Ambridge Investments Pty Ltd v Baker [No 2]
[2010] VSC 234
•28 MAY 2010
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
No. 2014 of 2005
| AMBRIDGE INVESTMENTS PTY LTD (IN LIQUIDATION) (RECEIVER APPOINTED) (ACN 077 299 051) | Plaintiff |
| v | |
| THEODORE BAKER & ORS | Defendants |
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JUDGE: | VICKERY J | |
WHERE HELD: | MELBOURNE | |
DATE OF HEARING: | 28 MAY 2010 | |
DATE OF JUDGMENT: | 28 MAY 2010 | |
CASE MAY BE CITED AS: | AMBRIDGE INVESTMENTS PTY LTD v BAKER & ORS [No 2] | |
MEDIUM NEUTRAL CITATION: | [2010] VSC 234 | |
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Companies — Security for costs — s.1335(1) of the Corporations Act 2001 - Separate trial ordered – Plaintiff successful on separate trial - Appeal pending – Application for discharge of orders for security for costs.
Practice and Procedure — Security for costs — Rule 62.05 of the Supreme Court (General Civil Procedure) Rules 2005 – Application for discharge of orders.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J W Peters SC and Mr C G Juebner | Tress Cox Lawyers |
| For the First to Seventh Defendants | Mr P J Bick QC, | Rigby Cooke Lawyers |
HIS HONOUR:
In its application by summons dated 22 March 2010, the plaintiff, Ambridge Investments Pty Ltd (“Ambridge”), seeks an order that the orders which have been previously made against it to give security for the costs of the defendants be in each case vacated, and that the security which is the subject of each such order be returned to it.
The trial of the proceeding commenced on 5 October 2009 before me and occupied 18 sitting days before concluding on 13 November 2009.
The questions for determination at the trial before me were summarised in my judgment delivered on 12 March 2010 cited as [2010] VSC 59 [27].
On 6 October 2009, on the second day of the trial, I made an order pursuant to Rule 47.04 of the Supreme Court (General Civil Procedure) Rules 2005 that specified questions and issues raised in the proceedings be tried before the trial of other questions in the proceeding. This step had the effect of confining the trial at that stage to questions of liability, leaving such matters as the taking of accounts, any breaches of any alleged agreement or duties, and damages to be tried separately. The questions for determination at the separate trial of the proceeding were confined to the matters generally described in my judgment.[1]
[1][2010] VSC 59 [27].
The plaintiff Ambridge was wholly successful in the separate trial before me, resulting in orders in its favour to the following effect:
(a)It was declared that the plaintiff held a 25 percent interest in the Wellington Parade joint venture under the terms of an enforceable contract of joint venture between the plaintiff and the other parties cited in the order, in the terms of the written joint venture agreement executed by Break Fast and Ambridge and provided to the first defendant on 8 October 2002; and
(b)It was further declared that the plaintiff Ambridge held a 25 percent beneficial interest in the Wellington Parade property pursuant to an express trust of which the sixth defendant, Break Fast, is the trustee.
Throughout the course of the proceeding the plaintiff has been ordered to pay security for costs pursuant to some five orders which were made progressively, as follows:
(a)An order made by the Honourable Justice Byrne in this proceeding on 25 February 2005 for the amount of $45,000.00;
(b)An order made by the Honourable Justice Whelan in this proceeding on 26 August 2005 for the sum of $50,000.00;
(c)An order made by the Honourable Justice Whelan in this proceeding on 2 December 2005 in the sum of $80,000.00;
(d)An order made by Master Kings, as she then was, in this proceeding on 24 April 2007 in the amount of $7,360.00; and
(e)An order made by myself in this proceeding during the course of the trial on 7 October 2009 in the amount of $230,000.00 by way of bank guarantee.
The orders made for security for costs thus a total sum $410,000.00.
The plaintiff, Ambridge, is a company in liquidation with a receiver appointed. Orders for security for costs that were made were founded upon s.1335(1) of the Corporations Act 2001(“the Corporations Act”) which provides as follows:
Where a corporation is a Plaintiff in any action or other legal proceeding the Court having jurisdiction in the matter may, if it appears by credible testimony that there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful in his, her or its defence, require sufficient security to be given for those costs and stay all proceedings until the security is given.
As the defendants have submitted in this application, the purpose of s.1335(1) of the Corporations Act is to provide a defendant in a proceeding with a measure of protection from being involuntarily prejudiced by the character of a corporate plaintiff having limited liability. See: Buckley v Bennell Design & Construction Pty Ltd,[2] a decision of Street CJ. See also: Pacific Acceptance Corporation Limited v Forsythe (No 2)[3] and Pearson v Naydler.[4]
[2][1974] 1 ACLR 301 at 303 to 304.
[3][1967] 2 NSWR 402 at 407.
