Clark v Lester [No 3] - [2019] SASC 195

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
CLARK & ORS v LESTER & ORS [NO 3]
[2019] SASC 195
Judgment of The Honourable Justice Hinton
15 November 2019
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - SECURITY FOR COSTS
Application for security for costs.
The first plaintiff and first defendant entered into an agreement to commence an olive growing business. The agreement was terminated following a dispute between the parties.
The plaintiffs commenced proceedings against the defendants on 21 May 2015 claiming that the agreement terminated for an improper purpose and that the defendants’ conduct has resulted in loss and damages to the plaintiff.
On 18 June 2015, the first and fourth defendants sought an order for security for costs against the plaintiffs citing the impecuniosity of the plaintiffs and alleging that the plaintiffs’ case was weak and brought for an ulterior purpose. This application was dismissed by a Master of this Court on 23 December 2016.
The Master refused the application for three primary reasons; first, the nature of the Underlying Agreement relied upon the finance resources of the first defendant acknowledging the plaintiff's comparative lack of resources. Second, the allegations were of a type that should be investigated. Third, the conduct alleged by the plaintiffs has contributed to their impecuniosity.
On 26 February 2018, the first and fourth defendants brought a further application for security for costs. It was contended that new evidence had come to light which further weakened the strength of the plaintiffs’ case.
Held, dismissing the first and fourth defendants’ application; there is no dispute that the plaintiffs are impecunious however allegations that the plaintiffs’ impecuniosity has been contributed to by the conduct of the defendants is a relevant consideration. The allegations in the case should be investigated at trial. It cannot be concluded on this application that the claim is not bona fide or has been instituted for an ulterior motive. An order for security for costs would stultify the proceedings and is not necessary in the interests of justice.
Corporations Act 2001 (Cth) s 1335; Supreme Court Civil Rules 2006 (SA) s 194, referred to.
Cowell v Taylor (1885) 31 Ch D 34, applied.
Harpur v Ariadne Australia Ltd [1984] 2 Qd R 523; Equity Access Ltd v Westpac Banking Corp (1989) ATPR 40-972; Interwest Ltd v Tricontinental Corporation Ltd and Anor (1991) 5 ACSR 621; Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR 564; Idoport Pty Ltd v National Australia Bank Ltd [2001] NSWSC 744; Jeffery and Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75; Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors (1992) 57 SASR 180, discussed.

CLARK & ORS v LESTER & ORS [NO 3]
[2019] SASC 195
Application
HINTON J:
Introduction

The first and fourth defendants (Mr Lester and Parkfast (SA) Pty Ltd (Parkfast) respectively) (the Applicants) seek an order for security for costs against the plaintiffs, jointly and severally, up to and including the first day of trial; in Mr Lester’s case, in the sum of $134,990.11, and, in Parkfast’s, $89.993.40.[1]
[1] FDN 101.
I would refuse the applications. My reasons follow.
Background
Mr Clark, the first plaintiff, and Mr Lester agreed to go into the olive oil production business. Mr Clark was to provide the knowledge necessary to the cultivation of olive groves and the commercial production of olive oil, whilst Mr Lester was to finance the operation. In this regard paragraph 23 of the Second Statement of Claim provided:[2]
23.In about 12 November 2012, Mr Clark and Mr Lester orally agreed to go into the olive grove and oil production business together on the following terms:
23.1. they would acquire olive groves that were out of condition and non productive;
23.2. Mr Lester would provide the finance to acquire the olive groves and plant and equipment and meet running costs;
23.3. Mr Clark would provide the ‘know-how’ and management of the olive groves and production of olive oil;
23.4. they would structure their business through a partnership between corporate entities and trusts controlled by each of them respectively and they would make their agreed contributions through the partnership. (“the Underlying Agreement”)
[2] FDN 67.
For the purpose of giving effect to the underlying agreement Mr Clark caused Bevo Agricultural Investments Pty Ltd (BAI), the second plaintiff, to be incorporated. Mr Clark is the sole director and sole shareholder in BAI. BAI entered into a partnership with Lameroo Station Pty Ltd (LSPL) (the Lameroo Station Partnership), the second defendant. LSPL is a company incorporated by Mr Lester. Mr Lester is the sole director and sole shareholder in LSPL.
BAI was also the trustee of the Bevo Agricultural Trust. Mr Clark was a beneficiary of that trust. Similarly, LSPL was trustee of the Mooreland Trust of which Mr Lester was beneficiary.
Initially the business was to operate in South Australia, but Mr Clark and Mr Lester agreed subsequently to expand the business into Queensland.
In Queensland the partnership was conducted between Bevo Agricultural Investments (Qld) Pty Ltd (BAIQ) and Pinnaroo Station Pty Ltd, the third and fourth plaintiffs, both incorporated by Mr Clark, and Lameroo Station (Qld) Pty Ltd (LS Qld) and MacLachlan-Lester Pastoral Group Pty Ltd (MLPG), the second and third defendants, incorporated by Mr Lester (the Queensland Partnership).
