Allcool Facilities and Maintenance Pty Ltd v CCS FM Pty Ltd
[2020] ACTSC 162
•23 June 2020
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Case Title: | Allcool Facilities and Maintenance Pty Ltd v CCS FM Pty Ltd |
Citation: | [2020] ACTSC 162 |
Hearing Date: | 8 May 2020 |
DecisionDate: | 23 June 2020 |
Before: | Crowe AJ |
Decision: | See [71] |
Catchwords: | PRACTICE AND PROCEDURE – SECURITY FOR COSTS – Application for security for costs – corporate plaintiff – whether there are reasons to believe that the plaintiff would be unable to pay the defendant’s costs if ordered to do so – whether delay in bringing application should result in its dismissal – discretionary considerations – consideration of the appropriate amount of security. |
Legislation Cited: | Court Procedures Rules 2006 (ACT) – rr 1902(1), 1904, sch 4 |
Cases Cited: | Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 134 ALR 187 KDL Building Pty Ltd v Mount [2006] NSWSC 474 |
Parties: | Allcool Facilities and Maintenance Pty Ltd (Plaintiff) CCS FM Pty Ltd (Defendant) |
Representation: | Counsel D Robens (Plaintiff) J Raftery (Defendant) |
| Solicitors Harrington Kibbey Law (Plaintiff) Somerset Ryckmans (Defendant) | |
File Number: | SC 390 of 2019 |
Crowe AJ:
Background
The plaintiff (Allcool) supplied and installed air-conditioning and heating products. The defendant (CCS) supplied facilities management services, including air-conditioning and heating services. The parties made two agreements (one in June 2017 and one in March 2018) to, in summary, sell specified assets of Allcool, including customer contracts, to CCS. Allcool commenced proceedings in this Court by Originating Claim and Statement of Claim on 6 August 2019. Allcool claimed for relief pursuant to the ‘June 2017 Agreement’, or alternatively, pursuant to the ‘March 2018 Agreement’. In essence, Allcool claimed that CCS was required to pay Allcool certain sums which were to be calculated by reference to the profit made on certain customer contracts which had been transferred to CCS. It was pleaded that in breach of the agreement(s), CCS had failed to pay those amounts.
The Statement of Claim also pleaded subsidiary oral agreements for the sale of vehicles and equipment. CCS was said to have breached these agreements by failing to pay the sums due in each case.
Allcool claimed a liquidated amount (just over $32,000) and specific performance, or, in the alternative, a declaration of unjust enrichment and an order for restitution, interest and costs.
CCS, by its solicitors, agreed to a directions timetable which was encompassed by consent orders dated 27 September 2019. Those orders required the filing and service of the Defence and any Counterclaim before 9 October 2019. Consequential directions were made for further pleadings and also discovery, interrogatories, and the service of expert reports. The matter was set down for a listing hearing on 30 March 2020 (subsequently moved to 2 April 2020).
On 15 October 2019, CCS filed its Defence and a Counterclaim. As a result of CCS’ Counterclaim, Shane William Evans (Mr Evans) was joined as the second defendant to the Counterclaim. Mr Evans is the sole director of Allcool. Simultaneously with the making of the June 2017 Agreement, CCS employed Mr Evans as its Operations Manager. He was subsequently appointed to General Manager. By its Defence, CCS pleaded that the June 2017 Agreement was made in contemplation of a further contract in substitution, that is, the March 2018 Agreement. It was pleaded that the March 2018 Agreement replaced the June 2017 Agreement and governed the contractual relationship between Allcool and CCS. CCS denied that it was in breach of the March 2018 Agreement and denied that Allcool was entitled to relief.
CCS further pleaded that in breach of the March 2018 Agreement, Allcool failed to transfer to CCS all of the customer contracts which it was obliged to transfer under the March 2018 Agreement. It was also pleaded that CCS had provided services to customers of Allcool for the benefit of Allcool, given that those contracts had not been transferred to CCS.
By its Counterclaim, CCS claimed against Allcool the value of the services said to have been provided for Allcool’s benefit. As against Mr Evans, CCS claimed that, pursuant to the June 2017 Agreement, Mr Evans had entered into a contract of employment with CCS. It was said that he became its Operations Manager and subsequently its General Manager. That employment ended on 18 June 2018.
