Haides Pty Ltd v Canberra Drilling Rigs Pty Ltd
[2018] ACTCA 68
•11 December 2018
SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
COURT OF APPEAL
Case Title: | Haides Pty Ltd v Canberra Drilling Rigs Pty Ltd |
Citation: | [2018] ACTCA 68 |
Hearing Date: | 11 December 2018 |
DecisionDate: | 11 December 2018 |
Before: | Murrell CJ |
Decision: | Appellant to give security of $30,000.00 in cash or an irrevocable bank guarantee. If security is not given, the appeal is deemed to have been dismissed, and the appellant is to pay respondents’ costs of the appeal on a party/ party basis. Appellant to pay the first respondent’s costs of the application. |
Catchwords: | PRACTICE AND PROCEDURE – SECURITY OF COSTS – Corporate appellant – whether impecunious – whether security of costs should be ordered – appropriate amount of security |
Legislation Cited: | Court Procedure Rules 2006 (ACT) rr 1900,1901, 1902, 5302 Building and Construction Industry (Security of Payment) Act 2009 (ACT) ss 15(4), 27(4)(b), 38 |
Cases Cited: | Feltafield Pty Ltd v Heidelberg Graphic Equipment Ltd [1994] FCA 554 Jones v Dunkel (1959) 101 CLR 298 Twining v Curtis [2014] ACTCA 19 |
Parties: | Haides Pty Ltd (Applicant/Respondent) Canberra Drilling Rigs Pty Ltd (Respondent/Appellant) |
Representation: | Counsel Mr Robens (Applicant/Respondent) Mr Phillips (Respondent/Appellant) |
| Solicitors WMG Legal (Applicant/Respondent) Chamberlains Law Firm (Respondent/Appellant) | |
File Number: | ACTCA 63 of 2018 |
Decision under appeal: | Court/Tribunal: ACT Supreme Court Before: McWilliam AsJ Date of Decision: 12 October 2018 Case Title: Canberra Drilling Rigs Pty Ltd v Haides Pty Ltd Citation: [2018] ACTSC 282 |
Murrell CJ
The application
This application concerns an appeal brought by Canberra Drilling Rigs Pty Ltd (the appellant) against two respondents: Haides Pty Ltd (the first respondent) and Max Tomkin (the second respondent). The second respondent did not take part in this application.
Pursuant to rr 1900 and 5302 of the Court Procedures Rules 2006 (ACT) (CPR), Haides applied for the following orders:
(a)The appellant give security by lodging with the Registrar $35,000.00 in cash or an irrevocable bank guarantee, unlimited as to time, within 21 days of this order;
(b)If the appellant fails to do so, the appeal be deemed to have been dismissed and the appellant is to pay the respondents’ costs of the appeal, to that date, on a party/party basis; and
(c)The appellant pay Haides’ costs of the application for security.
In support of the application, Haides argued:
(a)The appellant is a corporation and there is a risk it will not be able to pay the respondents’ costs if ordered to do so;
(b)The financial means of the appellant are very much in doubt;
(c)The estimated recoverable party/party costs of the proceedings exceed the security sought;
(d)This is an appeal, not first instance proceedings; and
(e)There is a director standing behind the appellant who would likely benefit from the litigation and who should be prepared to provide the necessary security.
Background to the appeal
Haides was a subcontractor to the appellant, a drilling company.
On 2 November 2017, Haides obtained an adjudication certificate under the Building and Construction Industry (Security of Payment) Act 2009 (ACT) (the Act) for $284,057.50.
On 15 December 2017, the appellant applied to the Supreme Court for relief, claiming that the adjudication determination was void and of no effect, and seeking an order quashing the determination.
On 12 October 2018, McWilliam AsJ (the primary judge) dismissed the application and ordered the appellant to pay Haides’ costs. As a consequence, the adjudication certificate remained in place.
On 5 November 2018, the appellant commenced the appeal, relying on nine grounds. The Court was advised that the substantive appeal will focus on grounds 7 and 8 in the notice of appeal, which state:
7. The trial judge erred at [96] in finding that for the purpose of s 15(4) of the Building and Construction Industry (Security of Payment) Act 2009, it is sufficient that it be arguable that the appellant may be liable to pay for the work;
8. The trial judge should have determined whether or not the work was carried out under the contract and within the statutory 12 month limit …
The appellant said that the argument hinged on s 15(4)(b) of the Act, which states that “a payment claim may be given only before the later of the end of the period of 12 months after the construction work to which the claim relates was last carried out”. The appellant described this as a “jurisdictional fact” that must be established before an adjudicator acquires jurisdiction. This is an issue of some complexity, although it is a relatively confined issue.
