176 Adelaide Tce Pty Ltd (Controller Appointed) (in liq) v Water Corporation
[2020] WADC 73
•5 JUNE 2020
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
IN CHAMBERS
LOCATION: PERTH
CITATION: 176 ADELAIDE TCE PTY LTD (Controller Appointed) (in liq) -v- WATER CORPORATION [2020] WADC 73
CORAM: REGISTRAR KINGSLEY
HEARD: 8 MAY 2020
DELIVERED : 5 JUNE 2020
FILE NO/S: CIV 4745 of 2017
BETWEEN: 176 ADELAIDE TCE PTY LTD (Controller Appointed) (in liq)
Plaintiff
AND
WATER CORPORATION
Defendant
PROGRAMMED FACILITY MANAGEMENT (PRA) PTY LTD
Third Party
VIADUX PTY LTD
Fourth Party
AVK WANG PTY LTD
Fifth Party
OCEANROSE
Sixth Party
Catchwords:
Practice - Application for security - No new principles
Legislation:
Nil
Result:
Application dismissed
Representation:
Counsel:
| Plaintiff | : | Mr De Kerloy |
| Defendant | : | Ms Lendrich |
| Third Party | : | No appearance |
| Fourth Party | : | No appearance |
| Fifth Party | : | No appearance |
| Sixth Party | : | In person |
Solicitors:
| Plaintiff | : | Mony De Kerloy |
| Defendant | : | Clyde & Co (Perth Office) |
| Third Party | : | Clayton Utz |
| Fourth Party | : | Trinix Lawyers |
| Fifth Party | : | Wotton Kearney Lawyers (Perth) |
| Sixth Party | : | Not applicable |
Case(s) referred to in decision(s):
Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176
Land Enviro Corp Pty Ltd (in liq) v HTT Huntley Heritage Pty Ltd [2017] NSWCA 207
Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132
McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1CLR 143
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57
REGISTRAR KINGSLEY:
This is the defendant's application dated 14 February 2020 seeking orders, pursuant to O 25 r 1 of Rules of the Supreme Court 1971 (WA) and s 1335 Corporations Act 2001 (Cth), that, within 14 days of the date of the order the plaintiff provide the defendant security with the defendant's costs of the action in the sum of $213,000.
In support of the application the defendant relies on the affidavit of Jonathan Wyatt sworn 14 February 2020 (Wyatt's first affidavit), the affidavit of Jonathan Wyatt sworn 26 March 2020 (Wyatt's second affidavit) and the affidavit of Elena Zoric sworn 5 May 2020.
Background
The action was commenced by a writ dated 22 December 2017. The plaintiff was entitled Domenic Buonaventura Di Latte as Controller of 176 Adelaide Tce Pty Ltd (ACN 142 882 513). The statement of claim pleads at par 1:
The plaintiff, 176 Adelaide Terrace, Perth (ACN 142 882 513), sues through its duly appointed controller Domenic Buonaventura Di Latte who was appointed by FPDL Investments Pty Ltd (ACN 613 293 753) a secured creditor of the plaintiff.
On 2 May 2018 the defendant filed a defence. The defendant did not admit par 1 of the statement of claim. At par 7 of the defence the defendant admits that the plaintiff contracted (via a written building contract) the construction of an apartment style serviced hotel (the development) to Diploma Construction (WA) Pty Ltd (the builder).
In May 2018 the plaintiff filed a list of document verified on oath and in August 2018 the defendant filed a list of documents verified on oath.
In September 2018 the defendant brought an application to join the third party. Orders were made joining the third party in early October 2018.
The third party issued a fourth party notice on 25 October 2018.
By a consent order filed 18 January 2019 directions were made in the third party and fourth proceedings.
In March 2019 the fourth party issued a fifth party notice, and by a minute of consent orders filed 2 May 2019, orders were made in relation the fifth party proceedings. The fifth party, by notice dated 22 May 2019, issued a sixth party notice. By a consent order filed 5 July 2019 orders for directions were made in the sixth party proceedings.