Mr Clark was the sole director and sole shareholder in BAIQ and Pinnaroo Station Pty Ltd whilst Mr Lester was the sole director of and sole shareholder in LS Qld and MLPG. BAIQ was also the trustee of the Bevo Agricultural No 2 Trust and Pinnaroo Station Pty Ltd was the trustee of the Pinnaroo Station Trust. Mr Clark was a beneficiary of each of those trusts. LS Qld was the trustee of the Mooreland No 2 Trust of which Mr Lester was a beneficiary. MLPG was a trustee of the McLachlan-Lester Pastoral Group Trust.
The Lameroo Station Partnership acquired three properties in this State, two with out of condition olive groves and the third with olive pressing and oil storage facilities. In Queensland four properties were acquired, each having an out of condition olive grove.
The Queensland Partnership granted a licence to the Lameroo Station Partnership to operate the olive groves located in Queensland and produce olive oil.
Difficulties in the partnership relationships arose in 2014 when Mr Lester decided to cease providing funds to meet the operating expenses of the Lameroo Station partnership and to enable the Queensland Partnership to meet its loan obligations. The consequence, as pleaded in the Second Statement of Claim, was that the Lameroo Station Partnership ceased to undertake watering, pruning and fertilising operations in the various groves, and the trees became stressed and incapable of producing a commercial crop for the 2015 season. Further without funds to meet obligations under the arrangements for the purchase of the Queensland properties the contracts for the acquisition of those properties were terminated by the vendors.
On 22 October 2014, Mr Lester on behalf of LSPL executed a notice of termination in relation to the Lameroo Station Partnership. On the same date LS Qld and MLPG did the same in relation to the Queensland Partnership.
On 5 December 2014 actions were commenced in this Court to wind up both the Lameroo Station Partnership and the Queensland Partnership. In January 2015, receivers were appointed to the assets and undertakings of each of the partnerships.
In March 2015 Mr Clark, BAI, BAIQ and Pinnaroo Station Pty Ltd instituted these proceedings against Mr Lester, LS Qld, MLPG, and others. In the Second Statement of Claim Mr Clark, BAI, BAIQ, and Pinnaroo Station Pty Ltd seek, amongst other things, damages from Mr Lester and the corporate partners he controlled for breaching the underlying agreement and orchestrating the diminution in value of Mr Clark’s interests in BAI, the Bevo Agricultural Trust, BAIQ and the Bevo Agricultural No 2 Trust.
In his defence, Mr Lester contends that the Lameroo Station Partnership was to be funded by borrowings and that those borrowings were to be repaid within 18 months of the partnership occupying the first property purchased in South Australia. The second and third properties purchased in this State were purchased after the underlying agreement was varied. Again, the properties were purchased using borrowings which were to be repaid within 18 months of the Partnership occupying the first property purchased. In short, a component of Mr Lester’s case is that representations were made to him regarding the capacity of the first property to yield an income in 18 months’ time that would be sufficient to discharge the borrowings. Parkfast was to extend credit to the partnership in order that it could operate in the meantime.
With respect to the Queensland Partnership, Mr Lester’s defence contends that within 18 months of the Lameroo Station Partnership taking up occupation of the first property purchased in South Australia, the Lameroo Station Partnership would put the Queensland Partnership in funds necessary to meet loan obligations arising from the purchase of the properties and water licences. In that same period of time the Lameroo Station Partnership was to repay Parkfast the money it lent to the Partnership for the purpose of managing the Queensland properties. Again a component of Mr Lester’s case revolves around representations made to him by Mr Clark and his father regarding the yield that could be expected from the olive groves purchased.
There is also a counterclaim and defence to counterclaim, but it is unnecessary for present purposes to deal with those pleadings.
The applicable legal principles
The applications are brought pursuant to rule 194(1)(e) of the Supreme Court Civil Rules 2006 (SA) (SCCR) as against Mr Clark, and pursuant to s 1335 of the Corporations Act 2001 (Cth) as against the corporate plaintiffs.
Section 1335 provides as follows:
1335 Costs
(1)Where a corporation is 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.
Rule 194(1)(e) SCCR provides:
194 – Security for costs
(1) The Court may order a plaintiff to provide security for costs if –
…
(e)the order is necessary in the interests of justice.
The power to order security for costs as contained in s 1335 is conditioned on the Court first being satisfied that 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 the defendant is successful in his, her or its defence. There is no condition precedent to the exercise of the power contained in rule 194(1)(e) SCCR. However, as a matter of practical reality, it must be established that there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if the defendant is successful because, absent such finding, there is no reason to make an order for security for costs.
