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Kento (Fiji) Ltd v Naobeka Investment Ltd [2016] FJHC 148; HBC100.2012 (4 March 2016)

IN THE HIGH COURT OF FIJI
WESTERN DIVISION
AT LAUTOKA

CIVIL JURISDICTION

CIVIL ACTION NO. HBC 100 of 2012

BETWEEN :

KENTO (FIJI) LIMITED a limited liability company having its registered office at P.O. Box 124, Nadi.

PLAINTIFF

AND :

NAOBEKA INVESTMENT LIMITED, a limited liability
company having its registered office at P.O. Box 1719, Nadi.
FIRST DEFENDANT

AND :

iTAUKEI LAND TRUST BOARD formerly known as NATIVE
LAND TRUST BOARD a statutory body registered under the provisions of Native Land Trust Act.
SECOND DEFENDANT

AND :

REGISTRAR OF TITLES of Suvavou House, Suva.
THIRD DEFENDANT

Mr. Sosefo Sikuri Inoke for the Plaintiff
(Ms) Patricia Valesasa Mataika for the First Defendant
No appearance for or on behalf of the Second Defendant

Date of Hearing: - 02nd December 2015
Date of Ruling : - 04th March 2016

RULING

(1) The matter before me stems from the first Defendant’s Amended Summons dated 18th August 2015, made pursuant to Order 23, rule 1 of the High Court Rules, 1988 and the inherent jurisdiction of the Court seeking of security for costs against the Plaintiff on the ground that “the Directors and the shareholders of the Company are resident outside of the jurisdiction”.

(2) The Amended Summons is supported by an Affidavit sworn by Mr. “Asiveni Lutumailagi”, the Manager of the Board of Directors of “Naobeka Investment Ltd.”, the first Defendant.

(3) The Amended Summons is strongly resisted by the Plaintiff. The Plaintiff filed an Affidavit in Opposition sworn by Mr. Michael Clowes, a Director of “Kento (Fiji) Ltd.”, the Plaintiff, followed by an Affidavit in reply.

(4) At the commencement of hearing before the court, a preliminary issue was raised by the Counsel for the Plaintiff. The Counsel for the Plaintiff submitted that the first Defendant is not entitled to security for costs under Order 23, rule 1 of the High Court Rules since the Plaintiff Company is ordinarily resident within the Court’s jurisdiction.

(5) The first Defendant admits that the Plaintiff Company is registered in Fiji and its registered office is in Fiji. But the Counsel for the first Defendant submits that the Company veil should be pierced to grant security for costs since the Directors used the Company to perpetrate fraud.

(6) I was asked to rule on this preliminary issue, prior to proceeding with the Amended Summons for security for costs. This ruling concerns with the preliminary objection raised by the Counsel for the Plaintiff.

(7) Before passing to the substance of the preliminary issue, let me record that the Counsel for the Plaintiff and the first Defendant in their written submissions has done a fairly exhaustive study of the judicial decisions and other authorities which they considered to be applicable.

I interpose to mention that I have given my mind to the oral submissions made by the Counsel for both parties as well as to the written submissions and the judicial authorities referred to therein.

(8) The preliminary issue raised by the Counsel for the Plaintiff needs to be disposed of. Let me proceed to examine the preliminary issue now.

(9) As I mentioned earlier, this is an application by the first Defendant seeking of security for costs against the Plaintiff, made pursuant to Order 23, rule 1(a) of the High Court Rules, 1988 on the ground that “the Directors and the shareholders of the Company are resident outside of the jurisdiction.”

Let me have a close look at Order 23, rule 1(a) of the High Court Rules, 1988.

I should quote Order 23, rule 1(a) which provides;

SECURITY FOR COSTS

Security for costs of action, etc. (O.23, r.1)

1–(1) Where, on the application of a defendant to an action or other proceeding in the High Court, it appears to the Court-

(a) That the Plaintiff is ordinarily resident out of the jurisdiction, or
(b) That the Plaintiff (not being a Plaintiff who is suing in a representative capacity) is a nominal plaintiff who is suing for the benefit of some other person and that there is reason to believe that he will be unable to pay the costs of the defendant if ordered to do so, or
(c) Subject to paragraph (2), that the plaintiff’s address is not stated in the writ or other originating process or its incorrectly stated therein, or
(d) That the Plaintiff has changed his address during the course of the proceedings with a view to evading the consequences of the litigation,

then, if, having regard to all the circumstances of the case, the Court thinks it just to do so, it may order the Plaintiff to give such security for the defendant’s costs of the action or other proceeding as it thinks just.

Order 23; rule 1(a) is quite clear.

As I read Order 23, rule 1(a), and when reduced to its essentials, the Plaintiff has to be ordinarily resident out of the jurisdiction. This is the condition precedent for proceedings brought under Order 23, rule 1 (a). This is the statutory foundation for an application seeking of security for costs made pursuant to Order 23, rule 1(a) of the High Court Rules, 1988. As I understand the evidence, it is not in dispute that;

❖ The Plaintiff is a Fiji registered Company
❖ It’s registered office is in Fiji

Therefore, the First Defendant has no legal standing to bring these proceedings for security for costs.

(10) Leave that aside for a moment. What are the circumstances that give rise to the present application?

The background to this case is briefly summarized by Hon. Judge Anare Tuilevuka, in the Ruling dated 24th July 2014, as follows;

[1] “Naobeka Investment Limited (“NIL”) is a company formed by the traditional landowners of Malamala Island. The island is situated off the Nadi coast. I gather that it is a popular spot for day cruises for tourists on Denarau Island and nearby resorts. In that regard, the island is of immense interest to tour operators who see the servicing of that day cruise and associated activities on the island – as a viable and competitive business.

[2] NIL holds a 99 year lease over the island commencing 01 July 2007. On 01 August 2007, NIL purportedly subleased the island to Kento (Fiji) Limited (“KFL”) for a period of 25 years. It is common ground between the parties that, not long after KFL acquired the sub-lease, it then entered into negotiations with Rosie Holiday Tours for the sale of the sub-lease to KFL. The KFL-Rosie deal, had it gone through, would have been worth over FJD$1.5 million dollars. The price Rosie was prepared to pay was just a little above that figure. However, the deal fell through. The reason why that deal fell through, as far as I can gather, was because NIL took the decision to re-enter the sub-lease in 2012. This happened because of some alleged breaches of the sub-lease by KFL. It appears to me that KFL has not operated any business on the island since 2011 – 2012. Whether that is due to the fact of the purported re-entry of the sub-lease by NIL, or whether it is due to the fact of the alleged breaches of the sub-lease by KFL, which triggered the re-entry of the sub-lease in the first place, is not clear to me. In any event, as it turns out, after NIL re-entered the sub-lease, it then entered into negotiations with another Company, namely South Sea Cruises, to sublease the island in question.”