CCS claimed against Mr Evans that he had breached a restraint of trade term of the employment contract, both during and after the employment. It was also alleged that Mr Evans had acted in conflict with his obligations owed to CCS pursuant to the employment contract. CCS was said to have suffered loss and damage as a consequence of these breaches.
In light of the joinder of Mr Evans and other matters, the original directions timetable was not complied with. The timetable was amended by consent orders made by the Senior Deputy Registrar on 5 December 2019. Pursuant to the amended directions, the listing hearing was delayed to 23 April 2020.
On 23 December 2019, CCS filed an Amended Defence and Counterclaim. So far as I can see, the amendments particularised what was said to have been overcharging by Allcool in relation to transferred customer contracts for the quarters ending 30 September 2017, 31 December 2017 and 31 March 2018. The amount overcharged was alleged to have been over $95,000.
It was further pleaded that the amounts due from CCS to Allcool under the March 2018 Agreement for the period from 1 July 2017 to 30 June 2019 resulted in CCS having been charged an excess of over $52,000. Having regard to the amount of more than $38,500 said to have been expended by CCS in providing services to Allcool’s customers, CCS asserted that the balance of accounts between the parties resulted in a debt from Allcool to CCS of at least $90,786.
The Counterclaim was amended to repeat the claims summarised in [7] and [8] above and to seek judgment against Allcool for damages in the sum of $90,786.
On 10 January 2020, further amended directions were made by consent. This new timetable pushed the listing hearing back to 14 May 2020. Thereafter, Allcool’s affidavit of discovery was filed on 13 February 2020. CCS’ affidavit of discovery was filed on 19 March 2020. In the meantime, CCS on 2 March 2020 delivered a request for Allcool to answer interrogatories. The verified answers were eventually filed on 23 April 2020. Allcool delivered a request for interrogatories of CCS on 18 March 2020. The answers have not yet been filed.
The delay in compliance with the timetable, particularly on the part of CCS, led to the matter being listed before the Senior Deputy Registrar on 2 March 2020. The directions timetable was again adjusted, and the listing hearing was deferred to 4 June 2020. Having regard to the failure of CCS to file verified answers to the interrogatories requested by Allcool, the matter again came before the Senior Deputy Registrar on 1 April 2020 when the directions timetable was further amended, although the listing hearing date was maintained.
On 17 April 2020, the solicitors for CCS emailed a letter to the solicitors for Allcool advising that CCS sought certain financial documents relating to Allcool and that if they were not provided by 21 April 2020, CCS would file an application for security for costs. Those documents were not provided and on 28 April 2020 CCS filed an Application in Proceeding seeking the following orders:
1. Pursuant to:
(a) Rule 1900 of the Court Procedures Rules 2006 (ACT);
(b) Section 1335 of the Corporations Act 2001 (Cth); and/or
(c) the inherent jurisdiction of the Court
an order that the plaintiff provide security for the defendant’s costs in the proceeding in the sum of $156,289 or such other amount as the Court deems fit, within 28 days.
2. An order that the proceedings be stayed unless and until the plaintiff provides security for the defendant’s costs in accordance with order 1 above.
3. An order that the proceedings be dismissed if the plaintiff fails to comply with the order to provide security within the time specified in the order.
4. Costs.
The Application in Proceeding was listed for hearing before me on 8 May 2020 and is the subject of this judgment. CCS is the applicant in the application and Allcool is the respondent.
Evidence
CCS relied on the following:
(a)Affidavit of Marc Ryckmans, solicitor, sworn 27 April 2020; and,
(b)Affidavit of Marc Ryckmans, solicitor, sworn 7 May 2020 (other than [11] and [12]).
Allcool relied on the following:
(a)Affidavit of James Hall, solicitor, affirmed 6 May 2020;
(b)Affidavit of Duncan Harrington, solicitor, affirmed 6 May 2020; and,
(c)Affidavit of Shane Evans, affirmed 6 May 2020 (other than [23], [36] and [43].
