Cordukes Limited v DS Parklane Development Pty Limited

[2001] NSWSC 480

CITATION:	Cordukes Limited v DS Parklane Development Pty Limited [2001] NSWSC 480
CURRENT JURISDICTION:	Equity Division Construction List
FILE NUMBER(S):	SC 055040/99
HEARING DATE(S):	6 and 7 June 2001
JUDGMENT DATE:	7 June 2001
PARTIES :	Cordukes Limited (Plaintiff/Respondent) DS Parklane Development Pty Limited (Defendant/Applicant)
JUDGMENT OF:	Bergin J

COUNSEL :	RW Hunt (Plaintiff/Respondent) GE Underwood (Defendant/Applicant)
SOLICITORS:	Corrs Chambers Westgarth (Plaintiff/Respondent) Mallesons Stephen Jaques (Defendant/Applicant)
CATCHWORDS:	Application for Security for Costs - Overlapping of issues in Summons and Cross Claim - Delay through period when plaintiff suffering financial difficulties - Application at time when plaintiff's financial circumstances improving.
LEGISLATION CITED:	Corporations Law
CASES CITED:	Buckley v Bennell Design Construction Pty Ltd (1974) 1 ACLR 301 KP Cable Investments Pty Ltd v Meltglow (1995) 56 FCL 189 Southern Cross Exploration v Fire and All Risk Insurance Ltd (1985) 1 NSWLR 114 Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1
DECISION:	Application refused.

THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION
CONSTRUCTION LIST

BERGIN J

DATE: THURSDAY 7 JUNE 2001

055040/99 - CORDUKES LIMITED v DS PARKLANE DEVELOPMENT PTY LIMITED

JUDGMENT

1    This is an application brought by the defendant DS Parklane Developments Pty Ltd, to which I shall refer as "Parklane", brought by notice of motion filed on 26 March 2001 for an order that the plaintiff Cordukes Limited, to which I shall refer as "Cordukes", provide security for Parklane's costs in defending the proceedings brought by Cordukes.

2    The proceedings arise out of a disputation in relation to a contract entered into in November 1996 between Cordukes as builder and Parklane in respect of construction of a project known as the Carlisle Apartments in Surry Hills. The contract was apparently administered by an architect, Overview Pty Ltd.

3    The proceedings commenced by way of summons filed on 17 November 1999. Parklane filed a defence and a cross-claim on 24 December 1999. The summons filed by Cordukes in November 1999 sought declarations in respect of a claim that Parklane had wrongfully repudiated the contract and that it, Cordukes, had lawfully rescinded the contract by written notice dated 16 November 1999. Cordukes made a claim that Parklane pay it for the work performed by it in respect of the works on a quantum meruit basis in the amount of $8.2 million. Alternatively, Cordukes sought an order that the defendant pay it damages for breaches of contract in the amount of some $7.6 million.

4    Further claims were made that the plaintiff, Cordukes, was properly entitled to certain extensions of time for practical completion of the works, that the works were deemed to have reached practical completion by a particular date and that Parklane should pay Cordukes an amount of $625,000 which it claimed Parklane had deducted as liquidated damages. Cordukes also sought a declaration that it was properly entitled to further payment from Parklane in the amount that I have referred to earlier. There was also an order sought in respect of the bank guarantee.

5    The cross-claim filed in December, to which I have referred a little earlier, raised two claims. One was a defective works claim and the another was a delay claim.

6    Cordukes filed an amended summons on 6 April 2000. It set out the various issues to which I have just referred but, additionally, took up the whole of the issues between the parties. Those issues were whether Parklane wrongfully repudiated the contract, whether Cordukes validly terminated the contract by reason of Parklane's alleged wrongful repudiation, whether Cordukes was entitled to the quantum meruit claim amount or, alternatively, damages, the entitlement in Cordukes to the return of the bank guarantee, issues in relation to the extension of time for practical completion, whether Parklane was entitled to deduct liquidated damages and deductions for defective works and whether Parklane was entitled to certain expenses for delay.

7    Parklane filed a further amended defence and a further amended cross-claim on 25 August 2000. It maintained its delay claim and the defective works claim. In this defence, it admitted a matter that I should mention in respect of this application which appears in paragraph 27 of the pleading. It admitted that in calculating the amount appearing on each of the progress certificates 15 to 30 inclusive, the architect took into account an amount in respect of liquidated damages which, in the case of progress certificates 15 to 29, was expressed to be "provisional", which amount increased with each progress certificate until it reached the amount of $625,000.