In the case of a natural person, generally security for costs is not ordered just because he or she is impecunious; “The general rule is that poverty is no bar to a litigant, that, from time immemorial, has been the rule at common law, and also, I believe, in equity.”[3] Often an order is the product of impecuniosity coupled with the presence of an additional factor such as the plaintiff being resident outside Australia, the plaintiff holding no assets within Australia, the plaintiff pursuing the action for others who stand to benefit if the plaintiff succeeds or with the assistance of others who stand to benefit if the plaintiff succeeds, the proceedings having been brought for an ulterior purpose or if the plaintiff’s case enjoys poor prospects of success.
[3] Cowell v Taylor (1885) 31 Ch D 34 at 38 (Bowen LJ).
As to the prospects of the plaintiff’s case succeeding, clearly on an interlocutory application such as this it is not for the Court to try the action, hence generally if a claim is bona fide and arguable, the Court will go no further in considering the merits of the action.[4]
[4] Equity Access Ltd Westpac Banking Corp (1989) ATPR 40-972 at 50,636 per Hill J; Interwest Ltd v Tricontinental Corporation Ltd and Anor (1991) 5 ACSR 621 at 624 per Ormiston J.
In the case of the impecunious corporate plaintiff, an important factor is that whilst the shareholders will benefit from any success, they are not liable for an adverse costs order that the corporate body cannot satisfy. In Harpur v Ariadine Australia Ltd the Queensland Full Court explained:[5]
The mischief at which the provision is aimed is obvious. An individual who conducts his business affairs by medium of a corporation without assets would otherwise be in a position to expose his opponent to a massive bill of costs without hazarding his own assets. The purpose of an order for security is to require him, if not to come out from behind the skirts of the company, at least to bring his own assets into play.
[5] [1984] 2 Qd R 523 at 532.
Thus in the case of a corporation impecuniosity not only enlivens the discretion but may provide reason enough to exercise it in favour of making an order.
Where the Court is confronted by plaintiffs that are both natural persons and bodies corporate and security is sought, the presence of the individual alongside the corporate plaintiff is a factor to be taken into account in weighing up the discretionary considerations, but is not an absolute bar to ordering security.[6]
[6] Fiduciary Ltd v Morningstar Research Pty Ltd (2004) 208 ALR.
In Jeffery and Katauskas Pty Ltd v SST Consulting Pty Ltd, French CJ, Gummow, Hayne and Crennan JJ summarised the position:[7]
The difficulties presented for a defendant by a plaintiff’s impecuniosity have led to the identification of an inherent jurisdiction, and the development of rules of court and statutory powers, under which a plaintiff may be ordered to provide security for costs. In general, the bare fact of impecuniosity is not of itself reason to order a plaintiff who is a natural person to provide security for costs. But a corporate plaintiff may be ordered to provide security where it is shown that it will not be able to meet the defendant’s costs. It is neither necessary nor appropriate to consider the extent to which those two general propositions should be elaborated or qualified. Neither is intended as a comprehensive or definitive statement of the applicable principles. (Citations omitted)
[7] (2009) 239 CLR 75 at [38].
With characteristic succinctness in Remm Construction (SA) Pty Ltd v Allco Newsteel Pty Ltd & Ors King CJ said:[8]
In considering security for costs the court ought to try to do justice as between the parties. The court should protect a defendant against the loss which may result from inability to recover costs by reason of the impecuniosity of the plaintiff but should not go further than is reasonable for that purpose.
[8] (1992) 57 SASR 180 at 189.
Lastly, the authorities show that the courts jealously protect access to justice. Whatever a plaintiff’s financial status, he, she or it has the right to approach the courts to seek the vindication of a right, the protection of an interest or the enjoyment of an entitlement. Consequently regard will always be paid to whether an order will unduly stultify the ability of the plaintiff to pursue the action.
The evidence relied upon
On the hearing of this application I have had regard to:
·the third, fourth and fifth affidavits of Damian Richard Rohan Lester;[9]
·the first and second affidavits of Lili Julie Manos;[10]
·the second and thirteenth affidavits of Matthew James Dorman;[11]
·the affidavit of Maris Andris Rudaks in action 1594 of 2014, and
·the second, third, fifth, sixth and seventh affidavits of Timothy Simon Douglas Clark;[12]
[9] FDNs 103, 114 and 115.
[10] FDNs 102 and 116.
[11] FDNs 16 and 106.
[12] FDNs 38, 62, 112, 113, 117.
This is the second time that the defendants have applied for an order that the plaintiffs, jointly and severally, provide security for costs. The affidavit evidence tendered on this application, in part, sought to establish that a material change in circumstances had occurred since the first application was heard, in addition to dealing with the reason why that application was refused. The first application was heard by a Master of this Court. The Master refused the application essentially for three reasons; first, the underlying agreement was entered into in a context where it was understood the “Clark interests” were not financially strong and yet Mr Lester was still prepared to go into business with Mr Clark. Second, the allegations were of a kind that should be investigated at trial. Third, the financial position in which the plaintiffs found themselves, on the plaintiffs’ case was due to the actions of the defendants.