Submissions
CCS’ submissions
Mr Raftery of counsel appeared for CCS. Mr Raftery provided a written outline of submissions and also made oral submissions at the hearing. In reliance on the decision of Brereton J in KDL Building Pty Ltd v Mount [2006] NSWSC 474 at [6], Mr Raftery characterised the issues raised by the present application at [10] of his written submissions in the following terms:
(a) whether there is reason to believe that the plaintiff will be unable to pay the defendant’s costs if ordered to do so;
(b) whether as a matter of discretion an order should be made; and
(c) if security is to be ordered, the quantum and the terms on which the order is to be made.
In relation to the first of these issues, Mr Raftery relied on the approach taken by Bromberg J in Professional Vending Services Pty Ltd v Christou [2010] FCA 580, where his Honour said at [13]:
As Jessup J said in Acohs Pty Ltd v Ucorp Pty Ltd[2006] FCA 1279 at [10], whether a corporation “will be unable to pay” involves two considerations of its own. The first is the need to fix the time at which the applicant's inability, or apprehended inability, is notionally to be assessed. That, as von Doussa J said in Beach Petroleum, is an element which requires an opinion to be formed about the financial position of the applicant “at the time of judgment and immediately thereafter”: at 205. The second consideration relates to the range of assets to which recourse might be had for the purpose of meeting an adverse costs order. For that purpose, Jessup J took account of those assets which might be immediately realised, together with those which could be realised in sufficient time to enable the applicant to comply with a costs order in the usual terms. I respectfully agree with that approach. For convenience, I will refer to the kind of assets Jessup J has identified as liquid assets.
Mr Raftery referred to the letter sent by Mr Ryckmans to Allcool’s solicitor on 17 April 2020, which indicated that searches of the real property registers in the Australian Capital Territory (ACT) and New South Wales (NSW) had demonstrated that Allcool did not own any real property. The company search indicated that Allcool had paid up capital of 1,000 $1 shares, of which 100 were owned by Mr Evans, and 900 were owned by another company. Mr Raftery pointed out that Allcool had failed to provide the copies of the documents requested by CCS which would have disclosed its current financial position.
Reference was also made to the balance sheet which was an exhibit to Mr Evans’ affidavit (see SWE6). Mr Raftery submitted that the document should be treated with caution given a number of anomalies. These anomalies included that several entries for 31 May 2019 were identical with the figures for 31 May 2020 in circumstances where it could be expected that those figures must have changed having regard to the passage of time. This included the figures for sundry debtors, depreciation figures and payroll liabilities.
The major asset of Allcool appeared to be various motor vehicles. However, these were subject to hire purchase liabilities. There was just over $10,500 available in liquid funds.
Mr Raftery argued that the balance sheet demonstrated that there was reason to believe that Allcool would be unable to meet an adverse costs order.
In relation to the exercise of the Court’s discretion to make an order for security for costs, Mr Raftery commenced by referring to Chan v KAI Design & Construction Pty Ltd [2014] ACTSC 86. Mossop M (as he then was) set out the approach for assessing the capacity of a party to meet a costs order and the exercise of the relevant discretion, by reference to what Black J had said in Re Pioneer Energy Holdings Pty Limited [2013] NSWSC 1366 at [5]. It is helpful to set out that passage of Black J in full:
I turn first to the question whether there is reason to believe (as contemplated by UCPR r 42.21(1)(d)) or credible testimony (as contemplated by s 1335) that BOE and BDA would be unable to pay the costs of the Second-Sixth Defendants if ordered to do so. This requirement will generally be satisfied if there is a real chance, in events that are reasonably possible, that the relevant corporation will be unable to pay those costs: Beach Petroleum NL v Johnson (1992) 7 ACSR 203 at 205; Deangrove Pty Ltd v Buckby [2002] FCA 1544 at [4]; ACN 105 921 962 Pty Ltd v Wiggett (2012) NSWSC 1526 at [4]. In Wollongong City Council v Legal Business Centres Pty Ltd above, Beazley JA (with whom Meagher and Barrett JJA agreed) observed that the Court should adopt a "practical commonsense approach" to the examination of a corporation's financial affairs (at [28]) and noted that the defendant bears the onus of establishing that there is reason to believe that the plaintiff will be unable to pay those costs if unsuccessful and, if that is established, the onus shifts to the plaintiff to establish a reason why security should not be granted (at [29]-[30]).