(11) Statement of Claim of the Plaintiff

(a) The Statement of Claim of the Plaintiff contains four separate alternative cause of actions and mainly seeks among other reliefs sought for, a declaration that any purported cancellation of the sublease is illegal, invalid and void.

(b) The Plaintiff stated that it is a registered company in Fiji and the registered proprietor of land leased known as “Malamala Island” in the Tikina of Nadi, Province of Ba containing an area of 2,4260 hectares for a period of 25 years commencing on the 1st day of August 2007 and that is duly authorized by the First and the Second Defendants.

(c) The First Defendant issued two notices on the Plaintiff dated 1st of March 2012 and 29th of March 2012 respectively to rescind or cancel the sublease for multiple reasons. Among those reasons, the main issues were that the Plaintiff has failed to carry out the survey under clause 5 (a) of the third schedule to the sublease within six months of the sublease, the sublease was signed by one Director under common seal of the Plaintiff is no longer acceptable to the First Defendant and the Plaintiff does not have proper approval by the Foreign Trade and Investment Board or Investments Fiji as it is now called.

(d) The Plaintiff further stated that the First Defendant served them another notice under section 105 of the Land Transfer Act dated 2nd day of April 2012. The Plaintiff claimed that the time limit prescribed in clause 5 (a) of the Third schedule in respect of survey the land was specifically extended for further time by the first and the Second Defendants in writing.

(e) The Plaintiff claimed that it continued its discussion for the sale of this sublease to a third party purchaser with the breaches to be taken over and remedied by the incoming purchaser within six months of the said proposed sale with the full knowledge and encouragement of the First and Second Defendants.

(12) Statement of Defence of the First Defendant

(a) The Statement of Defence of the First defendant constitutes three separate alternative defenses. The first is that the said sublease was not properly executed by the Plaintiff and the First Defendant subsequently withdrew its offer. The second is that if the said lease was properly executed, it had ceased to exist due to the Plaintiff’s failure to carry out the survey pursuant to clause 5 (a) of the third schedule to the sublease. Thirdly, if the lease agreed had continued to exist, it had been properly rescinded by the 1st Defendant on 1st of March 2012 and re-entered on 16th of March 2012.

(b) The First Defendant stated that it has started to rectify the breaches committed by the plaintiff and does not need the Plaintiff to rectify them under the agreement. The First Defendant further stated that the Plaintiff only constructed a bur but failed to take any required steps to carry out its obligations under the sublease.

(c) Moreover, the First Defendant stated that it gave its consent for the re-sale of the sublease to a third party subject to a memorandum of understanding, however, such memorandum of understanding was never materialized due to the Plaintiff’s lack of commitment. Wherefore, the First Defendant withdrew its consent subsequently.

• (13) Statement of Defence of the Second Defendant
  

The Second Defendant categorically denied the proprietorship of the Plaintiff. The Second Defendant claimed that the Plaintiff has no legal capacity to enter into any lease for the purpose of operating a day cruise business. The Plaintiff has no proper approval to operate a day cruise business by the Investment Fiji. In view of this lack of legal standing of the Plaintiff, the Second Defendant denied the averments in the Statement of Claim.

(14) Reply to the Statements of Defence of the Defendants

The Plaintiff claimed that the First and second Defendants cannot deny the existence of the sublease as they had been obtaining benefits from that for a period over 4 ½ years. The Plaintiff further stated that it has already applied for the extension of its activities and it is being processed with the Investment Fiji.

(15) THE STATUS OF THE SUBSTANTIVE MATTER

• (a) The Pleadings in the action begun by the writ are closed.
  
• (b) The Plaintiff and the Defendants have filed an Affidavit verifying List of Documents relating to the matters in question.
  
• (c) The status of the proceedings is for the parties to proceed for inspection of documents and discoveries.
  

(16) As I understand the evidence, it is not in dispute that;

• ❖ The Plaintiff is a Fiji registered Company
• ❖ It’s registered office is in Fiji
  

(17) The Counsel for the first Defendant’s argument runs essentially as follows;

• ❖ That during the time that the Plaintiff was dealing with the 1st Defendant the Director of the Plaintiff Company did not sign properly the agreement given to it, did not have Investment Fiji Certificate to take a sublease from 1st Defendant and could not pay for commitments it was supposed to carry out thus causing the 2nd Defendant to issue a notice to re-enter Malamala and cancel the 1st Defendants head lease.
  
• ❖ These are actions showing that the company structure was sued to perpetrate fraud.
  
• ❖ That the Directors used the Company to perpetrate the fraud therefore this Honorable Court must pierce the veil and grant the 1st Defendants application for Security of Costs.

(Emphasis Added)

(18) The pivotal question that awaits determination by this Court is whether the Court should pierce the corporate veil and grant the first Defendant’s application for security for costs?

What is meant by the phrase “Corporate Veil”?

A legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the Company’s debts and other obligations.

A company once incorporated becomes a separate legal entity or personality and the liability of the members are said to be limited. This is the principle enshrined in “Solomon v Solomon & Co. Ltd” (1897) A.C. 22, where the House of Lords affirmed the principle that the company was a separate legal person, can own property, sue and be sued in its own corporate name. Therefore, the company is distinct from its members, whose liability is limited to the amount unpaid in their shares and they are not liable for any of the company’s debts.

The logic of separate personality and limited liability was not tested to its full extent until the late 19th century as exemplified by the case of “Solomon” (supra).

One of the most significant effects of separate corporate personality based on the “Solomon” principle is that members are not personally liable for the debts of the corporation. The company owns the property and not its shareholders.

(19) What is meant by the phrase “lifting the corporate veil?”

At times it may happen that the corporate personality of the company is used to commit frauds and improper or illegal acts. Since an artificial person is not capable of doing anything illegal or fraudulent, the façade of corporate personality might have to be removed to identify the persons who are really guilty. This is known as “lifting of Corporate Veil”.

