Conlon Property Developments Pty Ltd v Cavanagh Bros Pty Ltd

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SUPREME COURT OF QUEENSLAND

CITATION:

Conlon Property Developments Pty Ltd v Cavanagh Bros Pty Ltd & Others [2018] QSC 127

PARTIES:

CONLON PROPERTY DEVELOPMENTS PTY LTD & ORS

(applicant/defendant)

v
CAVANAGH BROS PTY LTD & ORS

(respondent/plaintiff)

FILE NO:

1069 of 2017

DIVISION:

Trial Division

PROCEEDING:

Application

ORIGINATING COURT:

Supreme Court of Queensland at Brisbane

DELIVERED ON:

6 June 2018

DELIVERED AT:

Brisbane

HEARING DATE:

22 May 2018

JUDGE:

Ryan J

ORDER:

The plaintiff is to provide security for the defendants’ costs of the proceedings, up to and including the first day of trial, in the amount of $60,000.

CATCHWORDS:

PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – SECURITY FOR COSTS – FACTORS RELEVANT TO EXERCISE OF DISCRETION – DELAY – PLAINTIFF’S OR APPLICANT’S IMPECUNIOSITY – Where the defendants applied for an order that the plaintiff give security for their costs – Where the defendants first raised the issue of security for costs on
1 December 2017 – Where the matter was not raised again until 27 March 2018 – Where the plaintiff accepted that the prima facie threshold had been met – Where the plaintiff delayed in bringing their action – Whether the delay by the defendants disentitled them to an order – Whether the plaintiff’s impecuniosity was caused by the defendant’s conduct the subject of the claim

COUNSEL:

M A Eade for the applicant/defendant

A P J Collins for the respondent/plaintiff

SOLICITORS:

Cooper Grace Ward for the applicant/defendant

Jensen McConaghy Lawyers for the respondent/plaintiff

Background

  1. The plaintiff and the defendants engaged in a joint venture to develop land at Yatala.  The developed land was sold and the joint venture dissolved.  The parties are in dispute about the distribution of the sale proceeds and the amount to which the plaintiff is entitled.  The plaintiff claims $104,714.  The plaintiff also claims that the first defendant owed fiduciary duties to it which the first defendant breached by engaging in fraud or dishonesty, and that the second and third defendants knew of the fraud or dishonesty and actively participated or assisted in it. 

  2. The primary issues at trial will concern the terms of the joint venture agreement and the way in which the sale proceeds of the developed land were to be distributed; the relationship (trust, fiduciary or otherwise) between the plaintiff and the first defendant; and the second and third defendants’ knowledge of, consent to, or involvement in, the first defendant’s alleged fraud or dishonesty.

  3. The plaintiff company is a trustee proprietary limited company, with a paid up share capital of $2.  It is not registered as owning, or having a share in, any real property in Queensland or New South Wales.  It is not registered as the grantor of any security interest on the Personal Securities Register.

  4. The defendants have applied for an order that the plaintiff give security for their costs, under Chapter 17 of the Uniform Civil Procedure Rules 1999 (Qld) (the UCPR) or under section 1335 of the Corporations Act 2001 (Cth) (the Act).

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Details
Case
[2018] QSC 127
Decision Date

CaseChat Overview and Summary

In Conlon Property Developments Pty Ltd v Cavanagh Bros Pty Ltd, the defendants sought an order for the plaintiff to provide security for their costs. The court had to decide whether the delay by the defendants and the plaintiff's impecuniosity affected the defendants' right to such an order. The dispute arose from a joint venture between the parties, which terminated in 2011, and the plaintiff filed proceedings in February 2017, almost five years later. The defendants raised the issue of security for costs in December 2017, and the matter was not pursued until March 2018. The plaintiff conceded the prima facie threshold for security for costs had been met.

The court considered the discretionary factors relevant to the exercise of power for security for costs. It examined the defendants' delay in pursuing their application and the plaintiff's delay in filing and serving its pleadings. The court found that the delay was not excessive and did not prejudice the plaintiff. Additionally, the court considered whether the plaintiff's impecuniosity was caused by the defendants' conduct, which was the subject of the claim. The plaintiff did not provide evidence to support its assertion that its impecuniosity was due to the defendants' actions.

The court held that the defendants were entitled to an order for security for costs, despite the delay in pursuing the application and the plaintiff's impecuniosity. The court ordered the plaintiff to provide security for the defendants' costs of the proceedings, up to and including the first day of trial, in the amount of $60,000. The court found that the defendants had demonstrated that they were likely to succeed in the proceedings and that the plaintiff's impecuniosity did not preclude the making of the order.

Orders

Orders of the court

The plaintiff is to provide security for the defendants’ costs of the proceedings, up to and including the first day of trial, in the amount of $60,000.