In paragraphs 30-40 of his third affidavit, sworn 26 February 2018, Mr Lester contends that the plaintiffs remain impecunious. I do not understand this contention to be disputed. It may be accepted that if the plaintiffs lose this litigation they will be unable to satisfy an adverse costs order.
In his third affidavit Mr Lester deposes to not knowing at the time he first became involved with Mr Clark that Mr Clark was impecunious.[13] His impression from things Mr Clark said and his observations did not suggest that Mr Clark was without means. In fact Mr Lester formed the contrary view. He contends that he agreed to fund the partnerships because, on the strength of the representations made to him by Mr Clark, he saw it as a very good opportunity, not because Mr Clark did not have the means to do so. He adds that he did not think it would end up costing him the $70,000 per month that it did, did not anticipate litigation, such as has occurred, and did not contemplate that if the venture failed and litigation followed that Mr Clark would be unable to pay legal costs.
[13] FDN 103.
In response to the Master’s observation, on the allegations, that the financial predicament in which the plaintiffs find themselves has been contributed to by the defendants, Mr Lester suggests that seeing as Mr Clark had nothing in the first place, his involvement in the venture has left him no worse off.
Mr Lester contends that no objective evidence was put before the Master capable of satisfying him that an order that security for costs be provided would stultify the action. Mr Lester adds that Mr Clark’s ability to fund his solicitors and counsel to date suggests to the contrary.
In paragraphs 20-25 of his third affidavit, Mr Lester states that he believes the action is, in effect, an abuse of process, having been brought for the purpose of causing him expense, stress and harm and to pressure him into paying Mr Clark money to which he is not entitled. In this regard Mr Lester disputes the contention that he agreed to finance and meet the running costs of the Lameroo Station Partnership as capital contributions and disputes the contention that Parkfast is not a genuine creditor of the partnership. Mr Lester contends that it was agreed that the Lameroo Station Partnership was always to be funded by loans and not capital contributions, and disputes the contention that he was to finance the venture for the first 18 months whereupon the partnerships would be self-funding. Mr Lester produces a number of documents from the Partnership’s solicitor’s file that, he says, are consistent with his contention that finance for the partnership was to be raised by loans. Mr Lester adds that Mr Clark delayed the appointment of receivers over the partnerships, obstructed and delayed the sale of the olive groves and olive oil stock and attempted to have the receivers removed all for the purpose of injuring Mr Lester and Parkfast financially.

Next Mr Lester questions the plaintiffs’ capacity to fund the action generally and the trial in particular, leaving him exposed to the risk of costs of adjournments due to the plaintiffs being unrepresented, as already has occurred, to costs of applications necessitated by the absence of solicitors acting for the plaintiffs, as has occurred, and to the risk of costs thrown away if future hearing dates are wasted.
To the date of this application Mr Lester had been billed $220,884.11 by his solicitors including disbursements. It is estimated that an amount of $120,000 is yet to be billed.
In his fourth affidavit, sworn 11 June 2018, Mr Lester deals with the content of reports prepared by Mr Marcelo Berlanda, a consultant to the olive industry, in December 2013 and January 2014 (the Berlanda Reports).[14] At this point reference should be made to Mr Dorman’s thirteenth affidavit.[15] In that affidavit Mr Dorman tells how he contacted Mr Berlanda intending to retain him to give expert evidence in the trial of this matter. Mr Berlanda informed Mr Dorman that he knew Mr Clark and had prepared reports for Mr Clark in the past after inspecting the South Australian and Queensland olive groves operated by the Lameroo Station Partnership. Mr Berlanda further advised that his fees for the reports he prepared remained outstanding. Mr Berlanda could not recall whether he knew Mr Lester or if he had ever spoken to him, but did not believe he had.
[14] FDN 114.
[15] FDN 106.
Subsequently Mr Dorman spoke to Mr Lester who told him that he did not know Mr Berlanda and had never received or seen reports from Mr Berlanda. Mr Dorman then sought discovery of the reports from Mr Clark’s solicitors without luck causing Mr Dorman to seek the production of the reports from Mr Berlanda. Mr Berlanda responded, refusing to provide the reports. Eventually the defendants obtained the Berlanda Reports, save that 10 pages were missing from the January 2014 report and the defendants’ solicitors have been unable to obtain those pages.
The December 2013 report prepared by Mr Berlanda was an evaluation of the condition of the South Australian olive groves held by the Lameroo Station Partnership and included recommendations for the future operation of those groves. The January 2014 report performed the same function but in relation to the olive groves in Queensland.
Mr Lester refers in his fourth affidavit to reports prepared by Mr Clark in January 2014 and February 2014 about the South Australian and Queensland olive groves respectively. There is some contention as to whether the reports were prepared by Mr Clark or his father as they bear the letterhead of Mr Clark’s father’s business. The Clark reports, it is said, draw heavily on Mr Berlanda’s reports. A side by side comparison of the text is said to bear this out. Mr Lester deposes:[16]
… The only reason I entered into this venture was because the Clarks led me to believe that they had the necessary expertise to make these olive groves a success. The fact that they employed Berlanda to prepare these reports indicates to me that they had no such expertise.