Evidence and submissions on the application
10. The application for security for costs was made promptly.
11. The appellant contended that there is a distinction in proceedings of the present type—which concern the legitimacy of an adjudication certificate—and other appeal proceedings. The appellant argued that no final determination has been made on the merits as between the appellant and Haides, and referred the Court to s 38 of the Act.
12. The appellant could start proceedings to have the adjudication amount set aside, but would be required to pay into the Court, as security, the unpaid part of adjudicated amount, which is a substantial sum: s 27(4)(b) of the Act. The appellant has not commenced such proceedings although the adjudication occurred more than 12 months ago.
13. Since the adjudication decision in November 2017, the appellant has made no voluntary payments in reduction of the adjudicated amount. Reductions have been achieved only through enforcement proceedings.
14. Haides provided evidence of the efforts that it has made to enforce the adjudicated amount in the ACT and New South Wales. In the ACT, by virtue of debt redirection orders, Haides recovered $31,612.51 in October 2018. In New South Wales, by virtue of garnishee orders, Haides recovered a total of $99,464.18 in October 2018. Consequently, the amount that remains outstanding to Haides is $189,956.84, in addition to which there are the costs of the proceedings before the primary judge and the interest accruing.
15. In 2016, six payments, totalling $120,000.00, were made to Haides on behalf of the appellant from an account in the name of a separate legal entity.
16. Mr Dale Gaffey was appointed as a director of the appellant in September 2015. Commencing in November 2017—within days of the adjudication certificate being issued—and continuing into 2018, he was appointed as director and secretary of four companies with similar names to that of the appellant, none of which (as far as the evidence disclosed) have assets of substance. There is no evidence as to the roles and reasons for the creation of these companies with similar names.
17. A solicitor with many years of experience in commercial litigation has estimated that Haides’ total costs and disbursements of the appeal will exceed $45,000.00, on a party/party basis. There was some—albeit limited—particularisation of the means by which the amount was calculated. No contrary evidence was put as to the likely costs and disbursements.
18. The appellant chose to file no evidence.
19. The appellant relied on submissions to the following effect.
20. First, as there has been no final determination in favour of Haides, it remains open to the appellant and/or Haides to bring separate proceedings to challenge the amount adjudicated; therefore, the adjudication certificate is not of the same force as an ordinary first instance decision.
21. Second, the suggestion of impecuniosity on the part of the appellant was speculative only, particularly given the recent recovery of a substantial amount of the adjudicated sum. No notice to produce or other inquiries have been made of the appellant in an endeavour to ascertain its true financial position.
22. Third, the amount claimed for security, of $35,000.00, is far too high, both because the appeal is straightforward and because the appellant has an arguable case. In Moon v Whitehead [2014] ACTCA 16 (Whitehead), Penfold J said that whether the appeal is arguable is a factor that can be taken into account in determining the appropriate amount of security for costs.
Consideration of whether to order security
23. Rule 1901 of the CPR provides that on an application by a defendant, the Court may order the plaintiff to give security that it considers appropriate, for the defendant's costs of the proceeding. That is a broad discretion. Rule 5302 confirms that the Court of Appeal may order security for costs. Rule 1901 provides
1901Security for costs—when court may make order
The court may order a plaintiff to give security for costs under rule 1900 only if satisfied—
(a) the plaintiff is a corporation and there is reason to believe the plaintiff will not be able to pay the defendant's costs if ordered to pay them;
…
24. Rule 1902 provides,
1902Security for costs—discretionary factors
(1)In deciding whether to make an order for security for costs under rule 1900, the court may have regard to any of the following matters:
(a) the means of the people standing behind the proceeding;
(b) the prospects of success or merits of the proceeding;
(c) the genuineness of the proceeding;
(d) for rule 1901(a)—the corporation's lack of financial resources;
(e) whether the plaintiff's lack of financial resources is attributable to the defendant's conduct;
(f) whether the plaintiff is effectively in the position of a defendant;
(g) whether an order for security for costs would be oppressive;
(h) whether an order for security for costs would stop or limit the progress of the proceeding;
(i) whether the proceeding involves a matter of public importance;
(j) whether there has been an admission or payment into court;
(k) whether delay by the plaintiff in starting the proceeding has unfairly prejudiced the defendant;
(l) whether an order for costs made against the plaintiff would be enforceable within the jurisdiction;
(m) the estimated costs of the proceeding.
