GB Radio (Australia) Pty Ltd v Marchant (No 3)
[2005] VSC 222
•27 June 2005
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
No. 4408 of 2000
| GB RADIO (AUSTRALIA) PTY LTD AND OTHERS | Plaintiffs |
| v | |
| PIETER CECIL MARIA MARCHANT | Defendant |
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JUDGE: | HARGRAVE J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 27 May 2005 | |
DATE OF JUDGMENT: | 27 June 2005 | |
CASE MAY BE CITED AS: | GB Radio (Aust) v Marchant (No. 3) | |
MEDIUM NEUTRAL CITATION: | [2005] VSC 222 | |
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SECURITY FOR COSTS – Plaintiff’s application to discharge order for security for costs due to material change in circumstances since making of order – Delay by plaintiff in making application for discharge – Relevant principles to be applied to the exercise of the Court’s discretion – Rule 62.05, Supreme Court (Miscellaneous Civil Proceedings) Rules 1998 (Vic) – Gordano Building Contractors Ltd v Burgess [1988] 1 WLR 890 applied.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr P. Corbett | Donaldson Trumble |
| For the Defendant | Mr S. Wilson QC and Mr M. Strang | Aitken Walker & Strachan |
HIS HONOUR:
The Application
I have before me an appeal against a decision of Master Kings. Master Kings ordered that an amount paid into Court by the first plaintiff in respect of previous orders of the Court that the first plaintiff provide security for costs of this proceeding be released to the first plaintiff. The appeal raises for consideration the content of the discretion of the Court to vary or discharge an order for security for costs which has been made and complied with.
Pursuant to orders made by Master Wheeler on 18 October 2001 and 25 March 2002 in this proceeding, the first plaintiff was ordered to provide security for the costs of the defendant in the sum of $120,000. These orders were made by consent. As a result, the first plaintiff paid the sum of $120,000 into Court.
By summons dated 10 December 2004, the first plaintiff sought an order that the amount paid into Court by it as security for the costs of the defendant be released to it. This summons was based upon “changed circumstances” since the consent orders were made by Master Wheeler in 2001 and 2002.
On 5 May 2005, Master Kings delivered her reasons in respect of the first plaintiff’s application for a release of the monies paid into Court by way of security for the defendant’s costs. Without making any formal order, the Master stated in her reasons that, for the reasons given, she considered that the orders for security for costs should be discharged.
I was informed by counsel for the parties that, following the delivery of her reasons, an application was made on behalf of the defendant to Master Kings for a stay of her order discharging the orders for security for costs. Counsel informed me that this application was refused.
A short while later, the $120,000 paid into Court by the first plaintiff as security for costs was released to it. The amount released was exactly $120,000. As it had been contended before Master Kings that the first plaintiff was not suffering prejudice because the monies paid into Court would be earning interest, I gave special leave to the first plaintiff to rely upon an affidavit establishing that the monies released did not include any amount for interest.
Notwithstanding a request on behalf of the defendant that the $120,000 released from Court not be used by the first plaintiff pending a decision by the defendant as to whether to appeal, the sum of $120,000 was immediately used by the first plaintiff to pay outstanding legal costs due to its former solicitors. In my view, the application to Master Kings for a stay having been refused, and no application having been made for an injunction pending an appeal against the decision of Master Kings, it was entirely appropriate for the first plaintiff to use the $120,000 in this way.
The defendant has appealed against the decision of Master Kings to discharge the orders for security for costs. The nature of an appeal from a Master is a re-hearing de novo. [1] However, the judge hearing the appeal is entitled to give such weight to the decision of the Master as appears proper.[2]
[1]Rule 77.05(7).
[2]Southern Motors Pty Ltd v Australian Guarantee Corporation Limited [1980] VR 187 at 190; Australian Management Consultants Pty Ltd v Direct Mortgage Funding Pty Ltd & Ors [2003] VSC 202 at [18]-[21].
Background facts
It is first necessary to consider the relevant factual background against which the application was made by the first plaintiff for an order that the monies paid into Court by way of security for costs be released. In this regard, I note that the facts have already been canvassed in some detail by Beach J in two interlocutory judgments[3] and also by Master Kings in her reasons for judgment.
[3]G.B. Radio v Marchant [2000] VSC 213; GB Radio v Marchant [2001] VSC 98.