8    Additionally, the amended cross-claim, made an estoppel claim which relied upon an alleged agreement on 15 September 1997 referred to as the consolidated claim agreement and an alleged agreement referred to as the time bar waiver agreement.

9    Parklane filed a further amended defence and a further further further amended cross-claim some time in November 2000. It amended its defective works claim by pleading particular express clauses in the contract alleging that the architect had directed Cordukes to rectify some of the works that the architect had taken a particular view about and an alleged failure in Cordukes to comply with the direction of the architect.

10    The schedule to the pleading has been further amended. Indeed, counsel for Cordukes has provided a document entitled "Chronology Of Proceedings" which dates from 17 November 1999 effectively on this aspect to 29 September 2000. Those amendments to those defences and cross-claims have precipitated amendments to the reply filed by Cordukes.

11    The history of the litigation is lengthy. As I said, it commenced in November 1999. There have been approximately twelve directions given, nine of which have meant that legal representatives have had to appear in court. There have been interlocutory applications in respect of subpoenaed documents and the like and claims for privilege and I understand, although the detail is not before me, that there has been a related separate proceeding between the parties. One of the matters that occurred during the course of the directions were orders in respect of discovery. That discovery, I am informed by the parties, is substantially completed.

12    This motion was filed on 26 March 2001 and when it first came before me, I took the view that it simply could not be heard in the usual Friday Construction List. It was obvious to me that it had all the hallmarks of a case which required a special fixture. The motion was fixed before me for hearing yesterday, and I have heard it to completion today. Mr Underwood of counsel appears for Parklane, the applicant. Mr Hunt of counsel appears for Cordukes, the respondent to the motion.

13    There have been a number of other hearings of an interlocutory nature prior to the hearing of the motion by reason of claims for privilege and the way in which the evidence has been complied by Parklane in respect of a particular schedule of costs to which I will refer in due course.

14    Parklane seeks security in the amount of $425,000, together with a figure of $20,000 per month for a particular future period. The application is brought pursuant to section 1335(1) of the Corporations Law which provides:

"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 proceedings until the security is given."

Parklane also relies upon part 53 of the Supreme Court Rules in respect of its application.

15    The witnesses have all been cross-examined. That is a little unusual in an application such as this but it was apparent to me that there has been a great deal of conflict between the parties since they commendably tried to mediate their differences in 1999. Unfortunately for the parties, that mediation was not successful. It may be that some matters have been shortened but there is certainly quite clearly a very major piece of litigation between the parties at present.

16    Parklane relied upon the evidence of two legal practitioners and Mr David John Frank Lombe, an expert insolvency practitioner accountant. The two legal practitioners were Julie Anne Wright, a senior associate of Mallesons Stephen Jaques and Barry Casey, a partner of that firm. That firm is the solicitor on the record for Parklane.

17    Cordukes relied upon the evidence of one of the partners of Corrs Chambers Westgarth, Solicitors on the record, Robert John Regan, the evidence of John Edwin Cordukes, the evidence of Mr Martel, the financial controller of Cordukes, and the evidence of the expert witness, Mr Paul Mentzalis.

18    Although there has been a deal of cross-examination, ultimately it will not be necessary for me to make any findings in respect of credit. All the witnesses have, in my view, done their best to be truthful and all of the witnesses have achieved that end. In this instance it really comes down to whether the evidence that has to be established by Parklane has been established.

19    The way in which Parklane approached this application was not to utilise what is often seen as a usual method of establishing the relevant matters by calling an expert costs assessor or practitioner who has experience in the field of costs assessing, filing bills of costs and experience in that field over a lengthy period of time.

20    Ms Wright is a solicitor who was admitted only in 1999 in New South Wales. However, she was also admitted to practise as a solicitor in England in 1996. She graduated in England, completed two years articles between 1994 and 1996 and practised solely in the construction area of law in England until she came to Australia in 1998. It is apparent that she was working with the firm Mallesons Stephen Jaques prior to her admission and once admitted continued to work in the construction field. Effectively, it can be said that she has had a little over four years experience in the construction field.

21    The admission was made in her cross-examination that she has had no experience in the costs assessment processes as I have referred to earlier, although, of course, she would have seen many memoranda of fees and no doubt quite a number of documents within the firm upon which fees have been generated and entered.

