Jazabas v Haddad

[2008] NSWSC 593

CITATION:	Jazabas v Haddad [2008] NSWSC 593
HEARING DATE(S):	27 & 27 May 2008
JUDGMENT DATE :	17 June 2008
JURISDICTION:	Common Law
JUDGMENT OF:	Harrison AsJ
DECISION:	(1) The plaintiffs' notice of motion filed 7 January 2008 is dimissed. (2) The plaintiffs are to pay the defendants' costs as agreed or assessed.
CATCHWORDS:	LIFT STAY OF PROCEEDINGS - Security for costs
LEGISLATION CITED:	Corporations Act 2001 Environmental Planning and Assessment Act 1979 Fair Trading Act 1987 Uniform Civil Procedure Rules
CATEGORY:	Procedural and other rulings
CASES CITED:	Bell Wholesale Co Ltd v Gates Export Corporation (1984) 3 FCR 1 Buckley v Bennell Design & Constructions Pty Limited (1974) 1 ACLR 301 Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 Gentry Bros Pty Ltd v Wilson Brown & Associate POty Ltd (1992) 8 ACSR 405; 10 ACLC 1394 Jazabas v Botany Council [2000] NSWSC 58 Jazabas Pty Ltd v Haddad [2007] NSWCA 91 K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 Latoudis v Casey (199) 170 CLR 534 Maritime Association Inc (Court of Appeal, 23 December 1992, unreported) Oshlack v Richmond River Council (1998) 193 CLR 72
TEXTS CITED:	G E Dal Pont, Law of Costs (2003) LexisNexis Butterworths
PARTIES:	Jazabas Pty Ltd (First Plaintiff) BAS Developments Pty Ltd (Second Plaintiff) Permtree Pty Ltd (Third Plaintiff) Sam Haddad (First Defendant) State of New South Wales (Second Defendant) City of Botany Bay Council (Third Defendant)
FILE NUMBER(S):	SC 20020/2005
COUNSEL:	P E King (Plainitiffs) G Craddock SC (First & Second Defendants) G McNally SC (Third Defendant)
SOLICITORS:	Cropper Parkhill (Plaintiffs) Crown Solicitor (First & Second Defendants) Houston Dearn O'Connor (Third Defendant)

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

ASSOCIATE JUSTICE HARRISON

TUESDAY, 17 JUNE 2008

20020/2005 - JAZABAS PTY LTD v SAM HADDAD

JUDGMENT (Lift stay of proceedings
– security for costs)

1 HER HONOUR: By notice of motion filed 7 January 2008, the plaintiffs seek an order that, pursuant to s 67 of the Civil Procedure Act 2005, the order staying these proceedings made on 9 June 2006 be removed or lifted on the grounds “that all the persons interested in the companies which are the plaintiffs have given a personal undertaking to meeting the costs of the defendants in the event that the defendants obtain an order for costs should the proceedings prove unsuccessful.”

2 The first plaintiff is Jazabas Pty Ltd (“Jazabas”). The second plaintiff is BAS Developments Pty Ltd (“BAS”). The third plaintiff is Permtree Pty Ltd (“Permtree”). Stephen Haigh is the managing director of the first, second and third plaintiffs (“the plaintiffs”). The plaintiffs relied on affidavits by Mr Haigh dated 15 November 2005, 14 December 2005 and 7 January 2008 and affidavits of John McCracken dated 22 May 2008 and Patrick Campion dated 6 July 2005. The first defendant is Sam Haddad (“Mr Haddad”). The second defendant is the State of New South Wales (“the State of NSW”). The first and second defendants did not rely upon any evidence. The third defendant is the City of Botany Bay Council (“Botany Council”). Botany Council relied on three affidavits of Timothy James O’Connor dated 22 May 2005, 22 February 2008 and 29 April 2008. The plaintiffs relied on the affidavit of Stephen Haigh affirmed 7 January 2008.

The prior application for security for costs

3 On 25 and 26 May 2006, the proceedings came before Simpson J for the determination of the defendants’ notices of motion seeking security for costs. On 9 June 2006, Simpson J decided that the plaintiffs should provide security for costs in the sum of $100,000. On 28 July 2006 Simpson J made orders that the plaintiffs provide security for the costs of Mr Haddad and the State of NSW within 28 days in the sum of $50,000 as agreed or in such manner as the Registrar shall determine; the plaintiffs provide security for the costs of Botany Council within 28 days in the sum of $100,000 as agreed or in such manner as the Registrar shall determine; and an order pursuant to Part 42.21 of the Uniform Civil Procedure Rules that the proceedings be stayed as against each defendant until such security for the costs of such defendant is provided. The plaintiffs appealed to the Court of Appeal. On 25 October 2007, the Court of Appeal granted leave to appeal and dismissed the appeal.