This proceeding was commenced on 24 February 2000. The first plaintiff GB Radio (Australia) Pty Ltd (“GB”) was the corporate vehicle utilised by the second plaintiff Roger Thomas, the third plaintiff Alan Thomas, the fourth plaintiff Kerry Grills and the defendant Pieter Marchant to hold on their behalf certain radio broadcasting licences (“the licences”) issued by the Australian Communications Authority (“the ACA”) under the Radiocommunications Act 1992 (C’th). As will appear hereafter, there have been changes in the identity of the person registered as the owner of the licences at various times and, in addition, two of the licences, which have the most significant value, have now been sold to a third party. The net proceeds of sale of these licences remain in trust pending the resolution of this proceeding.
The licences were, in the first place, acquired by the defendant. Thereafter, they were transferred to GB.
Following a dispute between the parties, in June 1999 the defendant wrote to the ACA seeking to have the licences transferred back to him personally as registered owner. For reasons which are not relevant to this application, the ACA complied. As a result, this proceeding was commenced. GB sought the return of the licences to it and certain other relief.
Furthermore, GB commenced proceedings in the Administrative Appeals Tribunal ("AAT") seeking to reverse the decision of the ACA to transfer the licences back to the defendant. The AAT proceedings were vigorously defended. In the first place, the defendant sought to challenge the jurisdiction of the AAT to review the decision of the ACA to transfer the licences back to him. This challenge to jurisdiction was dismissed by North J in the Federal Court of Australia on 18 March 2002.[4] I note that the defendant was represented by senior and junior counsel on this challenge to jurisdiction.
[4]Marchant v GB Radio [2002] FCA 465.
Thereafter, the defendant, again represented by senior counsel, continued to oppose the proceedings in the AAT challenging the decision of the ACA to transfer the licences back to him. The defendant was unsuccessful. On 24 September 2002, Downes J set aside the decision of the ACA and ordered that the register maintained by the ACA be corrected to show GB as the licensee of each of the licences.[5]
[5](2002) 72 ALD 548.
Whilst the licences were under the control of the defendant, he dealt with the most significant and valuable licences, “the Melbourne licence” and “the Sydney licence” respectively, in a material way. He granted to Jim Henry (“Henry”) “or his nominee”:
(1)The right to use the Melbourne licence and the Sydney licence for a period of 10 years from 16 May 2001; and
(2)The option to take a transfer of the Melbourne licence and the Sydney licence in consideration of the payment of $200,000.
Thereafter, Henry nominated WorldAudio Communications Pty Ltd (“WorldAudio”) to take the full benefit of his agreement with the defendant in consideration of WorldAudio agreeing to pay Henry a fee of $800,000.
When GB was successful in the AAT, and restored in the register maintained by the ACA as the holder of the licences, it conducted separate dealings with WorldAudio. As a result, it apparently granted to WorldAudio an option to acquire each of the Melbourne licence and the Sydney licence for the sum of $500,000 per licence, a total of $1,000,000.
It would appear that GB was dissatisfied with this agreement and, in fact, has commenced proceedings against its previous solicitors for negligence in relation to it. Further, GB resisted a proceeding by WorldAudio in the Supreme Court of New South Wales for specific performance of the option agreements in respect of the Melbourne licence and the Sydney licence. GB was unsuccessful and specific performance was ordered against it.[6]
[6]WorldAudio v GB Radio[2003] NSWSC 855; WorldAudio v GB Radio [2003] NSWSC 1023.
After deducting an amount for WorldAudio’s costs of the proceedings in the Supreme Court of New South Wales, a sum of $660,000 is held in trust for the parties to this proceeding pending its resolution. On behalf of the defendant, it was submitted that, whatever may be the outcome of this proceeding, he will be entitled to one half of the $1,000,000 sale consideration (ie $500,000) as the defendant was not responsible for the litigation in the Supreme Court of New South Wales. Accordingly, at best, the plaintiffs will only be entitled to $160,000. This appears to me to be an over-simplification of the position. I certainly cannot determine whether or not this submission should be accepted on an application such as this. That is a matter which must await trial.
For many reasons, there have been substantial delays in the conduct of this proceeding. Although issued in February 2000, it is still not ready for trial. Both parties accepted that there were numerous reasons for this, including the AAT proceedings, the challenge to the jurisdiction of the AAT and the New South Wales proceedings. Further, each party sought to attribute blame to the other for certain periods of delay.
The Court's discretion
Rule 62.05 provides that the Court may vary or set aside an order for security for costs. On its face, an unfettered discretion is granted, depending on the circumstances of the case.