Background

Background to the litigation

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Evidence

Evidence Before The Court

In Livingspring[10] the Court said:“[21] … While the satisfaction of the threshold condition in the relevant sense ‘calls for’ the exercise of the power, this does not alter the fact that the burden rests on the defendant, from first to last, to persuade the court that the order for security should be made.[22] There are, of course, particularly discretionary matters of which the plaintiff must necessarily have carriage. If, for example, the plaintiff corporation asserts that an order for security would impose on it such a financial burden as would stultify the litigation, the plaintiff must establish the facts which make good that assertion … [23] The same would be true of a contention that the plaintiff’s impecuniosity was caused by the defendant.” [10] Ibid.The evidence – the defendants first raised the issue of security for costs on 1 December 2017 The parties undertook the joint venture from about April 2009 until 1 July 2011. The dispute between the plaintiff and the first defendant arose in late 2011. An informal mediation in December 2011 did not resolve matters. In May 2012, the plaintiff put the first defendant on notice of the proceedings, by informing the first defendant’s solicitors that a statement of claim would “shortly” be completed, and asking whether they had instructions to accept service. However, no pleadings were filed until 3 February 2017 – almost five years later – and they were not served until 31 October 2017 – a further nine months later. The proceedings identified a claim against the second and third defendants. The defendants filed their notice of intention to defend, and their defence, on 29 November 2017 and served it upon the plaintiff’s solicitors on 1 December 2017. The letter of 1 December 2017 asserted, in effect, that the plaintiff’s claim would fail and that the defendants were confident of their success. It concluded with this paragraph:“Finally, we understand that your client no longer trades and has no assets. On this basis we advise that any further steps in this matter will be met with a security for costs application. We believe such an application is necessary to ensure our clients’ costs of defending this matter can be met.”“Steps” taken by the plaintiff after 1 December 2017 and the defendants’ response thereto By letter dated 15 December 2017 to the defendants’ solicitors, the plaintiff’s solicitors identified errors in its statement of claim and, under the heading “Plaintiff’s Reply”, sought “particulars and/or disclosure” of certain matters referred to in the defence. The defendants’ solicitors did not reply. On 26 February 2018, the plaintiff’s solicitors wrote to the defendants’ solicitors – ·asking whether the requested particulars/disclosure would be provided; ·disclosing their list of documents ; and ·seeking the defendants’ list of documents. On 7 March 2018, the plaintiff’s solicitors wrote to the defendants’ solicitors, complaining, under r 444 UCPR, that the defendants had failed to disclose their list of documents.

Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The effect of Ms Klibbe’s explanation for the delay was that – (i) having placed the plaintiff on notice that “any further step” by the plaintiff would be met with an application for costs, she did not consider that the plaintiff had taken a “step” until it served its list of documents on 26 February 2018; and (ii) she expected a reply to the defendants’ defence and, until it was received, the issues in dispute between the parties could not be clarified and she was unable to estimate the defendants’ costs.Consideration of delay In my view, there has not been a wholly satisfactory explanation for all of the defendants’ delay. However, the delay was not excessive and the plaintiff did not identify any prejudice – monetary or otherwise – which flowed from it. The plaintiff’s counsel’s submission, that I ought to bear in mind that the making of an order may bring proceedings to an end, was unsupported by any evidence and made immediately after a submission that the plaintiff was not saying to the court that it could “keep going” (were an order for security made) nor was it saying “we can’t’. Earlier in the hearing, when it was suggested by the defendants’ counsel that the plaintiff was not suggesting, despite comments during correspondence, that an order for security for costs would stultify proceedings, the plaintiff’s counsel said: “the case law, in more recent times … also focuses on the financial capabilities of those who stand behind the company. So we haven’t put any evidence before your Honour about that … and therefore I couldn’t make submissions about than on a bona fide basis … So your Honour won’t be delayed with any submission in that respect”.[37] [37] Transcript, 1-6 – 1-7. As noted above, the plaintiff focused on the fact of delay of itself. The plaintiff challenged Ms Klibbe’s assertion that, by her letter of 1 December 2017, she intended to convey that she would delay an application for security for costs until the plaintiff took a “step”, in the sense of a rule 389 step, in the proceedings. Regardless of what she meant by “step” in her letter of 1 December 2017, Ms Klibbe acknowledged that the plaintiff’s service of its list of documents amounted to a step she had in contemplation. However she did not explain why that step (on 26 February 2018) was not met with an application for security as foreshadowed by her. The only other conduct of the plaintiff after 1 December 2017, and before it disclosed its list of documents, was its sending of a letter on 15 December 2017, identifying errors in its statement of claim and requesting “particulars/and or disclosure” of certain matters. That letter was ignored by the defendants. In her affidavit, Ms Klibbe did not explain why – even if the defendants’ costs could not then be satisfactorily estimated – she did not raise the issue of security in a general way after the plaintiff’s disclosure. However, the tenor of the defendants’ submissions was that they had “raised the matter at the jump”, there was no need to repeat it, the plaintiff might have hoped that they were not intending to pursue their application, but it was not reasonable for them to presume that it had been abandoned.[38] [38] cf Stella.