Commonwealth Bank of Australia v Rosebridge Nominees Pty Ltd
[2005] WASCA 211
•10 NOVEMBER 2005
COMMONWEALTH BANK OF AUSTRALIA -v- ROSEBRIDGE NOMINEES PTY LTD [2005] WASCA 211
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2005] WASCA 211 | |
| THE COURT OF APPEAL (WA) | |||
| Case No: | CACV:25/2005 | 7 SEPTEMBER 2005 | |
| Coram: | PULLIN JA MILLER AJA | 10/11/05 | |
| 13 | Judgment Part: | 1 of 1 | |
| Result: | Leave to appeal in each appeal granted Each appeal allowed | ||
| B | |||
| PDF Version |
| Parties: | COMMONWEALTH BANK OF AUSTRALIA ROSEBRIDGE NOMINEES PTY LTD CORRS CHAMBERS WESTGRATH (A FIRM) WFB PTY LTD |
Catchwords: | Appeal Interlocutory appeal Security for costs Corporations Act 2001 (Cth) Whether sufficient security ordered by Master Exercise of discretion Turns on own facts |
Legislation: | Corporations Act 2001 (Cth), s 1335 |
Case References: | Norbis v Norbis (1986) 161 CLR 513 Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 134 ALR 187 APEP Pty Ltd v Smalley (1983) 8 ACLR 260 Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1 Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497 Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 House v The King (1936) 55 CLR 499 LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517 Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia & Ors [2005] WASC 132 Wilson v Metaxas [1989] WAR 285 Wing Luck Foods v Lay Choo Lim [1989] WAR 358 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA TITLE OF COURT : THE COURT OF APPEAL (WA) CITATION : COMMONWEALTH BANK OF AUSTRALIA -v- ROSEBRIDGE NOMINEES PTY LTD [2005] WASCA 211 CORAM : PULLIN JA
- MILLER AJA
- Appellant (First Defendant)
AND
ROSEBRIDGE NOMINEES PTY LTD
Respondent (Plaintiff)
- Appellant (Second Defendant)
AND
ROSEBRIDGE NOMINEES PTY LTD
Respondent (Plaintiff)
- Appellant (Third Defendant)
AND
(Page 2)
ROSEBRIDGE NOMINEES PTY LTD
Respondent (Plaintiff)
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA & ORS [2005] WASC 31
File No : CIV 1235 of 1999
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA & ORS [2005] WASC 31
File No : CIV 1235 of 1999
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram : MASTER SANDERSON
Citation : ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA & ORS [2005] WASC 31
File No : CIV 1235 of 1999
Catchwords:
Appeal - Interlocutory appeal - Security for costs - Corporations Act 2001 (Cth) - Whether sufficient security ordered by Master - Exercise of discretion - Turns on own facts
(Page 3)
Legislation:
Corporations Act 2001 (Cth), s 1335
Result:
Leave to appeal in each appeal granted
Each appeal allowed
Category: B
Representation:
CACV 25 of 2005
Counsel:
Appellant (First Defendant) : Mr C G Colvin SC
Respondent (Plaintiff) : Mr R I Viner QC
Solicitors:
Appellant (First Defendant) : Christensen Vaughan
Respondent (Plaintiff) : WA Legal Pty Ltd
CACV 24 of 2005
Counsel:
Appellant (Second Defendant) : Mr C G Colvin SC
Respondent (Plaintiff) : Mr R I Viner QC
Solicitors:
Appellant (Second Defendant) : McCallum Donovan Sweeney
Respondent (Plaintiff) : WA Legal Pty Ltd
(Page 4)
CACV 20 of 2005
Counsel:
Appellant (Third Defendant) : Mr C G Colvin SC
Respondent (Plaintiff) : Mr R I Viner QC
Solicitors:
Appellant (Third Defendant) : Jackson McDonald
Respondent (Plaintiff) : WA Legal Pty Ltd
Case(s) referred to in judgment(s):
Norbis v Norbis (1986) 161 CLR 513
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [2004] WASC 60
Case(s) also cited:
Allstate Life Insurance Co v Australia & New Zealand Banking Group Ltd (1995) 134 ALR 187
APEP Pty Ltd v Smalley (1983) 8 ACLR 260
Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1
Brundza v Robbie & Co (No 2) (1952) 88 CLR 171
Bryan E Fencott & Associates Pty Ltd v Eretta Pty Ltd (1987) 16 FCR 497
Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191
House v The King (1936) 55 CLR 499
LHK Nominees Pty Ltd v Kenworthy (2002) 26 WAR 517
Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia & Ors [2005] WASC 132
Wilson v Metaxas [1989] WAR 285
Wing Luck Foods v Lay Choo Lim [1989] WAR 358
(Page 5)
1 PULLIN JA: I agree with the reasons of Miller AJA. I have nothing to add.
2 MILLER AJA: The appellants seek leave to appeal from a decision of Master Sanderson delivered on 23 February 2005 whereby the learned Master ordered that the respondent give security for the costs of the appellants as to $100,000 in each case. The security was ordered by way of a guarantee to be provided by Tony Grego of 204 Clontarf Road, Hamilton Hill, Western Australia and by a charge over 2532/67100th undivided shares in certificate of title volume 2131 folio 36 in the form of a document which was annexed to the order of the learned Master.
