Bird in the Hand 2 Pty Ltd v S&K Johnson Construction Pty Ltd

The parties involved in this matter were Bird in the Hand 2 Pty Ltd, the plaintiff, and S&K Johnson Construction Pty Ltd, the defendant. The dispute arose from an off-the-plan development, where the plaintiff sought statutory leave to rescind the contract due to alleged breaches by the defendant. Bird in the Hand 2 Pty Ltd was a special purpose vehicle created for the sole purpose of this development. Despite an overall loss projected for the development, the plaintiff had access to a loan facility that provided funds to cover legal costs. The primary issue before the court was whether Bird in the Hand 2 Pty Ltd was able to establish its inability to pay the costs of the proceedings and whether the proceedings were defensive in nature.

The court examined whether Bird in the Hand 2 Pty Ltd could demonstrate that it was unable to pay the costs of the proceedings. The plaintiff argued that its inability to pay was evidenced by the projected overall loss for the development. However, the court noted that the plaintiff had access to a loan facility that could be used to cover the legal costs. This facility demonstrated that the plaintiff had the means to fund its legal expenses, thus negating the argument that it was unable to pay. Furthermore, the court considered the nature of the proceedings and found that they were defensive in character, as the plaintiff sought to rescind the contract due to alleged breaches by the defendant. Consequently, the plaintiff was not entitled to statutory leave to rescind without providing security for the defendant's costs.

The court ultimately refused the plaintiff's application for security for costs. The reasoning was based on the plaintiff's access to a loan facility that could be used to cover the legal costs and the defensive nature of the proceedings. The court found that the plaintiff had not established its inability to pay the costs and that the proceedings were defensive in nature, which were factors that weighed against granting security for costs. As a result, Bird in the Hand 2 Pty Ltd was required to provide security for the costs of the defendant's legal proceedings.