Crestland Investments Pty Ltd v Parisi Holdings Pty Ltd

[2003] WASC 181

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   CRESTLAND INVESTMENTS PTY LTD -v- PARISI HOLDINGS PTY LTD & ANOR [2003] WASC 181

CORAM:   MASTER NEWNES

HEARD:   8 SEPTEMBER 2003

DELIVERED          :   22 SEPTEMBER 2003

FILE NO/S:   CIV 1858 of 2002

BETWEEN:   CRESTLAND INVESTMENTS PTY LTD

Plaintiff

AND

PARISI HOLDINGS PTY LTD
First Defendant

THE REVEREND BARRY JAMES HICKEY THE ROMAN CATHOLIC ARCHBISHOP OF PERTH
Second Defendant

Catchwords:

Practice and procedure - Security for costs - Interpleader proceedings - Claim and defence to counterclaim from same factual matrix - Delay - Turns on own facts

Legislation:

Rules of the Supreme Court 1971 (WA), O 25

Result:

Security for costs refused

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J C Giles

First Defendant             :     No appearance

Second Defendant         :     Mr M W Fatharly

Solicitors:

Plaintiff:     Solomon Brothers

First Defendant             :     No appearance

Second Defendant         :     Kott Gunning

Case(s) referred to in judgment(s):

Bryan E Fencott Pty Ltd & Associates v Eretta Pty Ltd (1987) 16 FCR 497

Buckley v Bennell (1974) 1 ACLR 301

Circaz Pty Ltd v Manolidis (2003) 45 ACSR 542

Concrete Constructions Pty Ltd v Dalma Formwork Pty Ltd [1999] NSWCA 16

Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1

McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 143

Rhodes v Dawson (1886) 16 QBD 548

Sarac v Croatian House Hrvatski Dom (Inc), unreported; FCt SCt of WA; Library No 950675; 12 December 1995

Spargos Mining NL v Fuller (2003) 21 ACLC 860

Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289

Case(s) also cited:

Bell Wholesale Co Ltd v Gates Export Corp (1984) 2 FCR 1

Brown v Haig (1905) 2 Ch 379

Brunza v Robbie & Co (No 2) (1952) 88 CLR 171

Cowell v Taylor (1885) 31 Ch D 34

Crestland Pty Ltd v Parisi Holdings Pty Ltd [2003] WASC 148

Dalecoast Pty Ltd v Guardian International Pty Ltd, unreported; SCt of WA (Master Sanderson); Library No 990168; 7 April 1999

JH Billington Ltd v Billington [1907] 2 KB 106

Kevorkian v Burney (No 2) [1937] 4 All ER 468

King v Commercial Bank of Australia Ltd (1920) 28 CLR 289

KP Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189

Melville v Craig Nowlan & Associates Pty Ltd (2002) 54 NSWLR 82

Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364

Morris v Hanley [2001] NSWCA 374

Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355

Ratcliffe v Ratcliffe [2003] WASC 79

Ratnam v Cumarasamy [1965] 1 WLR 8

Re City of Perth; ex parte Lord [2002] WASCA 254

Salomon v Salomon & Co Ltd [1897] AC 22

Shannon v ANZ Banking Group Ltd (No 2) [1994] 2 Qd R 563

Yandil Holding Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542

1. MASTER NEWNES: This is an application by the second defendant ("the Archbishop") for an order for security for costs pursuant to O 25 of the Rules of the Supreme Court.  The Archbishop is, by virtue of s 4 of the Roman Catholic Property Act, a body corporate.

2. By what was described by counsel for the Archbishop as an oversight, this application was made solely under O 25. The solicitors for the plaintiff ("Crestland") made it clear in their written outline of submissions, served before the hearing, that they were approaching the application on the basis that O 25 was the sole ground relied upon and they made it clear at the outset of the hearing that they would oppose reliance on any other ground.