Lifting the corporate veil refers to the possibility of looking behind the Company’s frame work (or behind the Company’s separate personality) to make the members liable, as an exception to the rule that they are normally shielded by the corporate shell (i.e. they are normally not liable to outsiders at all either as principles or as agents or in any other guise, and are already normally liable to pay the Company what they agreed to pay by way of share purchase price or guarantee, nothing more.)

When the true legal position of a company and the circumstances under which its entity as a corporate body is ignored and the corporate veil is lifted, an individual shareholder may be treated as liable for its acts.

There are two existing theories for the lifting of the corporate veil. The first is the “alter-ego” or other self-theory and the other is the “instrumentality” theory.

The alter-ego theory considers if there is indistinctive nature of the boundaries between the corporation and its shareholders.

The instrumentality theory on the other hand examines the use of a corporation by its owners in ways that benefit the owner rather than the corporation.

It is up to the Court to decide on which theory to apply or make a combination of the two doctrines.

(20) Prevention of fraud or improper conduct

Where the medium of a company has been used for committing fraud or improper conduct, courts have lifted the veil and looked at the reality of the situation. The two classic cases of the fraud exception are Gilford Motor Company Ltd v Horne (1933) Ch. 935 CA. and Jone v Lipman (1962) (1) WLR 832. In the first case, Mr. Horne was an ex-employee of the Gilford motor company and his employment contract provided that he could not solicit the customers of the company. In order to defeat this he incorporated a limited company in his wife’s name and solicited the customers of the company. The company brought an action against him. The Court of appeal was of the view that “the company was formed as a device, a stratagem, in order to mask the effective carrying on of business of Mr. Home. In this case it was clear that the main purpose of incorporating the new company was to perpetrate fraud.” Thus the court of appeal regarded it as a mere sham to cloak his wrongdoings. In the second case of Jones v Lipman a man contracted to sell his land and thereafter changed his mind in order to avoid an order of specific performance. He transferred his property to a company. Russel J specifically referred to the judgment in Gilford v. Horne and held that the company here was “a mask which (Mr. Lipman) holds before his face in an attempt to avoid recognition by the eye of equity”. His Lordship awarded specific performance both against Mr. Lipman and the Company.

(21) As to the general principles, in “Midland Beach Estate Ltd v Balgovind” (2012) FJHC 1043, Hon. Madam Justice Dilrukshi Wickramasinghe said;

Piercing the Company veil

[49] Mr Mishra submits that the plaintiff company, i.e. Midland Beach Estate Limited is a private company carrying on its business in its company name. He says that the property is now sold to a third party thus, he is not seeking specific performance.

[50] Mr Mishra submits that the major shareholder of the company Dr. Sahu Khan used the company as a façade to perpetrate the fraud therefore the court must pierce the corporate veil and award aggravated damages to the first defendant, holding the shareholders also liable. The claim is set out in paragraph 16 (d) read with paragraph (D) of the relief.

[51] As said in the seminal decision Solomon v A.Solomon & Sons [1897] AC. 22, it is a well-established principle of company law that a company is a separate and distinct legal entity different from its shareholders. The company has its own locus standi as a legal entity. The liability of the shareholders is therefore limited to the extent they have contributed to the company’s capital. Thus, the company acts as a shield to protect the assets of the shareholders from personal liability. Due to these rooted principles, the courts are cautious in piercing or lifting the corporate veil.

[52] The two oft cited decisions; Gilford Motor Company v Horne [1933] Ch 935; and Jones v Lipman [1962] 1 WLR 832, the court pierced the veil of incorporation and considered the rights and duties of the plaintiff as the rights or liabilities of its shareholders. The courts have in several instances endeavoured to lift the corporate veil, by considering the theory of economic reality and doctrine of control but the judicial dicta seems to prefer an orthodox approach. R v Darby [1911] 1KB page 95. Littlewoods v I.R.C [19969] 1 WLR 1241, 1254; Snook v London and West Riding Investments Ltd [1967] 2 QB 786 at 802 (Diplock LJ); Wallersteiner v Moir [1974] 1 WLR 991.

[53] Sir Andrew Morrit VC in Trustor AB v Smallbone and others (no 2) [2001] EWHC 703; 2001 WLR 1177 at 23 said:

“In my judgment the court is entitled pierce the corporate veil and recognise the recipient of the company as that of the individual (s) in control of it if the company was used as a device or façade to conceal the true facts, thereby avoiding or concealing any liability of those individual (s)”.

[54] In Adams v Cape Industries plc [1976] All ER Vol 3 page 462 the court held that the corporate veil may be lifted when a company is set up for fraudulent purposes or when it is established to avoid existing obligations. In DHN Food Distributors v Tower Hamlets [1976] 1 WLR 852 Lord Denning MR examined the overall business operation as an economic unit i.e.’ considering the corporation as a separate legal form. Lord Goff, in Bank of Tokyo v Karoon [1987] AC 45n agreed with Lord Denning’s above dicta. In Woolfson v Strathclyde BC [1978] UKHL5 the House of Lords approached the issue based on ‘totality of circumstances’ – confirmed to the facts of the case. However in Adams v Cape Industries (supra), Creasy v. Breachwood Motors Ltd (1992) BCC 638, Ord v Belhaven Pubc Ltd [1998] EWCA Civ 243; [1998] 2 BCLC 447, Trustor AB v Smallbone (No 2) [2001] 2 BCLC 436 seems to view that corporate veil should not be lifted simply because justice requires it.

[55] In Antonia Gramaci Shipping Corporation v Oleg Stepanovs [2011] Lyods Rep Page 647 Justice Burton dealt with piercing of the company veil extensively in his decision. In this case, there were several one ship corporate defendants with 63 chartering transactions interposed between the plaintiffs and third parties to siphon of profits from the Plaintiff. The defendant and four other beneficial owners of the company had masterminded the scheme and the Corporate Defendants were merely used as vehicles. Justice Burton discusses extensively the law in paragraphs 18 to 20 of his judgment and concluded in paragraph 20 that piercing the corporate veil although an exceptional course is possible and in fact does not need to be pleaded or shown to be necessary to give relief to the claimant.