[4][1977] 3 All ER 531 at 535.
As Ormiston J observed in Nord v Truett:[5]
The statutory obligation to give security for costs is the price for the privilege of limited liability.
[5] (1987) AIPC 90-457 at 37936.
The matter was also addressed by Smithers J in Sent & Petres & Collier v Jet Corporation of Australia Pty Ltd[6] where his Honour emphasised the importance of security for costs in circumstances where the plaintiff is an insolvent company controlled by a receiver. His Honour observed as follows:
Once it appears not only that there is a secured creditor in respect of whose claims against an insolvent company the proceedings are of special interest, but that the proceedings have been initiated by and are controlled by the receiver and manager appointed by that secured creditor whose primary purpose is the recovery of his own debt, and there is a reasonable inference that the secured creditor is supporting the litigation financially, in justice of that secured creditor pursuing his own interest in an action against the appellant parties, with no risk to itself should the appellant parties succeed in their defence, assume special significance on the question of the justice of granting or refusing to grant an order for security for costs.
[6][1984] 2 FCR 201 at 215.
Nevertheless, even though there was power under the section to award security for costs against the corporation Ambridge, and the circumstances giving rise to the exercise of the power provided a substantial factor in the determination to the exercise of the power, a discretion remains vested in the Court as to whether or not to make such an order.
Rule 62.05 of the Supreme Court (General Civil Procedure) Rules 2005 enables the Court to set aside an order requiring a plaintiff to give security for costs. This too is a discretionary power.
In any event the Court has inherent jurisdiction to order the return of any security ordered in the course of controlling its own process.
Further, the fact that an order for security was made by consent of the parties does not deprive the Court of the power to vary or vacate the order in the proper case. An order was made on 7 October 2009 in this proceeding in the course of the trial, which I have referred to, in the amount of $230,000.00. This order was made by consent.
In relation to the orders made by Byrne J on 25 February 2005, the orders made by Whelan J on 26 August 2005 and 2 December 2005, and the order made by Master Kings on 24 April 2007, I accept what Mr Jones, the solicitor acting for Ambridge, has said in his affidavit in support of the application to the effect that in each case the only matter to be determined on the pleadings as they then stood was the question of whether Ambridge had an interest in the joint venture.
In relation to the order which I made on 7 October 2009 on the third day of that trial, this order was made after I had ordered a separate trial confined essentially to the question as to whether Ambridge had any and what interest in the joint venture. In this application it was conceded by all parties that the order as to security which was made on 7 October 2009, was confined to the provision of security for costs of the trial of the separate question before me. No order for security for costs has yet been made in respect of the matters which remain to be determined in the proceeding, based on the current pleadings.
The Court has now delivered its judgment on the question in respect of which the orders for security for costs were made. Ambridge, the plaintiff, was wholly successful in the trial of the separate question. The defendants, other than the second and the fifth defendants have appealed to the Court of Appeal on the judgment delivered in respect of the separate question. No security has yet been ordered in respect of the appeal. Nevertheless the plaintiff claims that it is entitled to have the security, which it has paid in respect of the separate trial, repaid to it.
The plaintiff relied upon an early decision of the Supreme Court of Victoria in Huon Shipping and Logging Co Ltd v South British Insurance Co Ltd[7] (“Huon Shipping”) where Irvine CJ, in ordering the release of security for costs at the conclusion of the trial, stated:
This appears to be an important point of practice; that it is I think governed by authority. It is not a question of discretion but of what is the proper effect of an order that the Plaintiff do pay into Court the sum of a hundred pounds as security for costs of the defendant in this action. At first I was disposed to think that the order should be construed to include the costs of the action, and the costs of any proceeding that might subsequently be taken by way of appeal. I think however that that is not so, and the Plaintiff having secured a judgment in his favour has complied with the terms of the order.
[7][1923] VLR 216 at 217.
That decision was followed later by Blackburn CJ in A & R Construction Pty Ltd v Lees,[8] where his Honour the Chief Justice noted that neither the words of the order in the Victorian case nor the words of s.363(1) of the ordinance (which conferred on the Court power to order security for costs) can reasonably be taken to comprehend costs to which the defendant may possibly become entitled as a result of an order of another court of appeal.
[8][1982] 7 ACLR 900.
The defendants in this application sought to distinguish the application of Huon Shipping on the basis that the principles stated therein related only to the costs of a party at the conclusion of the trial, and as there were a number of matters on the present pleadings which had to be dealt with, it was premature to make any order discharging the orders for security.
The defendants called in aid of their submission a reference to G E Dal Pont, Law of Costs (2nd Ed, 2009) at [28.65], which it was said put the general rule as follows:
Where a Plaintiff pays money into Court as security for the defendant's costs of the action, and is successful in the action, assuming no order requiring a successful Plaintiff to meet the costs, the Plaintiff is entitled to have the money paid out of Court as soon as judgment is entered, notwithstanding the defendant has been granted a stay of execution with a view to an appeal [emphasis added].