Notice and grounds of appeal
3 The draft notice of appeal of each of the appellants contends that the orders of the learned Master should be set aside and in lieu thereof, the following orders should be made:
(a) the respondent give security for the costs of the appellant in CACV 25 of 2005 in the sum of $199,566 or such other amount as the Court considers appropriate by payment of that amount into Court;
(b) the respondent give security for the costs of the appellant in CACV 24 of 2005 in the sum of $100,000 by payment of that amount into Court; and
(c) the respondent give security for the costs of the appellant in CACV 20 of 2005 in the sum of $100,000 by payment of that amount into Court.
4 Each of the draft notices of appeal is in identical terms save for the amounts in respect of which it is contended should have been paid into Court. The grounds of appeal contend that the learned Master, having found that the respondent should provide security for the costs of the various appellants, erred in law in failing to give consideration or adequate consideration to the sum in which such security should be provided. It is further contended that the learned Master erred in law by failing to give any or any adequate reasons for decision in determining the particular sums which were ordered and/or alternatively that the learned Master erred in the exercise of his discretion in holding that the personal guarantee of a director of the respondent secured by a charge over his 2532/67100th undivided shares in the land described above constituted sufficient security for the purposes of s 1335 of the Corporations Act
(Page 6)
- 2001 (Cth). Further and alternative grounds contend that there was, in any event, a failure of the learned Master to exercise his discretion according to law in relation to what would constitute sufficient security by limiting his consideration to the limited guarantee which was proffered by the director, Tony Grego. Finally, it was contended that, in all the circumstances, the appropriate order was for provision of security for costs by payment by the respondent into Court of the full amount sought.
Reasons of Master
5 By reasons delivered on 6 April 2004 (Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia [2004] WASC 60), the learned Master first determined that there should be an order for security for costs in favour of each of the appellants. No challenge is made to that conclusion. In the course of reaching that preliminary conclusion, the learned Master found as a fact that an order for security for costs would not stultify the respondent's claim. He said, at [13]:
"As I understand the submissions made by counsel for the plaintiff, if an order is made then those standing behind the company will have to consider their position. But certainly there is nothing in any of the affidavit material filed which suggests that if an order is made, the action will be brought to an end. I need say nothing more about that discretionary consideration."
6 The learned Master then considered the form in which an appropriate order for security for costs should be made. He found that from time to time there had been a number of directors of the respondent. Two of those directors had sworn affidavits in the proceedings before him. They were Tony Grego and Erigo Fazio. Neither of them had offered to meet the costs of the appellants in the event that the respondents actually failed. Nor had any shareholder in the respondent offered such an undertaking. Mr Grego had however, made a "limited and slightly unusual offer". He had an interest in a property at Mandurah, the ownership of which the learned Master described as "somewhat complicated" and he was prepared to offer a personal guarantee for any security that might be ordered up to $200,000 secured by his interest in the land in question. He was prepared to offer a "limited personal guarantee secured by [his] interest in the land" and prepared to have that limit divided as to $100,000 for each of the first and third appellants if necessary.
7 The learned Master said that there were a number of points to be made about the offer. The first was that it was limited to $200,000 and
(Page 7)
- the second was that it was a guarantee secured over an interest in land. This he said, stood apart from an undertaking often offered by those standing behind a company. The third point he made was that the offer was as to $100,000 for each of the first and third appellants but no offer of security was made for the second appellant.
8 The first and third appellants rejected the offer that was made on the basis that $100,000 by way of security for two of them was inadequate. They each filed bills of costs showing the anticipated taxed party and party costs at well over $300,000 for each appellant. It was submitted that even taking the most conservative view of costs that could be expected after a 10 day trial, they would not be less than $200,000.
9 The Master identified a more fundamental objection raised by the appellant. It was that Mr Grego's interest in the land in question may not be worth $200,000. In fact, the submission was stronger than that. Counsel for the appellant submitted that it was worthless. The submission was based upon difficulties that the appellants would face if they were called upon to realise the security. The learned Master described those difficulties as "largely related to the complex ownership structure of the land and the difficulties the [appellants] may have in affecting [sic] a forced sale".