3. This action arises out of a contract for the sale of certain land in Wellington Street, Perth, made between the Archbishop as vendor and Crestland as purchaser.  The first defendant was the real estate agent engaged by the Archbishop to sell the property.  The contract was entered into on 20 December 2002 and provided for a purchase price of $1,250,000, with payment of the sum of $100,000 by way of deposit.  The deposit of $100,000 was duly paid by Crestland to the first defendant. 

4. Crestland alleges that, before it entered into the contract, the first defendant, on behalf of the Archbishop, represented to it that the property was able to be redeveloped, was suitable for redevelopment as a retail shop or shops and was structurally sound.  Crestland says that the first defendant did not inform it that (as Crestland alleges to be the case) any redevelopment would require the approval of the Heritage Council, that the property could not be redeveloped without retaining the original facade - which was in an unsound condition and would have to be rebuilt at substantial expense - and that further substantial expense would be required to meet the conditions of the local authority and to put the building into a structurally sound condition.  Crestland also says that it was an implied term of the contract that the building was structurally sound and capable of use as a retail shop or shops.  It alleges that it is neither structurally sound nor fit for such use and accordingly the Archbishop is in breach of that term.

5. On 8 August 2001, Crestland wrote to the first defendant, as the Archbishop's agent, to say that it was rescinding the contract on the ground that Crestland had been induced to enter into it by misleading and deceptive conduct on the part of the first defendant, as the agent of the Archbishop, alternatively because the Archbishop was in breach of the implied term.

6. The Archbishop denied Crestland's allegations and denied that Crestland was entitled to rescind the contract.  The Archbishop treated Crestland's letter as a repudiation of the contract, which it accepted. 

7. Crestland and the Archbishop each claimed to be entitled to the deposit, which was held in the first defendant's trust account.  The first defendant commenced interpleader proceedings.  The question then arose as whether Crestland or the Archbishop should be the plaintiff in the proceedings.  It appears from an affidavit, sworn on 30 June 2003, by Mark William Fatharly, the solicitor acting for the Archbishop, that the Archbishop wished to be made the plaintiff, but that at a hearing on 19 July 2002 Acting Master Chapman, after hearing submissions from the parties, decided that Crestland should be the plaintiff and the Archbishop should be the second defendant. 

8. Since then further claims have been made on each side.  Crestland says that it incurred expenditure in excess of $60,000 in relation to the property after entering into the contract and it seeks to recover that expenditure from the Archbishop.  The Archbishop says that it has since resold the property for $1,100,000, thereby suffering a loss of $150,000, and it counterclaims against Crestland for that amount and for a declaration that it is entitled to retain the deposit.

9. The primary issue in Crestland's claim against the Archbishop, and in its defence to the Archbishop's counterclaim, is whether Crestland was entitled to rescind the contract by reason of the alleged misrepresentations or breach of an implied term of the contract of sale.  The determination of those matters will determine whether Crestland or the Archbishop is entitled to the deposit and to any consequential damages.  I should say that neither party contended on this application that the consequential loss claims would take up a significant part of the trial.

10. It is against that background the Archbishop's application for security for costs falls to be determined.

11. So far as it is relevant, O 25 provides as follows:

    "1.The Court may order security for costs to be given by a plaintiff, but no order shall be made merely on account of the poverty of the plaintiff or the likely inability of the plaintiff to pay any costs which may be awarded against him.

    …

    3.The granting of security shall be in the discretion of the Court, and in determining whether an order should be made the Court shall take into consideration ¾

    (a)the prima facie merits of the claim;

    (b)what property within the jurisdiction may be available to satisfy any order for costs against the plaintiff;

    (c)whether the normal processes of the Court would be available within the jurisdiction for enforcement of any order for costs made against the plaintiff."

12. It is clear that there is a general discretion to award or refuse security for costs which is not limited to the matters set out in O 25 r 2 (none of which is relevant on this application) and that, while the mere fact of the poverty of the plaintiff is not of itself enough to justify an order for security for costs, the capacity of the plaintiff to meet an order for costs if unsuccessful in the action is an important consideration: Sarac v Croatian House Hrvatski Dom (Inc), unreported; FCt SCt of WA; Library No 950675; 12 December 1995.