By a chamber summons dated 31 October 2019 the plaintiff sought orders to amend the writ of summons, and for leave to adduce expert evidence. Relevantly the writ of summons sought to be amended to alter the name of the plaintiff to:
176 Adelaide Tce Pty Ltd (ACN 142 882 513) (Controller Appointed) (in liquidation).
Orders were made 5 December 2019 and the defendant's chamber summons was filed 14 February 2020.
Wyatt in his first affidavit deposes that in October 2019 the plaintiff proposed the amendments to the statement of claim and, prior to the application being determined on 5 December 2019, the defendant's solicitors gave the plaintiff's solicitors notice it would seek security for costs when the plaintiff was changed.
Wyatt deposes that up to October 2019 the plaintiff had maintained that the Controller was the correct plaintiff and that by letter dated 24 October 2019 the plaintiff appeared to accept that the plaintiff identified in the writ was not clear and that the correct plaintiff was the company.
Discussion
The defendant's application is brought pursuant to s 1335 Corporations Act. That section provides that where a corporation is a plaintiff and it appears by credible evidence there is reason to believe the corporation will be unable to pay the costs of the defendant, if successful, a court may require sufficient security to be given for those costs.
The threshold question is whether the plaintiff would be unable to pay the costs of the defendant in these proceedings. It is common ground that this threshold requirement is satisfied.
The question then becomes whether this court should exercise its discretion to award security for costs.
The court has an unfettered discretion to order security for costs and that discretion is to be exercised with regard to the circumstances of each particular case. Those circumstances will vary from case to case and the weight to be given to any circumstance in a particular case will depend not only upon its own intrinsic persuasiveness, but upon the impact of the other circumstances which have to be weighed: Mabrouk Minerals Pty Ltd v Mabrouk Holdings Ltd [2008] WASC 132.
In Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 Edelman J stated 11 of the most commonly cited non‑exclusive factors, which depending on the circumstances, may have different strengths and effect on the exercise of the discretion to award security for costs.
The parties have identified three factors which go to this application for security. Those factors are (and not in the order submitted by the defendant):
1.The question of delay.
2.An undertaking given by the Controller.
3.The strength of the plaintiff's case.
Delay
The defendant submits that the action was commenced by an individual, and in December 2019 that individual was replaced by the company. The defendant submits that this change was not merely a change in the name of the plaintiff but the substitution of a corporate entity, an entity distinct from an individual.
The plaintiff submits that the plaintiff has never changed. The plaintiff submits that the defendant was put on notice in a letter dated 10 March 2017 and headed 176 Adelaide Tce Pty Ltd claim against Water Corporation, as to the entity which, as the plaintiff submits, has the cause of action.
The plaintiff submits that the defendant's response to that letter was to pass responsibility to others. The plaintiff submits that whilst the defendant's primary submission is that the original plaintiff was an individual (namely the Controller) the defendant could not be in any doubt that the company who owned the property was always the plaintiff.
It is well established that an application for security for costs must be made promptly: McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1CLR 143. The further a plaintiff has proceeded in an action and the greater the cost the plaintiff has been allowed to incur without steps being taken to apply for an order for security for costs, the more difficult it will be for the defendant to persuade the court that such an order is not, in the circumstances, unfair or oppressive: Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497. In Christou v Stanton Partners Australasia Pty Ltd [2011] WASCA 176 the court noted that it is incumbent upon a defendant who wishes to obtain security for costs to apply promptly for that relief. Security for costs is not a card that a defendant can keep up its sleeve and play at its convenience. The court went on to say that delay is an important consideration in the determination of an application for security because it is capable of causing prejudice or unfairness and a plaintiff is entitled to know at the earliest opportunity, before it has committed substantial resources to pursuing the litigation, whether it will be required to provide security. The later an application is made the greater the likelihood that it will cause substantial disruption or distraction in the conduct of the plaintiff's case.
Further the court noted in Christou the need to ensure the efficient use of judicial resources has become increasingly important, and therefore delay may also be significant in that regard. A late application which frustrates the action will mean that the judicial resources already devoted to the case will have been wasted.