10 The learned Master described the land as Lot 1, Mandurah Road, Lakelands, just outside the City of Mandurah. It is bounded by Mandurah Road on the west and Stock Road on the east. Recourse to the various papers before the learned Master reveals that the subject land comprised 257.7521 hectares. At the relevant time, part of the western sector (53.1 hectares fronting Mandurah Road) was zoned rural and the remainder (72.1 hectares) zoned for urban purposes. A significant portion of the site, being some 99.5 hectares, was required by the Department of Planning and Infrastructure for railway and conservation purposes. A taking order (I781464 registered 5 February 2004) affected lots 103 and 1587 of the land, which comprised a total of 99.48 hectares. The taking order took the land for public purposes.
11 There was before the learned Master, annexed to an affidavit of Mr Grego sworn 26 February 2004, a valuation of the subject land from Knight Frank (WA) Pty Ltd. It was made by Wayne Lawrence, a certified practising valuer. He expressed the view that the market value of the unencumbered freehold interest in the property as at 6 August 2002 was $6,250,000, exclusive of GST. The learned Master made no findings in relation to this valuation, but the Court was informed that the valuation
(Page 8)
- was objected to at the hearing before the learned Master. No ruling appears to have been made in relation to its admissibility.
12 The learned Master observed that at the time of the hearing before him, no claim for compensation had been made in relation to the taking order and it was unclear what, if any amount, each individual owner might receive in consequence of such a claim. He also identified a number of other problems. The first was that the ownership structure of the land was complicated by the existence of an agreement between the owners, which contained a provision that if any one owner wished to deal with his interest in the property, he must obtain the approval of the other owners. It had been submitted on behalf of the appellants that this clause was an impediment to the security offered by Mr Grego. The learned Master's answer was that if an order was made for security in terms of that offered and if because of the relevant deed the security could not be provided, then the order would not be complied with and "certain consequences would follow". He added, at [19]:
"It is not, in my view, a proper approach to say that because there are impediments in the way of providing the proposed security, an order ought not be made."
13 Although counsel for the respondent contended at the hearing for the Court that if, because of the deed, an order for security could not be made, the respondent would be in contempt of court; I do not agree. However, it is of no moment.
14 Recourse to the papers reveals that by deed dated 1 October 1985 it was recited that the various entities who had purchased the land had done so as tenants in common in a variety of different shareholdings. The deed recorded the terms upon which the parties held the land and what arrangements there were for payment of the purchase moneys as between them.
15 A further deed dated 22 March 1991, which was made between the same parties, contained a provision that, in the event that the parties wished to deal with the land or any interest therein, otherwise than as expressly authorised by the deed, a resolution authorising such action had to be passed by no less than 10 parties collectively holding at least 366 shares in the land at a meeting. Further, another document titled "authority to appoint valuer and agreement regarding sale/transfer/disposal of the interest in land" (the subject land) provided that each party agreed that, should they decide to sell or transfer their
(Page 9)
- interest in the land, they would first offer it to the members of the "Group". If any or all of the members of the Group did not wish to purchase the interest in the land being offered, it would then be offered on the same terms and conditions to the other two Groups mentioned in the document in proportionate equal terms. There were three Groups mentioned. The first was the "Tranchita Group", the second was the "Naso Group" and the third, the "Video Group." Messrs Fazio and Grego were members of the latter. The learned Master stated that the pre-emptive rights contained in the agreement were "of concern".
16 Having found that there ought to be an order for security for costs in favour of each of the three appellants, the learned Master turned to the amount of the security and how it should be provided. He said, at [24] - [25]:
"In my view, the plaintiff should provide security for costs for each of the three defendants in an amount of $100,000. That security should be provided by way of a guarantee from Mr Grego in favour of each of the three defendants. That personal guarantee should be secured over Mr Grego's interest in the Mandurah property. I appreciate that the security may not be sufficient to meet the full $300,000. I also appreciate that difficulties may arise in realising the security. Nonetheless, Mr Grego has offered a personal guarantee and he has put himself at risk were a costs order to be made against the plaintiff. For the present, that is sufficient.
I would, however, give leave to the defendants to bring an application to top up the security after the matter is entered for trial."
The appeal
17 The essential question on the hearing of this application was whether the learned Master was correct in ordering security in the manner in which he did. The principles upon which this Court may disturb the exercise of discretion by the learned Master are well known. They were summed up in Norbis v Norbis (1986) 161 CLR 513 by Mason and Deane JJ at 517 - 518 as follows:
"It is well settled that the principles governing interference by an appellate court with the exercise of a discretionary judgment at first instance apply to the Full Court of the Family Court as an intermediate court of appeal: De Winter v De Winter (1979)
(Page 10)
- 23 ALR 211; Gronow v Gronow (1979) 144 CLR 513; Mallet. It is not disputed that the Full Court of the Family Court was bound to apply these principles in the present case on the footing that the trial judge, in making orders under s 79 of the Act, was exercising a judicial discretion. The principles have been constantly reiterated and applied by this Court in the form in which they were expressed in House v The King (1936) 55 CLR 499 at pp 504 - 505:
'It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred.'"