22    Mr Casey, on the other hand, has had such experience but did not express any particular view on the substantive matters of the costs in this litigation. Mr Casey's evidence was really responding to the solicitors' for Cordukes assessment of the manner in which the proceedings would be conducted and various estimates made by Mr Regan.

23    The evidence relied upon by Ms Wright is a document that became somewhat controversial prior to the motion being heard on a privilege ground. It is exhibit B. It contains various details of the total legal costs incurred in the matter. That final contract value, as it is referred to, is $1,147,216.50. There have been 41,107 units spent on this litigation. There have been 240,919 minutes spent on the litigation. It is not in issue that a figure of $1.5 million has been expended. The detail of how that is to be apportioned or allocated, of course, is in issue but there is no doubt that a great deal of money, and it appears in the realms of $1.5 million worth of costs have been incurred by Parklane since the beginning of this disputation.

24    The document (Ex. B) does not make any assessment of party/party costs. Indeed, although perhaps not dissected in a way that was precise, Ms Wright was of the view that it excluded from it any reference to the separate proceedings that were apparently brought relating to this matter and it also excluded any other matters not relevant to the issues between the parties in this litigation. In particular, there were matters to which Mr Hunt took Ms Wright which related to separate proceedings possibly on the 20th of March about some inadvertent disclosure and discussions with Einstein J's clerk, as he was referred to, about delivery of documents in respect of the separate proceedings. There were also references to Snelgrove and Partners, lawyers who were apparently dealing with a mediation with the owners corporation which really has no relevance to the costs incurred between the parties at this stage. Indeed, Ms Wright was very frank in indicating that she was not able to indicate how many of those entries there may be.

25    There was also a reference to a preparation of an affidavit in respect of an application. Mr Hunt challenged Ms Wright as to whether that was also a reference to something that had nothing to do with this litigation. Ms Wright once again very frankly said she was unable to recall what it related to. That is not surprising, having regard to the numerous entries in exhibit B. It is also true that there are a number of entries throughout the exhibit relating to the amendment of the pleadings.

26    The approach that Parklane takes is that although there is no costs expert, and although there has been no attempt to provide the Court with the party/party costs, an arithmetical approach can be adopted to the $1.5 million figure; that is that it should be cut in half. If one takes 70 percent of that half as a rule of thumb for a party/party cost recovery, then it is submitted that may well be a fair figure.

27    Mr Underwood submitted that the further calculation carried out by Parklane to reduce that figure even lower to a figure of approximately 23 percent to reach $425,000, is reasonable. It is not contended by Mr Underwood, nor could it be, that this is a precise approach, but he has suggested that in line with previous approaches where cost experts have been called, this would not be an unreasonable approach.

28    The evidence of Mr Lombe is in the form of two reports. He has been cross-examined by Mr Hunt in relation to some of the matters that emerged after Mr Lombe read the evidence of Mr Mentzalis. It is clear that Mr Lombe proceeded upon some bases which needed clarification and amendment, and that exercise was done so that by the time Mr Lombe was cross examined he had clarified the matters that were the subject of complaint.

29    It is necessary to deal with some history of Cordukes to set the relevant competition between the two experts in context. Mr Cordukes is a director of Cordukes. The firm JP Cordukes was established in 1926 by Mr Cordukes's father. That firm was a predecessor of Cordukes. Mr Cordukes has been a director of Cordukes since 1958. His position has changed, and I will deal with that shortly.

30    The Commonwealth Bank was Cordukes banker for many years. In about 1998 Cordukes commenced experiencing some financial difficulties, to use a general term. In September 1998 the then financial controller/company secretary wrote to the Commonwealth Bank and advised that Cordukes required a rearrangement of its facilities to assist it with what was described as a temporary liquidity tightening.

31    The financial controller referred to two projects. One, the Phoenix Apartments at Pyrmont, and two the Carlisle Apartments in Surry Hills, the subject of these proceedings. There were meetings with the bank in December 1998, and discussions about the company's position. It appears that on Christmas Eve 1998 Cordukes was informed that the bank required further comfort.

32    A meeting occurred with the bank in February at the Martin Place premises of the Commonwealth Bank, and the Bank was informed that additional financial losses had been incurred since the letter of September 1998 and discussions prior to Christmas. The half yearly accounts to 31 December 1998, which had been audited, were presented to the bank, which disclosed an operating loss after tax of some $4.6 million.

