Dalem Investments Pty Ltd (ACN 129 747 011) (as trustee of the Dalem Trust) and Ors

[2022] VCC 578

IN THE COUNTY COURT OF VICTORIA

AT MELBOURNE

COMMERCIAL DIVISION

Revised
Not Restricted
Suitable for Publication

GENERAL LIST

Case No. CI-21-01713

DALEM  INVESTMENTS PTY LTD (ACN 129 747 011)  AS TRUSTEE OF THE DALEM TRUST	Plaintiff
v
OWNERS CORPORATION 1 PLAN NO. PS742733Q & ORS	Defendant

---

JUDGE:	HIS HONOUR JUDGE MACNAMARA
WHERE HELD:	Melbourne
DATE OF HEARING:	27 April 2022
DATE OF RULING:	27 April 2022
CASE MAY BE CITED AS:	Dalem Investments Pty Ltd (ACN 129 747 011) (as trustee of the Dalem Trust) & Ors
MEDIUM NEUTRAL CITATION:	[2022] VCC 578

REASONS FOR RULING

---

Subject:  Security for Costs

Catchwords:             Security ordered – security not paid by date set – proceeding stayed – whether proceeding should be dismissed where plaintiff deliberately refrained from paying pending advice from new solicitors – proceeding claiming more than $6 million a cloud on title of each of 250 units served by defendant owners corporations – effect on price and resale – unreasonable for plaintiff to delay decision – self-executing order of dismissal operating in 21 days if security not paid

Legislation Cited:     County Court Civil Procedure Rules 2018; Sale of Land Act 1962

Cases cited:Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 18; Marinas v Prendergast [2019] WASC 215

Judgment:Order of dismissal by way of self-executing order to take effect 21 days in the event that the security remains unpaid.

---

APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr N. Evans, solicitor	Aptum Legal Pty Ltd
For the Defendant	Mr T. Sedal	Boutique Lawyers

HIS HONOUR:

1In this proceeding, the plaintiff seeks an amount in excess of $6 million as being owing to it by reason of the operation of management agreements with some four Owners Corporations, which are the defendants in the proceeding.  The defendants have filed detailed defences denying liability.  Amongst the matters asserted on their behalf is that, whilst the agreements were drawn upon the supposition they would be entered into whilst the developers were the sole owners of units in the four Owners Corporations, in fact, the purported agreements were made after third party purchasers had become unit holders and, therefore, members of the various Owners Corporations.  Further, it is said, the rules as to the use of the Owners Corporations’ common seals have not been properly adhered to.  A further defence now made is that the agreements were procured by the payment of some $600,000 as a commission to the developer and, in the circumstances, therefore, if otherwise valid, could be avoided upon the basis of the payment of a secret commission or bribe.  Finally, there is a claim for knowing assistance and knowing receipt on the basis that the plaintiff was a third party knowingly assisting, or knowingly receiving, trust property from the developers who were said, in the circumstances to be in the position of a trustee or trustees, or other fiduciary. 

2Judge Brimer heard an application for security for costs on the part of the defendants, which was successful.  Her Honour ordered payment of money by way of security by 22 March this year, failing which the proceeding would stand stayed.  That security has not been provided.  Indeed, the solicitors then acting for the plaintiff advised the Court, and the defendants, that that security would not be given.  As a result, the proceeding is now stayed. 

3The present application is made under Order 62.4 of the County Court Civil Procedure Rules 2018, which provides:

“Where a plaintiff fails to give the security required by an order, the Court may dismiss the plaintiff’s claim.”

4Mr Sedal of counsel, who appears on behalf of the defendant, submits, in the circumstances, this power should be exercised. Since the hearing before Judge Brimer, the initial firm of solicitors acting for the plaintiff has ceased to act. The plaintiff obtained advice, initially from its present solicitors on 17 March, and those solicitors filed a Notice of Acting in this proceeding for the plaintiff on 1 April this year. Mr Sedal says that, in the circumstances, the interests of justice favour the making of the order which this client seeks. He has relied upon affidavit material filed on behalf of the defendants to the effect that pendency of the proceeding for such a large sum of money as $6 million has had a negative effect on the value of the various units affected by the defendant Owners Corporations. He says, and it is not denied, that the existence of this proceeding, albeit stayed, is a matter which any unit holder offering his, her or its, unit for sale, must be disclosed in the Vendor’s Statement in accordance with s32F of the Sale of Land Act 1962. Affidavit material would also suggest that the pendency of the proceeding has been the cause of concern and dissension amongst the unit holders. Accordingly, says Mr Sedal, the order should be made.