[56] His Lordship stated as follows:

21. The concept of necessity is not a fetter upon such a claim. It does not need to be pleaded or proved in limine. Piercing the veil is an exceptional course, not a “routine adjunct to any claim brought against a company for dishonest assistance or knowing receipt” per Norris in Law Society v Isaac [2010] EWHC 1670 (ch) at para 40);

[57] Justice Burton completed his reasoning by stating at paragraphs 26 and 27 that there is ‘no good reason of principle or jurisprudence why the victim cannot enforce the agreement against both the puppet company and the puppet who, all the time was pulling the strings ....I accept ... the puppeteer can be made liable, as a party to the contract, but that as a matter of public policy he cannot enforce the contract’.

[58] I also considered carefully the details reasoning given by Arnold J in the case of VTB Capital v Nutritex International Corp et al [2011] EWHC 3107 (Ch) where he considered the historic development of the doctrine examining various authorities on the point (paragraphs 65 to 102). In the case after given detail reasoning his Lordship held that the facts in that case did not warrant piercing the corporate veil.

[59] However, I find that the judicial dicta resonates minimum two instances where the courts have not been hesitant to pierce the corporate veil i.e. fraud or using the alter ego doctrine. If the corporate is used as a façade or a vehicle to defraud, then the courts have not been hesitance to lift the corporate veil. So as when the corporate is the alter ego of the fraudster then then courts have pierced or lifted the corporate veil to look beyond the legal fiction and consider the reality of the situation.

[60] The equitable remedy of piercing the corporate veil is fluid. Therefore, in my view the court must examine the evidence in totality before piercing the corporate veil.

(22) I now return to the present case bearing the aforementioned legal principles uppermost in my mind.

A limited company covers its shareholders through the corporate veil. Courts can lift the corporate veil, in cases that a Company is formed for a fraudulent purpose. In the case of “United States v Milwaukee Refrigerator Transel Company”, (1905) 142F, edn. 2, U.S. Supreme Court held that “where the notion of legal entity is used to defeat public convenience, justify wrong, protect fraud or defend crime, the law will disregard the corporate entity and treat it as an association of persons”.

With these considerations in mind I approach the case before me;

The Counsel for the First Defendant’s argument runs essentially as follows;

❖ That during the time that the Plaintiff was dealing with the 1st Defendant the Director of the Plaintiff Company did not sign properly the agreement given to it, did not have Investment Fiji Certificate to take a sublease from 1st Defendant and could not pay for commitments it was supposed to carry out thus causing the 2nd Defendant to issue a notice to re-enter Malamala and cancel the 1st Defendants head lease.

❖ These are actions showing that the company structure was sued to perpetrate fraud.

❖ That the Directors used the Company to perpetrate the fraud therefore this Honorable Court must pierce the veil and grant the 1st Defendants application for Security of Costs.

(Emphasis Added)

Although the issue of fraud is raised in the First Defendant’s pleadings, I find myself quite unable to agree with the First Defendant’s proposition, since no evidence has been adduced before me in support of this proposition. No such evidence is forthcoming. To pierce the corporate veil, the First Defendant must adduce some cogent evidence to establish that the Plaintiff Company is formed for a fraudulent purpose. I find no evidence whatsoever to show that the Plaintiff company was formed and was carrying on business merely as a cloak or sham for the purpose of enabling the Directors to perpetrate fraud. A bare allegation of fraud raised in the pleadings is not sufficient. An allegation of fraud or near fraud, cannot properly be decided on pleadings. It requires viva voce evidence.

In the context of the present cases, I would prefer to be guided by the robust approach of the Court in Sigatoka Builders Ltd v Pushpa Ram & Ano. (Unreported) Lautoka High Court Civil Action No. HBC 182.01L, 22 April 2002 and allow my doubts to be submerged in what I think I may just call the current of authority.

Fraud: Sufficiency of evidence;

In Sigatoka Builders Ltd v Pushpa Ram & Ano. (unreported) Lautoka High Court Civil Action No. HBC 182.01L, 22 April 2002 the Court held in relation to “Fraud: sufficiency of evidence”;

“Though evidence of fraud and collusion is often difficult to obtain, the evidence here fails a good way short of a standard requiring the court’s further investigation. In Darshan Singh v Puran Singh [1987] 33 Fiji LR 63 at p.67 it was said:

“There must, in our view, be some evidence in support of the allegation indicating the need for fuller investigation which would make Section 169 procedure unsatisfactory. In the present case the appellant merely asserted that he had paid the money for the purchase of the property. This was denied by both Prasin Kuar and the respondent. There was nothing whatsoever before the learned judge to suggest the existence of any evidence, documentary or oral, that might possibly assist the appellant in treating the case as falling within the scope of Section 169 of the Land Transfer Act and making an order for possession in favour of the respondent.”

In that case it was also held that a bare allegation of fraud did not amount by itself to a complicated question of fact, making the summary procedure of Section 169 in appropriate see too Ram Devi v Satya Nand Sharma & Anor.

[1985] 31 Fiji LR 130 at p.135A. A threshold of evidence must be reached by the Defendant before the Plaintiff can be denied his summary remedy. In Wallingford v Mutual Society [1880] 5 AC 685 at p. 697 Lord Selbourne LC said:

“With regards to fraud, if there be any principle which is perfectly well settled, it is that general allegations, however strong may be the words in which they are stated, are insufficient even to amount to an averment of fraud of which any Court ought to take notice. And here I find nothing but perfectly general and vague allegations of fraud. No single material fact is condescended upon, in a manner which would enable any Court to understand what it was that was alleged to be fraudulent.”

(Emphasis Added)

I can see no reason why the rule of law enunciated in the aforementioned judicial decision should not be applied in this case.

Generally, Courts defer to the sanctity of the corporate form as a separate legal personality and are slow to lift the corporate veil, as evidenced by Adams v Cape Industries (2000, 6 comp LJ 377).

Perhaps it is splitting hairs, but to my mind, it is an explicit recognition that some improper conduct must have occurred, establishing that the corporation was controlled and dominated.

Control and domination part of the test determines the relationship between the shareholder and the corporation. Generally, mere majority stock ownership will be insufficient to satisfy this element. Instead, one must show “complete domination, not only of finances, but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction has no separate mind, will or existence of its own.” To determine the existence of “complete domination”, courts usually require the Defendant to produce evidence of inadequate capitalization or undercapitalization, failure to follow corporate formalities, commingling of funds, diversion of funds or assets for non-corporate purposes. (Please see; Shagun Singh, Lifting the Corporate Veil with reference to leading cases, available at http://artismc.com/index.php/blogs/view/55/221/Last visited 20th September 2014.) There is no evidence whatsoever in the case before me to show that the corporation was controlled and dominated.