The writ of summons on its face entitles the plaintiff as the individual. However the pleaded statement of claim defines the plaintiff at par 1 as 176 Adelaide Terrace, Perth. The defendant in its defence does not admit that allegation but at par 7 of its defence the defendant admits that the plaintiff contracted (by a written building contract) the construction of an apartment. In accordance with usual pleading practice I can take it that the defendant had in its possession the written building contract such that the admission could be made.
Thereafter the defendant issued a third party notice and that third party notice brought in an additional three parties.
Each of the third party, fourth, party and fifth party have filed statements of claim and the fourth party, fifth party and sixth party have filed defences to those statements of claims. Thus not only has the plaintiff advanced the case but the defendant, through its actions, has caused four other parties to undertake work and raise costs.
In my opinion it was incumbent upon the defendant to resolve the issue of the identity of the plaintiff at an early stage. Even before the writ was issued the defendant had given notice that other parties would be joined. It was therefore incumbent upon the defendant to bring an application for security at a much earlier stage of the proceedings than what it has.
In my opinion the application has been brought far too late and that is fatal to the application.
The undertaking
The plaintiff submits that the Controller had proffered an undertaking which would keep the defendant in the same position as they are.
The Controller was appointed pursuant to an amended security deed. FPDL Pty Ltd was the secured party and appointed the Controller. The deed of security appoints the Controller as agent of FPDL Pty Ltd.
The plaintiff submits that there is clear law that the Controller of a company, as one who stands behind the litigation and who brings proceedings, will be personally liable for an adverse costs order. The plaintiff cites Land Enviro Corp Pty Ltd (in liq) v HTT Huntley Heritage Pty Ltd [2017] NSWCA 207 as authority.
The defendant does not agree with the plaintiff's submissions, and submits that pursuant to the Deed of Appointment of Controller dated 13 July 2017 the secured creditor FPDL Pty Ltd appointed the Controller. Clause 2.2 of the Deed provides that the Controller is the agent of the Security Provider but the Controller will not be personally liable to the Security Provider or the Controllers acts or omissions.
The Controller is appointed with all the rights, privileges, benefits, discretions and authorities conferred by the Security, the finance documents and by law (cl 2.1, Deed). The Controller looks not only to the Deed but also to the Corporation Act 2001 WA, specifically s 419(1). That section provides that notwithstanding any agreement to the contrary the receiver is liable for the debts incurred in the course of receivership. The imposition of personal liability protects suppliers of goods and services. In my opinion, the Controller is personally liable for debts incurred.
The plaintiff submits that the Controller having filed the undertaking, the court should not now interfere with that situation and make it harder for the plaintiff to conduct the bone fide case against the defendant. There is no foundation for the plaintiff's submission that it would be harder for the plaintiff to conduct its case against the defendant. There is no evidence from the plaintiff that any security will have an effect on its case.
Equally there is no evidence of the worth of the undertaking. There is no evidence that the Controller has assets of value to support the undertaking. Accordingly, I give no weight to the undertaking.
The defendant submits that the entity standing behind the plaintiff, being FPDL Pty Ltd is the one to provide security. Having found that in Controller is the one personally liable and I do not intent to address that argument
Merits of the action
As is properly the case there was limited argument on the merits of the actions. The statement of claim and amended writ promotes a claim by 176 Adelaide Terrace Pty Ltd that it owned land and entered into a construction contract with another entity and that there were contractual or tortuous duties owed by the defendant to 176 Adelaide Terrace Pty Ltd which were allegedly breached.
The defendant has consistently denied that 176 Adelaide Terrace Pty Ltd entered into a contract with it, and denies the existence of the alleged contractual or tortuous duties. The defendant has not sought to strike out the statement of claim.
In my opinion the strength and weakness of the plaintiff's claim must simply be considered as neutral in the exercise of the court's jurisdiction.
Whilst the defendant's submissions touched on all the other discretionary factors that are usual in an application of this nature argument before me was only on the three issues discussed above.
For the reasons expressed under the heading 'Delay' I am of the opinion that the defendant's application must be dismissed.
I will hear counsel on the issue of costs and the future progress of the action.
I certify that the preceding paragraph(s) comprise the reasons for decision of the District Court of Western Australia.
DH
Court Officer5 JUNE 2020
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