[16] FDN 114 at [8].
Mr Lester contends that a comparison of the January 2014 Clark report with the December 2013 Berlanda report suggests that Mr Clark deliberately concealed adverse comments made by Mr Berlanda and was unduly optimistic in other respects. Mr Lester contends he was deliberately misled and deceived.
The same comparative exercise has not been possible in relation to the January 2014 Berlanda report and the February 2014 Clark report because of the missing pages. Notwithstanding, Mr Lester contends that the difference between Mr Clark’s yield forecasts and the actual quantity of olives harvested and oil produced from the Queensland properties is so different that Mr Clark obviously misled Mr Lester in relation to the potential of the Queensland olive groves.
Mr Lester also relies upon the affidavit of Ms Lili Manos, sworn 26 February 2018.[17] Ms Manos is a friend of Mr Lester. She was his partner when he first went into the olive cultivation and oil production business with Mr Clark. She was present when the two men first spoke of the venture. In fact she accompanied them on an inspection of the South Australian groves in mid-2012 before they first went into business with each other. She gained the impression from Mr Clark’s conduct that he was a man of means. He spoke of the groves being self-funding within 18 months.
[17] FDN 102.
On a second visit to the South Australian groves Ms Manos says Mr Clark referred to the trees, which appeared in a poor state, as capable of producing “rivers of gold”. He did not say that the trees would take longer than 18 months to be profitable.
Ms Manos and Mr Clark became friends. She was constantly in Mr Clark’s and Mr Lester’s presence. She recalls one conversation where Mr Clark agreed to Mr Lester utilising the losses sustained by the venture for his own tax purposes.
In time Ms Manos would meet Mr Clark regularly for lunch at a restaurant in the city. Once these proceedings commenced that ceased. However in early 2016 Mr Clark contacted her and invited her to lunch. She went, hoping that they would not discuss the proceedings. By this time Mr Lester was living in Queensland and she and he were no longer partners. At lunch, from the very start, Mr Clark quizzed her about Mr Lester and wanted to know if she had accepted Mr Clark’s luncheon invitation to “bleed information” from him about the proceedings. Mr Clark’s father soon joined them, which surprised Ms Manos. The conversation turned to this case and Mr Clark insinuated that Mr Lester was a liar and a cheat. Ms Manos remarked that she could not understand why Mr Clark was continuing the matter considering that it was Mr Lester who suffered financially from the failure of the venture. Mr Clark is said to have remarked that Mr Lester was a criminal who was going to pay and that Mr Lester was going to die.
Ms Manos had no further contact with Mr Clark until August 2017 when he telephoned her unexpectedly. In the conversation that followed he accused her of deliberately trying to harm him in league with Mr Lester, referred to attempts on his life that Mr Lester had made and said that he would destroy Mr Lester and that Mr Lester would end up in gaol. In the same conversation Mr Clark said that he was well-off and had retained the services of a leading Queen’s Counsel whom he was paying $15,000.00 a day. He said, “Lilli you know me, I have always been able to make money”. Ms Manos says she responded reminding Mr Clark that he had assured Mr Lester that there would be “rivers of gold within 18 months” and that they had agreed that Mr Lester would only need to make financial contributions for 18 months. Ms Manos says Mr Clark agreed, but said “farming is unpredictable”. She had never heard him qualify his “rivers of gold” assessment before.
Mr Dorman’s second affidavit was prepared for the first application for security for costs. The affidavit deals with the financial circumstances of the plaintiffs. No need arises to refer further to Mr Dorman’s second affidavit. As I have said, it is not disputed that the plaintiffs are impecunious.
Mr Clark’s second affidavit, sworn 28 July 2015, contains largely background material consistent with the content of the Second Statement of Claim. In it he also states that he and the plaintiff companies are impecunious.
In his fifth affidavit, sworn 24 April 2018, Mr Clark contends that his financial position has always been transparent and known to Mr Lester. He says he always shared details of his financial circumstances with Mr Lester whenever Mr Lester asked. He contends at paragraph four:
… Mr Lester always knew that with my father, we were contributing the expertise and labour, not the purchase and the initial operating costs, which were expected to become self-funding after rejuvenation of the farms and crops. It was never intended or agreed that I provide significant monies towards the ventures, as I could not, which was known by Mr Lester, other than a personal guarantee I provided to Bank SA.
In his affidavit Mr Clark explains the basis upon which he claims to have expertise in farming and selling olives and why he may have given the impression of having means. Despite this he refutes any suggestion that Mr Lester did not know that his means were limited and vigorously asserts that at all times his contribution was labour and expertise. He made clear he could not fund the purchase of any farm.