19 It is unnecessary to deal with submissions made on behalf of the appellants that by reason of the provisions of s 1335 of the Corporations Act which requires "sufficient security", the form of security must be enough or adequate in character to secure payment of the amount of costs identified. Consideration of the provisions of both that section and O 25 of the Rules of the Supreme Court seem to me to lead to only one result: that once the learned Master had determined that an order should be made for security for costs, the actual form in which security should be ordered
(Page 11)
- was a matter for discretion and the precise method of giving security was to be adjusted according to the circumstances of the respondent.
20 Further, it is unnecessary to resolve the question whether there is a difference between security under s 1335 of the Corporations Act and under O 25 of the Rules of the Supreme Court. On any view of it, the orders for security made by the learned Master in this case were an erroneous exercise of discretion. They were wholly inadequate to meet the circumstances of the case and the orders made reveal both error and unreasonable or unjust resolution of the question of security from the point of view of the appellants.
21 The interest that Mr Grego held in the land was only a 3.77 per cent interest. There was no valuation of the interest. There was only a disputed valuation of the total parcel of land. The learned Master accepted that the security may not be sufficient to meet the full $300,000 that he ordered by way of security. There were difficulties in the way of the appellants realising the security which was ordered. This was recognised by the learned Master. Those difficulties included the following:
(1) The whole of the land was mortgaged to Bendigo Bank Ltd and although there was evidence before the learned Master that the mortgage had been repaid, any further advance under the registered mortgage would cause potential problems for the appellants, depending upon whether or not Bendigo Bank Ltd had notice of Mr Grego's personal guarantee secured by charge over the property.
(2) Mr Grego's share in the land was subject to the provisions of the three deeds respectively dated 1 October 1985, 22 March 1991 and 30 August 2000. By the second of these deeds, if any party wished to deal with the land or any interest therein other than as expressly authorised by the deed, a resolution authorising that action was to be passed by not less than 10 parties collectively holding at least 366 shares in the land. By the third of the deeds, Mr Grego agreed that should he decide to sell or transfer his interest in the land, it would first be offered to the members of his Group and if any or all of them did not wish to purchase the interest in the land being offered, it would then be offered on the same terms and conditions to the other two Groups referred to in the deed, in proportionate equal shares. These pre-emptive rights were
(Page 12)
- protected by an absolute caveat, dated 9 October 2002, which described the interest in the land so protected as "a deed between the registered proprietors and caveators dated 30 August 2000".
- (3) A caveat dated 27 May 2003 and lodged by Erigo Fazio, sought to protect his interest in the land as registered proprietor and unpaid seller of a 2532/67100th share in the land by reason of the fact that on or about 14 October 2002, he signed a transfer of land which was no longer in his possession and over which he had lost control and in respect of which he had not received payment of the purchase price.
(4) In his affidavit sworn 26 February 2004, Mr Grego revealed that Vincenzo and Giuseppina Fazio had mortgaged their interest in the land. To whom and in what circumstances is not revealed.
(5) The complications of applications for compensation in relation to the taking order lodged on 8 August 2003 were major stumbling blocks to the realisation by the appellants of the security ordered by the learned Master.
22 Although the learned Master ordered that leave should be given to the appellants to bring a further application "to top-up the security" after the action was entered for trial, this qualification did not, in my view, alter the fact that the form of security ordered by the learned Master was entirely inadequate. Even on the learned Master's own conclusions, there were so many uncertainties in relation to realisation of the security ordered that it is difficult to understand how he arrived at the ultimate conclusion he did.
23 In my view, there was only one appropriate order to make and that was to order that the respondent provide security for costs by payment of the sum of $300,000 into Court, being security in the sum of $100,000 in respect of each of the appellants. The respondent may not have had the financial capacity to make payment into Court of that sum, but it was for those standing behind the respondent, one of whom was Mr Grego, to decide whether or not in the circumstances they were prepared to make the payment into Court to facilitate the action (which had been commenced in March 1999) to continue.
24 I would grant leave to appeal in each appeal, allow the appeals, set aside the orders for security made by the learned Master and order in lieu
(Page 13)
- thereof that the respondent pay into Court, in respect of each of the appellants, the sum of $100,000 by way of security for costs, such payment to be made within 14 days of the date of this order.
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