J Cummins Pty Limited v F and D Bonaccorso Pty Limited
[2012] NSWSC 1062
•20 August 2012
Supreme Court
New South Wales
Medium Neutral Citation: J Cummins Pty Limited v F & D Bonaccorso Pty Limited [2012] NSWSC 1062 Hearing dates: 20 August 2012 Decision date: 20 August 2012 Jurisdiction: Equity Division Before: Lindsay J Decision: Further security for costs granted. Security in support of undertaking as to damages refused. The costs of the motion to be costs in the proceedings.
Catchwords: PRACTICE AND PROCEDURE - costs - security for costs Legislation Cited: - Cases Cited: - Texts Cited: - Category: Interlocutory applications Parties: J Cummins Pty Ltd (Plaintiff)
F & D Bonaccorso Pty Ltd (Defendant)Representation: V.R.W. Gray (Plaintiff)
M. Darke / M.J. Smith (Defendant)
Parisi and Associates Lawyers (Defendant)
File Number(s): 2011 / 304034
JUDGMENT Ex tempore
The principal proceedings concern a development property at Strathfield. Both parties to the proceedings are corporations. The defendant is the registered proprietor. The plaintiff claims to have exercised an option to purchase the property. The principal of the plaintiff corporation - its sole director and shareholder - is a Mr John Campbell Hawkins.
There is a dispute about the terms of the option which requires no close examination by the Court at this stage. By its summons (filed on 21 September 2011) the plaintiff seeks, inter alia, an order for rectification of the option agreement and an order for specific performance. The plaintiff lodged a caveat on the title to the property. Shortly after commencement of the proceedings, it obtained an order for a limited extension of the caveat. On 12 October 2011 Gzell J decided, at the end of a contested hearing that the caveat should be extended until further order.
There is no dispute today that the plaintiff has an arguable case to advance at trial. The defendant's concession on this score follows, in part, the decision of Gzell J to extend the plaintiff's caveat.
His Honour made an order for extension of the caveat conditioned upon Mr Hawkins providing to the Court an undertaking as to damages. That appears in paragraph 22 of his Honour's reasons for judgment. It appears, from paragraph 2 of those reasons, that the plaintiff offered that undertaking in answer to criticism of it as a $1 company.
Pursuant to Gzell J's orders the plaintiff filed, electronically, an affidavit of Mr Hawkins apparently sworn on 18 October 2011. Paragraph 2 of that affidavit is in the following terms:
"2. In accordance with the undertakings given to the Court on my behalf on 12th October 2011 I hereby give my personal undertaking to the court to submit to such order (if any) in respect of the Plaintiff Company as the court may consider to be just for the payment of compensation and costs (to be assessed by the court or as it may direct) to any person (whether or not a party) affected by the operation of the interlocutory order made on 12th October 2011 or undertaking or of any interlocutory continuation (with or without variation) of the interlocutory order or undertaking."
The Court does not presently have possession of an original affidavit bearing the signature of Mr Hawkins. It should have, in case the undertaking needs to be enforced. Accordingly, I propose to direct that the original affidavit, or another affidavit freshly sworn, be filed within 14 days of today's date.
Via an exchange of correspondence in mid-October 2011 (namely, a letter from the defendant's then solicitors dated 17 October 2011 and a reply from the plaintiff's solicitors dated 19 October 2011) the plaintiff offered to provide security for costs in the amount of $50,000. That led to an order for the provision of security for costs - a consent order made by the Court on 15 November 2011.
There is no dispute that the plaintiff complied with that order by the payment of $50,000 into an account maintained by the solicitors for the defendant, the proceeds of the account being held by the solicitors as stakeholders, pending further order of the Court, as security for the defendant's costs of the proceedings.
