Austrack Infrastructure Development Pty Ltd v Sharvine Pty Ltd (No. 4)
[2011] VSC 686
•16 December 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
S CI 2005 10032
| AUSTRACK INFRASTRUCTURE DEVELOPMENT PTY LTD (ACN 065 271 141) AND ORS (according to the schedule attached) | Plaintiffs |
| v | |
| SHARVINE PTY LTD (ACN 080 518 396) | First Defendant |
| - and - | |
| TRANSPACIFIC CLEANAWAY PTY LTD (formerly known as Brambles Australia Limited) (ACN 000 164 938) | Second Defendant |
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JUDGE: | LANSDOWNE AsJ |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 16 December 2011 |
DATE OF JUDGMENT: | 16 December 2011 |
DATE OF THESE REASONS: | 22 December 2011 |
CASE MAY BE CITED AS: | Austrack Infrastructure Development Pty Ltd and ors v Sharvine Pty Ltd and anor (No. 4) |
MEDIUM NEUTRAL CITATION: | [2011] VSC 686 |
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PRACTICE AND PROCEDURE-Dismissal for want of prosecution- Inordinate delay established-Not inexcusable due to prior consent by defendants to adjournment-Prejudice established-Application for dismissal refused-Reinstatement of proceedings refused-Security for costs ordered
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiffs | No appearance | |
| For the Defendants | Mr C.P. Young | Thomsons Lawyers |
HER HONOUR:
These are reasons for orders I made on Friday, 16 December 2011 in respect of three summonses. The summonses, in the order in which I deal with them in these reasons are as follows:
1.The defendants’ application for dismissal or stay of the proceedings filed 18 March 2011.
2.The plaintiffs’ application to reinstate the proceedings filed 17 October 2011.
3.The defendants’ application for security for costs filed 22 September 2009.
These applications were listed before me pursuant to orders made by me on 7 November 2011. Those orders were the subject of detailed reasons in relation to order 2 (which refused leave to the plaintiffs to be represented by Mr Taylor) which were published on 17 November 2011. Subsequently, as permitted by order 6 made 7 November 2011, Mr Taylor made application for adjournment of the proceedings on medical grounds. I refused that application by orders made 24 November 2011 and gave written reasons also dated 24 November 2011. After those orders were made and reasons published, a further affidavit sworn by Mr Taylor came to my attention purporting to be in reply or seek reconsideration of my decision on the adjournment. For the avoidance of doubt, I considered this affidavit and it was the subject of orders made by me on 9 December 2011 which confirmed my earlier order refusing the adjournment.
Mr Taylor did not attend the hearing on 16 December. At the commencement of the hearing a solicitor appearing on his behalf but not on the record, sought an adjournment to enable that solicitor to consider whether or not to go on the record. I heard that application, treating the solicitor as amicus for that purpose. For reasons set out separately I refused that application and the hearing of the summonses proceeded, undefended as regards the defendants’ summonses and without a prosecutor in respect of the plaintiffs’ summons.
Application for dismissal of the proceedings
The summons was first returnable on 6 April 2011. On that date there was no appearance for the plaintiffs and on the evidence before me all of the plaintiff companies had been deregistered and so ceased to exist. Accordingly, I ordered that the proceedings be stayed and made orders permitting the plaintiffs to apply for leave to reinstate the proceedings on certain terms (to which I will return later). The summons was then adjourned to Wednesday, 10 August 2011 and subsequently adjourned without appearances on that date to 28 September 2011.
On that date Mr Taylor attended and sought leave to represent the plaintiffs as their director. The evidence before me on that date was that four of the plaintiffs had been re‑registered, being plaintiffs 1 to 3 which were re‑registered on 27 September 2011, and plaintiff 6 which was re‑registered on 21 June 2011. Plaintiffs 4, 5 and 7 were as at that date deregistered and remain so. I granted leave to Mr Taylor for that day only to represent the re‑registered plaintiffs and counsel for the defendants put his submissions for dismissal of the proceedings. The summons, together with the defendants’ summons earlier filed for security for costs and the plaintiffs’ application for reinstatement, at that time informally made by affidavit only, was then adjourned to 7 November 2011. On that date the whole of the special fixture was consumed by a subsequently filed summons by Mr Taylor seeking leave to represent the plaintiffs, which leave I refused. Thereafter, as set out above, the summons for dismissal came before me again part-heard on Friday, 16 December 2011.