For the reasons which I have endeavoured to explain, I am not satisfied that the Plaintiff Company is “a mere cloak or sham”. The proposition put forward by the First Defendant is manifestly incorrect.

At this point, I cannot resist in saying that the proposition advanced by the First Defendant is a far cry from the obvious and natural limitations to the doctrine of piercing the corporate veil and it flies on the face of rule of law enunciated in Adams v Cape Industries (2000, 6 comp LJ 377).

In these circumstances, the preliminary objection must be upheld and for the reasons which I have already stated, I decline to lift the corporate veil.

Accordingly, I have no alternate but to dismiss the First Defendant’s Summons seeking of security for costs.

I cannot see any other just way to finish the matter than to follow the law.

In view of the approach I have adopted, I do not consider it necessary for me to express my views on the merits of the First Defendant’s Summons relating to security for costs. It will be at best a matter of academic interest only or at worst an exercise in futility to discuss the merits of the First Defendant’s Summons seeking of security for costs.

(23) The Plaintiff moved for indemnity costs. The next issue for consideration is costs.

What is the basis upon which the Plaintiff seeks indemnity costs?
(Counsel in his submissions writes)

“This is a hopeless flawed application, brought in bad faith and predicated on causing anguish. It is not a genuine exercise of legal rights. The Plaintiff is therefore entitled to indemnity costs of $5,000, if not at the high end of the normal costs order.”

(24) Against this factual background, it is necessary to turn to the applicable law and the judicial thinking in relation to the principles governing “indemnity costs”.

(25) Order 62, rule 37 of the High Court Rules empower courts to award indemnity costs at its discretion.

For the sake of completeness, Order 62, rule 37 is reproduced below.

Amount of Indemnity costs (O.62, r.37)

37.- (1) The amount of costs to be allowed shall (subject to rule 18 and to any order of the Court) be in the discretion of the taxing officer.

(26) G.E. Dal Pont, in “Law of Costs”, Third Edition, writes at Page 533 and 534;

‘Indemnity’ Basis

“Other than in the High Court, Tasmania and Western Australia, statute or court rules make specific provision for taxation on an indemnity basis. Other than in the Family Law and Queensland rules – which define the ‘indemnity basis’ in terms akin to the traditional ‘solicitor and client basis’ – the ‘indemnity basis’ is defined in largely common terms to cover all costs incurred by the person in whose favour costs are ordered except to the extent that they are of general law concept of ‘indemnity costs’. The power to make such an order in the High Court and Tasmania stems from the general costs discretion vested in superior courts, and in Western Australia can arguably moreover be sourced from a specific statutory provision.

Although all costs ordered as between party and party are, pursuant to the ‘costs indemnity rule’, indemnity costs in one sense, an order for ‘indemnity costs’, or that costs be taxed on an ‘indemnity basis’, is intended to go further. Yet the object in ordering indemnity costs remains compensatory and not penal. References in judgments to a ‘punitive’ costs order in this context must be seen against the backdrop of the reprehensible conduct that often justifies an award of indemnity costs rather than impinging upon the compensatory aim. Accordingly, such an order does not enable a claimant to recover more costs than he or she has incurred.”

(27) Now let me consider what authority there is on this point.

The principles by which Courts are guided when considering whether or not to award indemnity costs are discussed by Hon. Madam Justice Scutt in “Prasad v Divisional Engineer Northern (No. 02)” (2008) FJHC 234.

As to the “General Principles”, Hon. Madam Justice Scutt said this;

• A court has ‘absolute and unfettered’ discretion vis-à-vis the award of costs but discretion ‘must be exercised judicially’: Trade Practices Commission v. Nicholas Enterprises (1979) 28 ALR 201, at 207
  
• The question is always ‘whether the facts and circumstances of the case in question warrant making an order for payment of costs other than by reference to party and party’: Colgate-Palmolive Company v. Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, at 234, per Sheppard, J.
  
• A party against whom indemnity costs are sought ‘is entitled to notice of the order sought’: Huntsman Chemical Company Australia Limited v. International Cools Australia Ltd (1995) NSWLR 242
  
• That such notice is required is ‘a principle of elementary justice’ applying to both civil and criminal cases: SayedMukhtar Shah v. Elizabeth Rice and Ors(Crim Appeal No. AAU0007 of 1997S, High Court Crim Action No. HAA002 of 1997, 12 November 1999), at 5, per Sir MotiTikaram, P. Casey and Barker, JJA
  
• ‘... neither considerations of hardship to the successful party nor the over-optimism of an unsuccessful opponent would by themselves justify an award beyond party and party costs. But additional costs may be called for if there has been reprehensible conduct by the party liable’: State v. The Police Service Commission; Ex parte BeniaminoNaviveli(Judicial Review 29/94; CA Appeal No. 52/95, 19 August 1996), at 6
  
• Usually, party/party costs are awarded, with indemnity costs awarded only ‘where there are exceptional reasons for doing so’: Colgate-Palmolive Co. v. Cussons Pty Ltd at 232-34; Bowen Jones v. Bowen Jones [1986] 3 All ER 163; Re Malley SM; Ex parte Gardner []2001] WASCA 83; SDS Corporation Ltd v. Pasonnay Pty Ltd &Anor [2004] WASC 26 (S2) (23 July 2004), at 16, per Roberts-Smith, J.
  
• Costs are generally ordered on a party/party basis, but solicitor/client costs can be awarded where ‘there is some special or unusual feature of the case to justify’ a court’s ‘exercising its discretion in that way’: Preston v. Preston [1982] 1 All ER 41, at 58
  
• Indemnity costs can be ordered as and when the justice of the case so requires: Lee v. Mavaddat [2005] WASC 68 (25 April 2005), per Roberts-Smith, J.
  
• For indemnity costs to be awarded there must be ‘some form of delinquency in the conduct of the proceedings’: Harrison v. Schipp [2001] NSWCA 13, at paras[1], [153]
  
• Circumstances in which indemnity costs are ordered must be such as to ‘take a case out of the "ordinary" or "usual" category ...":MGICA (1992) Ltd v. Kenny & Good Pty Ltd (No. 2) [1996] FCA 862; (1996) 140 ALR 707, at 711, per Lindgren J.
  
