J M Properties Pty Ltd (ACN 062 504 590) v Strata Corporation No 13975 Inc (No 2) - [2006] SASC 336

SUPREME COURT OF SOUTH AUSTRALIA
(Civil: Application)
J M PROPERTIES PTY LTD (ACN 062 504 590) v STRATA CORPORATION NO 13975 INC & ORS (NO 2)
[2006] SASC 336
Reasons for Decision of The Honourable Justice Layton
8 November 2006
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - EXTENSION OF TIME FOR APPEAL
APPEAL AND NEW TRIAL - APPEAL - PRACTICE AND PROCEDURE - SOUTH AUSTRALIA - SECURITY FOR COSTS
PROCEDURE - SUPREME COURT PROCEDURE - SOUTH AUSTRALIA - JURISDICTION AND GENERALLY
Appellant appealed against two decisions of a Judge of the District Court in related matters - Appellant ordered to provide security for costs - Application for extensions of time for appeals to be set down for hearing - Application to vary order regarding form of security for costs - Whether 'special circumstances' exist for granting an extension of time - Consideration of relevant factors in the exercise of the discretion to grant such an order - Held: No special circumstances for granting the application for extensions of time - No proper grounds to vary the form of security for costs - Application dismissed.
Application by first respondent to have an action struck out on the basis of the appellant's failure to set down the appeal for hearing within time - Consideration of the Court's power to strike out or dismiss actions - Held: Not an appropriate case to exercise this power - Application refused.
Supreme Court Rules 1987 (SA) R 95.11 and R 100.03; Corporations Act 2001 (Cth) s 1335, referred to.
J M Properties Pty Ltd v Strata Corporation No 13975 Inc & Ors [2006] SASC 227; REM Construction (SA) Pty Ltd v Wallbridge & Gilbert Pty Ltd (1991) 162 LSJS 99; General Steel Industries Inc v Commissioner of Railways (1964) 112 CLR 25; National Mutual Life Association of Australia Ltd v Coffey [1991] 2 Qd R 40; Wiltshire-Smith v Leighton Hill Pty Ltd (No 2) (Unreported, SC(SA), Lander J, 14 July 1995), considered.

J M PROPERTIES PTY LTD (ACN 062 504 590) v STRATA CORPORATION NO 13975 INC & ORS (NO 2)
[2006] SASC 336
LAYTON J.

This is an application by the appellant for extensions of time for appeals to be set down for hearing. The appellant is also seeking an order to vary an order made as to security for costs.
The short history is that the appellant has appealed against two linked judgments in the District Court, the first being Supreme Court Action 473 of 2006 instituted on 21 April 2006; the second being Action 562 of 2006 instituted on 11 May 2006. Subsequently an amended Notice of Appeal was filed in Action 473 of 2006 on 7 June 2006.
There had been many interlocutory arguments including issues concerning the content of the appeals, and also an application made by the first, third, fourth and sixth respondents for security for costs in relation to both appeals. On 7 July 2006 I ordered that the appellant provide security for costs and I reserved my reasons for decision.
On 2 August 2006 I ordered that the appellant give security for costs for the first respondent in the sum of $50,000 and for the third, fourth and sixth respondents of $30,000. At the same time I indicated I would hear the parties as to the form of that security.[1]
[1] J M Properties Pty Ltd v Strata Corporation No 13975 Inc & Ors [2006] SASC 227.
By virtue of the fact that this order was made, not only having regard to s 1335 of the Corporations Act 2001 (Cth) but also by virtue of R 95.13, then R 100.03 of the Supreme Court Rules 1987 (“SCR”) applies, which relevantly provides:
Where security is ordered the action or other proceedings shall be stayed until the security is furnished, unless the court otherwise orders.
The stay imposed by SCR 100.03 operates without requiring any order needing to be made to that effect.[2] Further, where only one defendant obtains an order for security which is not complied with, SCR 100.03 operates to stay the proceedings against all other defendants including that defendant. [3]
[2] REM Construction (SA) Pty Ltd v Wallbridge & Gilbert Pty Ltd (1991) 162 LSJS 99.
[3] Ibid.
Therefore it can be seen that unless the Court otherwise orders, the security ordered prevents any further action being taken by the appellant until such time as the security is furnished.