The defendants rely on the inherent power of the Court to dismiss for want of prosecution in accordance with the principles stated by Lord Griffiths in Department of Transport and Chris Smaller (Transport) Limited,[1] in the following terms:
The power should be exercised only where the court is satisfied either (1) that the default has been intentional and contumelious, e.g. disobedience to a peremptory order of the court or conduct amounting to an abuse of the process of the court; or (2)(a) that there has been inordinate and inexcusable delay on the part of the plaintiff or his lawyers, and (b) that such delay will give rise to a substantial risk that it is not possible to have a fair trial of the issues in the action or is such as is likely to cause or to have caused serious prejudice to the defendants, either as between themselves and the plaintiffs, or between each other, or between them and a third party.[2]
[1][1989] AC 1197.
[2]Ibid at 1203.
This statement of general principle was endorsed by the Victorian Court of Appeal in Bishopgate Insurance Australia Limited v Deloitte Haskins and Sells.[3]
[3][1999] 3 VR 863 at 873.
As is apparent, there are two alternative limbs on which a party seeking dismissal for want of prosecution may rely. The defendants rely on the second limb, i.e. inordinate and inexcusable delay on the part of the plaintiffs or their lawyers which, it is said, has given rise to serious prejudice to the defendants. The principal evidence relied on by the defendants is contained in the affidavit sworn by Alison Urquhart on 30 March 2011 both as to delay and as to prejudice. I also incorporate into these reasons my discussion in my reasons of 17 November 2011 at [6] to [16] inclusive and [21] to [22], and my reasons of 24 November 2011 at [17].
Delay
As set out in Ms Urquhart’s affidavit and as found by me in the previous applications, there has been very substantial delay in these proceedings at the hands of the plaintiffs. The proceedings were not issued until the very eve of the expiration of the limitation period; they were not served until the eve of the expiration of the one year service period; and no statement of claim was filed until 3 April 2007, four months after service of the generally endorsed writ. What occurred next is set out in the affidavit of Adam Pope sworn 21 September 2009, which is chiefly in support of the application for security for costs but also contains relevant procedural history to this application. After service of the statement of claim, Mr Pope contends, and there is no evidence to the contrary, that the solicitors for the defendants pointed out deficiencies in the statement of claim by letter dated 12 April 2007 culminating in orders made 7 June 2007 by consent that the plaintiffs have leave to file and serve an amended statement of claim by 5 July 2007, failing which the statement of claim would be struck out. As no amended statement of claim was filed and served by that date, the statement of claim was struck out on 5 July 2007.
Subsequently, in the period December 2007 to June 2008, according to the affidavit of Mr Pope, the plaintiffs served four versions of their proposed amended statement of claim. The amended statement of claim was finally filed and served in late June 2008. There followed requests and Court orders requiring the plaintiffs to provide copies of the documents referred to in the amended statement of claim. Eventually orders were made on 19 May 2009 by Associate Justice Daly that the plaintiffs serve copies of remaining documents not yet provided, failing which the plaintiffs were required to file and serve a further amended statement of claim by 2 June 2009 deleting references to that correspondence. The further amended statement of claim was filed on 2 June 2009 and the defence to that further amended statement of claim filed on 8 July 2009.
Thus the plaintiffs did not finalise their claim in respect of events in the years 1997 to 2000 until June 2009, between nine and twelve years after these events, and three and a half years after the commencement of proceedings.
The plaintiffs have taken no substantial step in the proceedings since the defence was filed in July 2009. A portion of this may have been due to without prejudice negotiations with the defendants. Mr Pope’s affidavit refers to such negotiations in paragraph 30, which apparently took place in the period between March 2009 and September 2009. While negotiations may then have continued, the necessity for the plaintiffs to take affirmative action was crystallised on the filing of the defendants’ application for security for costs and evidence in support on 22 September 2009.
The plaintiffs did not file any affidavit material in response to the application for security for costs until after my orders of 6 April 2011, i.e. a period of 18 months.
Following my orders of 6 April 2011 and immediately preceding that date, Mr Taylor filed a number of affidavits as follows:
affidavit dated 31 March 2011 but sworn 5 April 2011;
affidavit dated 5 April 2011 and sworn 5 April 2011;
affidavit dated 28 July 2011 and sworn that date;
affidavit dated 9 August 2011.
Those affidavits contain material that is relevant to the application for dismissal, chiefly being assertions as to Mr Taylor’s ill‑health from August 2009 and continuing. I will also consider these affidavits in relation to the application for security for costs. In addition to the period September 2009 to April 2011, the defendants rely on the failure by the plaintiffs thereafter to retain solicitors and to efficiently respond to the applications in support of their application for dismissal. Even assuming that these affidavits of Mr Taylor are responsive to the two applications of the defendants, for security for costs and for dismissal, the applications did not commence to be heard until 28 September 2011 and the hearing did not conclude until 16 December 2011, 7 November 2011 being entirely consumed by an unsuccessful application by the plaintiffs to be represented by Mr Taylor.