• ‘... it has been suggested that the order of costs on a solicitor and client basis should be reserved to a case where the conduct of a party or its representatives is so unsatisfactory as to call out for a special order. Thus, if it represents an abuse of process of the Court the conduct may attract such an order’: Dillon and Ors v. Baltic Shipping Co. (‘The Mikhail Lermontov’) (1991) 2 Lloyds Rep 155, at 176, per Kirby, P.
  
• Solicitor/client or indemnity costs can be considered appropriately ‘whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known ... he had no chance of success’: Fountain Selected Meats (Sales) Pty Ltd v. International Produce Merchants Ltd & Ors [1988] FCA 202; (1998) 81 ALR 397, at 401, per Woodward, J.
  
• Albeit rare, where action appears to have commenced/continued when ‘applicant ... should have known ... he had no chance of success’, the presumption is that it ‘commenced or continued for some ulterior motive or ... [in] willful disregard of the known facts or ... clearly established law’ and the court needs ‘to consider how it should exercise its unfettered discretion’: Fountain Selected Meats, at 401, per Woodward, J.
  
• Where action taken or threatened by a defendant ‘constituted, or would have constituted, an abuse of the process of the court’, indemnity costs are appropriate: Baillieu Knight Frank (NSW) Pty Ltd v. Ted Manny Real Estate Pty Ltd (1992) 30 NSWLR 359, at 362. per Power, J.
  
• Similarly where the defendant’s actions in conducting any defence to the proceedings have involved an abuse of process of the court whereby the court’s time and litigant’s money has ‘been wasted on totally frivolous and thoroughly unjustified defences’: Baillieu Knight Frank, at 362, per Power, J.
  
• Indemnity costs awarded where ‘the defendant had prima facie misused the process of the court by putting forward a defence which from the outset it knew was unsustainable ... such conduct by a defendant could amount to a misuse of the process of the court’: Willis v. Redbridge Health Authority (1960) 1 WLR 1228, at 1232, per Beldam, LJ
  
• ‘Abuse of process and unmeritorious behaviour by a losing litigant has always been sanctionable by way of an indemnity costs order inter parties A party cannot be penalised [for] exercising its right to dispute matters but in very special cases where a party is found to have behaved disgracefully or where such behaviour is deserving of moral condemnation, then indemnity costs may be awarded as between the losing and winning parties’: Ranjay Shandil v. Public Service Commission (Civil Jurisdiction Judicial Review No. 004 of 1996, 16 May 1997), at 5, per Pathik, J. (quoting Jane Weakley, ‘Do costs really follow the event?’ (1996) NLJ 710 (May 1996))
  
• ‘It is sufficient ... to enliven the discretion to award [indemnity] costs that, for whatever reasons, a party persists in what should on proper consideration be seen to be a hopeless case’: J-Corp Pty Ltd v. Australian Builders Labourers Federation Union of Workers (WA Branch)(No. 2) [1993] FCA 70; (1993) 46 IR 301, at 303, per French, J.
  
• ‘... where a party has by its conduct unnecessarily increased the cost of litigation, it is appropriate that the party so acting should bear that increased cost. Persisting in a case which can only be characterised as "hopeless" ... may lead the court to [determine] that the party whose conduct gave rise to the costs should bear them in full’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
  
• However, a case should not be characterised as ‘hopeless’ too readily so as to support an award of indemnity costs, bearing in mind that a party ‘should not be discouraged, by the prospect of an unusual costs order, from persisting in an action where its success is not certain’ for ‘uncertainty is inherent in many areas of law’ and the law changes ‘with changing circumstances’: Quancorp Pty Ltd &Anor v. MacDonald &Ors [1999] WASC 101, at paras[6]-[7], per Wheeler, J.
  
• The law reports are replete with cases which were thought to be hopeless before investigation but were decided the other way after the court allowed the matter to be tried: Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002), at 11, per Lord Steyn
  
• Purpose of indemnity costs is not penal but compensatory so awarded ‘where one party causes another to incur legal costs by misusing the process to delay or to defer the trial and payment of sums properly due’; the court ‘ought to ensure so far as it can that the sums eventually recovered by a plaintiff are not depleted by irrecoverable legal costs’: Willis v. Redbridge Health Authority, at 1232, per Beldam, LJ
  
• Actions of a Defendant in defending an action, albeit being determined by the trial judge as ‘wrong and without any legal justification, the result of its own careless actions’, do ‘not approach the degree of impropriety that needs to be established to justify indemnity costs ... [R]egardless of how sloppy the [Defendant] might well have been in lending as much as $70,000 to [a Plaintiff], they had every justification for defending this action ... The judge was wrong to award [indemnity costs] in these circumstances. He should have awarded costs on the ordinary party and party scale’: Credit Corporation (Fiji) Limited v. Wasal Khan and MohdNasir Khan (Civil Appeal No. ABU0040 of 2006S; High Court Civil Action No. HBC0344 of 1998, 8 July 2008), per Pathik, Khan and Bruce, JJA, at 11
  

Defining ‘Improper’, ‘Unreasonable’ or ‘Negligent’ Conduct in Legal Proceedings as Guide to Indemnity Costs Awards: Cases where ‘wasted costs’ rules or ‘useless costs’ principles have been applied against solicitors where their conduct in proceedings has led to delay and/or abuse of process can provide some assistance in determining whether conduct in proceedings generally may be such as to warrant the award of indemnity costs. These cases specifically relate to solicitors’ conduct rather than directly touching upon the indemnity costs question; nonetheless the analysis or findings as to what constitutes conduct warranting an award of costs can be helpful. See for example:

• Ridehalgh v. Horsefield and Anor [1994] Ch 205
• Medcalf v. Weatherill and Anor [2002] UKHL 27 (27 June 2002)
• Harley v. McDonald [2001] UKPC 18; [2001] 2 AC 678
• Kemajuan Flora SDN Bh v. Public Bank BHD &Anor(High Court Malaya, Melaka, Civil Suit No. 22-81-2001, 25 January 2006)
• Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004)
• SZABF v. Minister for Immigration (No. 2) [2003] FMCA 178
• Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008)
  

Some of the matters referred to include:

• At the hearing stage, the making of or persisting in allegations made by one party against another, unsupported by admissible evidence ‘since if there is not admissible evidence to support the allegation the court cannot be invited to find that it has been proved, and if the court cannot be invited to find that the allegation has been proved the allegation should not be made or should be withdrawn: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
  
