This case concerned security for a costs application. The s 1335 threshold question (Corporations Act) is whether there is credible testimony of a real chance the Plaintiff corporation will be unable to pay the defendant’s costs must be satisfied prior to exercising the discretion to order security for costs: .
There is no particular evidentiary onus to be discharged by either party on the threshold question or on the exercise of the discretion. A party may be required to provide evidence of facts it wishes to assert, otherwise there is a persuasive onus that rests on the Defendant: .
The court must fix the time of the Plaintiff’s apprehended inability to pay and identify the range of assets to which recourse could be had. If tangible assets are held on trust must consider the difficulties a defendant may have in enforcing costs orders: .
Discretion under s1335 is unfettered. Relevant considerations include:
- Whether the application for security had been brought promptly;
- The strength of the Plaintiff’s case;
- If the Plaintiff’s impecuniousity was caused by the Defendants conduct the subject of the claim;
- If the application was oppressive;
- If the persons standing behind the Plaintiff offered any personal undertaking to be liable for the costs and the form of the undertaking;
- If the applicant was in substance a Plaintiff or the proceedings were defensive in sense of directly resisting proceedings already brought or trying to stop the defendant’s self help remedy; and
- The public interest: .
The evidence satisfied the threshold question. The only assets the Plaintiff had recourse to would be trust assets. The Plaintiff’s net asset position was uncertain, there was nothing to suggest the Plaintiff’s position would improve plus charges had been granted by the Plaintiff: .
The Plaintiff could arguably maintain claims under ss 1325 and 1041H of the Corporations Act and s 12DA of the ASIC Act.
The pleadings reflect misconceptions about a corporation’s liability for its civil wrongs and the liability of others connected with the corporation. This goes to the merit of its claims: .
Directors cannot be held liable for torts of employees and agents unless they ordered or procured the acts to be done: . At common law if a person is the directing the mind and will of the corporation their conduct is attributable to the corporation: . Under s 75B of the Trade Practices Act and its equivalents in the Corporations Act and ASIC Act, a director will not be party to the corporation’s contravention merely by being a director. A party to the contravention must be an intentional participant. Necessary intent is based on knowledge of the essential elements of the contravention: . Accessorial liability depends on the principles in Barnes v Addy. An allegation the directors ‘directed and procured’ a breach by Rewards by being directors and because Rewards could only act through them is insufficient to establish primary or accessorial liability: .
Other difficulties with the pleadings included that the particulars did not attempt to plead matters that sustained an allegation of dishonesty or allegations of breach of fiduciary duties. There was no evidence of loss to the Plaintiff arising from Rewards alleged change in position.
The application for security for costs was successful.
Relevant paragraphs of Ford
[3.390], [4.053], [4.054], [8.410], [10.030], [16.020], [16.070], [22.020], [22.050], [22.120], [22.450], [22.502], [22.508], [22.509]