5He complained that the course taken by the plaintiff amounts to flouting Judge Brimer’s order.  The plaintiff has put on evidence to the effect that its original solicitors were, in the course of March – that is last month – perceived to be acting in conflict of interest.  They had been involved in the preparation and execution of the agreements which were the subject matter of the proceeding.  New solicitors have been appointed, but Mr Evans of that new firm, Aptum, has said that his firm has not been in a position to provide definitive advice to the plaintiff as to whether it should press on with the proceeding in light of the various defences asserted against it.  He says that the plaintiff has had difficulty obtaining access and, in fact, has not, at this stage, obtained access to the file created by its original solicitors.  Moreover, there are other matters which require investigation and the relevant material for those other matters must be sourced from other quarters.  Further consideration needs to be given, he says, to the possibility of a transformation of this proceeding, so that it might be brought not only on the present claims against the present defendant, but, also, in the alternative, against the solicitors, and perhaps the developer.  Mr Evans says that the just outcome is that this application should be adjourned to 23 June, by which time his client should be presumed to have the opportunity to carry out the investigations and give consideration to the matters already described.  Mr Sedal says that such a thing would be intolerable to the defendants who have the cloud of this proceeding hanging over them. 

6If it appears that, this proceeding, having been dismissed, further consideration discloses there is a claim to be brought against these defendants with or without other persons, a new proceeding might be launched.  It is not suggested that success for the defendants in this application would create a res judicata or issue estoppel which would prevent the renewal of a claim either in the present form or in a modified form.  Mr Evans noted that the authority, Idoport Pty Limited v National Australia Bank Limited [2002] NSWSC 18, which is commonly cited in these circumstances, characterises the making of an order of dismissal as an extreme step. He says that extreme step ought not be taken in the circumstances. He says that his client, on the basis of an affidavit from its director, is in a position to pay the security ordered by Judge Brimer if, upon further consideration, it seems the wise and proper thing to do. He denied, in the circumstances, that his client should be regarded as not paying what it was able to pay as being a contender in the circumstances. Mr Sedal stressed that, whilst the order for security was principally relative to costs yet to be incurred and therefore matters which were in the future rather than matters which were a present burden for the defendants, the form of her Honour’s order showed that the amounts she said ought to be paid included the costs of the successful application which, although her Honour authorised them to be forthwith assessed despite a presumption to the opposite in the Rules, had not, in fact, been assessed. Mr Sedal’s point, however, is that his clients are out of pocket for costs already incurred and costs which the Court has ordered should be met by the plaintiff.

7I accept that making an order of dismissal is an extreme step.  However, Mr Sedal referred to a decision of Martin J of the Supreme Court of Western Australia, Marinas v Prendergast [2019] WASC 215 at paragraph [66], where his Honour said:

“None of that, of course, is to render any final determination concerning the ultimate merits of this action at trial. However, for my present task perspective of evaluating possible prejudice to the plaintiffs on this dismissal application, it is clear that, even viewing the presently proposed reamended repleading(s) of the statement of claim, that the action, at least on paper, displays itself as being a marginal looking action in terms of its prospects and ultimate merits.”

8Something similar, I think could be said here.  Very substantial defences are being urged against the plaintiff’s claim and the plaintiff, itself, is in a state of uncertainty as to whether this is a proceeding that it wishes to go on with or not.  In the same way as the substantive merits of the claim were thought to be relevant by Martin J in Marinis v Prendergast these matters are, I believe, relevant here.  Further, Mr Evans rightly conceded that the present state of affairs constituted a prejudice to the defendants of which they could legitimately complain.  I have been told there were as many as 250 units affected by the four Owners Corporations.  It is in the nature of todays’ highly mobile society that at any moment it is likely at least one, or probably more than one, of those unit holders would be seeking to market his, her, or its unit, and the pendency of this proceeding constitutes a cloud on title and a deterrent to successful selling.  Therefore, where we have a claim that even the plaintiff is not really confident in at this point, I believe it constitutes a cloud which it is proper to remove from the defendants’ title, in the knowledge that the plaintiff, should it think better of matters, can return to the fray with a new proceeding.  It would be wrong to effect a dismissal “on the nail today”.  In my view, there should be an order of dismissal by way of self-executing order to take effect twenty-one days from today in the event that the security ordered by Judge Brimer remains unpaid.

---