Mr Clark says he has received no personal income in the last five years and has been unable to work due to injuries he sustained in a motor vehicle accident. He has used savings and funds borrowed from his father to fund the proceedings so far. He expects that his savings will fund the continuation of the matter, but he does not have the means both to pay security and fund his case.
Mr Clark denies the allegation that these proceedings have been brought for an ulterior purpose. He implies that he considered the prospects were good for the venture initially, and that a return on the first two farms purchased was to be expected in 18 months, but that the partnership grew too quickly. He denies the allegations made by Ms Manos. He contends that he and the plaintiff companies have lost significant distributions and profits due to Mr Lester’s and his related companies’ conduct. He says at paragraphs 25 and 26:
There is no person besides me sitting behind this litigation or the corporate plaintiffs. I have no agreement with anyone to fund this litigation and no one other than me and the corporate plaintiffs stands to receive anything (other than payment of legal costs) if the plaintiffs are successful in this action.
This application is very late. I have expended significant sums on legal costs and all I want to do is get to trial and expend my funds on this action being determined. Instead I seem to be being met with application after application brought by the first and fourth defendants.
And at paragraph 28:
… I was upset about the partnership and I still am. I say that apart from guarantees and any funds invested in the partnership I had been working extremely long hours, up to 7 days a week for the entire period of the partnership. It is my view that Mr Lester had deliberately derailed the project and caused me and the plaintiff corporations great loss by his actions.
In his seventh affidavit, sworn 26 July 2018, Mr Clark responds to Mr Lester’s allegations regarding the Berlanda Reports. He concedes that he did produce reports or forecasts in respect of the olive groves and olive farms. He says that he used conservative estimates. He says that he agreed with Mr Lester to manage the olive groves using a three-tier system. Tier one involved Mr Clark and his father using their management and horticultural skills. Tier two involved obtaining the assistance of agronomists as required. Tier three involved the use of external experts independent of the partnerships and the entities involved. Mr Berlanda was one such expert. He was recommended to Mr Clark by a tier two agronomist that the partnership had used.
Mr Clark concedes that Mr Berlanda attended the South Australian olive groves and some months later the Queensland olive groves. Mr Clark says that contrary to his affidavits, Mr Lester knew about Mr Berlanda’s attendance. In fact Mr Clark says he flew to Queensland with Mr Lester and his father for the purposes of the Berlanda inspection of the Queensland groves. Mr Clark also contends that he discussed with Mr Lester various things that Mr Berlanda had said to his father about the South Australian groves shortly after the inspection. He also discussed the Queensland inspection with Mr Lester.
By way of explanation for why Mr Clark’s reports bear some resemblance to those produced by Mr Berlanda in terms of content, Mr Clark says his father taped the South Australian inspection with Mr Berlanda’s consent so that they had a record of the advice given which was used by Mr Clark in the preparation of his reports. Similarly the Queensland inspections were recorded.
Mr Clark says that he never saw a written report prepared by Mr Berlanda. He was aware that reports had been prepared but was told they would not be provided until Mr Berlanda’s bill was paid. Mr Clark says that he was told by Mr Lester’s bookkeeper that Mr Lester had decided not to pay Mr Berlanda.
Mr Clark concedes that he may have received summaries from Mr Berlanda forwarded electronically, but cannot recall seeing such summaries. In any event he maintains that he has never seen until these proceedings a report prepared by Mr Berlanda.
As for the projections contained in the reports that Mr Clark produced, he maintains they were realistic. He says that he and his father worked very hard on all of the properties to make sure that the groves could be rejuvenated in order to produce the yields they thought should be possible. He says there are a number of key reasons why the initial projections were not met; when he made the initial projections, he anticipated there would be two olive groves in South Australia. Over the period of 12-14 months the partnership purchased further olive groves in South Australia’s mallee and then in Queensland which took the total number of groves from two to nine. That meant that there was a substantially increased requirement for labour and additional cost to service the various groves in two states.
Spreading themselves between the two States affected Mr Clark’s and his father’s ability to rejuvenate each of the groves within the period originally planned. Notwithstanding those difficulties there were additional factors affecting yields. The most important was harvesting. In his affidavit Mr Clark proceeds to tell how arrangements for the use of a particular harvester were made and subsequently frustrated by action on the part of Mr Lester. The result was that not all fruit was harvested. Further, Mr Lester had directed that the operation use only half the water required in order that there could be savings on the cost of diesel used in pumping the water to the groves. Using less water resulted in a smaller crop. Further again, Mr Lester directed that there be less fertiliser used further affecting yields. The speedy expansion of the partnership placed financial pressure on Mr Lester resulting in the cut-backs. On this basis Mr Clark contends that the allegations made by Mr Lester in his affidavits are false.