13. Crestland conceded that, on the evidence, it was not in a position to meet an order for costs if it were unsuccessful in the action. 

14. On the question of the merits of its claim, Crestland's counsel submitted that on the material available on this application the only appropriate conclusion was that Crestland's claim was reasonably arguable:  Circaz Pty Ltd v Manolidis (2003) 45 ACSR 542 at 549; Spargos Mining NL v Fuller (2003) 21 ACLC 860 at 863. I accept that that is the case.

15. The grounds upon which it was submitted on behalf of Crestland that the application for security should be refused were, first, that there is a substantial overlap in the factual and legal issues arising in Crestland's claim and the Archbishop's counterclaim and, secondly, that there has been excessive delay in bringing the application. 

16. In the current circumstances, where the proceedings are interpleader proceedings, whether a party is to be treated as a plaintiff or a defendant is to be determined on the real merits of the case and not by the form in which the action is constituted.  It may be that each claimant is as much a plaintiff as the other:  Rhodes v Dawson (1886) 16 QBD 548 at 553.

17. In addition, where the issues between the parties cover substantially the same factual ground, that is an important consideration in the exercise of the discretion.

18. In Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 73 ALR 289, Smart J noted (at 300) that a factor relevant to the exercise of the discretion to award security for costs was:

    "[w]hether substantially the same facts are likely to be canvassed in determining the action and the cross‑action.  The court would be slow to allow a situation where the action is stayed because of the inability to provide security but the cross‑action covering substantially the same factual area proceeds."

19. That statement was referred to with approval by Rolfe J in Dalma Formwork Pty Ltd (Administrator appointed) v Concrete Constructions Pty Ltd and, on appeal, in Concrete Constructions Pty Ltd v Dalma Formwork Pty Ltd [1999] NSWCA 16, where Sheppard AJA (with whom Mason P and Handley JA agreed) said [at 24]:

    "But as Rolfe J said … the fact that a claim and a cross‑claim arise out of the same, or essentially the same, factual matrix is a very important consideration.  He added that it would be quite wrong to preclude a party from litigating matters by way of defence to a cross‑claim merely because that party was the initial institutor of the proceedings.  I entirely agree with what Rolfe J has said.  He concluded this part of his judgment by saying that it was a somewhat arid exercise to be considering an application for security for costs if the plaintiff could be cast in the role of defendant and could litigate the very matters the subject of its claim by way of defence."

20. In the present case, I think it can reasonably be said that in substance Crestland and the Archbishop are each as much a plaintiff as the other.  Moreover, as I have said, the primary issue in both Crestland's claim and in its defence to the Archbishop's claim is whether Crestland was, as it claims, entitled to rescind the contract by reason of misleading or deceptive conduct or breach of an implied term.  It follows that, even if Crestland's claim were to be stayed, it would still be entitled to litigate that issue in defence to the Archbishop's claim.  The only matter that would fall away would be Crestland's claim for consequential losses.

21. I accept, as submitted by Crestland's counsel, that it would be a somewhat odd result if Crestland was ordered to provide security for costs for its claim, with the potential consequence that that claim could be stayed, when essentially the same factual issues would be litigated in its defence of the Archbishop's counterclaim.

22. In the circumstances, I do not consider that Crestland should be required to provide security for costs.

23. As the question of the delay in bringing this application was fully argued, it is appropriate that I deal with it. 

24. Counsel for Crestland pointed out that the interpleader proceedings had been commenced in June 2002 and directions for the trial of the issues made in July 2002.  An order for payment of the deposit into court was made at that time.  Crestland filed its original statement of claim on 14 August 2002 and the Archbishop's defence and counterclaim were filed on 26 August 2002.  Crestland filed an amended statement of claim on 10 October 2002, together with a reply and a defence to the Archbishop's counterclaim.  Discovery was provided by the parties in October and November 2002.  On 31 March 2003, Crestland made an application to further amend its statement of claim and, on 11 April 2003, the first defendant applied to strike out parts of the amended statement of claim.  Those matters came on for hearing on 22 July 2003 and on 15 August 2003 an order was made striking out some parts of the amended statement of claim, with leave to replead.  A further minute of proposed amended statement of claim has since been filed.  This application was filed on 30 June 2003.