Since that time the parties' preparations for trial appear to have proceeded at a leisurely pace. At the time the plaintiff commenced proceedings by the filing of a summons, it also filed a statement of claim (on 21 September 2011). The defendant filed a defence on 8 December 2011. Although no formal orders appear to have been made to this effect, the parties appear to have shared a common assumption that the issues in the proceedings are to be defined by pleadings, and the evidence to be adduced at trial is to be adduced in the form of affidavits. There is, I think, no necessity to formalise that arrangement by a confirmatory order today.
The only substantive affidavit apparently served in the principal proceedings to date is an affidavit sworn by Mr Hawkins on 20 September 2011 in support of the plaintiff's application for extension of its caveat. Reference has been made to it today, but it is not in evidence before me. Mr Gray, counsel for the plaintiff, today informed the Court that that affidavit compromises the whole of the evidence the plaintiff proposes to adduce in chief at the trial.
THE NOTICE OF MOTION BEFORE THE COURT
The defendant has filed a notice of motion seeking the provision of further security by the plaintiff. An amended notice of motion dated 28 June 2012 is the process presently before me. That amended motion seeks security on two fronts. First, it seeks an increase by a further $64,000, on top of the $50,000 hitherto provided by the plaintiff, as security for the defendant's costs. Secondly, it seeks security (in an amount of approximately $969,000) in support of the undertaking as to damages given to the Court by Mr Hawkins in return for an extension of the plaintiff's caveat.
The $64,000 is supported by evidence given by the current solicitor on the record for the defendant, Mr Charles Parisi. The amount of $969,000 is said to be the equivalent of two years' interest calculated at the rate of 8.5 per cent per annum on the amount of the purchase price of $5.7 million, which, in 2010, the parties agreed that the plaintiff would pay for the property if it validly exercised its option.
There is no dispute between the parties that the Court has jurisdiction to make orders of the type sought by the defendant. That appears in written submissions filed in connection with today's hearing of the defendant's motion, and it was confirmed by counsel on both sides of the record during the course of the hearing. For the record, I formally note the defendant's written submissions dated 6 August 2012 and the plaintiff's written submissions dated 17 August 2012. If there be any need for reference to authority, it can be found in the defendant's written submissions in particular.
Although the defendant's application for security for costs was expressed in its motion as based upon an invocation of Uniform Civil Procedure Rules 2005 (NSW) Rule 42.21, s 1335 of the Corporations Act 2001 (Cth) and the inherent jurisdiction of the Court, the parties were content - and so expressed themselves - to argue the question of security for costs by reference only to s 1335.
The parties' debate, on each aspect of the defendant's motion, is limited to the proper exercise of the Court's discretion.
SECURITY FOR COSTS
I address firstly the question of security for costs.
The evidence of Mr Parisi establishes that, in relation to the $50,000 security thus far provided by the plaintiff, the defendant has to date incurred costs of only $21,500 or thereabouts.
There has been a change of solicitors on the defendant's side of the record since the sum of $50,000 was agreed between the parties. Having come into the proceedings, Mr Parisi has made his own independent assessment of the quantum of costs that the defendant might recover on a party/party assessment if the defendant ultimately wins the case at trial and obtains an order for costs against the plaintiff. His estimate, in global terms, is that those costs might be assessed at some point between $98,000 and $114,000 or thereabouts. It is on the basis of that assessment that the defendant seeks an additional $64,000.
There is no suggestion that, if the plaintiff is ordered to provide that additional sum, its proceedings will be stultified. The plaintiff contends that there is no occasion to provide additional security, particularly as the existing security has not been exhausted, but it has not advanced any case that it could not provide the security if ordered to do so.
The plaintiff's case is reinforced by its willingness to provide a further undertaking to the Court by Mr Hawkins as evidence of his willingness, personally, to answer for any costs orders made against the plaintiff.
I have been invited to draw inferences against the plaintiff, and Mr Hawkins, arising from their refusal to respond to the defendant's demands for full disclosure of Mr Hawkins's personal financial position.
On the evidence adduced on the motion I am not prepared to draw such an inference. That is especially so because the plaintiff and Mr Hawkins have volunteered undertakings from Mr Hawkins, agreed to provide security in the amount of $50,000 and proceeded to provide it.