I accept the submission of the defendants that the delay since September 2009 has been inordinate. A period of two years between the filing of an application for security for costs and the first hearing of an application is by any standard inordinate. I am also satisfied that the delay is properly attributable to the plaintiffs. It is plain from the affidavit material filed both by the defendants and by Mr Taylor on behalf of the plaintiffs, that the plaintiffs rely on the ill‑health of Mr Taylor from August 2009 and continuing as the reason for the inability of the plaintiffs to participate in the proceedings.
Has the delay been inexcusable?
The real difficulty for the defendants is whether the delay since September 2009 has been excusable. This difficulty arises because the defendants consented to numerous adjournments of the hearing of the application for security for costs, which was required to be heard before the proceedings could move forward, between September 2009 and 10 November 2010 on the grounds of Mr Taylor’s ill‑health. Counsel for the defendants contends that the fact that the defendants did not oppose the adjournments or consented to them does not render the delay excusable, because Mr Taylor’s assertions of ill‑health were never tested. They also rely on an inference to be drawn from affidavit evidence by Mr Taylor that “in recent years I have also led mineral exploration activities in South America”[4] and “while having been disadvantaged by ill‑health in dealing with this litigation and my affairs generally, I am able to say that over the last several years in South America I have led mineral exploration discovering significant economic tantalum, tin and other high value industrial metal resources and filed mineral claims and took other appropriate steps under relevant government policies and laws, to the effect that I am (sic) a position to meet my financial obligations including costs in this matter, going forward.”[5]
[4]Paragraph 2(h) of affidavit dated 31 March 2011.
[5]Paragraph 8 of affidavit dated 5 April 2011.
The defendants rely on these statements as evidence that notwithstanding his ill‑health, Mr Taylor has been able to focus on some activities and has made a positive choice to devote his time to them, rather than to this litigation. They also rely on the fact that some of the affidavit material of Mr Taylor, notwithstanding assertions that he was required to remain in the United States for medical treatment, was apparently sworn before a Justice of the Peace in Sydney, in particular his affidavit dated 28 July 2011. This is relied upon to support the submission that Mr Taylor’s absence overseas for medical treatment has not always been necessary and so cannot be sufficient explanation for the delay in prosecuting the proceedings.
I do not consider that the defendants can assert that delay in the period September 2009 to 10 November 2010 has been inexcusable when they themselves excused it, by consenting or not opposing applications for adjournment by the plaintiffs on the grounds of Mr Taylor’s ill‑health. The defendants were at liberty to seek to test the evidence in support of that contention at any time and chose not to do so. This is not to criticise the defendants, as their attitude may have been entirely proper, but it is to require consistency in their approach to the delay during that period.
On that basis, the defendants are only at liberty to complain in this application of inexcusable delay from 10 November 2010. Even taking the defendants’ case at its highest, this period extends only to 28 September 2011 by which time four of the seven plaintiffs had been re‑registered, the plaintiffs through Mr Taylor had endeavoured to file evidence in response to both the security for costs and the dismissal applications, and the applications had commenced to be heard. While this period needs to be seen against the background of the proceedings as a whole and the earlier inordinate delay, given that no complaint specifically had been made of that delay by way of application to dismiss the proceedings until March 2011 and the defendants’ consent or lack of opposition to adjournments prior to that time may have lulled the plaintiffs into the belief that no objection was taken, in my view the period from November 2010 to the filing of the application and thereafter to the hearing of the application is not sufficient to support dismissal of the proceedings.
Prejudice
I consider that I should make it clear to the plaintiffs, however, that any further inexcusable delay on their part may well provide support to an appropriate application for dismissal of the proceedings in the future. In the absence of solicitors on the record, and reinstatement of the proceedings pursuant to the orders of 6 April 2011 as subsequently varied, the plaintiffs cannot prosecute the proceedings, and so the delay at the hands of the plaintiffs will necessarily increase.
Further, I accept the submission of the defendants that the plaintiffs’ delay in progressing the proceedings has already caused significant prejudice to the defendants in the conduct of their defence by reason of the matters set out in sub paragraphs 23(a)-(c) of the affidavit of Ms Urquhart sworn 30 March 2011. It is apparent from the pleadings that oral evidence will be required of disputed conversations in March 2000, now more than 11 years ago. Indeed, it may be that the plaintiffs will seek to call evidence relating to an earlier period in time from 1996. Mr Taylor asserts in his affidavit dated 31 March 2011[6] that what he says was the wrongful termination of agreements between the plaintiffs and the defendants at the hands of the defendants was a continuation of a pattern of behaviour on the defendants’ part first evident from 1996.