33    The debate between the bank and the representatives of Cordukes concerned the possibility of the company reducing its level of facilities, and the approach that may be adopted to get it out of its present difficulties. Within two weeks or so the bank had taken a decision to sever its connection with Cordukes. Exhibit L indicates that that was passed on to the financial controller at the time by telephone, and a subsequent meeting was held on 2 March.

34    Although it is apparent that Mr Cordukes advocated for the maintenance of support by the bank, having regard to the fact that it had been a client of the bank for 70 years, there was no capacity to persuade the bank to continue its relationship. After arrangements were put in place to facilitate financing with another bank, the Commonwealth Bank severed its relationship with Cordukes.

35    It is clear that in 1998 and 1999, Cordukes were suffering financial difficulties, and lost its banker of some 70 years. That certainly caused major concern for a publicly listed company.

36    In September 1999 the Australian Financial Review article which was noted by Cordukes' new bank, St George, referred to the fact that Mr Cordukes had resigned as the chief executive officer and was to remain as a non executive director of the company. A new managing director was appointed, who was previously the CEO of Thomas and Coffey, a business that Cordukes had purchased.

37    Concurrently to the matters to which I have been referring, was a decision taken by Cordukes to restructure. That restructure has been referred to in the documents of the both banks which are in evidence.

38    On 7 June 1999 Mr Cordukes, who was then the managing director, and Mr Isherwood, who was the chairman, wrote to the shareholders. It was noted that the company had sold its investment property at Lidcombe, that it had entered into discussions in respect of the disposal of other non core assets of the company, that it had restructured its operations in other states, that there had been a merger of the office in Newcastle with the Thomas and Coffey Newcastle office, that it had undertaken a strategic review of the business of the company.

39    There was a prediction that the company's expectations of a return to profitability would not be fulfilled within the next six months. There was a statement to the shareholders that the board of the company was continuing to address and monitor closely the restructuring process, its financial effects, and the progress of the remaining contractual disputes. That was at a time when the parties were mediating.

40    The St George Bank provided the facilities to Cordukes in place of the facilities that were provided by the Commonwealth Bank. By September 2000, the bank had agreed to extend the company's facilities to 28 February 2001. There had apparently been an internal review of the banking facilities of Cordukes, and the bank noted that as at 30 June 2000, the group reported a further loss resulting in a breach of the loan covenants with the bank. The bank advised that it would waive its rights under the breach of covenants.

41    It then went on to say:

"It can be confirmed that the bank will require the group to meet the ongoing covenants on a quarterly basis, and will reserve its rights in the future. The bank will definitely require the group to operate within the boundaries of the set covenants, and for continued support will certainly require the group to report a satisfactory profit for the 2001 financial year."

42    Since the beginning of this year, the St George Bank has conducted a further review of Cordukes’ account. Its risk grading as at March 2001 and presently, as I understand it, is E2. That is a matter that Mr Underwood relies upon in submitting that this plaintiff is in financial difficulties.

43    In March this year the St George bank noted the following:

"Client expected cheque yesterday for 300K, which has not yet been received. Unable to contact client this morning due to the company holding a board meeting. However, it can be confirmed Cordukes have been achieving monthly profits of $100,000 since September.

SRM is meeting with MD of Cordukes next Friday, and will discuss performance and ongoing cash flow position. A considerable number of projects have been won by the company recently, for which we have been providing bank guarantees, and it is expected that this increase in projects being undertaken will place some temporary pressure on the cash flow. It is expected excess will clear by Tuesday 27 March 2001 through receipt of cheque for 300K and formal or normal banking processes. In the meantime, the company is not writing any further cheques. There is to be a further review on 27 March 2001."

44    Mr Lombe apparently reviewed these documents, but not in a great detail, and he was aware that the bank had graded Cordukes as an E2 risk. The matters that Mr Lombe raised in his report included the disclosure of equity as at 30 June 2000, the operating loss after income tax for that year, the cash position decrease, and the fact that there were certain intangible assets that may on one view of them not be available in respect to meet any costs order. He removed from consideration the future income tax benefits. Another matter to which Mr Lombe referred was the share price of Cordukes. It is, from an investors point of view, and no doubt from the plaintiff's point of view, in an unsatisfactory state at ten cents.

45    Mr Lombe expressed a view that there was reasonable doubt as to whether the plaintiff Cordukes would be able to pay the costs of Parklane, if ordered to do so. It is that opinion upon which Parklane moves for these orders.

