also emphasises that the plaintiff will continue to incur its own legal expenses in relation to this litigation and, if unsuccessful, also face liability for the second and third defendants’ costs.  He submits these are relevant factors to take into account in considering the evidence of the financial position of the plaintiff, and its ability to pay the first defendant’s costs if ordered to pay them.  As a general proposition, I accept that is reasonable.  However, there is no evidence of what these costs might be before the court – only submissions on behalf of the first defendant.
  11. [44]
    Bearing in mind the principles above, including as to the onus on an applicant for an order for security for costs, the question is whether the court is satisfied there is reason to believe the plaintiff corporation will not be able to pay the first defendant’s costs if ordered to pay them.  Having considered all of the material, I am not so satisfied.
  12. [45]
    Both Ms Baldwin and Mr Trickett, the plaintiff’s accountant who has prepared the financial reports since 2017, give sworn evidence as to the ability of the plaintiff to meet an adverse costs order.  Neither of them were cross-examined.   Ms Baldwin’s and Mr Trickett’s evidence, as to the increased profitability of Pure Casting’s business in the last couple of years, and projections for the future, is also unchallenged, explained by reference to the changes Ms Baldwin has implemented since she took over management of the business and supported by reference to the financial reports which the plaintiff has put in evidence. 
  13. [46]
    Although counsel for the first defendant was critical of the plaintiff, suggesting it had been “evasive” regarding its current liabilities, there is no onus on the respondent to an application such as this.  It is the applicant who must adduce evidence sufficient to persuade the court to the requisite state of satisfaction required under r 671(a).  And in this case, the plaintiff has in fact put on quite a deal of evidence, including from the plaintiff’s accountant.[16] I do not regard it as reasonable to infer there has been any evasion.
  14. [47]
    On the basis of the evidence as to the financial position of the plaintiff, the first defendant has not discharged the onus of persuading me that there is reason to believe the plaintiff will not be able to pay the first defendant’s costs, if ordered to pay them.  According to the most recent of the financial reports (for the financial year ended 2019) the plaintiff has a surplus of assets over its current liabilities.  The non-current liabilities have been consistent, and constant, for a number of years.   I regard the evidence of recent demands by the first defendant with some scepticism, in the face of the loan from E&B Properties being recorded as a non-current liability at least since 2012, the evidence of Mr McCosker about the circumstances of the recent meeting of E&B Properties at which a resolution to demand payment was purportedly made, and the demand for repayment of the gold loan in specie.   In addition, there is evidence before the court of projected profitability of the business, as well as currently available liquid assets.
  15. [48]
    There is also the evidence of the ability of Mr McCosker and Ms Baldwin to provide funds to the plaintiff, if necessary, in order to meet an adverse costs order.  Counsel for the first defendant is critical of the failure of Ms Baldwin and Mr McCosker to offer personal guarantees or undertakings to meet any adverse costs order made against the plaintiff – submitting, in effect, that puts the lie to their belief as to the ability of the plaintiff to do so.  In the circumstances of this case, I do not accept that follows.  In cases where the solvency of a company is in question, the likely existence of continued support of directors and/or shareholders is a relevant (sometimes significant) consideration, whether that support is formalised by the offer of an undertaking or not.[17]  It is also a relevant consideration here.
  16. [49]
    Mr McCosker has been involved in the plaintiff’s business since its inception in 2010.  He is both a director and shareholder of Pure Casting.  Ms Baldwin became involved in the business in 2017, became a director in July 2017, invested $500,000 into the business by way of capital contribution (not loan) at the time she became involved, and has been proactively working to improve the financial viability of the business since she took over the day to day management of it, with apparent success.   Neither of them was challenged about any aspect of their evidence, including the evidence of their abilities to borrow money from other entities in which they have interests to pay an adverse costs order against the plaintiff.  On the material before the court, I do not consider it reasonable to infer they would simply let the plaintiff go into liquidation, as opposed to doing what they have said they would do (if required), namely, provide funds to enable the plaintiff to meet a costs order.
  17. [50]
    For those reasons, I am not satisfied that, on the evidence before the court, there is reason to believe the plaintiff will not be able to pay the first defendant’s costs if ordered to pay them.
  18. [51]
    It follows that the discretion to order security for costs under r 671(a) is not enlivened.  It is therefore not necessary to engage in the second stage of the process, involving consideration of the discretionary factors under r 672.[18] 
  19. [52]
    Accordingly, the application is dismissed, with costs.

