Healy Airconditioning Pty Ltd v Oracle Corporation Australia Pty Ltd

[2003] WASC 78

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CHAMBERS

CITATION:   HEALY AIRCONDITIONING PTY LTD -v- ORACLE CORPORATION AUSTRALIA PTY LTD & ANOR [2003] WASC 78

CORAM:   MASTER SANDERSON

HEARD:   3 APRIL 2003

DELIVERED          :   10 APRIL 2003

FILE NO/S:   CIV 2004 of 1999

BETWEEN:   HEALY AIRCONDITIONING PTY LTD (ACN 050 559 807)

Plaintiff

AND

ORACLE CORPORATION AUSTRALIA PTY LTD (ACN 003 074 468)
First Defendant

AAG TECHNOLOGY SERVICES PTY LTD (ACN 010 854 994)
Second Defendant

Catchwords:

Corporations Act - Application for security for costs - Turns on own facts

Legislation:

Supreme Court Act, s 37(1)

Result:

Defendants' appliations dismissed

Category:    B

Representation:

Counsel:

Plaintiff:     Mr J C Giles

First Defendant             :     Mr C G Colvin SC

Second Defendant         :     Mr S F Popperwell

Solicitors:

Plaintiff:     Solomon Brothers

First Defendant             :     Corrs Chambers Westgarth

Second Defendant         :     Pynt & Partners

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

Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120

Spargos Mining NL v Fuller [2003] WASC 37

Case(s) also cited:

Alabaster v Harness [1895] 1 QB 339

Bell Wholesale Co Pty Ltd v Gates Export Corporation (No 2) (1984) 2 FCR 1

Black v Brockley Investments Ltd, unreported; FCt SCt of WA; Library No 930039; 16 December 1992

Chartspike Pty Ltd v Chahoud [2001] NSWSC 585

Crypta Fuels Pty Ltd v Svelte Corporation Pty Ltd (1995) 19 ACSR 68

Elfic v Macks (2001) 162 FLR 41

Gore v Justice Corp Pty Ltd (2002) 189 ALR 712

Hill v Archbold [1968] 1 QB 686

Southern Cross Exploration NL v Fire and All Risks Insurance Co Ltd (1985) 1 NSWLR 114

West v Jackson McDonald (A Firm) [2001] WASC 198

1. MASTER SANDERSON:  This is an application brought by both defendants seeking security for costs.  This is another application where the plaintiff is proceeding with the support of a litigation funder.  (Although it is not reflected in the present title to the action the plaintiff is in liquidation.  The liquidator has entered into the funding agreement under the provision of s 477(2)(c) of the Corporations Act).  The defendants say that in all the circumstances an order for security for costs by way of a cash deposit is appropriate.  The plaintiff says that a guarantee it has put in place (which I will detail below) provides the defendants with sufficient security.  Further, the plaintiff says that the defendants' delay in bringing this application mitigates against any order for security being made. 

2. There were a number of concessions made by the parties.  For its part the plaintiff conceded that if called upon to do so, it would not be able to meet any costs order.  Thus, the jurisdictional requirements of s 1335 of the Corporations Act have been satisfied and the question is whether, in the exercise of my discretion, I ought order security for costs.  On behalf of the defendants it was conceded that the plaintiff had an arguable case - that is to say, it was not suggested that security for costs ought be ordered because the plaintiff had a weak case which was unlikely to succeed.  All parties conceded that the presence of a litigation funder backing the plaintiff was but one factor to be taken into account in determining whether or not security ought be ordered.  None of the parties suggested the fact that there was a litigation funder was decisive one way or the other.  That, I think, is the proper approach to the matter:  see Spargos Mining NL v Fuller [2003] WASC 37.

3. The defendants' position can be summarised in this way.  There was a litigation funder standing behind the plaintiff.  Pursuant to the terms of the funding agreement (which had been disclosed to the defendants) the litigation funder stood to benefit if the action by the plaintiff against the defendants was successful.  That being so, the plaintiff should be ordered to provide security for costs.

4. On behalf of the plaintiff, it was not conceded that the fact a litigation funder was involved and stood to benefit from the litigation, in and of itself justified the making of an order for security for costs.  This was particularly so where, as in this case, the liquidator who had responsibility for day‑to‑day management of the plaintiff's action, had been provided with a bank guarantee by the litigation funder to cover any costs which might be awarded against him.  That, it was said, provided sufficient security to the defendants.  Furthermore, certain undertakings had been given on behalf of the litigation funder directly to the defendants.  These undertakings, which I will detail more fully below, protected the defendants against the possibility that the litigation funding agreement might be terminated, without the defendants' knowledge, with the effect that the defendants' position with respect to security was weakened.  Further, the plaintiff said that the defendants' delay in applying for security was such that it was a discretionary factor against an order for security for costs being made at this stage of proceedings.

5. In response to these submissions it was said on behalf of the defendants that the guarantee covering security for costs was given to the liquidator personally and not to the plaintiff.  The authorities showed that it was generally not the case that costs would be awarded against a liquidator personally.  That being so, the defendants were not protected in any way by the guarantee.  Further, it was said, that the undertakings given by the litigation funder to the defendants were in a questionable form and did not provide any comfort to the defendants.  In relation to the delay it was said that there was no evidence that the delay in making the application for security for costs in any way prejudiced the plaintiff's position.  It was said there was no evidence that the order for security would stultify the proceedings and this rendered any delay in the context of this case of no significance.