• At the preparatory stage, in relation to such allegations – not necessarily having admissible evidence but there should be ‘material of such a character as to lead responsible counsel to conclude that serious allegations could properly be based upon it: Medcalf v. Weatherill and Anor, at 8, per Lord Bingham
  
• Failures to appear, conduct which leads to an otherwise avoidable step in the proceedings or the prolongation of a hearing by gross repetition or extreme slowness in the presentation of evidence or argument are typical examples of wasting the time of the court or an abuse of its processes resulting in excessive or unnecessary costs to litigants: Harley v. McDonald, at 703, para[50] (English Privy Council)
  
• Starting an action knowing it to be false is an abuse of process and may also involve knowingly attempting to mislead the court: Ma So So Josephine v. Chin Yuk Lun Francis and Chan Mee Yee (FACV No. 15 of 2003, Court of Final Appeal Hong Kong Special Administrative Region, Final Appeal No. 15 of 2003 (Civil)(On Appeal from CACV No. 382 of 2002, 16 September 2004), at para[43], per Ribeiro, PJ (Li, CJ, Bokhary and Chan, PJ and Richardson, NPJ concurring)
  
• Lending assistance to proceedings which are an abuse of the process of the court – using litigious procedures for purposes for which they were not intended, ‘as by issuing or pursuing proceedings for reasons unconnected with success in the litigation or pursuing a case known to be dishonest’ or evading rules intended to safeguard the interests of justice ‘as by knowingly failing to make full disclosure on ex parte application[s] or knowingly conniving at incomplete disclose rue of documents’: Ridehalgh v. Horsefield [1994] Ch 205, at 234, per Bingham, MR
  
• Initiating or continuing multiple proceedings which amount to abuse of process: Heffernan v. Byrne [2008] FJCA 7; ABU0027.2008 (29 May 2008), per Hickie, J.
  

Specific Circumstances of Grant/Denial Indemnity Costs: Specific instances supporting or denying the award of indemnity costs include:

• Indemnity costs follow per a ‘Calderban offer’, that is, where a party makes an offer or offers prior to trial, which is/are refused, and that party succeeds at trial on a basis which is better than the prior offer: Calderbank v. Calderbank [1975] 3 WLR 586
  
• However, no indemnity costs awarded where Calderbank letter contains no element of compromise, making it not unreasonable for the party not to accept the offer. The question is ‘... whether the offeree’s failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs ...’: SMEC Testing Services Pty Ltd v. Campbelltown City Council [2000] NSWCA 323, at para[37], per Giles, JA Hence, if the offer is not a genuine offer of compromise and/or there is no appropriate opportunity provided to consider and deal with it, then no indemnity costs follow: Richard Shorten v. David Hurst Constructions P/L; D. Hurst Constructions v. RW Shorten [2008] AdjLR 06/17 (17 June 2008), per Einstein, J. (NSW Supreme Court, Equity Division T&C List); Leichhardt Municipal Council v. Green [2004] NSWCA 341, at paras[21]-24], [36], per Santow, JA, Stein, JA (concurring); Herning v. GWS Machinery Pty Ltd (No. 2) [2005] NSWCA 375, at paras[4]-[5], per Handley, Beazley and Basten, JJA; Elite Protective Personnel v. Salmon [2007] NSWCA 322, at para [99]; Donnelly v. Edelsten [1994] FCA 992; [1994] 49 FCR 384, at 396
  
• Indemnity costs awarded:
  
  • upon a winding-up petition’s being presented on a debt known to the petitioner to be genuinely disputed on substantial grounds;
    
  • the clearly established law being that a winding up order will not be granted in such circumstances, meaning that the petitioner ‘had no chance of successfully obtaining a winding up order’;
    
  • where in these circumstances the filing of the petition ‘constituted a deliberate tactical manipulation of the winding up process by the [petitioner, the State Government Insurance Commission ‘SGIC’] for the purposes of bringing very substantial pressure to bear’ on Bond Corp Holdings ‘BCH’
    
  • this in the circumstances meant that the ‘filing of the petition was an abuse of process of the court in the true sense of that expression’;
    
  • the discretion to stay the petition should not be exercised because this would ‘cause BCH serious harm’ meaning it would be ‘extremely difficult for BCH to be able to conduct its business normally if the petition [were] not dismissed’: citing Re Lympne Investments [1972] 1 WLR 523, at 527, per Megarry, J.; also Re Glenbawn Park Pty Ltd [1977] 2 ACLR 288, at 294, per Yeldham, J.
    
  • an abuse of process ‘having been established in the circumstances outlined, justice requires the award of solicitor and client, or, rather, "indemnity" costs’ so that ‘the SGIC should be ordered to pay all the costs incurred by BCH except insofar as they are of an unreasonable amount or have been unreasonably incurred, so that, subject to [these] exceptions, BCH be completely indemnified by the SGIC for its costs’, citing Foundation Selected Meats (Sales) Pty Ltd v. International Produce Merchants [1988] FCA 202; (1988) 81 ALR 397, at 410, per Woodward J.: Re Bond Corp Holdings Ltd (1990) 1 ACSER 350, at 13, per Ipp, J.
    
• Indemnity costs are appropriate where an applicant (in an unfair dismissal):
  
  • 'insists' over a respondents' objections that an application should proceed to trial rather than await the outcome of other possible litigation (including a police investigation);
    
  • fails repeatedly, despite allowances, to meet deadlines for lodgment of a witness statement;
    
  • fails to advise her lawyers of her whereabouts so denying them of the ability to inform the court of reasons for seeking an unqualified adjournment less than a week prior to trial;
    
  • fails to comply with directions to provide a current address, consult a medical specialist and obtain a report of fitness to attend the trial;
    
  • fails to appear at the final hearing when on notice that the application will be dismissed in event of such failure: Nicole Pender v. Specialist Solutions Pty Ltd (No. B599 of 2004. 17 May 2005), per Bloomfield, Commissioner
    
• Indemnity costs denied as against a Plaintiff who discontinued a claim for a permanent injunction to restrain a Defendant's industrial action, where the Defendant had filed a chamber summons seeking to have the Plaintiff's claim struck out as an abuse of process: Cooperative Bulk Handling Ltd v. Australian Manufacturing Workers Union (WA Branch)(Unreported, WASC, Lib. No. 970190, 30 April 1997), per Wheeler, J.
  
