Construction Industries Australia Ltd (in Liq) v WFI Insurance Ltd - [2017] WASC 187

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL

CITATION: CONSTRUCTION INDUSTRIES AUSTRALIA LTD (IN LIQ) -v- WFI INSURANCE LTD [2017] WASC 187

CORAM: PRITCHARD J

HEARD: 20 JUNE 2017

DELIVERED : 20 JUNE 2017

FILE NO/S: CIV 1879 of 2016

BETWEEN: CONSTRUCTION INDUSTRIES AUSTRALIA LTD (IN LIQ) (ACN 137 079 095)
First Plaintiff
KIMBERLY ANDREW STRICKLAND AND DAVID ASHLEY NORMAN HURT AS THE LIQUIDATORS OF CONSTRUCTION INDUSTRIES AUSTRALIA LTD (IN LIQ) (ACN 137 079 095)
Second Plaintiffs
AND
WFI INSURANCE LTD (ACN 000 036 279)
Defendant

Catchwords:

Springing orders - Security for costs - Time for compliance with order for security for costs - Turns on own facts

Legislation:

Nil

Result:

Application for springing order granted

Category: B

Representation:

Counsel:

First Plaintiff                  :     Mr C Armeli-Cartillazzone
Second Plaintiffs           :     Mr C Armeli-Cartillazzone
Defendant:     Mr B Winburn-Clarke

Solicitors:

First Plaintiff                  :     Kings Park Corporate Lawyers
Second Plaintiffs           :     Kings Park Corporate Lawyers
Defendant:     SRB Legal

Cases referred to in judgment:

Australian Growth Managers Ltd v Egerton‑Warburton [2007] WASC 10
Construction Industries Australia Ltd (In Liq) & Ors v WFI Insurance Ltd [2016] WASC 404
Idoport Pty Ltd & Anor v National Australia Bank Ltd & Ors [2002] NSWSC 18
Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 9] [2016] WASC 69
PRITCHARD J:
(These reasons were delivered extemporaneously on 20 June 2017 and have been edited from the transcript).