46    Cordukes relies upon a later report of the bank, which is Exhibit 2 in this application. It is dated 19 April 2001. The grading is still E2. It was noted in the report that Cordukes continues to undertake restructuring and rationalisation. Significantly, the portion of the report dealing with key risks refers to the profitability and cash flow, together with reference to the cyclical nature of the construction industry.

47    I should here pause to refer to some evidence given by the financial controller of the company, Mr John Martel. Mr Martel extracted the figures for the last ten months, indicating a total year to date profit of some $230,000. There is something significant about these figures, and it has been commented upon by both experts. The figures demonstrate that from September last year to April this year, there were profits of $771,000 achieved, which were reduced by the large losses that were suffered in July and August last year. That in fact amounted to $540,000, reducing the profit for the ten month period to $230,000.

48    The reason I have said it is significant, is that since September there have been no recorded losses, that is in an individual month. They have all been profitable months, obviously having to be reviewed in the overall situation, as has been done.

49    That evidence needs to be read with the evidence of what the bank has said. It noted the decision by Cordukes to diversify in particular into large residential developments at low margins, to significantly increase its market share, and that that had proved to be costly, causing a first ever loss recorded by the company of $12 million in 1999.

50    The bank noted that the group had acted swiftly as a result of the poor trading, by undertaking a major restructure and, to use its term, downsizing the business. The bank then observed:

"The latest financials show the group is now achieving profit before abnormal items, write-offs. The return to the core business has been generally successful, with an increasing number of projects won with acceptable margins. The business must now be profitable for the 2001 financial year in all respects."

51    The bank then went on to refer to the major restructure, the reduction in staffing numbers, and a new business strategy that had been adopted by Cordukes. The bank observed that it would review the position after June 2001, with a view to amending the covenants, and amortisation. The position noted was that the company was improving, albeit slowly, and that further tolerance is supported as proposed pending a mid year review. There has been a return at least to a supportive attitude by a major banking organisation of Cordukes.

52    Mr Martel was tested in his cross-examination and taken to various alternative positions as to the capacity for the company to pay a costs order at particular times. The evidence of Mr Martel is that ultimately the position would be, as he put it, “tight”.

53    It is obvious from both Mr Martel's evidence and from Mr Mentzalis' evidence that it is important that profitability is maintained. But at the moment, with the recent performance which has been referred to as the company having “turned the corner”, both Mr Martel and Mr Mentzalis would go no higher than to say, or perhaps no lower than to say, the position would be tight.

54    Mr Mentzalis, in his report, detailed the matters in Mr Lombe's report and responded to them, ultimately reaching his conclusion that on the assumptions and the matters to which he referred, which of course also rely upon the continued profitability of the company, he is of the view that Cordukes' financial position "should" enable it to pay a costs order if ordered to do so around early to mid 2003.

55    The reference to that date is also significant. Parklane has proceeded upon the basis that the case will not be finalised for another two years. That is because of the features to which Ms Wright has taken the Court, including interlocutory matters, the fact that statements have not yet been ordered and various other matters.

56    There is an issue between the solicitors for Cordukes and the solicitors for Parklane as to the way in which this litigation could be streamlined. On one view of it, there may well be ways in which the litigation can be shortened by restricting issues or dealing with issues in particular ways. There is a difference in view about whether any alternative dispute resolution mechanism would be successful. Mr Casey takes a fairly dim view about that, having regard to the failure of the mediation in 1999. There is a fairly significant change since the mediation and that is this Court's powers to order mediation non-consensually, coupled with the overriding requirement which seems to have failed in this case that litigation in this Court should be just, cheap and quick. In any event, the position is that the expert for Parklane has a reasonable doubt as at the time he gave his evidence and Mr Mentzalis is of the view that Cordukes should be able to pay such a costs order.

57    I should just return to the requirement on Parklane in this application. It is required to put before me material sufficiently persuasive to permit a rational belief that if ordered to do so, Cordukes would be unable to pay the costs of Parklane when the proceedings are disposed of: Warren Mitchell Pty Limited v Australian Maritime Officers Union (1993) 12 ACSR 1 at 5. On that basis, Mr Lombe's opinion is a very important.