[6]Paragraph 26.
Even if the proceedings were now ready for trial, a trial would not likely be available until later in 2012. The proceedings are not, however, anywhere near ready for trial given that discovery has not yet taken place. In all probability, even with efficient progression from hereon, the claims could not go to trial until 2013. The prejudice occasioned to the defendants by reason of the lapse of time will be correspondingly greater.
I find that this prejudice already exists and will increase by reason of the necessity for witnesses to recall events now so long ago. I do not, in this finding, rely on the absence or possible absence of documentary material, being the matters set out in sub paragraphs 23(d) and (e) of Ms Urquhart’s affidavit. I note that Mr Taylor asserts in his affidavit dated 31 March 2011 that he put the defendants on notice in writing in 2000 not to destroy their relevant documents, and accordingly reserve the question of prejudice arising from the absence of documentary records for further detailed consideration if required.
These are my reasons for dismissing the defendants’ summons filed 18 March 2011 seeking dismissal of the proceedings. I do so without prejudice to the defendants’ right to make further application for dismissal in the future. I consider that the defendants should bear their own costs of the summons, with the exception of 6 April 2011. On that date no plaintiff existed, and so the now re-registered plaintiffs should bear the costs of that day, as ordered on that day. Although the defendants have been unsuccessful, the plaintiffs have not been legally represented since the filing of the summons except for a very short period and were not legally represented at any of the court appearances or in respect of the filing of the affidavit material in response. Accordingly, there is no basis for an order for payment of the plaintiffs’ legal costs of the summons.
Plaintiffs’ summons for reinstatement
By order No. 2 made 6 April 2011 I directed as follows:
The plaintiffs may apply for leave to reinstate the proceedings, such application to be made no later than 29 July 2011 and such application to be supported by an affidavit on behalf of the plaintiffs deposing as to:
(a)the reinstatement of the registration of all or any of the plaintiffs;
(b)the evidence relied upon by the plaintiffs in response to the orders for security for costs sought by the defendants by summons dated 22 September 2009;
(c)the measures put in place by the plaintiffs to ensure the proceeding is prosecuted without further delay; and
(d)payment of the order of Registrar Conidi of 10 February 2011.
Mr Taylor on behalf of the plaintiffs purported in his affidavit dated 28 July 2011 and sworn that date, to make application that the proceedings be reinstated. As at that date, the sixth plaintiff had been reinstated. Mr Taylor also exhibited material that he said evidenced that the plaintiffs would be able to prosecute the proceeding. I will consider that in relation to the security for costs application. The order of Registrar Conidi is exhibited to the affidavit of Ms Urquhart of 30 March 2011. It taxes the defendants’ costs for earlier interlocutory applications in the sum of $40,016.16 to be paid by Austrack Infrastructure Development Pty Ltd, which is the first‑named plaintiff. In apparent reference to the requirement that the application for reinstatement refer to payment of that order, Mr Taylor in his affidavit of 28 July 2011 asserts that the plaintiffs and he are owed $150,692.93 being their costs of complying with the subpoena issued by one or both of the defendants in related proceedings. In later affidavits Mr Taylor conceded that that amount had not yet been taxed.
At my request, the defendants provided a copy of the most recent order in relation to that taxation, being the order of Judicial Registrar Gourlay made on 8 November 2011 in respect of a summons for taxation filed on 7 October 2011. The order is made in proceedings between Bridge and Marine Engineering Pty Ltd and Sharvine Pty Ltd, Sharvine being the first defendant in these proceedings. The order does not disclose which of the plaintiffs in these proceedings was subpoenaed but refers to Mr Taylor as the director of the “subpoenaed party”. By that order, the subpoenaed party is required to file and serve any affidavit on which it intends to rely (in addition to an earlier affidavit of Mr Taylor filed 30 November 2009 in respect of an earlier summons for taxation) by 20 January 2012. The taxation of the subpoenaed party’s costs is fixed for hearing on 2 March 2012. There is no evidence of payment of the order of Registrar Conidi before me and the defendants assert it has not been paid.