SCR 95.11(1)(a) requires that an appeal be set down for hearing within two months of being instituted. This is the usual time within which an appeal should be set down. However, SCR 95.11(3)(a) provides:
Where an appeal has not been set down within 6 months from its institution…it shall lapse at that time unless the time for setting down has been extended prior to the time set by this Rule expiring, or where in special circumstances only, such time has been extended after the time limited by this rule has expired.
As a consequence of SCR 95.11(3)(a), the appeal in relation to Action 473 of 2006 automatically lapsed on 20 October 2006. Therefore special circumstances are required before time can be extended.
In relation to Action 562 of 2006, the six month period will shortly lapse on 10 November 2006, unless an extension of time is granted. The appellant was granted leave to include an order for extension of time in relation to Action 562 of 2006.
The effect of SCR 100.03 and the failure of the appellant to make any provision for the security ordered, would have prevented the appeal being set down. In the absence of an order of the Court, such action could not be taken.
In light of this background, and since they are linked matters, I will consider both the application for “variation” of the security and the application for extensions of time together.
On 2 August 2006, I left open the question of the form of the security and it is therefore not strictly accurate for the appellant to refer to this as an application for a “variation” of the security. The order for security was simply stated as security for the respective sums amounting to $80,000, without regard to the form in which that security was to be given.
The first respondent contests that the orders sought by the appellant should be granted and seeks an order that Action 473 of 2006 be struck out. This application is to be made by the respondent on the basis that if the appeal is regarded as having lapsed, then each party bears its own costs, whereas if Action 473 of 2006 is struck out then the respondent may obtain costs against the appellant.
I will first consider the application by the appellant.
The ‘special circumstances’ relied on by the appellant are contained in an affidavit of Kelly Tronnolone sworn on 25 October 2006, enclosing as an exhibit a copy of an affidavit of Ms Marina Balalis sworn on 23 October 2006 and exhibits.
The material in the combination of the affidavits, depose that Marina Balalis has been the sole director and secretary of the appellant since 4 April 2006. The special circumstances primarily relate to the psychiatric condition of Ms Balalis over a period of time, as well as a history of her having to instruct new solicitors in these matters, and the complications arising from both factors.
The affidavit of Ms Balalis deposes a psychiatric history dating back to June 2005. In mid 2006 she attempted suicide and was in the Adelaide Clinic for several weeks. She was later readmitted as being unable to cope, again discharged and again re-admitted. After discharge from the Adelaide Clinic in about July 2006 she stayed with her father to assist her recovery. Later that month she again attempted suicide and was re-admitted to the Berri Private Hospital where she remained for approximately three weeks. A medical certificate had on an earlier occasion been tendered before me. This certificate provided by a general practitioner, Dr Jacobus Van Staden, certified on 7 October 2006 that Ms Balalis “has been admitted to the Riverland Regional Hospital from 25 July until 7 August 2006. She was admitted with severe depression, and was consequently unable to deal with any legal issues”. There are no further details of her psychiatric condition since that date, except a reference by Ms Balalis in her affidavit, that she continues to take anti-depressant and anti-anxiety medications and sleeping tablets, and that she is still suffering from “several side effects”, including drowsiness, confusion, loss of ability to think clearly, reduced energy and general lack of motivation. In addition, Ms Balalis deposes that the medication has severely impacted upon her ability to give clear and precise instructions on behalf of the appellant in various court matters.
At the same time Ms Balalis deposes that on or about 10 June 2006 Costi & Co ceased acting for the appellant and she then engaged Winters Solicitors to act for the appellant. In relation to the various applications concerning the content of Notices of Appeal and also the security for costs arguments, Mr Costi appeared for the appellant together with counsel, Ms Nelson QC. Therefore instructions appear to have been given at least up until the time when I heard argument which resulted in me making the order for security for costs on 2 August 2006.
There is little available information after that, save a reference in the affidavit of Ms Balalis, that she was unable to properly instruct Winters Solicitors, and that they ceased acting for the appellant on 25 September 2006. An affidavit of Nicholas Adel Eid sworn 13 September 2006 deposes that between 13 June 2006 and the filing of the affidavit, Winters Solicitors made numerous written requests for instructions for the purpose of enabling the proceedings to be conducted, but the appellant failed to provide these instructions. Further, the appellant did not make payment in respect of an outstanding debt to those solicitors in the amount of $4,714.70. Accordingly an order was requested and subsequently made that Winters Solicitors cease acting for the appellant.