Footnotes

[1]Mr Dudman’s affidavit, at pp 30-31 of the exhibit.

[2]Exhibit “CAL-10” to Mr Long’s affidavit, at p 128.

[3]Mr McCosker’s affidavit at [23].

[4]See, for example, exhibit 1 (financial reports for year ended 2012) and Mr Trickett’s affidavit, at p 29 (financial report for year ended 2019).

[5]As to both matters, see Mr Long’s affidavit, at p 119.

[6]Exhibit “CAL-12” to Mr Long’s affidavit, at p 132.

[7]Mr McCosker’s affidavit, at [26]-[40].

[8]See exhibit 1 (financial reports for the year ended 2012).

[9]Mr Long’s affidavit, at pp 89-99.

[10]Mr Long’s affidavit, at pp 100-110.

[11]Mr Long’s affidavit, at pp 111-123.

[12]Mr Trickett’s affidavit, at [9].

[13]Mr Long’s affidavit, at pp 124-127 of the exhibits.

[14]Mr Trickett’s affidavit, at pp 21-33.

[15]Mr Trickett’s affidavit, at p 34.

[16]Cf Mannix Electrical Pty Ltd v Belport Pty Ltd [2019] SASC 159.

[17]See, for example, Mulherin v Bank of Western Australia; McCann and Ors v Bank of Western Australia [2006] QCA 175 at [115] per Muir JA, referred to in Consortium Holdings Pty Ltd v Maybell 1 Pty Ltd [2015] QSC 55 at [3] and also [44] per Jackson J.

[18]Monto Coal at [61].

Close

Editorial Notes

  • Published Case Name:

    Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long

  • Shortened Case Name:

    Pure Casting Pty Ltd (as trustee for the Pure Casting Unit Trust) v Long

  • MNC:

    [2020] QSC 325

  • Court:

    QSC

  • Judge(s):

    Bowskill J

  • Date:

    28 Oct 2020

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Consortium Holdings Pty Ltd v Maybell 1 Pty Ltd [2015] QSC 55
1 citation
Jump To
Cite 1 - [2015] QSC 55
Cornelius v Global Medical Solutions Australia Pty Ltd (2014) 98 ACSR 301
1 citation
Jump To
Cite 1 - (2014) 98 ACSR 301
Cornelius v Global Medical Solutions Australia Pty Ltd [2014] NSWCA 65
1 citation
Jump To
Cite 1 - [2014] NSWCA 65
George v Rockett (1990) 170 CLR 104
1 citation
Jump To
Cite 1 - (1990) 170 CLR 104
Mannix Electrical Pty Ltd v Belport Pty Ltd [2019] SASC 159
1 citation
Jump To
Cite 1 - [2019] SASC 159
Monto Coal 2 Pty Ltd v Sanrus Pty Ltd[2019] 3 Qd R 143; [2018] QCA 309
6 citations
Jump To
Cite 1 - [2018] QCA 309
Cite 2 - [2018] QCA 309
Cite 3 - [2018] QCA 309
Cite 4 - [2019] 3 Qd R 143
Cite 5 - [2019] 3 Qd R 143
Cite 6 - [2019] 3 Qd R 143
Mulherin v Bank of Western Australia Ltd [2006] QCA 175
1 citation
Jump To
Cite 1 - [2006] QCA 175
Wollongong City Council v Legal Business Centre [2012] NSWCA 245
1 citation
Jump To
Cite 1 - [2012] NSWCA 245

Cases Citing

Case NameFull CitationFrequency
Lal Family Holdings Pty Ltd v Brygon M.C. Pty Ltd [2022] QDC 1222 citations
1

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