By orders made 28 September 2011, I required the plaintiffs to thereafter be legally represented. In relation to the application for reinstatement of the proceedings sought to be made by Mr Taylor’s affidavit, I directed by order 3 that the plaintiffs:
(a)file and serve a summons by 24 October 2011; and
(b)file and serve any further affidavit in compliance with Orders 2(b), (c) and (d) of 6 April 2011 by 24 October 2011.
Order 2, made on 28 September, was in these terms:
The plaintiffs are required to be legally represented on that day (being 7 November 2011) and not to take any step in these proceedings except by a solicitor without the consent in writing of the defendants or leave.
Mr Taylor subsequently filed a summons on 17 October 2011 seeking that the proceedings be reinstated together with other orders. He sought to do so as director of the plaintiffs without obtaining the consent in writing of the defendants or leave. Leave was conclusively refused to the plaintiffs to be represented by Mr Taylor on 7 November 2011. Accordingly, the summons was filed in breach of the orders of 28 September 2011.
I gave yet a further opportunity to the plaintiffs to be legally represented for the purpose of prosecuting the application for reinstatement by orders 3, 4 and 5 made 7 November 2011. These orders adjourned the summons seeking reinstatement, together with the defendants’ summonses, to 16 December 2011 and permitted the plaintiffs to file fresh evidence and any proposed amended summons seeking reinstatement of the proceedings by 4.00pm on Friday, 9 December 2011. No such summons was filed on behalf of the plaintiffs by a solicitor on the record and there is no appearance today by a solicitor on the record for the plaintiffs to prosecute the summons as filed by Mr Taylor.
For these reasons I dismiss the plaintiffs’ summons of 17 October 2011, without prejudice to the right of the plaintiffs through a solicitor on the record to file a fresh application seeking reinstatement in the future. As it is conceded that some of the plaintiffs have been re‑registered and the security for costs application was heard and determined on 16 December 2009, any future application for reinstatement need deal only with the matters set out in paragraphs 2(c) and 2(d) of the orders of 6 April 2011.
I will order that the plaintiffs pay the defendants’ costs of the summons, being the usual result where an application is dismissed because it has not been prosecuted.
Defendants’ application for security for costs
The proceedings are already stayed by virtue of the order made 6 April 2011. There is, accordingly, an initial issue as to whether this application, which would result in a stay if successful until security was provided, can appropriately be heard and determined. Counsel for the defendants’ submission is that it can, and I agree. Now that there are plaintiffs who have been re‑registered, in my view there is no bar to the determination of an application that will result in a stay of the proceedings on a different basis. For the proceedings to be reinstated so as to enable the parties to move to the next stage of the proceedings, both reasons for the stay will need to be addressed i.e. the giving of any security ordered to be given, and the Court making an order for reinstatement on a summons filed by the plaintiffs by a solicitor on the record having regard to the matters set out in order 2(c) and (d) of 6 April 2011.
The defendants’ summons filed 22 September 2011 seeks security for the defendants’ costs pursuant to Rule 62.02(1)(b) and (f) of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”), s 1335 of the Corporations Act2001 (Cth) (“the Corporations Act”) and the inherent jurisdiction of the Court. The amount sought is $124,530 as security for the defendants’ costs of and incidental to defending the proceeding up to and including mediation. The two substantial steps to be taken between close of pleadings and mediation are of course discovery and the mediation itself. Associated with these are consideration of any further and better particulars of the further amended statement of claim, possible directions hearings, possible subpoenas, and various disbursements. The summons seeks cash in this sum and paid within 14 days. Counsel for the defendants on 16 December sought security by way of bank guarantee only and payment by 27 January 2012, to allow for the Christmas period. The defendants also proposed that the order contain liberty for the parties to apply, which could be utilised if appropriate by the plaintiffs to seek an extension of time to provide the security. The summons sought that in default of compliance with the order for security the proceedings be dismissed. The defendants do not seek that order now, but the plaintiffs must be aware that any inexcusable delay in complying with the order for security for costs will add weight to any future application for dismissal.
The material relied upon in support of the summons is contained in the affidavit of Amanda Kiely sworn 18 September 2009, her updating affidavit (now in her married name of Amanda Johnstone) sworn 2 November 2011, the affidavit of Adam Pope sworn 21 September 2009 and the correcting affidavit of Mr Pope sworn 23 September 2009. That last affidavit had not been filed until the hearing of these proceedings on 16 December 2011, when it was filed in court. I was informed that it had been served.
Although the application was undefended in terms of an appearance on 16 December 2011, counsel for the defendants in discharge of his duty to the Court has taken me to various portions of the affidavits of Mr Taylor sworn before 28 September 2011 which could be considered to relate to this application. I have read the whole of those affidavits being the four affidavits earlier enumerated from 31 March 2011 to 9 August 2011 and taken them into account.