As to the question of whether a security order would stultify the proceedings (see r 1902(1)(h) of the Court Procedures Rules 2006 (ACT) (CPR)), Mr Raftery submitted that this was not claimed by Allcool, nor was any evidence tendered as to the financial position of Mr Evans. The circumstances allowed for the inference that Mr Evans was funding the litigation.
It was submitted that the defendant had good prospects of success, both in its Defence and in the Counterclaim: see r 1902(1)(b) of the CPR.
Mr Raftery argued that the evidence did not suggest that the financial state of Allcool was attributable to the defendant’s conduct: see r 1902(1)(e) of the CPR. Indeed, Mr Raftery pointed to the allegations in CCS’ pleadings that CCS had overpaid Allcool by more than $52,000 by 30 June 2019.
In relation to the proposition that CCS was effectively in the position of a defendant (see r 1902(1)(f) of the CPR), it was submitted that the relevant test is whether a defendant is, in the commercial sense, the aggressor. If the counterclaim arose out of the same matter and transaction as the defence, the discretion to order security for costs should not be refused. Mr Raftery relied on the approach taken by Connolly M (as he then was) in Stelmag Pty Ltd v Tifferly Manufacturing Pty Ltd [2002] ACTSC 99 (Stelmag).
As for the delay in bringing the application, Mr Raftery pointed to the evidence of Mr Ryckmans that he had initially considered the matter to be a straightforward contract claim and that it was not until he was confronted with the task of discovery on behalf of CCS in February 2020, that he realised that the costs which would be incurred by his client might well exceed the amount in dispute.
Mr Raftery argued that the matter had not yet been set down for hearing. It appears likely that this matter will be listed for hearing either later this year, or possibly, early next year. There is still a dispute about the extent of discovery by CCS, and the lay and expert evidence has not yet been served. Reference was made to a number of cases where significant delays had not resulted in the refusal of an order for security.
The fall-back position for CCS, relying on Chocron v Onkoud [2018] NSWSC 1205 at [10] and Re Colorado Products Pty Ltd (in prov liq) [2013] NSWSC 611 at [69], was that any delay here should result in an order for security in respect of future costs, and not those already incurred. Ultimately, the amount for which CCS sought security was $117,935.50 (as to which see [59] below).
Allcool’s submissions
Mr Robens of counsel appeared for Allcool.
In relation to the issue of the capacity of Allcool to meet any costs order, Mr Robens pointed to the fact that Allcool did have assets and that it was continuing to trade.
However, the primary focus of Mr Robens’ submissions related to the discretionary factors. The matters of particular concern were the delay in the bringing of the application for security, the assertion that in reality Allcool was in the position of a defendant, the claim that any financial difficulty for Allcool was the result of CCS’ conduct in ceasing the quarterly payments due under the agreement(s) between the parties, and what was said to be the obstructive approach of CCS to the litigation.
As to delay, Mr Robens submitted that the explanation given by Mr Ryckmans was not satisfactory. He argued that the nature of the June 2017 and March 2018 Agreements between the parties meant that CCS should have been in a position to easily identify the invoices relevant to the transferred customer contracts from 2017 onwards. Mr Robens pointed to the considerable steps taken in the litigation between August 2019 and the end of April 2020 when the issue of security was first raised.
In relation to the true position of Allcool, Mr Robens argued that once its business was transferred to the control of CCS, Allcool was entirely reliant on CCS for the processing and payment of the correct amounts pursuant to the agreements. Mr Robens submitted that CCS took matters into its own hands by ceasing payments, refusing to disclose the profits which it was making each quarter from the transferred customer contracts, and alleging improper conduct on the part of Mr Evans in the pre-litigation correspondence. It was submitted that Allcool had no choice but to commence proceedings.
Mr Robens pointed to the fact that pursuant to the agreements between the parties, a significant part of Allcool’s business had been transferred to CCS. Given that CCS ceased paying that which was due under the agreements, any lack of financial resources suffered by Allcool could be attributed to the conduct of CCS.