Both parties relied upon the decision of the Court of Appeal of England in Gordano Building Contractors Ltd v Burgess[7]. In that case, Mann LJ (with whom Sir Denys Buckley agreed) stated:
[7][1988] 1 WLR 890.
“The question is essentially this. Can a plaintiff return if he can show a material change of circumstances and can a plaintiff return if he produces fresh evidence as to the state of affairs extant at the date of the original order?
I take the second first. In my judgment, a plaintiff cannot return and seek to get an order varied or set aside by producing fresh evidence as to the state of affairs extant at the date of the order. There would be no end to the matter if such a situation was tolerable. He who wishes to have an opportunity to produce new evidence should, no doubt at some penalty as to costs, apply for an adjournment.
That leaves, however, the question of whether a plaintiff can apply if he can show a material change of circumstances. There is, surprisingly, no direct authority upon this point in regard to situations of impecuniosity. The matter is discussed in … The Supreme Court Practice 1988 … where reference is made to a decision in this Court, Parkinson v Myer Wolff & Manley (unreported), 23 April 1985; Court of Appeal (Civil Division) Transcript No. U.B. 1888 of 1985. The facts are quite unimportant for present purposes, but there is a passage in the judgment of Kerr L.J., who gave the leading judgment, which is material:
‘While it is not necessary to express a concluded view on the jurisdiction of the Court in such cases, it seems to me at present that the conclusion expressed in that note is correct and that, just as the defendant may from time to time make further applications for security in the light of changed circumstances, so a plaintiff may be entitled to apply for variation or discharge of an order previously made if his circumstances have changed. Whether the Court would accede to such an application must then depend on the circumstances, the nature of the order previously made and any other material considerations’.
Those observations, were, in the circumstances of that case, obiter. I would, however, adopt them. As Sir Denys Buckley pointed out in the course of argument, it must be open to a plaintiff to apply for payment out in the light of circumstances which have changed.”[8]
[8][1988] 1 WLR 890 at 894.
As I have said, both parties sought to rely on the decision in Gordano and its acceptance of the obiter statements of Kerr L.J. in Parkinson v Myer Wolff.
For the first plaintiff, it was contended that there has been a material change of circumstances sufficient to enliven the discretion to vary or discharge the orders for security for costs made in this case. Further, it was submitted that the discretion was “at large” or unfettered, thus enabling the Court to consider all of the material circumstances relevant to the making, variation or discharge of an order for security for costs, including the circumstances which existed at the date the first plaintiff consented to the original orders for security.
On behalf of the defendant, it was contended that there has been no material change of circumstances and, accordingly, there was no occasion to exercise any discretion to set aside the orders for security. Alternatively, if that is not the case, it was contended on behalf of the defendant that:
(1)the first plaintiff could not rely upon factors which existed at the time it consented to the original orders for security; and
(2)in any event, the application should be refused by reason of the delay of the first plaintiff in bringing it. In this regard, it was pointed out that the decision of the AAT re-instating the first plaintiff as the holder of the licences was made in September 2002, more than two years before this application was made.
In my opinion, there has been a material change of circumstances since the original orders for security for costs were made. These new circumstances are, in themselves, sufficient to warrant the discharge of the earlier orders for security for costs. Even if this were not so, and the new circumstances were not in themselves sufficient to warrant a discharge of the earlier orders, I am of the view that I am entitled to consider all of the circumstances of the case, including those existing at the time that the original orders for security for costs were made. I do not accept the submission on behalf of the defendant that my discretion is fettered in the way submitted, so that I am not entitled to take into account the circumstances existing at the time of the original orders. In my view, rule 62.05 gives a broad unfettered discretion to be exercised according to all of the circumstances of the case existing at the time of the application to vary or discharge.
I accept, however, that in the absence of a material change in circumstances, the discretion will usually be exercised against variation or discharge, for the reasons stated by Mann LJ in Gordano.[9] Fresh evidence of facts existing at the time of the original order for security will not usually be sufficient to enliven the Court's discretion. I say usually, because there may be circumstances where there are good reasons for the fresh evidence being unknown to the party who has provided security. For example, the beneficiary of the security may have misled the Court or the other party about the existence of material facts.
[9][1988] 1 WLR 890 at 894.
As I have said, I am of the view that there has been a material change of circumstances since the original orders for security for costs. Furthermore, I am of the view that those new circumstances are of themselves sufficient to cause me, in the exercise of my discretion, to order that the original security for costs orders be discharged and the monies paid into Court be released to GB.