58    In my view, Mr Lombe made a concession in his oral evidence that is important in considering whether Parklane has put the material before me that could properly lead to such a rational belief. He said, at page 17:

"Q. Mr Lombe, it's fair to say, isn't it, that your conclusion is that you believe that Cordukes may be unable to pay Parklane's costs of defending these proceedings if they were so ordered to do; that's correct, isn't it?
A. I think my words were 'reasonable doubt'. 'Reasonable doubt' I think were the words I used in my report.

Q. But your position is that there's some degree of uncertainty as to whether they will be able to or they will not be able to?
A. Yes. It's not absolutely clear-cut but my view is there is reasonable doubt.
Q. And your position is, isn't it, that in your view, based upon the analysis that you have done, that the Cordukes may be unable to, depending on how their future activities pan out?
A. Yes, it does depend to some degree on future profitability but my analysis has focused on the present position."

59    I am of the view that Mr Lombe's evidence is a concession that the position is not absolutely clear, that there is some degree of uncertainty and that it will depend upon the profitability of the company. He did refer in that last answer to focusing on the present position. He was tested on that and it does appear that there may well be a more historical approach by Mr Lombe than as at today.

60    I should comment upon that very topic because, as I have already referred to, the figures provided by Mr Martel are up to April 2001. I do not know what has happened in May 2001 and Mr Martel was not asked for those figures. I am assuming, therefore, that in the circumstances any figures may not assist Parklane. They are not before me. The predictions or forecasts are in evidence and it is clear that Mr Martel is of the view that there will be a loss in July 2001, that there will be a loss in January 2002 - I presume that is taking into account the matters pertinent to the contracts Cordukes is currently engaged in - and that, over all, by end of year 2001, there is expected to be a profit of some 1.464 million.

61    Mr Underwood understandably submitted that I should view those forecasts with some scepticism, having regard to the forecasts that had been previously made which have not been met in the last three years by this company. He submitted that the directors of Cordukes had unreasonably optimistic views of the forecasts and that there is no reason for me to be comfortable that this forecast is not of the same ilk.

62    There are a number of factors that have to be weighed in relation to that submission. Firstly, there is a new financial controller. Secondly, there has been a restructure. Thirdly there has been a general rationalisation of Cordukes and fourthly there has been, for the last eight months, a profit in each of those months. Those matters still may not give any one cause for certainty. Indeed, Mr Mentzalis' statement that no-one can guarantee the future, as trite as it is, needs to be remembered in this case. That means that there is a line up to which the evidence has been taken and it is close to the mark in which a court might order security. There is no doubt that the situation has been difficult for Cordukes.

63    That then requires me to consider a number of matters in the exercise of my discretion. The first is what Cordukes alleges is a delay in bringing this application. Mr Hunt makes the point that Mr Lombe's report details observations and opinions in relation to publicly available documentation that would have been available to Parklane and that it could have made an earlier application.

64    There has been no challenge to the amount of money that Cordukes has spent on this litigation thus far. To date, approximately $1.2 million has been incurred and approximately $598,663 has been expended from the commencement of the proceedings in November 1999 to 20 April 2001.

65    Mr Underwood submits that there is no express explanation on the evidence as to why this application was not brought until March 2001. He submitted, however, that I could infer from the material available to me that the position of Cordukes was such that at the end of 1999 there was what he referred to as a turn-around with an operating profit of approximately a little over $200,000.

66    From that material, he submitted that I should infer that there may not have been a delay. That means that at the first available opportunity, an application was made, in other words a previous application was not justified. I do not think that can be established on the evidence. It does appear in Mr Lombe's report and his responses in cross-examination that the exercise that he completed for the year 2000 would have been similar in the year 1999.

67    Mr Hunt submitted that his client had expended $600,000 that may well have been used elsewhere had it been aware that an application of this kind was to be made. He also submitted that the way in which this litigation has been conducted has the plaintiff Cordukes now "locked" into a situation and that the unfairness that may be visited upon Cordukes at this stage would not have been present at an earlier stage.

68    I am of the view that there is no explanation for the delay. That is a matter of fact. The delay in the circumstances of this litigation, having regard to the enormous costs that have been incurred on both sides of the record, in my view, is a significant one.

69    The next matter to which I should turn is the overlap between the issues in the summons and amended summons and the very much amended defence and cross-claim.

70    Mr Regan has practised in the area of construction dispute resolution for the last 13 years. He has compared the pleadings in a schedule in annexure RJR 1 to his affidavit. That annexure needs to be reviewed in light of the very helpful outline that is in exhibit E. Parklane submitted that there are separate matters in Cordukes’ claim from the cross-claim brought by Parklane. They are the matters of the quantum meruit claim, the claims in respect of practical completion and the variations claim.