4 Hence, there remains on foot an order for security for costs together with an order that proceedings be stayed until there is compliance with that order. The plaintiffs seek that the stay be lifted for three reasons. They are firstly, the shareholders of all three companies and directors now provide an appropriate personal undertaking as to the costs of the defendants; secondly, the public interest as to contamination from the aged industrial facilities at the Botany Randwick Industrial Park; and finally that if the order remains in place it will inappropriately stultify the further conduct of the proceedings.

5 In Jazabas Pty Ltd v Haddad [2007] NSWCA 91, McClellan CJ at CL summarised the background to these proceedings and the case against Haddad, the State of NSW and Botany Council and the prior proceedings between Jazabas v Botany Council [2000] NSWSC 58. I respectfully adopt and reproduce his Honour’s summary. It is as follows:

“Background

38 Many of the facts relevant to this application are not controversial. Mr Haigh became interested in the acquisition of a parcel of land at 2-10 Nilson Street, Hillsdale (“Nilson Street land”) within the City of Botany Bay for the purpose of development. The land was owned by Amcor Ltd. It was offered for sale by public auction. On 5 November 1993 Amcor’s solicitor applied to the Council for a certificate under s 149 of the Environmental Planning and Assessment Act 1979. On 11 November 1993, and again on 29 November 1993 the Council issued certificates, each of which stated that no development control plan nor draft plan applied to the Nilson Street land. They also stated that the land was not “affected by any Council policy to restrict development by reason of … any other risk.”

39 By letter dated 10 December 1993 the Council’s solicitors wrote to Amcor and its real estate agent, advising that the Council had resolved to prepare a development control plan which would affect the Nilson Street land. The letter contained information as to the effect of the plan on the permissible floor space ratio, the proposed building footprint/site coverage and specified facilities which any residential flat development should incorporate. No information relating to possible contamination was included.

40 Mr Haigh sought further information. He telephoned the Council and spoke to Ms Cuthbert. He says he was informed that provided any proposed development complied with the relevant development standards there would be no problem in obtaining development consent.

41 On 21 December 1993 Evenvest contracted to purchase the Nilson Street land. That purchase was ultimately completed by Jazabas on 28 June 1994. Early in 1994 Evenvest obtained a s 149 certificate which repeated the statement that the land was not affected by any Council policy to restrict development by reason of “any other risk.”

42 Jazabas submitted a development application to the Council which was approved on 4 June 1996. On 17 July 1996 Jazabas submitted a building application. A further building application was submitted in October 1997 which was not dealt with by the Council resulting in an appeal to the Land and Environment Court. The Council contested the appeal on the grounds that (i) the land was located in the risk reduction zone; (ii) the land was proximate to a petrochemical complex and chlorine manufacturing plant; and (iii) the building plans did not satisfactorily address measures to warn inhabitants of the proposed buildings or protect them from risk of death or injury in the event of a substantial release of toxic gases or some other contamination event. On 23 April 1998 the appeal was dismissed by Assessor Bly, who was satisfied that the evidence established the Nilson Street site was “unsuited for further residential intensification on hazard grounds.”

43 Although the Council had succeeded in the appeal to the Land and Environment Court it took the extraordinary step of appealing that decision, claiming the assessor had made an error of law. On 16 April 1999 Lloyd J upheld the appeal and the application was remitted to an assessor for redetermination. On 15 July 1999 the court granted approval. On 15 August 1999 Jazabas sold the land, with the benefit of the building approval and secured a modest profit. However, it claims that if the land had not been contaminated the profit from the venture would have been greater.

44 In the main proceedings the claimants allege that, at the time of the purchase, the Nilson Street land was seriously affected by contamination from industrial activity which had been taking place within the locality over many years. In 1983 and again in 1985 the Department of Urban Affairs and Planning prepared risk assessment studies for an area which included the Nilson Street land. Only the second of these studies was published. Although it identified a “risk reduction zone”, which included the Nilson Street land, the claimants allege that the 1985 study was a “sanitised version of the results” of the 1983 study and contained erroneous representations about the risk of death, serious injury and irritation from toxic hazards to present and future residents.