In the first place, I am of the view that the decision of the AAT in September 2002 to re-instate GB as the registered holder of the licences was a material change in circumstances which, in effect, changed the whole dynamic of the case. Rather than GB seeking to obtain control of the licences by action in this Court, it obtained control by the orders of the AAT. Although the question of the beneficial ownership of the licences still remains to be determined by this Court in this proceeding, the fact remains that, by reason of the AAT orders, GB obtained practical control of all of the licences until it was obliged to transfer the Melbourne licence and the Sydney licence to WorldAudio pursuant to the orders of the Supreme Court of New South Wales. It remains in control of the remainder of the licences.
Furthermore, although the question of the beneficial ownership of the licences was always in dispute, the pleadings in the proceeding have altered to a considerable degree by reason of this material change in circumstances.
Secondly, I am of the view that the decision of the Supreme Court of New South Wales in the WorldAudio case is a material change in circumstances. As a result of this decision, and the orders made pursuant to it, there is now some $660,000 held in trust on behalf of the parties. Even if it be accepted that $500,000 of this is likely to be found to belong to the defendant, a matter which I regard as being in significant dispute, there will still be some $160,000 held in trust for the plaintiffs and available to be utilised in payment of any adverse costs order against them. In other words, there is a form of security provided by reason of the agreement that the net proceeds of the New South Wales proceedings be held in trust for the parties pending the resolution of this proceeding.
Thirdly, there have been significant delays in this matter reaching trial. I think this is a material change in circumstances from those in contemplation at the time the original orders for security for costs were made. It is in my view highly unlikely that any of the parties, or the Court, considered that the proceeding would not have reached trial by this stage. Although there have been many reasons for the delay, some of which may be attributable to the plaintiffs, there has been significant delay on the part of the defendant. Not only was there the most recent delay of approximately one year caused by his failure to answer interrogatories in a timely fashion, but the defendant’s opposition to the proceedings in the AAT no doubt diverted the plaintiffs' time and resources away from pursuing this proceeding, and contributed to the overall delay. The defendant was unsuccessful in his attempts to divert or defeat the AAT proceedings.
I accept that, on the other hand, the plaintiffs have caused some of the delays. Their refusal to perform the agreement reached with WorldAudio, and the consequent New South Wales Supreme Court proceedings in which they were unsuccessful, must have diverted their time and resources away from the prosecution of this proceeding.
In the end, however, it is the fact of delay which is relevant. In my view, given the fact that no interest accrues on the monies paid into Court by way of security for costs, this is a material factor in the exercise of my discretion.
As I have said, the above changed circumstances are, in my view, sufficient to cause me to exercise my discretion in favour of discharging the earlier orders for security for costs. Further to these new matters, I am of the opinion that the “unity of issues” raised by the plaintiffs in their claims and the defendant in his counterclaims is a strong factor militating against the continuance of the security for costs orders. A reading of the pleadings in the proceeding indicates that they are, in substance, about rival claims to ownership of the licences or the proceeds of their sale which are held in trust. The plaintiffs and the defendant make claims in respect of the very same subject matter. In my view, it cannot be said that either party is, in substance, an aggressor against the other who is merely defending himself. In substance, the plaintiffs are aggressors and the defendant is also an aggressor in respect of the very same subject matter. In these circumstances, it is not in my view appropriate that there be an order for security for costs against either party.[10]
[10]Some of the authorities on the relevance of there being a unity of issues are referred to and discussed by Master Kings in paras 31-39 of her reasons for judgment.
I accept that the unity of issues raised by the parties was a factor which was in existence at the time GB consented to the original orders for security for costs. As I have said, I do not believe that this prevents me from taking this factor into account in the exercise of my discretion following upon GB’s establishment of a material change in circumstances, as discussed above. Further and in any event, it is my view that the AAT orders have had the effect of rendering the unity of issues between the parties more apparent, as evidenced by the amendments made to the pleadings in this proceeding.
Both parties submitted that I should take the merits of the case into account in exercising my discretion. However, the matter is a complex one and it appears to me that there are substantial arguments to be put on behalf of each of the parties. The respective merits of the cases for each of the parties have played no part in my exercise of discretion.
The final issue which I should deal with is that of delay by GB in making its application for discharge of the security for costs orders. It was submitted on behalf of the defendant that, even if I was otherwise satisfied that there had been a material change in circumstances justifying the exercise of my discretion to discharge the security for costs orders, I should nevertheless refuse to exercise my discretion in favour of GB because of its delay in bringing this application. It was submitted that, just as a defendant will be unsuccessful in obtaining an order for security for costs if the defendant delays in making the application for security, a plaintiff who delays in seeking a discharge of an order for security once the change of circumstances relied upon has occurred should also fail. In this regard, it was submitted on behalf of the defendant that he had incurred costs “on the faith of” the sum of $120,000 having been paid into Court as security for costs.