The defendants, sought to explain the reference in Dal Pont, to which I have referred in the following way: "Notwithstanding the Plaintiff has the benefit of one judgment in its favour, the trial of the matter has not been concluded, and the Plaintiff has not been successful in the action". They said further, "At present issues, both of liability and quantum remain to be determined in addition to the pending appeal. As success in the action is a precondition to the release of security, the Plaintiff's application is premature". They said that, "Put another way, the purpose of the security has not yet been exhausted".
In my opinion, this is to state the proposition cited in Dal Pont too highly. The learned author plainly did not consider the position of a separate trial of a question stated pursuant to Rule 47.04, as occurred in this case. The separate trial has concluded. In these circumstances, in my view, the plaintiff has had the benefit of a judgment in its favour and the trial of the matter on the issues dealt with in that judgment has concluded. Accordingly, the plaintiff has been successful in the action within the principle referred to in Dal Pont.
The defendants also placed reliance on a decision of the New South Wales Court of Appeal, Kiri Te Kanawa v Leading Edge Events Australia Pty Ltd[9] (“Kiri Te Kanawa”) where Beazley JA made a number of observations on an application before her to discharge a plaintiff from a security for costs order where an appeal from the trial judge was pending. Her Honour [at 1] referred to the judgment of the trial judge, which ordered amongst other things in favour of the successful plaintiff, that the security for the first and fourth defendants’ costs which had been provided, pursuant to an earlier order, be discharged. The first defendant then filed a summons for leave to appeal. The relevant order made by her Honour at first instance, discharged one of the orders for security for costs which had been made in the course of the proceeding, namely an order for security in the sum of $250,000 in respect of the costs of the first and fourth defendants.
[9][2007] NSWCA 187.
It is clear that in Kiri Te Kanawa, Beazley JA considered, and correctly in my view, that the question of the discharge of the trial judge's order for security for costs was to be determined in the exercise of the Court's discretion. Her Honour in particular observed [at 22] as follows:
I consider that this application should be determined on the basis that leave to appeal will be granted, and that there is an arguable prospect that the appeal will be allowed. It is not necessary, in my opinion, to make any assessment of that prospect, it is sufficient to judicially notice that there is an argument available to the 1st defendant that her costs should not have been conflated with those of the 4th defendant.
In that circumstance I am of the opinion that the 1st defendant should be in no worse position that she was at the trial in relation to her costs being secured.
However, in this case I have not been taken to the grounds of appeal nor have I been given an opportunity to consider them to assess the prospects of success or otherwise in the appeal, nor to determine whether there is any viable argument open to the defendants on appeal.
Accordingly, unlike the position in Kiri Te Kanawa, I must proceed without the advantage of any assessment of the prospects of appeal even on the low threshold that I have referred to.
I accept that the plaintiff has not put before the Court any statement of its current assets and liabilities. The fact that the plaintiff is in liquidation, and absent any evidence to the contrary, is in the usual case sufficient reason to believe that its assets will not be sufficient to pay the defendants’ future costs should the plaintiff be ordered to pay any. However, at least for the present, the plaintiff having won at the trial of the separate question is not likely to be exposed to an order for costs of that trial, if the usual rule that costs follow the event is to be applied, although the question of the costs of the separate trial is yet to be determined. The position remains that, for the purposes of this application, there is no material before me which demonstrates that the plaintiff is likely to suffer any award of costs against it in respect of the separate trial, and no submission was made in this application that this was a likely outcome.
As to the costs of the separate trial which might be ordered following a successful appeal, as I have indicated, I am not in a position to make any assessment at all of the prospects of that occurring on the material that is presently before me.
It is for those reasons that I am prepared to make the orders sought in paragraph 6 of the plaintiff's summons dated 22 March 2010 which are as follows, and I will pronounce them now:
(1)The following orders by which the plaintiff was required to give security for costs in this proceeding be vacated and that the security, the subject of each such order be returned to the plaintiff
(a)the order made by the Honourable Justice Byrne in this proceeding on 25 February 2005 for the sum of $45,000.00;
(b)an order made by Honourable Justice Whelan in this proceeding on 26 August 2005 for the sum of $50,000.00;
(c)the order made by the Honourable Justice Whelan in this proceeding on 2 December 2005 in the amount of $80,000.00;
(d)the order made by Master Kings, as she then was, in this proceeding on 24 April 2007 in the amount of $7,360.00 and the order made by the Honourable Justice Vickery in this proceeding on 7 October 2009 in the amount of $230,000.00 by way of bank guarantee.
(2) A stay of 28 days is granted.
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