Nevertheless there is no dispute that the Court's discretion has been enlivened and, fortified by the evidence of Mr Parisi, it is, in my opinion, open to the Court to make an order for the additional security for costs sought by the defendant.
Mr Gray submits that the appropriate course would be to dismiss the defendant's present application for security for costs, reserving to the defendant a right to apply for further security when all the evidence has been served and a date for trial is to be appointed.
I agree with Mr Darke, leading counsel for the defendant, that to take such a course would be simply to invite another notice of motion.
Although it is accepted by both sides of the record that, as a matter of jurisdiction, it is open to the defendant to make an application for additional security, especially if there is a change in circumstances, it would, in my opinion, be better to make an order for an increase in the security provided for the defendant's costs, now, rather than to face, inevitably, another application for security for costs within a short time frame.
In those circumstances, I propose to do two things in relation to the application for security for costs. The first is to accept Mr Hawkins's undertaking to the Court to answer, personally, for any costs orders made against the plaintiff. The second is to make orders substantially in the terms of paragraph 1 of the defendant's amended notice of motion (substituting the sum of $64,000 for the sum of $50,000 there recorded) and in the terms set out in paragraph 4 of the motion.
SECURITY FOR THE UNDERTAKING AS TO DAMAGES
I do not, however, propose to make any orders for the provision of security in support of Mr Hawkins's undertaking as to damages referable to the extension of the plaintiff's caveat.
I am not prepared to draw the inferences adverse to Mr Hawkins that the defendant submits that I should draw in relation to the state of his finances.
Moreover, I am not satisfied, on the evidence before the Court, that I should find that the plaintiff has suffered, or will suffer, an actual loss by reason of the existence of the caveat.
Accordingly, I propose to dismiss the claim for relief made in paragraph 3 of the defendant's motion.
PROPOSED ORDERS
Subject to any points of refinement raised by counsel, I propose to make the following notations and orders: first, I note the existing undertaking of Mr Hawkins given to the Court on 12 October 2011 and confirmed in the affidavit apparently sworn by Mr Hawkins on 18 October 2011.
Secondly, I note the undertaking given to the Court by Mr Hawkins today (through Mr Gray) that he will personally answer for any costs ordered by the Court in these proceedings to be paid by the plaintiff.
Thirdly, I direct the plaintiff to file within 14 days an affidavit or affidavits sworn by Mr Hawkins verifying these undertakings.
Fourthly, I make orders as sought in paragraphs 1, 2 and 4 of the defendant's amended notice of motion, substituting the amount of $64,000 for the amount of $50,000 shown in paragraph 1 of the motion, and deleting from paragraph 1 the words "or such other sum as this honourable Court considers fit".
I dismiss paragraph 3 of the defendant's amended notice of motion.
I propose, in light of what has occurred during the course of argument and, subject to anything the parties may say, to make directions for the further conduct of the proceedings: noting the plaintiff's statement today about the state of its affidavit evidence, directing the defendant to serve affidavits within a particular time frame and standing the proceedings over to a convenient date before the registrar.
Subject to hearing the parties, I also propose to order that the costs of the defendant's amended notice of motion be costs in the proceedings.
[SUBMISSIONS AS TO COSTS HEARD]
What I propose to do is make the order that I indicated, namely, that the costs of the notice of motion be costs in the proceedings.
[DISCUSSION ENSUED]
In response to further submissions made by counsel I note that: (1) I am prepared to make orders for the provision of the additional security by way of instalments; (2) although it will remain open to the defendant to apply for further security at a later date, and the Court would be obliged to hear such an application on its merits, my hope is that, with the benefit of the security ordered today, it will not be necessary for any further applications to be made for security for costs; and (3) rather than making any orders today, I invite counsel to bring in draft short minutes overnight. Upon the assumption that there is unlikely to be any dispute about those short minutes, I will make orders, in chambers, following my receipt of the draft short minutes.
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Decision last updated: 19 September 2012
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