(2)This rule does not limit the matters to which the court may have regard.
25. The purpose of an order for security for costs is to ensure that a defendant in whose favour a costs order has been made will have those costs met.
26. Under r 1901 the threshold question is whether, having regard to the whole of the evidence, there is credible testimony that the plaintiff—in this case, the appellant—will be unable or unwilling to pay the defendant's costs if they succeed in their defence. If so, the second question is, whether, in the exercise of discretion, the justice of the case means that security should be ordered. The third question is the appropriate amount of any award.
27. The relevant principles are well established and can be found, among other places, in Feltafield Pty Ltd v Heidelberg Graphic Equipment Ltd [1994] FCA 554 at [20], Twining v Curtis [2014] ACTCA 19 (Twining) at [16], and Jornad Pty Ltd v Sampe Pty Ltd [2018] ACTSC 147 at [17].
28. As has been pointed out in a number of decisions including Twining at [14]–[15], there is a difference between applications for security for costs at trial and on appeal. In relation to an appeal, it is presumed that the first instance decision favouring the respondent is correct until it is set aside.
29. In this case, the appellant argued that the original decision of the adjudicator is not final as to the amount owed. Regardless of the merits of that argument, for present purposes the relevant first instance decision is not that of the adjudicator, but that of the primary judge. If the Court of Appeal dismisses the appeal against her Honour's decision, that decision will bring an end to the Supreme Court proceedings.
30. Most of the argument before the Court was directed to the issue of whether there was adequate evidence of the impecuniosity of the appellant. As noted above, the appellant submitted that impecuniosity was merely a matter of speculation; Haides had made inadequate inquiries to establish impecuniosity to the requisite standard.
31. In my view, there is sufficient evidence establishing the impecuniosity of the appellant.
32. First, there is the evidence that the sum of $120,000.00 that was recovered in 2016 was paid from an account held in the name of a separate legal entity.
33. Second, there is the evidence that Haides has recovered part of the adjudicated amount only because it has brought enforcement proceedings, and there have been no voluntary payments.
34. Third, the appellant has not commenced proceedings challenging the adjudicated amount under s 27 of the Act, in the context that, if it had brought such proceedings, it would have been required to lodge a substantial amount as security while the proceedings were pursued.
35. Fourth, there is the establishment of a number of companies similar in name to the appellant. The first such company was established only two days after the adjudication certificate was issued.
36. Finally, there is the absence of evidence from the appellant explaining the above concerns. In light of the appellant’s unexplained failure to provide evidence, I draw an inference in accordance with the rule in Jones v Dunkel (1959) 101 CLR 298 that there is no evidence that would have assisted the appellant to show that it is financially liquid.
37. As Haides has in its favour a decision of the primary judge and the above matters point to impecuniosity on the part of the appellant, I will order security for costs.
Amount of security
38. The next question is the amount in which security should be ordered.
39. I have noted that in Whitehead, when considering the quantum of security for costs, Penfold J took into account the fact that there was an apparently arguable case on appeal. Given the purpose of an order for security for costs, I am not convinced that this is an appropriate consideration. Nevertheless, I accept that the amount ordered to be paid by way of security should be conservative.
40. There was no cross-examination of the experienced lawyer who gave evidence of the likely costs of defending the appeal (see [17]). However, erring on the side of conservatism, I consider that an appropriate amount for security is $30,000.00.
41. The Court orders that:
(a)The appellant give security by lodging with the Registrar of the Supreme Court the amount of $30,000.00 in cash, or an irrevocable bank guarantee unlimited as to time, within 21 days of this order.
(b)If the appellant fails to give security as required within 21 days of this order, the appeal is deemed to have been dismissed, and the appellant is to pay respondents’ costs of the appeal to that date on a party to party basis.
(c)The appellant is to pay Haides’ costs of this application.
| I certify that the preceding forty-one [41] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Chief Justice Murrell. Associate: Date: |
Key Legal Topics
Areas of Law
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Civil Procedure
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Commercial Law
Legal Concepts
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Appeal
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Costs
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