In his seventh affidavit Mr Clark confirms that he still owns no assets. Further, the plaintiff companies no longer have assets other than this claim. This is due to the conduct of Mr Lester and his companies in winding up the partnerships and selling the assets. At present Mr Clark does not earn an income. He has not filed a tax return for the last five years as he has not earned sufficient money to exceed the tax-free threshold. In the car accident to which reference has been made he suffered a head injury which prevents him from gaining employment. Generally he has always been self-employed and has no employment record. He says he is now funded in this matter by borrowing from his father who also helps him with the cost of living. His savings have been exhausted. He has no capacity to borrow from a bank or any other financial institution as he has no assets that may be used as security and no income to prove his capacity to repay a loan. He concludes his affidavit saying that he has no agreement with his parents or anyone else to share in the proceeds of this litigation should he succeed.
In his fifth affidavit Mr Lester responds to Mr Clark’s fifth affidavit. Mr Lester says that he was led by Mr Clark to believe that Mr Clark was a part owner in Barossa’s Rosedale Park Olive Oil (Rosedale Park) which was Mr Clark’s father’s business. Mr Clark would talk of rolling Lameroo Station into Rosedale Park as part of his contribution to the partnership and because the two businesses were a good fit. Consistent with Mr Clark’s statements the partnership solicitor has a file note recording the intention that Rosedale Park buy the entirety of the June 2013 harvest. Rosedale Park did in fact take some of the 2013 harvest, but Mr Clark’s father refused to pay for the olives. Mr Lester says that Mr Clark refused to sell the oil produced from the balance of the harvest despite being requested on numerous occasions by Mr Lester and the partnership accountant to do so.
Next Mr Lester makes clear his disagreement with Mr Clark’s claim that properties were purchased without Mr Clark being consulted. It is unnecessary to spell out the detail of Mr Lester’s contentions.
In the balance of his fifth affidavit Mr Lester observes that neither Mr Clark nor his father have explained the basis for their yield projections, suggests that contrary to Mr Clark’s opinion the South Australian olive groves were doomed from the start as not being viable, denies interfering with the 2014 harvest which he says was a failure and denies any obligation to fund the partnership past the 18 month mark. He repeats his allegation that Mr Clark frustrated the speedy sale of the South Australian properties by the receivers.
Submissions
Mr Lester contends that the claims made by Mr Clark and the plaintiff companies are not bona fide and have been brought for an ulterior purpose. He does not contend that I need to make findings to this effect. He submits that it is enough that I satisfy myself that the claims are weak to justify granting the application and ordering that security be provided.
Mr Lester submits that Mr Clark’s claims to have provided conservative forecasts of yields, that Mr Lester’s obligation to fund the partnerships was for a period greater than 18 months and that Mr Lester and LSPL were to contribute capital and that the partnership was not to be funded from borrowings, are all false or at least weak. The failed 2014 harvest and the Berlanda Reports demonstrate the falsity of the yield forecasts. To this is added the observation that nowhere in the pleadings or affidavits filed does Mr Clark attempt to explain the basis upon which he arrived at his forecasts. The partnerships solicitor’s notes, the signed 2013 financial statements recording Parkfast as a creditor of the Lameroo Station Partnership, admissions by Mr Clark to the effect that the Lameroo Station Partnership leased equipment from Parkfast and his act of guaranteeing the debts of the Lameroo Station Partnership all suggest that the partnership was to be funded by loans and not capital provided by Mr Lester. Next Mr Lester relies upon the affidavit evidence of Ms Manos as supporting the contention that the claims have been made for an ulterior purpose.
Mr Lester submits that the Court should reject the implicit contention made by Mr Clark that the proceedings would be stultified if an order for security for costs were made. The vague assertion made is inadequate to discharge the onus of proving that an order would stultify the action. Mr Clark should have adduced evidence of all of his assets and his attempts to obtain funding. Notwithstanding his claims to having exhausted his savings and to have borrowed from his father, he does not indicate that he cannot continue to borrow and has been able to retain solicitors and counsel in this action apart from a brief period. Added to this is the statement made to Ms Manos which suggests he is resourceful if nothing else.
Mr Lester acknowledges that the possibility that his counterclaim may proceed and Mr Clark’s claim be stayed if an order that security for costs be granted is a relevant factor to consider. He contends that his counterclaim is largely defensive and would seek damages no greater than that necessary to set off any amount awarded in favour of Mr Clark and the plaintiff companies were they to succeed on their claims.
As to why a second application for security for costs should be entertained by the Court, Mr Lester points to the disclosure of the Berlanda Reports and access to the partnerships’ solicitor’s file as amounting to a material change in the circumstances justifying the application.

In reply, Mr Clark submits that the only difference between this application and the first, is that the applicants are trying to create credibility issues which cannot be determined on the application and are a matter for trial. The Master had before him an expert agronomist’s report, a file note from the solicitor and an email from Mr Clark all deployed for the same purposes as the Berlanda Reports and the solicitor’s notes on the hearing of this application. Whether Mr Lester and/or his companies were to fund the partnerships for the first 18 months or until the proceeds of the second harvest were available, whether the agreement was that the funding, despite being loans, was to be capital contributions and whether the ultimate loss of production was caused by Mr Lester’s conduct in withdrawing funds are matters for trial. They are not matters capable of being resolved on the present application.