In relation to the conduct of the proceedings, Mr Robens pointed particularly to the interrogatories administered by Allcool on 18 March 2020. Those should have been answered by 22 April 2020. The interrogatories were said to go to the nub of the dispute by identifying the relevant customer contracts and the details of the work done and profits generated in servicing the contracts. I was asked to draw an adverse inference from the fact that the defendant, rather than filing and serving the answers to interrogatories in compliance with the order of the Court, embarked to this security for costs application.
Mr Robens conceded on behalf of Allcool that he was unable to submit that an order for security for costs would prevent the matter from proceeding to hearing.
Allcool’s primary position was that security for costs should not be ordered. Mr Robens submitted that if, contrary to that position, the Court was minded to order security for costs, the order should be deferred until after the completion of discovery and perhaps mediation.
CCS’ submissions in reply
Mr Raftery argued that deferral of any order for security for costs would not be appropriate.
In relation to the magnitude of the discovery task, Mr Raftery took me to Annexure B to Mr Ryckmans’ affidavit sworn 7 May 2020. Annexure B is a report prepared on behalf of CCS. As I understand it, the report attempts to reconcile a difference between the customer contracts which were specifically identified in the agreement and those for which claims were lodged by Allcool after 1 July 2017. The situation reflected in that report is complex. I suspect that it will require detailed explanation in due course, should this matter proceed to hearing. Mr Raftery submitted that based on that report, it was incumbent on CCS to disclose the underlying 26,000 invoices.
Mr Raftery submitted that the failure of Allcool to put on evidence as to what position it would have adopted had application for security been made at the commencement of the proceedings effectively undermines its argument based on delay.
It was also submitted that the withholding of payments by CCS did not per se place Allcool in a defensive position. If that was so, the plaintiff in every case involving a claim for money under a contract would be in a ‘defensive position’.
Consideration
I am satisfied that there is reason to believe that Allcool would not be in a position to pay CCS’ costs in the event that CCS is successful and obtains a favourable costs order at the completion of the proceedings. I have come to this conclusion in large part for the reasons advanced by Mr Raftery on behalf of CCS. In particular, I do not find the “balance sheet” attached to Mr Evans’ affidavit to be persuasive. I do not accept that it reliably demonstrates the financial position of Allcool. What it does demonstrate is that Allcool has little or no liquid assets which might be available to meet a costs order of any significance in this matter.
While, as Mr Robens submitted, Allcool does continue to trade that does not, in my view, undermine the evidence which provides the basis for exercising the discretion to order security for costs in this case.
I turn then to the discretionary factors raised by the parties as relevant to this particular case. I will deal with them in the order in which they appear in r 1902(1) of the CPR, finishing with the issue of delay.
Means of people behind Allcool
As pointed out on behalf of CCS, Mr Evans did not provide any information as to his personal financial position in his affidavit, apart from disclosing that he was the sole director of the company and that he and his wife were the secretaries. Mr Evans said that the shares in Allcool were held by himself and a related entity which Mr Evans controlled for the benefit of himself and his wife.
I am prepared to infer that Mr Evans is a person with some means. I draw this inference from the disavowal by Mr Robens, on behalf of Allcool, of the proposition that an order for security for costs would stultify the capacity of Allcool to continue the proceedings.
The prospects of success or merits, and genuineness of the proceedings
There is clearly a genuine dispute between the parties. I am not in a position to make any useful assessment of the prospects of success of the substantive proceedings. The report at Annexure B to Mr Ryckmans’ second affidavit demonstrates a dispute of some complexity. It is likely, if the matter proceeds to hearing, that the Court will be required to carefully construe the terms of the agreement(s) made between the parties and also make findings as to precisely what customer contracts were transferred to CCS, either pursuant to the agreement or, perhaps, on some other basis.
Whether Allcool’s lack of financial resources is attributable to CCS’ conduct
It is certainly the case that Allcool transferred the bulk of its business to CCS in mid‑2017. While it has continued to perform some work since then, there seems to be no issue that the level of that work is very much less than what would have been the case before 1 July 2017. It is true that Allcool would be better off financially had CCS continued to pay quarterly amounts consistent with those paid for the first three quarters after 1 July 2017. However, I do not think that that fact is sufficient to discharge the onus carried by Allcool in proving that its lack of financial resources is attributable to CCS’ conduct. In particular, I note that there is no evidence before me as to the financial position of Allcool during the years before 1 July 2017.