In my reasons for orders of 7 November 2011 delivered 17 November 2011 I determined that I would not allow the plaintiffs to rely on any affidavits filed by Mr Taylor after 28 September 2011, when I considered him to be on clear notice that the plaintiffs were required to act through a solicitor. I left open for further argument if required whether the plaintiffs could rely on affidavits filed by Mr Taylor prior to that date. As is evident, the defendants have not taken objection to reliance on such affidavits.
Legal principles in relation to security for costs
The legal principles applicable to an application for security for costs by a defendant where proceedings are taken against that defendant by a company were set out in the decision of the Court of Appeal Livingspring Pty Ltd and Kliger Partners.[7] The Court determined that the test to be applied is the same whether it is the Rules that are relied upon or the Corporations Act. That test is whether there is reason to believe that the plaintiff corporation will be unable to pay the costs of the defendant if the defendant is successful in its defence. The onus remains on the applicant defendant throughout the application, although in respect of certain matters the plaintiff would need itself to adduce evidence of the facts grounding the submission that security should not be ordered. In particular, if a plaintiff asserts that security will stultify the litigation or that the impecuniosity of the plaintiff has been occasioned by the defendant, the plaintiff would be expected to adduce the evidence to ground this submission.
[7][2008] VSCA 93.
The jurisdictional threshold is whether there is reason to believe that the corporation will be unable to pay the costs of the defendant if successful. This must be satisfied before the discretionary power to order security for costs is enlivened.[8] I consider that threshold condition is met here for the following reasons.
[8]Livingspring at [11].
The affidavits of Ms Kiely, later Mrs Johnstone, depose that no currently registered plaintiff has any real property in Victoria or New South Wales. All have very limited paid up share capital and there are no external indications that any are trading. These matters are essentially conceded by the plaintiffs, as Mr Taylor has asserted consistently that the plaintiffs were corporate vehicles only for the purpose of the coal loader enterprise and had no separate purpose. The only relevant development disclosed by the later company searches conducted by Mrs Johnstone and exhibited to her affidavit of 2 November 2011 is that the shareholding of plaintiffs 1 to 3 inclusive has been in each case doubled to allocate shares to a Mr Adrian Taylor. The paid up share capital for each plaintiff remains very small, however. The paid up share capital of the first plaintiff is now $24, $24 for the second plaintiff, $4 for the third plaintiff and $12 for the sixth plaintiff.
Mr Taylor in his affidavits sets out three matters that could be said to relate to this threshold issue of capacity to meet a costs order. The first is his comment at paragraph 7 of his affidavit dated and sworn 5 April 2011, in which he says that he has offered to the solicitors for the defendants “my personal guarantee of costs”. There is no more detail than this bare assertion in either the plaintiffs’ or the defendants’ material, and in the absence of such detail and the guarantee being of sufficient size and likely recoverability to cover a costs order, it does not detract from the force of the defendants’ submissions in relation to the impecuniosity of the plaintiffs.
The second matter is referred to in paragraph 8 of that affidavit. This is the reference quoted earlier to mineral exploration in South America. This is expanded in the affidavit dated 9 August 2011 which exhibits documents that appear on their face to be mineral claims in the name of Mr Taylor, apparently for areas in Colombia. Again, however, the claim is not sufficiently detailed and supported to be persuasive, and appears to be in the name of Mr Taylor, not any plaintiff.
The third matter is set out first at paragraph 5 of Mr Taylor’s affidavit dated 28 July 2011 which exhibits what appears to be a US patent dated 21 January 2003 issued in the name of Mr Taylor as inventor and assigned to the first plaintiff as assignee relating to “an uncovered storage facility for stockpiling bulk materials for establishing stockpiles of predetermined geometry”. Mr Taylor elaborates on this in his affidavit of 9 August 2011 at paragraph 7 where he says that the US patent “a priori demonstrates adequate assets to prosecute this matter since her (being a reference to Ms Urquhart) clients Brambles and Sharvine entered into agreements, including a licence agreement on 7 December 1997 to pay me more than $10 million in licence fees for use of this design”.
Accepting for the purpose of this application that the patent has some value, there is simply no evidence as to what its current value may be, how easily it can be realised, and whether it is likely to be sufficient and available to meet the costs of the defendants. In the absence of evidence of this type, I am satisfied on the basis of the material in Ms Kiely’s (later Mrs Johnstone) affidavits that there is reason to believe that the plaintiff corporations will be unable to pay the costs of the defendants if the defendants are successful.