6. Expressed in this way the question for determination is whether or not the bank guarantee provided to the liquidator of the plaintiff, taken together with the undertaking offered by the litigation funder, is sufficient so that no further order for security is necessary.  If the answer to that question is in the affirmative, that is the end of the matter.  If the answer is in the negative, other factors need to be considered in the exercise of my discretion. 

7. The bank guarantee is found as annexure "CMW4" to the affidavit of Christopher Michael Williamson ("Mr Williamson"), sworn 19 March 2003 and filed in opposition to the application.  The guarantee is provided by the ANZ Bank and is in favour of Kimberley Andrew Strickland ("Mr Strickland") as the liquidator of the plaintiff.  The guarantee is for $80,000 and is expressed to guarantee the obligations of Litigation Lending Services Number 2 Partnership to indemnify Mr Strickland against an adverse costs order in these proceedings.  The defendants point out that they had invited the solicitors for the plaintiff to arrange for the guarantee to be provided to the plaintiff itself, rather than to Mr Strickland as liquidator.  This offer had been declined.

8. On behalf of the defendants it is said that although there is power under the Supreme Court Act, s 37(1) to make a costs order against a liquidator, it is rare that such an order would be made.  Reference was made to the decision of Hession v Century 21 South Pacific Ltd (In Liq) (1992) 28 NSWLR 120. It was therefore submitted that the guarantee provided by the liquidator funder was of no real value to the defendants. With respect, I take a different view. I would accept that as a general rule of practice, an order for costs is not made against a liquidator in proceedings properly brought in the name of the company in liquidation. But here, where the evidence clearly establishes that the liquidator has been provided with a bank guarantee up to a specified amount, I can see no reason at all why such an order would not be made. Provided the order was only up to the amount of the guarantee, the liquidator is at no risk. I find it difficult to envisage circumstances where a Judge would decline to make an order against the liquidator personally. That is particularly so where there has been this application for security for costs and the liquidator has resisted the application squarely on the basis that his position was guaranteed. In practical terms, I see no real difference between the bank guarantee being provided to the company in liquidation and the guarantee being provided to the liquidator.

9. It was also put on behalf of the defendants that under certain circumstances the litigation funding agreement could be brought to an end.  If that occurred, then the guarantee would fall away and the defendants would have no security for their costs.  To cover this possibility, the litigation funder provided an undertaking which is to be found as annexure "CMW5" to Mr Williamson's affidavit.  On behalf of the defendants it was said that the undertaking was unsatisfactory in at least two respects.  First, it was said, that it was given on behalf of a partnership.  If it was necessary to take action on the undertaking, it would be necessary to proceed against the individual partners, most of whom lived in the eastern states and at least one of whom was resident overseas.  Further, it was said that the undertaking was signed by one Michelle Silvers ("Ms Silvers"), who was said to be the "Managing Director" of the partnership.  Counsel for the defendants called into question the authority of Ms Silvers to give the undertaking on behalf of the partnership.

10. In my view there is no substance in either objection.  True it is that the litigation funder is a partnership but all of the partners are identified in the agreement itself.  There is no reason at all to believe that the partners will not collectively and individually honour the undertaking.  If they did not do so, then taking action against the partnership would present no insurmountable difficulty.  As I said, each partner is identified and although it may be necessary to proceed against parties resident outside the State, that is hardly novel.  As to the authority of Ms Silvers, it is difficult to imagine an undertaking such as this being provided via the plaintiff's solicitors without proper authority.  There is nothing to suggest that is the case.  In fact, the undertaking is given on the letterhead of the litigation funder who has, presumably, direct contact with the plaintiff's solicitors.  To conclude that Ms Silvers does not have proper authority would be tantamount to concluding that there had been an elaborate fraud.  There is no evidence to support such a conclusion.

11. In all the circumstances I am satisfied that the defendants are secured up to an amount of $80,000.  The question then is whether or not the amount of the security is adequate.  The defendants say that it is not.  In an affidavit of James Michael Cudmore, sworn 7 March 2003, the first defendant estimates its costs on the basis of a 10‑day trial, at just over $153,000.  In an affidavit affirmed 13 February 2003, Deborah Colvin ("Ms Colvin") estimates the second defendant's costs at $60,000.  Ms Colvin affirmed a further affidavit on 1 April 2003 to which she annexed a draft bill of costs which estimated the second defendant's costs at $137,892.  Counsel for the plaintiff addressed short submissions to the estimates of both defendants and without going through counsel's submissions in any detail, it is sufficient if I say that I have real doubts as to whether either defendant would obtain anything like the figures quoted in the draft bill on taxation.  Anyway, I take the view that the better course is to leave the matter for the present on the basis that the defendants are adequately secured up to an amount of $80,000.  It may be at some later stage in these proceedings, perhaps after a trial date is known, the defendants can apply again in relation to security for costs.  By that stage the parties should have a clear idea of how long the trial will last, how many witnesses will be called, whether or not senior counsel will be retained and how much preparation will be necessary.  At that stage it might be proper to order the provision of further security.

12. For the present, I am satisfied that the proper order is that the defendants' applications be dismissed.  I will hear the parties as to costs.