In Jazabas Pty Ltd v Haddad [2007] NSWCA 291; 65 ACSR 276, McClellan CJ at CL (Mason P agreeing) said, at [95]:
In “Law of Costs”, G E Dal Pont says:
“[T]he plaintiff must be able to support the allegation with relatively straightforward and unambiguous evidence of a fairly compelling nature, because otherwise the hearing of the issue of security might become a trial within a trial. For this reason, it is not enough that the defendant’s conduct is merely a contributing factor – it must be the material contributor to or cause of the plaintiff’s impecuniosity.” (at [29.96] emphasis added by McClellan CJ at CL)
Having regard to the evidence in this matter, I am left with the distinct impression that the reason why Allcool’s financial position has stagnated somewhat is that Mr Evans, who appears to be the motivating force behind the company, has, since leaving CCS, transferred his energy and talents to other interests.
Overall, I am not satisfied that Allcool’s lack of financial resources was caused, or materially contributed to, by the conduct of CCS.
Whether an order for security would be oppressive, or limit the progress of the matter
As noted at [40] above these factors are not relied upon by Allcool, other perhaps than in relation to the issue of delay, which is dealt with separately below.
The estimated costs of the proceedings
Mr Ryckmans, in his first affidavit, said that he has been practising as a solicitor for many years. He has considerable experience in dealing with costs in the Supreme and District Courts of NSW, and also in the Federal Court of Australia. Mr Ryckmans provided an estimate that the solicitor/client costs of progressing the matter to hearing would be in excess of $223,270, and that the party/party component of that estimate would be $156,289.
Mr Harrington, in his affidavit, said that he has been practising as a solicitor in the ACT since 2011. He has had particular experience with costs assessments in this Court and has, since 2017, specialised in legal costing. Mr Harrington took issue with the approach taken by Mr Ryckmans to the estimation of CCS’ costs. He pointed out that the figures used were significantly higher than the Scale of Costs in sch 4 of the CPR, and that the hourly rate used for counsel was also much higher than the indicative rates set out in the Counsel’s Fees Scale issued by the ACT Supreme Court. Finally, Mr Harrington referred to the amount allowed for expert fees of $20,000 as being excessive for a matter of this type.
Mr Ryckmans in his second affidavit acknowledged the points made by Mr Harrington and recalculated his estimation accordingly. This resulted in a figure of $117,935.50 for party/party costs. I note that this amount included $3,868 for the costs of this application, $6,419 for the work required to answer interrogatories and $20,000 for the costs of the expert. The estimation (including the revised estimation) does not distinguish between the work required for the Defence and the Counterclaim.
Delay
The reason why the consideration of delay is important in an application for security for costs was adopted by Schmidt J in Karl Suleman Enterprizes Pty Limited (in liquidation) v Pham and Ors [2010] NSWSC 886 at [57]:
In Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd [2009] NSWSC 563, Barrett J explained:
"28 The reason why delay acts against an applicant is that it allows a plaintiff to proceed without interruption and without any warning that his or her preparations and expenditures on them may be rendered worthless by the intervention of a stay brought about by inability to furnish security. The point was made in these terms by Einstein J in Liberty Grove (Concord) Pty Ltd v Mirvac Projects Pty Ltd [2008] NSWSC 48 at [7]:
“The comprehensive treatment of the appropriate principles which fall to be considered in relation to applications for security for costs to be found in Idoport v National Australia Bank [2001] NSWSC 744 (‘Idoport’) (at [69] and following) is accepted as correct for present purposes. One of the first and most important such principles concerns the need for an application for security for costs to be made promptly: Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1; Buckley v Bennell Design & Construction Pty Ltd (1974) 1 ACLR 301 at 308; Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114 at 123. The authorities have recognised that it would often be patently unjust to permit a defendant who stood by and allow a plaintiff to work on their case to ask for security after expenses had been incurred: Smail v Burton; Re Insurance Associates Pty Ltd (in liq) (1975) 1 ACLR 74 at 75. Indeed the longer the delay, the proximity of the hearing and the more acts done during the interval, the greater the significance of the delay and the more difficult it will be to persuade the Court that an order for security will not, in the circumstances, be unfair or oppressive: see French J in Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 at 514.” "
I note that Mr Ryckmans was sufficiently instructed by 13 October 2019 to be able to draw the Defence and Counterclaim in this matter. I also note that the detailed report at Annexure B to Mr Ryckmans’ second affidavit appears to have been prepared by 13 December 2019. It seems likely that the report would have been provided to Mr Ryckmans shortly after that date. It seems to me that Mr Ryckmans should have been aware of the potential complications in this litigation, including the magnitude of discovery, well before late February 2020. The initial directions timetable ordered on 30 September 2019 required CCS to file its affidavit of discovery by 4 December 2019. I do not accept that it was reasonable for this application to be delayed for nearly nine months after the commencement of proceedings.