Mr Clark embraced the Master’s reference to the allegation that many of the losses sustained were attributable to Mr Lester’s conduct in withdrawing funding and terminating the partnerships at a critical time as an important consideration militating against granting the application.
Mr Clark also contends that the making of the current application, and the challenge that it mounts in part to the Master’s conclusions, is inappropriate. If the Master’s conclusions were to be challenged, Mr Lester should have appealed. He adds that the application is late, being at a stage after the applicants have engaged in significant interlocutory litigation.
Lastly, Mr Clark submits that it is clear that an order for security would stultify the action.
Consideration
It is not disputed that Mr Clark and the plaintiff companies are impecunious and have remained so since the first application for security for costs.
The Master refused the first application for three primary reasons; first, the nature of the Underlying Agreement relied upon the financial resources of Mr Lester acknowledging the lack of such resources held by Mr Clark. Second, the allegations were of a type that should be investigated. Third, the conduct alleged by the plaintiffs has contributed to their impecuniosity.
As to the first of the Master’s reasons, whatever one makes of the evidence of Mr Clark giving the impression that he was a man of means and whatever one makes of Mr Lester’s understanding of Mr Clark’s financial position at the time they agreed to establish the Lameroo Station partnership, it could not have been long before Mr Lester realised the financial burden of funding the partnerships was his alone to bear. The point is that if Mr Lester did not realise at the outset that Mr Clark was without means, it must have quickly become apparent.
At this point I turn to Mr Lester’s contention that the plaintiffs’ case is not bona fide and is weak. It would be an understatement to say that the objective evidence gives rise to many questions that Mr Clark will have to answer if the matter proceeds to trial. The content of Mr Clark’s reports compared to the Berlanda Reports is troubling. First, a textual comparison suggests he had more than just the recordings of the inspections available to him. Second, there is the omission of unfavourable comments. However, Mr Clark and his father enjoyed some expertise in olive farming themselves. How that expertise compares to Mr Berlanda’s, I do not know, but it is possible that they simply disagreed with his assessment or his methodology. It is also noted that Mr Berlanda has subsequently said that he did not prepare any reports assessing the commercial viability of the farms nor undertake a comparison of yield forecasts. That suggests there is an answer for the difference in projections that is not harmful to the plaintiffs’ case and that Mr Berlanda, Mr Clark and Mr Clark’s father may not be opposed in their view of the olive groves, their management and potential. Then, of course, Mr Clark contends that Mr Lester knew all about Mr Berlanda.
As for the actual yields, there is much room for debate on the impact of watering, fertiliser and input from Mr Clark and his father. One thing that is not disputed is the rapid growth of the partnerships. At a minimum that would have affected and altered Mr Clark’s hands-on input.
The solicitor’s notes and the financial statements raise questions, but they are not incapable of being explained away.
As for Ms Manos’ claims of what Mr Clark said, the simple answer is that he says they are untrue.
I am not sure that Mr Clark’s opposition to the receivership can be necessarily linked to a desire to do harm to Mr Lester. Clearly there is no goodwill between them, and they are each deeply suspicious of the other. Equally clearly, one or other is lying. It does not appear that the pleadings leave room for the possibility of any misunderstanding. Thus, at the heart of this case lies a credibility clash. To find on this application that Mr Clark’s and the plaintiff companies’ case is weak and is not bona fide does involve an evaluation of the likelihood that credible answers to the questions which the objective evidence raises may not be forthcoming. I am reminded of Megarry J’s cautionary observations:[18]
As everybody who has anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.
[18] John v Rees [1970] Ch 345 at 402.
I do not think it can be concluded on this application that the claim is not bona fide or has been instituted for an ulterior motive. I do not think it can be said that the claim is necessarily weaker than the defence. Much will turn on Mr Clark’s evidence and, indeed, Mr Lester’s. Corroboration will likely prove critical.
I agree with the Master that the allegations in this case call for investigation at trial. I also agree that the plaintiffs’ impecuniosity being contributed to by the failure of the partnership is a relevant consideration. I accept the submission that the application has been brought after not inconsiderable interlocutory litigation.
Mr Clark has no income and no assets and cannot borrow money commercially. His sole source of finance is his father. He deposes that he cannot both pay security for costs and fund his trial preparation. To my mind that is evidence to the effect that if an order is made the proceedings will be stultified.
In this case the corporate plaintiffs are nominal and, in reality, enjoy no identity independent of Mr Clark. It is not then a matter where the corporate plaintiffs can be considered separately for the purposes of this application.
I do not criticise Mr Lester for bringing a second application. The further disclosure has armed him with more material with which to challenge Mr Clark’s truthfulness. Nonetheless, in all the circumstances, I am not persuaded that an order for security for costs is necessary in the interests of justice.
I dismiss the application.