Discretionary considerations
There are two matters that Mr Taylor refers to in his affidavits which could be said to militate against an order for security for costs, even though there is reason to believe that the plaintiffs will be unable to pay the costs of the defendants if the defendants are successful. In his affidavit dated 31 March 2011 he asserts at paragraph 26 that the defendants acted throughout with the intention of not paying the plaintiffs any of the payments stipulated in the agreements and then wrongfully terminated the agreements to “damage me and insure (sic) that my companies and I were depleted of funds”. This could be seen as an assertion that any impecuniosity of the plaintiffs was occasioned by the defendants’ actions. This was certainly the way the submission was put by the then solicitors for the plaintiffs in a letter dated 9 February 2009 to the solicitors for the defendants in response to their initial approach seeking security for costs. That letter is exhibited to the affidavit of Adam Pope sworn 21 September 2009. By paragraph 6 of the letter the solicitors then asserted that “it is the plaintiffs’ position that they will not be required to provide security because:
(a)the defendants’ conduct was the cause of their financial position; or
(b)an order for security for costs would stifle the proceedings; or
(c)the delay by the defendants.”
The solicitors then elaborated on the submissions in the following paragraphs.
The difficulty with this submission on behalf of the plaintiffs is that it is largely just that – submission, rather than evidence. No doubt had the plaintiffs been legally represented at the time the application for security for costs came to be heard they would have appreciated the distinction and put on some evidence to support the assertion. Mr Taylor’s affidavit of 31 March similarly largely makes assertion rather than setting out evidence. Paragraph 26(c)(ii) refers to the second defendant obtaining legal advice as to how it could proceed with the project and not pay Mr Taylor, and what Mr Taylor describes as a “scorched earth exit strategy” from it’s obligations to him which was then implemented. Documents said to evidence these matters were exhibited by Mr Taylor to later affidavits. Due to the absence of a solicitor on the record, those affidavits may now not be relied upon. Paragraph 26(c)(iv) refers to “a signed witness statement” by a person to the effect that Brambles staff were directed by a named person to avoid documenting the satisfaction of conditions precedent to various payments. The witness statement is not, however, in evidence before me. The simple point is that assertion alone is not sufficient to establish such a serious allegation. It may be, indeed, that the allegation, which is central to the proceedings themselves, would require a full trial, and so be impracticable of proof in this application.
There is the further difficulty that what seems to be alleged is action on the part of the defendants, in the plaintiffs’ case intentional, which prevented the plaintiffs from making a profit. This is a different thing, arguably, to the defendants causing impecuniosity, if that is limited to losing a formerly solid financial position at the hands of the defendants. I express no concluded view on this issue, which would require further argument.
For the reasons set out earlier I do not consider the assertions by Mr Taylor and his solicitors at an earlier stage in the proceedings in relation to the defendants causing the plaintiffs’ impecuniosity to be of sufficient weight to militate against the making of a security for costs order otherwise warranted.
The second matter of relevance asserted by Mr Taylor is his contention that he or one or more of the plaintiffs is owed a substantial sum by the first defendant for his and its costs of compliance with a subpoena issued by the first defendant in the related proceedings. I have set out earlier the background to this assertion. In the absence of a taxed order for these costs, and given that the plaintiffs have not paid the costs order made by Registrar Conidi in the defendants’ favour, I do not consider it appropriate to give weight to this as a factor militating against making an order for security for costs. I will provide the parties with liberty to apply and, in the event that the taxed order is, or is proved likely to be, substantial, the plaintiffs may, through a solicitor on the record, consider it appropriate to seek a variation in the quantum of security ordered or the time to pay it.
The then solicitors for the plaintiffs in their letter of 9 February 2009 referred to two other discretionary matters, being that an order for security for costs would stifle the proceedings and the delay by the defendants. In the face of the plaintiffs’ delay since 2009 and earlier in the prosecution of the proceedings I do not consider the third matter to be of any weight. In relation to whether or not an order for security for costs would stifle the proceedings, the first matter to note is that the plaintiffs themselves do not assert this. Indeed, Mr Taylor asserts that he personally at least has sufficient means to prosecute the proceedings. I found in my previous determination on the leave application by the plaintiffs to be represented by Mr Taylor that I was not satisfied that there were financial considerations which would prevent the plaintiffs being legally represented. While the issue before me on this application is slightly different, being whether an order for security for costs would prevent the plaintiffs, once legally represented (at cost to them), being able to prosecute the proceedings, there is no evidence before me on which I could reach that conclusion and, indeed, as I have indicated, the plaintiffs themselves do not put it.