• Indemnity costs cannot be awarded in a criminal appeal, albeit 'in criminal appeals, as in civil cases, unreasonable conduct by the unsuccessful party might increase a usual award': Sayed Mukhtar Shah v. Elizabeth Rice and Ors(Crim Appeal No. AAU0007 of 1997S, High Ct Crim Action No. HAA02 of 1997, 12 November 1999), at 4, per Sir Moti Tikaram, P., Casey and Barker, JJA
  
• Indemnity costs awarded then reversed on appeal where solicitor held liable for costs (under a 'wasted costs' order) in initiating action for clients where solicitor taken to have known that the basis of the clients' action was wholly false"
  

(28) Let me now proceed to examine the basis upon which the Plaintiff seeks indemnity costs bearing the aforementioned legal principles uppermost in my mind.

As I mentioned earlier, the Plaintiff seeks indemnity costs on the following ground.

Reference is made to paragraph 32 of the written submissions filed by the Counsel for the Plaintiff;

"This is a hopeless flawed application, brought in bad faith and predicated on causing anguish. It is not a genuine exercise of legal rights. The Plaintiff is therefore entitled to indemnity costs of $5,000, if not at the high end of the normal costs order."

(29) What concerns me is that, is it a correct exercise of the Courts discretion to direct the First Defendant to pay costs on an indemnity basis to the Plaintiff for commencing the proceedings seeking security for costs against the Plaintiff on the ground that "the directors and the shareholders of the Company are resident outside of the jurisdiction."?

As I read Order 23, rule 1 (a), and when reduced to its essentials, the Plaintiff has to be ordinarily resident out of the jurisdiction. This is the condition precedent for proceedings brought under Order 23, rule 1(a). This is the statutory foundation for an application seeking of security for costs made pursuant to Order 23, rule 1 (a) of the High Court Rules, 1988. (It is not in dispute that the Plaintiff is a Fiji registered Company and its registered office is in Fiji).

Any practitioner in the field should have known the clear state of the law and the statutory foundation for security for costs. The First Defendant and its practitioner must have known that they had no possibility of success against the Plaintiff in the proceedings, seeking security for costs since the Plaintiff is a Fiji registered Company.

The proceedings seeking security for costs has been commenced in circumstances where the first Defendant properly advised should have known it had no chance of success. There is said to be a presumption in such cases that the proceedings was commenced or continued for some ulterior motive or in willful disregard of known fats or clearly established law.

Please see; Fountain Selected Meats (Sales) (PVT) Ltd v International Produce Merchants (PVT) Ltd, (1988) 81 ALR 357

In my view, the first Defendant persisted in what should a proper consideration be seen to be a hopeless proceedings.

It was unreasonable for the First Defendant and its practitioner to commence the proceedings seeking security for costs against the Plaintiff in a case where the Plaintiff is a Fiji registered Company and its registered office is in Fiji.

Despite all this and to make matters worse, the First Defendant continued proceedings seeking security for costs by inviting the Court to pierce the corporate veil and grant the first Defendant's application for security for costs in a case where the Court find no evidence whatsoever to show that the Plaintiff was formed and was carrying on business merely as a cloak or sham for the purpose of enabling the Directors to perpetrate fraud.

I cannot resist in saying that this puts flesh on the bones of the First Defendant's application for security for costs and makes plain the unfairness of it.

In these circumstances, I find that the commencement and continuation of proceedings seeking security for costs is completely unwarranted. It clearly shows the indefatigable initiative and endless effort on the part of the First Defendant who is so insistent in bringing proceedings seeking security for costs with no regard to any merits whatsoever.

Costs are of course a matter which lies in the discretion of the court. However, that discretion, being a judicial, rather than an unfettered one, must be exercised in accordance with established principles. The usual principle to be applied in inter partes litigation is that costs follow the event, those costs being taxed on a party and party basis.

The circumstances in which one is justified in departing from that established principles are, as it seems to me, limited, and it seems to me that, as a general rule, and order that costs be taxed on an indemnity basis is justified only where the procedures taken, or the procedures threatened, by a party constituted, or would have constituted, an abuse of the process of the court, or where the actions of the party, in the conduct of the proceedings, have involved an abuse of the process of the court, in the sense that the court's time, and the other parties money has been wasted on totally frivolous and thoroughly unjustified proceedings.

In the present case, there was no sufficient ground to commence and continue proceedings seeking security for costs because;

❖ The Plaintiff is a Fiji registered Company
❖ It's registered office is in Fiji
❖ There is no evidence whatsoever to show that the Plaintiff was formed and was carrying on business merely as a cloak or sham for the purpose of enabling the Directors to perpetrate fraud.

In these circumstances, the proceedings against the Plaintiff seeking security for costs were hopeless from the outset. The proceedings for security for costs against the Plaintiff is vexatious, in the shorter Oxford Dictionary sense of a legal proceedings instituted "without sufficient grounds for the purpose of causing trouble or annoyance to the Plaintiff". The other possibility is that the proceedings seeking security for costs against the Plaintiff was pursued for no good purpose at all due to carelessness.

I cannot help thinking that the First Defendant commenced and continued proceedings seeking security for costs for the purpose of causing trouble or annoyance to the Plaintiff. There has been reprehensible conduct by the First Defendant.

I wish to emphasize that the First Defendant's resort to proceedings seeking security for costs against the Plaintiff in a case where the Plaintiff is a Fiji resident Company and its registered office is in Fiji is a high risk strategy, the penalty for which, in my view should be an order for costs on an indemnity basis. I am satisfied there is reprehensible, oppressive and vexatious conduct by the First Defendant, the penalty for which in my view, should be an order for costs on indemnity basis.

I could see nothing to change my opinion even on the basis of exhaustive work contained in G.E. Dal Pont, "Law of Costs", Third Edition.

Essentially that is all I have to say!!!

FINAL ORDERS

(1) The Plaintiff's preliminary objection is upheld.

(2) The First Defendant's Amended Summons dated 18th August 2015, seeking of

Security for costs against the Plaintiff is dismissed.

(3) The Plaintiff's application for indemnity costs is allowed.

(4) The Plaintiff is directed to file and serve its detailed costs for the assessment

of the indemnity costs within 14 days from the date hereof.

.......................................
Jude Nanayakkara
Master of the High Court

At Lautoka
04th March 2016