This is an application by the defendant for orders that unless the plaintiffs pay security for the defendant's costs in this case by a specified date, the action be taken to be dismissed and judgment be entered for the defendant (the Application). In effect, therefore, the defendant seeks a springing order against the plaintiffs.
The Application is sought by the defendant in this case on the basis of delays by the plaintiffs in complying with orders that I made in December 2016 for the provision of security for costs by or on behalf of the plaintiffs, by the payment into Court of a sum of $85,000, or the provision of a bank guarantee in that sum. The parties were given liberty to apply if they were unable to reach agreement as to the terms of the bank guarantee, if that was the proposed method of providing the security for costs. (I will refer to the orders I made as the December 2016 orders.)
The December 2016 orders did not specify any timeframe within which security for costs was to be provided. Since those orders were made, no action appears to have been taken by the plaintiffs to make arrangements for the provision of security for costs. Not surprisingly, that is the basis for the defendant now seeking a springing order.
It is clear that the Court, as part of its inherent jurisdiction, is able to grant a springing order in circumstances such as these. The factors which may be taken into account in the making of a springing order in circumstances such as these include those referred to by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd,[1] which has been referred to in a number of decisions in this jurisdiction.[2] His Honour's list of factors is not exhaustive, but is indicative of the sorts of considerations that will be relevant. They include:
1.the period that has elapsed since security was ordered;
2.the fact that the party against whom the security has been ordered (the plaintiffs) has been on notice of an application for dismissal;
3.the apparent inability of the plaintiffs to fund the proceedings;
4.the prejudice to the defendant; and
5.the position of the court.
[1] Idoport Pty Ltd & Anor v National Australia Bank Ltd & Ors [2002] NSWSC 18 [24].
[2] Trafalgar West Investments Pty Ltd v Superior Lawns Australia Pty Ltd [No 9] [2016] WASC 69 [14] (K Martin J); Australian Growth Managers Ltd v Egerton‑Warburton [2007] WASC 10 [110] (Master Newnes).
Insofar as the first of those factors is concerned, in this case there has been almost a six‑month period since the December 2016 orders were made, in which it appears that nothing has been done. No affidavit has been produced by the plaintiffs to suggest that efforts have been made to provide that security, or to explain that there has been some difficulty encountered in the provision of the security, which might support the conclusion that a springing order should not now be made.
The plaintiffs has been on notice of the Application, certainly since at least two weeks ago when the matter was last before the Court.
The question of whether the plaintiffs is able to further fund the proceedings remains a little unclear. I have had regard to the affidavit of Mr Claudio Armeli‑Cartillazzone sworn 20 June 2017, together with the attachments thereto. It suggests that a company which apparently has some relationship to the plaintiffs' litigation funder, Esplanade Holdings Pty Ltd, may be in a position to provide security for a bank guarantee by the plaintiffs in the present proceedings. The precise way in which that would be able to be done is not entirely clear from Mr Armeli‑Cartillazzone's affidavit. However, I take into account the indication by Mr Armeli‑Cartillazzone that he has been instructed that that could be done. Whether it can, in fact, be done remains to be seen, given the considerable delay since the December 2016 orders were made. For the moment, it seems there is a real question about the plaintiffs' ability to fund the proceedings.
Insofar as prejudice to the defendant is concerned, there are two aspects to which I need to refer. The first is the prejudice to the defendant by the plaintiffs' continuing inaction in prosecuting the action. That is particularly relevant, given that the issues that are the subject of the statement of claim go back some years. The insurance contract which is the subject of the action was executed in 2013. A very large quantity of goods which had been hired by the plaintiffs and which were said to have been covered by the insurance contract went missing at about that time, and in the years prior to 2013, as explained in my reasons for decision to grant the defendant's application for security for costs.[3] Insofar as the present action may involve questions of contractual construction, a delay of six months is not, of itself, particularly prejudicial. However, insofar as there may be issues relating to how it was that the goods went missing, what arrangements there were for security for the goods to be provided, and any other matters that might require the provision of oral evidence, clearly a continuing delay by the plaintiffs in prosecuting the action is bound to have a prejudicial impact on the defendant's ability to defend the action, to identify witnesses to address the matters to which I have referred and any others that might be relevant. That aspect of the prejudice to the defendant warrants the granting of the springing order sought in the Application.
[3] Construction Industries Australia Ltd (In Liq) & Ors v WFI Insurance Ltd [2016] WASC 404 [11] ‑ [19].
The second aspect of the question of prejudice is the fact that the defendant seeks that the springing order should spring by the end of June. The plaintiffs say that they would need, out of an abundance of caution, until the end of July to be able to provide the bank guarantee. There has been no suggestion by counsel for the defendant that the provision of, effectively, one further month would prejudice the defendant in any materially additional way to that which I have already referred. It seems to me that that consideration clearly weighs in favour of the plaintiffs having a further period of time in which to attempt to comply, given the consequences for the plaintiffs of the springing order springing.
As for the position of the Court, this is not a particularly significant consideration in this case. Unlike some other cases, this is not a case where the action is in any way close to trial, so I do not place any weight on that factor. Finally, I have taken into account the fact that there effectively has been consent, or at least acceptance, by the plaintiffs that it is appropriate that a springing order should be made, subject to a further time period for the plaintiffs to provide the security for costs.
Taking into account all of these matters and, most particularly, the prejudice to the defendant and the inaction of the plaintiffs until very, very recently, it is appropriate to grant the springing order sought, but with the provision of extra time (until the end of July, as sought by the plaintiffs) to enable the plaintiffs the opportunity to attempt to provide security for costs.
In relation to the question of the costs of the Application, the defendant having been successful in obtaining the springing order it sought, costs would ordinarily follow the event. There have been two directions hearings in respect of the Application. The last directions hearing was, with respect to counsel on both sides, a wasted opportunity because there had been a failure to properly confer in relation to the orders sought in the Application, resulting in the need to adjourn the hearing until today. Having regard to that failure to confer, about which I expressed my concern on the last occasion, it seems to me that there should be some adjustment to the costs order which is made, to reflect the fact that while the defendant has been successful on the Application, nevertheless, the failure to confer properly resulted in wasted orders.
In all of those circumstances, there will be an order that the plaintiffs pay the defendant's costs of the directions hearing today, but not for the last occasion.
The following orders will be made:
1.Unless by 31 July 2017 the Plaintiffs do comply with order 1 or order 2 of the orders made by the Court on 14 December 2016, the action be dismissed and judgment be entered for the Defendant with costs to be taxed if not agreed.
2.The Plaintiffs pay the Defendant's costs of the appearance today fixed in the sum of $425.00.
3.There will be no order as to the costs of the directions hearing on 6 June 2017.