The present solicitors Robert Chrzaszcz & Associates were instructed at a date which is not specified, but for reasons which appear hereafter, this was likely a short time before 16 October 2006. These instructions appear to have been given over the telephone, and there is reference to Ms Balalis currently visiting Renmark to try and recover from her current medical problems. Instructions have also been given to her current solicitors in relation to the form of security for costs. The consequence appears to be the affidavit of Larissa Vakulina sworn on 27 October 2006, which deposes as to the form of the security which the appellant is prepared to give for costs. I will return to consider this security later in these reasons.
In considering whether I should exercise my discretion under R 95.11(3)(a), it is necessary to consider whether the above matters amount to special circumstances, and if they do, whether it is appropriate to exercise my discretion.
The respondents submit that the factors asserted by the appellant do not constitute special circumstances. It is submitted first, that they are not established as a matter of fact, and secondly they could not be characterised as causative of the appellant’s delay in setting down the appeal, or for its failure to apply for, and obtain an order extending time for the setting down of the appeals before now.
As to the establishment of a fact, not only was there no psychiatric report available to support Ms Balalis’ claims, there was no real information as to why it is only now that she is able to give instructions. There is a letter annexed to the affidavit of Ms Tronnolone which refers to a letter having been written by her current solicitors on 16 October 2006. This is the earliest date upon which one is able to discern that she has provided instructions to her current solicitors. There is nothing from which I can glean information which explains Ms Balalis’ complete failure to provide information and instructions after 2 August 2006, and her ability to give instructions now.
I am sympathetic to the serious medical matters of which Ms Balalis deposes. However, there is a lack of any supporting documentation for her claimed inability to give instructions, except the very brief doctor’s certificate previously adverted to. In addition, the security now being proffered is not dependant upon the exertions of Ms Balalis, the arrangements for finance are being done by another. Furthermore, there are actions in other jurisdictions relating to Ms Balalis, to which she appears to have given priority over any application made in these actions. Those other actions concern winding-up proceedings instituted against the appellant in the Federal Court on 1 September 2006.
In essence, the winding-up proceedings relate to a claim for $371,000, which was obtained by a default judgment. In that matter, an appearance was filed by Robert Chrzaszcz & Associates on 17 October 2006 indicating an intention to oppose an order. That application was supported by a detailed affidavit of Ms Balalis, which sets out a number of matters including assertions of facts concerning that action and an allegation of a failure to serve certain documentation. The affidavit also purports to set out grounds of opposition to the winding-up order. Therefore, at least until 17 October 2006, Ms Balalis appears to have been able to give quite detailed instructions.
It is to be noted that there are also contempt proceedings against Ms Balalis in the District Court, being Action 720 of 2006.
It is evident that there are a number of court matters pending in relation to the appellant, as well as Ms Balalis individually. The concern therefore arises as to whether the inaction of Ms Balalis solely relates to her medical condition, or to a lack of financial resources to deal with the multiplicity of actions in which she is involved.
The respondents argue that even if Ms Balalis was incapacitated, this did not prevent her various solicitors from providing a proposed index of appeal books, or inquiring as to any exhibit or the inclusion of any exhibits, being preparatory work required for setting down the matters for hearing. Whilst that is so, in another sense it would have been open to the respondents to view that as progressing the actions, as they were not required to involve themselves in approving such an index, or compiling any appeal books until such time as security for costs was provided.
Having regard to the history of this matter, including the lack of any information to support Ms Balalis’s assertions about her incapacity to give instructions in relation to the security for costs and setting the matters down for hearing, combined with the later apparent activity only occurring in October 2006 when insolvency is afoot, I am not satisfied that special circumstances exist which justify the extensions of time sought.
