Ecos College Inc v J & P Pope Pty Ltd No. Scciv-02-1543

[2003] SASC 33

ECOS COLLEGE INC v J & P POPE PTY LTD
[2002] SASC 33

LEAVE TO APPEAL

1. GRAY J                 This is an application for leave to appeal against an order made by a Judge of the District Court for security for costs.

   Background

2. In March 2001 the parties entered into a written agreement (“the agreement”) with respect to the operation and purchase of a boat. The defendant, J & P Pope Pty Ltd was said to have leased a boat to the plaintiff, Ecos College Inc for a period of 5 years with an option to purchase the boat during that time. Ecos College claimed that on 21 June 2001 J & P Pope seized and subsequently sold the boat.

3. Ecos College claimed that the actions of J & P Pope were in breach of the agreement. It was alleged that the breach deprived Ecos College of the use and enjoyment of the boat causing loss and damage including lost bookings, lost projected earnings and the cost of a replacement boat. Damages were estimated at more than $178,000.00.

4. J & P Pope denied that there had been any breach of the agreement. J & P Pope made an application for security for costs. A supporting affidavit set out the basis for the application. It was argued that the claim was controversial, and that a trial may result in costs of around $15,000. J & P Pope contended that Ecos College was an associated incorporation. Its principal objects did not include engaging in trade or commerce or securing a pecuniary profit for its members. J & P Pope did not believe that Ecos College would be able to pay costs if its claim was rejected.

5. The Judge allowed the application and ordered security for costs in the amount of $10,000. Due to computer error the reasons given by the Judge were not transcribed. However, the Judge provided a brief summary of his reasons:

   “Firstly, I was of the view that [Ecos College] did not have a strong case, having read the primary documents and considered the matters before me.

   Secondly, I did not think it a valid answer to the application for security that [Ecos College] might have earned an income had the boat not been repossessed. It would seem to me that even with an income the financial position was parlous anyway. I did not think that there was any undue delay in bringing the application and whilst I acknowledge that on present information it would seem that an order will thwart the claim [of Ecos College], nevertheless I do not think [J & P Pope] should be forced to bear the risk of recovering nothing in the event of success.”

   Appeal

6. Ecos College complained in its written application that the Judge erred in law and fact in reaching his conclusions. It was said he erred in finding that the evidence entitled J & P Pope to an order for security for costs. It was contended that he erred in finding that the applicant did not have a strong case. It was submitted that the Judge misdirected himself by concluding that the applicant had to establish a ‘strong’ case. It was said he placed too much emphasis on the impecuniosity of Ecos College. Finally, it was said the he erred in concluding that J & P Pope had not unduly delayed the making of the application for security.

7. On the hearing of the leave application, counsel for Ecos College submitted that Arthur Boucaut Jones, the public officer of the applicant, was the only person who stood behind the applicant and was the only person who would benefit from the litigation. It was said that the beneficiaries of a trust fund that received money from Ecos College were not natural persons. It was a purpose trust, controlled by Ecos College. Information was provided that Mr Jones was impecunious. He was a discharged bankrupt. His only asset was said to be a 1992 Holden motor vehicle valued at no more than $2,000. This was the only security he was able to provide. Mr Jones worked as a part-time bookkeeper. However no information was provided in regard to his earnings or the nature of his employment.

8. Counsel for J & P Pope noted that it had been conceded that Ecos College was impecunious. It was emphasised that the applicant’s financial position had not arisen from any conduct on the part of the respondent. It was said that there were persons who stood to benefit from the action. One substantial creditor was apparently related to Mr Jones. The financial position of that creditor was not revealed.

   Consideration of the Issues

9. The Judge exercised a discretion to order security for costs. Counsel for Ecos College accepted that no point of general principle arose in the proposed appeal. The complaint related to the exercise of discretion in regard to the matter of practice and procedure.

10. Before this court the thrust of the submission was that the order for security for costs would stifle an arguable claim. It was said that the interests of fairness and justice should lead to a grant of leave, and ultimately an order setting aside the Judge’s order for security for costs.

11. The decision to order security was an interlocutory decision relating to a matter of practice and procedure. No error has been identified in the Judge’s approach. The Judge has not had regard to any irrelevant factor or overlooked any relevant material. The amount of security ordered was relatively modest. In the course of the hearing of the application Ecos College produced limited financial records and discrete records relating to trusts associated with the college. The records were incomplete and materially deficient. The documentation disclosed that a substantial creditor was related to Mr Jones. No information was provided about this creditor’s interest in the litigation, or the creditor’s ability to provide security.

12. Having reviewed the material and considered the submissions of counsel advanced in this Court I do not consider that leave to appeal should be granted. There is no reason to doubt the correctness of the Judge’s decision. No injustice arises. The application for leave is refused.