I do not accept the defendant’s submissions concerning delay. It is true that there has been a substantial delay by GB in bringing this application. As I have said, the AAT decision was made in September 2002. This application was not made until December 2004.
However, the mere fact of delay is not enough by itself. Although a relevant factor, delay is, in my view, only relevant where it causes prejudice in some way.
In Buckley v Bennell Design & Constructions Pty Ltd[11], the Court of Appeal affirmed a decision of a trial judge to refuse an order for security for costs. In the course of doing so, the Court of Appeal stated that an application for security for costs against an impecunious company ought be made promptly so as to avoid prejudice to the plaintiff. Street CJ, who delivered the principal judgment, stated:[12]
“A significant matter to be weighed in determining whether or not an extension of time should now be allowed is that this arbitration has run on for some eight hearing days. The builder has now expended money in respect of its own legal costs for those eight days. And if security now be ordered, accompanied by the usual sanction that the arbitration as well as the proceedings in this Court be stayed until such security be furnished, this would, in effect, place the company in the position of running a risk, if unable to provide security, of having wasted the costs of these eight days. It is an accepted principle in the ordering of security for costs that such an application should be made promptly. There may, of course, be cases where the impecuniosity of the company may only be discoverable or provable at a later stage of the proceedings. Similarly, there may be cases in which the length of the proceedings was not foreseen when they commenced. Other situations could occur in which a late application could, without procedural prejudice, be brought forward during the currency of the disputed proceedings. But ordinarily, I reiterate, the application ought to be made promptly in order to avoid the very situation which has developed in this case.” (Emphasis added)
[11](1974) 1 ACLR 301.
[12](1974) 1 ACLR 301 at 308.
In Loreva Pty Ltd v CEFA Associated Agencies Pty Ltd[13] Needham J refused an application for security for costs against an impecunious company which was made late. The application was refused because the delay had caused costs to be incurred which would not otherwise have been incurred:
“It seems quite clear in this case that the petitioner has incurred costs in these proceedings which would not have been incurred if the application had been made successfully immediately upon the service of the petition.”[14]
[13](1982) 7 ACLR 164.
[14](1982) 7 ACLR 164 at 165.
In James v Australia and New Zealand Banking Group Limited (No.1)[15] Toohey J (as he then was) held that an order for security for costs should not be made because, by reason of the delay in making the application:
“So much time and costs have been expended, that it would work a grave injustice [to the plaintiffs] if they were ordered to provide security for costs when it is apparent that they could not comply with such an order.” (emphasis added).[16]
[15](1985) 9 FCR 442.
[16](1985) 9 FCR 442 at 446.
In my view, although there has been a substantial delay by GB in making this application, there has been no prejudice caused to the defendant. I am satisfied that the defendant would have conducted this case in precisely the same manner that it has, and at the same cost, whether or not GB had consented to the order for security for costs and paid the sum of $120,000 into Court. The whole of the conduct of the defendant, in this Court, in the AAT and in the Federal Court, indicates that this is a case where the defendant is prepared to take any point available and to pursue it vigorously, often by briefing senior counsel to appear. Indeed, I was informed by senior counsel for the defendant that the defendant has, in total, expended in the order of four times the $120,000 security previously paid into Court by GB in relation to this dispute. This includes costs in the AAT and in the Federal Court. In these circumstances, I infer that the defendant would have incurred the expenses which it has in fact incurred whether or not it had the “protection” of the $120,000 security for costs. This is an entirely different situation to a defendant delaying in applying for an order for security for costs against an impecunious plaintiff where, if the order for security is made, the plaintiff will be unable to comply with it and thus the costs already expended will have been wasted.
Further and in any event, I am entirely satisfied that the defendant would have proceeded with its counterclaim in this proceeding whether or not it had the protection of the security for costs paid into the Court by GB.
For the above reasons, I am not persuaded that the delay by GB in bringing this application has caused any prejudice to the defendant. Accordingly, GB’s delay is not such as to disentitle it to the relief which it seeks.
I will order that:
1.The appeal by the defendant against the decision of Master Kings made on 5 May 2005 is dismissed.
2. The defendant pay the plaintiffs’ costs of the appeal.
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