71    It has to be remembered that this case involves competing claims about whether the contract was repudiated and legally rescinded or validly terminated. It seems to me that the quantum meruit claim and the alternative claims for damages may well overlap. The issue of practical completion cannot be isolated because of the matters to which I referred earlier in respect of the claims made by Parklane in fixing the date of practical completion, the claims made in respect of the standard of work, the defective works and the delay claim. It seems to me that the issues in the summons and the cross-claim do overlap and they certainly rely upon the same factual matrix.

72    Mr Underwood's submission in respect of the variations is a sound one. Indeed, as it is to be expected, Mr Hunt properly conceded that it is a discrete matter. That discrete matter is contained in schedule 3 to the amended summons. The items upon which Cordukes claim those amounts for additional work cover some four pages and when compared to the schedules to the further amended cross-claim, pale into insignificance.

73    A further matter that needs to be considered is the question as to whether Cordukes' difficulties that were experienced in 1998, 1999 and the year 2000 were causally related to the conduct of Parklane. Mr Cordukes was cross-examined about these matters and would not concede that the other projects in which his company was involved at the relevant time caused the financial difficulties.

74    One of the documents tendered in Parklane's case is the letter from the financial controller to the Commonwealth Bank dated 21 September 1998. That letter says of the Carlisle Apartments:

"This project is the main reason for the difficulty. Delay claims against the client and quantity surveyor of approximately 3.5 million remain outstanding and we believe will not be finalised for three to four months."

75    At least as at September 1998, the financial controller of Cordukes took that view. Whether that was justified is another matter. The problem seems to have arisen at least in some respects by Cordukes not receiving progress payments. The reasons for that are matters that need to be decided in the main case. Cordukes claims that the result was that this caused its financial difficulties. It may or may not be so. I am not in a position today to decide that it was, having regard to the evidence before me. There is certainly a hotly contested issue in respect of that matter.

76    There is another aspect to that conduct. It is submitted that Parklane took self-help by reducing the amounts of progress payments which the architect certified. Reliance is placed on the admission made in the defence to which I referred earlier of the architect taking into account the amount of $625,000.

77    Mr Underwood submitted that I should approach my task with a predisposition in favour of Parklane. That term comes from a decision of Waddell J in Southern Cross Exploration v Fire and All Risk Insurance Ltd (1985) 1 NSWLR 114.

78    In that case Waddell J was citing Street CJ’s decision in Buckley v Bennell Design Construction Pty Ltd (1974) 1 ACLR 301 and 305. What the Chief Justice said in that case was that it seemed to him that the discretion could properly be regarded as ordinarily exercisable, so as to protect a defendant sued by an impecunious company, but that if the Court in any case takes the view that this protection should not be afforded to the defendant, it has an unlimited and unrestricted discretion to give effect to such view, without having to look for special circumstances.

His Honour then went on to say:
"I prefer to regard the discretion conferred by the section as being one which should be exercised merely with the predisposition in favour of the defendant party."

Waddell J then noted that such statement was obiter, and not adopted by the other members of the Court in that case.

79    In any event, Beazley J in K P Cable Investments Pty Ltd v Meltglow (1995) 56 FCL 189 referred to the law being “now settled”, that the discretion is unfettered and should be exercised having regard to all the circumstances of the case, without any predisposition in favour of an award for security. That is the way in which I approach this application.

80    The matter of delay to which I referred earlier needs to be one that is balanced against a very significant undertaking that has been given by Parklane through its solicitor, Mr Casey. It has undertaken that if security is ordered, it will not prosecute its cross-claim until security is provided.

81    That, Mr Underwood submitted, is a feature distinguishing this case from the myriad of cases to which both parties have referred. I have taken that matter into account in a significant way, I have had regard to Mr Lombe's concession at page 17 of the transcript, the unexplained delay in bringing this application, the same factual matrix and the overlap between the summons and the cross-claim, and the fact that the evidence discloses, in my view, what may be regarded as a better financial position - and I put it no higher than that - presently that Cordukes enjoys, in reaching the decision that to do justice between the parties, it is not appropriate to make the orders sought by the applicant to the notice of motion. In those circumstances, I dismiss the notice of motion.

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Last Modified: 06/13/2001