Adour Holdings Pty Ltd v Commonwealth Bank of Australia

[1990] FCA 273

NOT FOR DISTRIBUTION

JUDGMENT NO. .22.3.1..4-6-

IN THE FEDERAL COURT OF AUSTRALIA	)
NEW SOUTH WALES REGISTRY	) NO. NG1357 of 1988
GENERAL DIVISION	)

BETWEEN ADOUR HOLDINGS PTY LIMITED

Applicant

and

COMMONWEALTH BANK OF AUSTRALIA

Respondent

CORAM :  Bowen C. J .

m RECEIVED -

PLACE :	Sydney
DATE :	18 June 1990  FEDERAL COURT OF

AUSTRALIA PRINCIPAL REGISTRY

EX TEMPORE REASONS FOR JUDGMENT

This is a motion by the Commonwealth Bank of Australia for security for costs against Adour Holdings Pty Limited. Adour Holdings commenced proceedings against the Bank by application filed on 17 November 1988. A statement of claim was filed on 17 November 1988 and it alleged that there was a loan application dated 21 August 1986 by which the applicant, that is Adour Holdings, sought approval of a loan from the Bank to finance the purchase of certain land at Queen Street, Campbelltown and the construction upon it of a development project.

provision of security documents it would approve at that stage Bank informed Adour Holdings that subject to satisfactory

It is alleged that by a letter dated 19 September 1986 the

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a loan in respect of the acquisition of the land. Adour Holdings thereafter obtained, according to its statement of claim, assurances from the Bank that subject to the building plans being approved construction finance would be available and that the Bank considered the application as one deal, namely, for the purchase of the land and for the construction of the development project. These later assurances relating to the second part of the deal, as it is called, are denied by persons on behalf of the Bank. This conflict represents an issue of fact in the principal proceeding.

It is claimed by Adour Holdings that loss and damage flowed from the action of the Bank in not agreeing to proceed with the second stage of the development.

On 27 November, 1989 on the petition of a creditor other than the Bank an order was made in the Supreme Court of New South Wales for the winding up of Adour Holdings and a liquidator was appointed. Adour Holdings has an asset consisting of the

Bank of $1.46 million and it has indebtedness to the Bank	land at Campbelltown which it purchased with the loan from the
amongst others which with interest exceeds that amount.
Nevertheless the proceeding which was commenced as I have said in November 1988 has continued with the consent of the liquidator because the directors of Adour Holdings have agreed to finance the proceeding.

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The proceeding came before a Judge of this Court on 1 June 1990 and the Bank was then given leave to file cross-claims against certain individuals, whom I understand include directors of Adour Holdings. Some of these cross-claims are to enforce mortgages and some to enforce guarantees. I am informed from the Bar table that the cross-claims have actually been filed today. The whole proceeding has been listed for hearing on 30 July 1990 with an estimated duration of 5 days arrived at before the cross-claims were filed.

The estimates of the amount of costs involved in the application by Adour Holdings varied. The solicitor for the Bank gave evidence that legal costs and disbursements for the hearing alone will be not less than $35,000 and that the total cost of the proceeding to the Bank would be in the order of $60,000. In cross-examination he agreed that the figures were not party and party costs but an estimate he had made based upon his own fixed scale of charges. He is an "in house" solicitor for the Bank.

The solicitor for Adour Holdings estimated $15,000 as the	Bank's costs of the proceeding based on the briefing of junior
counsel. In cross-examination he said that he had hlmself briefed senior counsel on Friday.
Turning to the question of security for costs the Court clearly has a discretion to make an order for security either

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under s.533 of the Companies Code (N.S.W.) or under 9.56 of
the Federal Court of Australia Act.

The Bank has established that Adour Holdings which is in liquidation will be unable to pay the Bank's costs if its proceeding against the Bank is unsuccessful. On the other hand counsel for Adour Holdings points to the fact that the basis for its claim really involves the proposition that the failure of its development plan and its insolvency is due to the action of the Bank in giving it the loan to enable it to buy the land and then not approving finance for the second stage, that is the construction of the complex on the land. That is, the alleged misconduct of the Bank is the cause of Adour Holding's impecuniosity. Counsel also points to the delay in applying for security since the Bank has known of the insolvency of Adour Holdings at least since 27 November 1989 and possibly earlier.

There is no evidence one way or the other as to whether an

order for security for costs will prevent the further	litigation of this matter. It is difficult to assess because
on the evidence it is litigation funded by the directors not by Adour Holdings itself. What is clear is that the Bank even if it wins will not be able to recover any of its costs against Adour Holdings unless I order security.
I have not found this an easy matter to determine but in all
the circumstances I have come to the conclusion that I should

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order securlty for costs in the sum of $20,000. I order that Adour Holdings pay the costs of the Bank of this motion. I also order that each party has liberty to apply to the Court on 2 days notice. I take the opportunity of giving a direction that the principal proceeding be listed for further directions on 2 July, 1990.

I cert~fy	that this and the	'r
,	prt?! :~d~nr#	pages are a true copy of the

' Re:	.(I tt r Judgment herein of his Honour
1 t h ~ '	cc Sir Nigel Bowen

) -&'p d 5 ~

! Associate

1 Dated: 1 J J Q (yL1C

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