However, even if I had been satisfied as to the existence of special circumstances, I do not consider the circumstances of this case to be such that I should exercise my discretion to grant the extensions of time. The respondents have been put to considerable expense in all of these processes. The appellant has not abided by undertakings given to the Strata Corporation and to the Court at the hearing before me on 10 July 2006, namely the conditions for the grant of an interim stay. A condition being that the appellant pay 11.2 per cent of the strata levy pursuant to the current articles and pursuant to s 27 of the Strata Titles Act during the period of the adjournment. The appellant has not paid the Strata Corporation any of the monies as set out in the affidavit of Sally Wilson filed on 8 August 2006.
Security for costs
The security which is offered at the present time is an offer from the seventh respondent, being the owner of Unit 9 in the same set of units as the subject of these proceedings. It was submitted by the respondents (first, third, fourth and sixth respondents), that the security is inadequate and lacks sufficient clarity.
The respondents submitted that the value of Unit 9 is flawed in that it is derived from an assessment for SAWater rates, and is contradicted by evidence previously relied upon by the appellant in District Court Action 1030 of 2003. The evidence led by the appellant in Action 1030 provided a market value of Unit 9 as being $50,000, whereas the SAWater rate valuation is asserted to be a capital value of $390,000. Ms Vakulina deposes that it is subject to a mortgage registered to Westpac, stamped at $196,000. Ms Vakulina also deposes that there is approximately $200,000 of equity available on the property.
In addition, the respondents asserted that such equity in the property is unlikely as it does not take into account the outstanding contributions and levies owed to the Strata Corporation in respect of Unit 9 which amount to $121,444.29. Further, the affidavit deposes to the stamped value of the mortgage as distinct from what may be owed to the bank in respect of the mortgage.
A further concern is that the affidavit of Ms Vakulina sworn on 27 October 2006 deposes:
I have also begun the process of discharging the Westpac mortgage by way of refinance over other business interest entirely separate from the property, and accordingly, any mortgage over the property granted in favour of the respondents for the security of costs will be the first priority. I expect to be in a position to do this within approximately four weeks.
The respondents submitted that this was unclear, unsatisfactory and uncertain. The issue is whether on a ‘refinance’ the property is to be mortgaged in any way, in which case if it is with a banking institution it is unlikely that it would be prepared to give a priority mortgage to another for $80,000. Further, there is only a vague indication of when this security arrangement would in fact be put in place.
In all of the circumstances, I agree with the respondents’ arguments that the proffered method of security for the $80,000 is unsatisfactory. The situation remains that no security is currently available by the appellant to satisfy the order.
For these reasons, I do not consider it appropriate to extend time for the setting down of the appeals or to “vary” an order made as to security, so as to regard the proposed security as being adequate to fulfil the order.
The appellant’s application should be dismissed.
Strike out
The first respondent has applied to have Supreme Court Action 473 of 2006 struck out on the basis of the appellant’s failure to provide security, and its failure to set the appeal down for hearing. As indicated earlier, this order is sought to allow an order for the costs of the appeal to be paid by the appellant, and not simply for each party to bear its own costs.
The power to strike out or dismiss an action, as distinct from the power to strike out a pleading or a step in proceedings, is an exercise of an inherent power of the Court or a power granted pursuant to SCR 3.01. Whichever source of power is used, the essential principles are the same, namely that the power should be used with great caution and only in clear cases.[4] For example, where no cause of action is disclosed; where there is no real issue of law or fact to be determined;[5] or where security has not been given and either will not or cannot be given.[6]
[4] General Steel Industries Inc v Commissioner for Railways (1964) 112 CLR 125.
[5] National Mutual Life Association of Australia Ltd v Coffey [1991] 2 Qd R 40.
[6] Wiltshire-Smith v Leighton Hill Pty Ltd (No 2) (Unreported, SC(SA), Lander J, 14 July 1995).
Having regard to all the circumstances, I am not satisfied that this is an appropriate case in which to strike out the action. In my view, the failure to set down proceedings, and failure to provide security for costs would not be sufficient to attract the final step of dismissing the action in this case. No argument has been put to me which suggests that the appeal is unsustainable, and I am not presently satisfied that security will not, or cannot be given. It is not appropriate to seek to use different procedures simply to change the costs orders which would otherwise follow the application of the relevant rules in this case.

The first respondent’s application that Supreme Court Action 473 of 2006 be struck out is refused.