Quantum
The quantum sought is in the sum of $124,530. This is substantially less than the initial request put by the solicitors for the defendants in the sum of $361,400, to which the then solicitors for the plaintiffs responded by their letter of 9 February 2009. How this sum is arrived at is set out in the affidavit of Adam Pope of 21 September 2009 at paragraphs 34 and following. He sets out that he has reached these conclusions having regard to the size and nature of the plaintiffs’ claims. It may have been that had the plaintiffs been represented by an experienced solicitor who was in a position to comment on the basis of his or her experience on the items claimed, or retain a cost consultant to do so, that some aspects of Mr Pope’s estimate may have been challengeable. There is, however, no such evidence before me filed on behalf of the plaintiffs. Further, some support to Mr Pope’s estimates is provided by the evidence of Mrs Johnstone contained in her affidavit of 2 November 2011 that since the date of filing the application for security the solicitors for the defendants have either billed or will shortly bill the defendants for professional costs and disbursements in the total sum of $219,464.02. These are of course solicitor/client costs and not party/party costs as required for an order for security for costs. But these costs were incurred for interlocutory steps of less moment than the interlocutory steps of discovery and mediation which are the subject of the application for security for costs. They were incurred in respect of directions hearings, preparation and filing and service of the application for dismissal of the proceedings, attendance on 6 April 2011 and 28 September 2011, and perusal of and responding to various affidavits by Mr Taylor. I do not seek by this list to exhaustively enumerate the matters in respect of which these costs have been incurred, as that may be the subject of taxation in the future. What this illustrates, however, in my view is that the party/party costs of the considerably lesser sum of $124,530 sought by the defendants in respect of the more substantial steps of discovery and mediation are not, on their face, excessive.
I consider that, on the evidence before me, this quantum is appropriate and will order security in this amount.
I will reserve the question of the defendants’ costs of this application for security for costs, although they have been successful. This is because the ultimate appropriateness of this application will be determined by the outcome of the proceedings as a whole. As indicated earlier in relation to the application for dismissal of the proceedings, I will make one exception and that is in respect of 6 April 2011. This was the first return date of the application for dismissal of the proceedings but the application for security for costs had earlier been adjourned to be before the Court on that day. Although the defendants are required to bear their own costs of the application for dismissal generally, in my view the first return date should be an exception and should also be an exception to the general reservation of the defendants’ costs in respect of the application for security for costs. That is because as at 6 April 2011 there was no plaintiff currently registered but, in fairness, an opportunity was given to the plaintiffs to become re‑registered, which they subsequently utilised. For these reasons the plaintiffs should be required to pay the defendants’ costs of 6 April 2011.
Costs of other attendances and applications
I reserved by my orders of 24 November 2011 and 9 December 2011, both of which dealt with unsuccessful applications by the plaintiffs for adjournment, the question of the defendants’ costs of and incidental to those applications. I reserved the costs solely because I made orders in chambers, and to give the parties an opportunity to address me in respect of costs. The defendants now seek their costs of those two applications. The applications were unsuccessful and there is no reason before me why the plaintiffs should not pay costs. I will so order.
Given the complexity of the procedural history and for the avoidance of doubt I set out below by date of hearing and/or order the costs order intended to be made:
6 April 2011
Plaintiffs pay the defendants’ costs of that day
28 September 2011
The defendants bear their own costs of that day and of the dismissal application generally (with the exception of 6 April 2011)
7 November 2011
This was the hearing of the plaintiffs’ summons to Mr Taylor to represent them which was unsuccessful. By orders made on 7 November I have ordered the first, second, third and sixth plaintiffs to pay the costs of the defendants’ of this summons.
24 November 2011
Refusal of Mr Taylor’s application for adjournment. The plaintiffs are required to pay the defendants’ costs of and incidental to this application.
9 December 2011
Confirmation of my refusal of Mr Taylor’s application for adjournment. The plaintiffs are required to pay the defendants’ costs of the further affidavit sworn by Mr Taylor on 24 November 2011 and filed 29 November 2011.
16 December 2011
Refusal of the application for dismissal and grant of the defendants’ application for security for costs. The costs of this day are reserved, being part of the defendants’ costs of their application for security for costs. For the purpose of any future taxation, I note that the summons for dismissal consumed very little of the time available on this day as the defendants relied on their submissions put on 28 September 2011. The time was taken by the plaintiffs’ further and unsuccessful application for adjournment and the defendants’ successful application for security for costs and for dismissal of the plaintiffs’ summons for reinstatement.
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