I am also conscious of the considerable work done on behalf of the plaintiff during that nine month period. I do not accept that it was necessary for Allcool to have put on evidence to prove that it would have decided not to proceed with the matter if the application for security for costs had been brought in a timely manner. While such evidence might add to the weight to be given to delay, the absence of such evidence does not, it seems to me, undo the harm caused to a party by progressing the claim on the assumption that provision of security for costs will not be an issue. Plainly, the longer that situation is allowed to continue, and the more work done in preparation of the matter, the greater the potential for prejudice to that party.
It is also of significance that some of the delay has been caused by the failure of CCS to comply with the procedural directions which have been made by this Court. I take particular note of the failure of CCS to have filed verified answers to Allcool’s interrogatories even as at the present date.
General
Taking account of the relevant factors, apart from the issue of delay, I would have concluded that this was an appropriate case for ordering security for costs. However, the delay and the circumstances of that delay cause me to hesitate to make such an order. Had the matter been a little more advanced I would have rejected the application. However, I note that the matter has not yet been set down for hearing and that there are further interlocutory steps to be finalised.
Balancing all of the circumstances of the case, I have concluded that it is appropriate to make an order for security, however not in the terms as sought by CCS. Having regard to his unfamiliarity with costs assessment in the ACT Supreme Court, I have some reservations as to the accuracy of Mr Ryckmans’ second estimation of costs. Also, in light of the delay in the making of the application, I am not prepared to order security for past costs or the costs of this application. I also do not consider that any order should encompass the work required to answer interrogatories, given the lack of compliance by CCS with the directions made by the Court.
I note that in the matter of Stelmag, Connolly M was not prepared to include the costs of the Counterclaim in the sum for which security was ordered. That seems to me to be an appropriate approach in the circumstances of this case.
Although the course suggested by Mr Robens of deferring any security order until after completion of discovery and/or mediation has some attraction, it seems to me that that course might just create further complications. On balance, it is preferable that I do not take that course.
Making a “broad brush” assessment (see Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 134 ALR 187 at 199-201; Ashington Capital Pty Ltd v Parissen Capital (Project X) Pty Ltd [2012] NSWSC 410 at [17]-[18]) I conclude that the appropriate order is for Allcool to provide security for costs in the sum of $50,000 with such security to be given within 28 days from the date of the order. I do not see a need to make an order in the terms of orders 2 or 3 as sought in the Application in Proceeding having regard to r 1904 of the CPR.
I will leave it to the parties to agree on the form of the security to be provided. I will grant liberty to apply if agreement cannot be reached.
In relation to costs of the application, it seems to me that costs should follow the event. However, having regard to the desirability of avoiding an interlocutory costs assessment, I see it as appropriate that the costs not be assessed until the matter ends.
Orders
The orders of the Court are:
(1) The plaintiff provide security for the defendant’s costs in the proceeding in the sum of $50,000 within 28 days.
(2) The parties have liberty to apply on 2 days’ notice in relation to the form of the security.
(3) The plaintiff pay the defendant’s costs of the Application in Proceeding filed on 28 April 2020.
(4) The costs referred to in order (3) not be assessed until the matter ends.
(5) Orders (3) and (4) are stayed for 14 days, and thereafter until further order if either party exercises the leave granted in order (6).
(6) The parties have leave to seek different orders as to costs by notifying my Associate accordingly within 14 days of the date of these orders.
| I certify that the preceding seventy-one [71] numbered paragraphs are a true copy of the Reasons for Judgment of his Honour Acting Justice Crowe. Associate: Date: |
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