25. In his affidavit of 30 June 2003, Mr Fatharly says that, at the commencement of the proceedings, he knew little of Crestland's financial status and did not know enough to determine whether an application for security for costs was appropriate.  He says the early progress of the claim was comparatively swift and it appeared that the matter could be brought to trial relatively quickly.  Mr Fatharly says he considered that any application, whether in relation to the pleadings or otherwise, would bring about delay and expense.  However, following the first defendant's application to strike out the claim and Crestland's application to amend it, and the need for further amendments to be made to Crestland's statement of claim, the progress of the proceedings slowed and they have since become caught up in interlocutory applications which have added, and are likely to add, significantly to the costs of the parties. 

26. In those circumstances, Mr Fatharly spoke to the first defendant's solicitors and was informed that they proposed to make an application for security for costs.  Mr Fatharly then arranged for various searches to be conducted to ascertain the financial position of Crestland and those who stood behind it.  On 9 May 2003, he received from the solicitors for the first defendant a letter from Crestland's solicitors by which its directors gave an undertaking to the first defendant to pay any party‑party costs order in favour of the first defendant up to an amount of $45,000. 

27. The Archbishop's solicitors then wrote to Crestland's solicitors on 20 May 2003 inquiring whether Crestland would provide security for costs or a similar undertaking.  Crestland's solicitors declined by letter of 26 May 2003.  Mr Fatharly says he then sought instructions on whether to pursue an application for security for costs.  The filing of the application was also delayed by his commitments in another matter. 

28. It is well established that an application for security for costs must be made promptly:  McLaughlin v Daily Telegraph Newspaper Co Ltd (1904) 1 CLR 143; Foss Export Agency Pty Ltd v Trotman (1949) 67 WN (NSW) 1. The further a plaintiff has proceeded in an action and the greater the costs the plaintiff has been allowed to incur without steps being taken to apply for an order for security for costs, the more difficult it will be for the defendant to persuade the Court that such an order is not, in the circumstances, unfair or oppressive: Bryan E Fencott Pty Ltd & Associates v Eretta Pty Ltd (1987) 16 FCR 497 at 514; Buckley v Bennell (1974) 1 ACLR 301 at 309. The need for such an application, which could have a substantial effect on the litigation, to be made promptly is reinforced by O 1 r 4A and 4B.

29. I accept, however, that delay is not of itself necessarily decisive and that it must be considered in the light of all of the circumstances of the case. 

30. In the present case, Mr Davies, in his affidavit of 1 August 2003, says that, in light of the time the proceedings have been on foot, Crestland did not expect that an application for security for costs would be brought and since the proceedings commenced it had structured its affairs on the basis that security for costs would not have to be provided.  Mr Davies does not, however, explain how Crestland's affairs have been so structured or what effect an order for costs would have on Crestland.  I am not inclined, in those circumstances, to give any significant weight to that.  There is, moreover, nothing to suggest that Crestland would have taken any different course in respect of this litigation had an application been made earlier and, given the common issues that arise in its claim and its defence to the Archbishop's counterclaim, it is not readily apparent how it could.

31. The fact remains, however, that the application has been brought relatively late in the proceedings.  I do not regard the explanation provided for the delay as satisfactory.  Enquiries into the second defendant's financial position could have been made much earlier.  A decision having been made early in the proceedings not to pursue such an application, the current interlocutory applications referred to do not seem to me to be sufficient to justify a change of heart.

32. Although I do not regard the delay as sufficient in itself to warrant the dismissal of the application, it is an additional reason that weighs against an order for security being made.

33. In my view, in the circumstances the application should be dismissed.