The case against [Haddad, the State of NSW and Botany Council] in the main proceedings

45 The claimants’ case against Mr Haddad has a number of limbs. Although the pleading is not elegant it raises claims in tort, including misfeasance in public office and negligent advice and alleges a breach of s 42 of the Fair Trading Act 1987 (NSW) .

46 The claimants allege that Mr Haddad was responsible for the 1985 risk assessment study. It is alleged that in that study the boundaries of the risk reduction zone are misrepresented. It is pleaded that the misrepresentation was either deliberate or reckless. The claimants allege that when embarking on the purchase and development of the land they relied upon the representations made in the study and, because they failed to make the profit they would otherwise have made, have suffered loss.

47 It is further pleaded that the State breached its duty of care to the claimants by failing to take reasonable steps to prevent a foreseeable risk of damage identified as economic loss. The particulars in the pleadings refer to the failure to warn or disclose information about the toxic risks and hazardous industry risk affecting land within the risk reduction zone. The claimants further allege that the State, Mr Haddad and the Mayor of the Council were involved in a conspiracy to conceal the 1983 investigations and report with respect to the toxicity of land in the risk reduction zone. The State is said to be vicariously liable for Mr Haddad’s acts. The Mayor of the Council has not been made a party to the main proceedings.

48 The case against the Council is pleaded in negligence, misfeasance in public office and deceit. It is alleged that the Council failed to warn persons likely to be affected of the hazards and toxic risks associated with the relevant areas.

49 It is further alleged that by appealing the decision of Assessor Bly, with the purpose of enabling an approval to issue, the Council breached its duty of care to the claimants. It is pleaded that the appeal from Assessor Bly’s decision was made for an improper purpose and to obtain an advantage collateral to and extraneous to those proceedings. That purpose is said to be to increase the value of the property and thereby diminish the Council’s potential liability in damages. The ultimate relevance of this allegation is difficult to discern. If, as the claimants allege, the Council acted to reduce its liability this could only have resulted in the claimants suffering less damage.

50 The primary judge described the claimants’ statement of claim “as less than crystal clear.” However, her Honour identified the critical allegation to be the assertion that the 1983 risk assessment study was concealed by one or more (or all) of the opponents. The fundamental question in the main proceedings will be whether, if this occurred, it could provide the foundation for a successful action in damages.

The earlier proceedings: Jazabas v Botany Council [2000] NSWSC 58

51 This is not the first case brought by Jazabas against the Council. On 12 August 1998 Jazabas commenced proceedings in the Federal Court of Australia claiming damages. It pleaded causes of action in negligent misstatement and misleading and deceptive conduct. Jazabas alleged that the s 149 certificate, the letter of 10 December 1993 and conversations with the Council officer had all, either expressly or by omission, falsely represented that the Nilson Street land was not affected by any Council policy to restrict development, or that there was no planning impediment to the development of the land. The proceedings were transferred to the Supreme Court in September 1998 and were heard by Rolfe J. It was during the course of those proceedings that the Council appealed the decision of Assessor Bly dismissing Jazabas’ appeal.

52 On 24 February 2000 Rolfe J delivered judgment and awarded Jazabas $1,218,832 in damages. The Council appealed and this Court, by majority, upheld the appeal and entered judgment for the Council.”

6 On 19 April 2002, in these earlier proceedings, special leave to appeal to the High Court of Australia was refused.

7 I shall return to the Court of Appeal’s decision in more detail later in this judgment.

8 A convenient summary of the relevant principles governing an application for costs is set out by Beazley J (as she then was) in K P Cable Investments Pty Ltd v Meltglow Pty Ltd (1995) 56 FCR 189 at 196-198.

9 On 9 June 2006, her Honour Justice Simpson, in granting an order for security for costs, stated that there were real difficulties in the manner in which the pleading was laid out. Her Honour was not persuaded that the plaintiffs had established any real likelihood that they would be ultimately successful. She further found there was limited merit in an argument on estoppels and there was there was likely to be a number of interlocutory issues to be resolved before the proceedings came on for trial. For the purposes of this application, I accept that although the pleading requires considerable attention, the case as presently pleaded appears bona fide and although it may face difficulties, one of which is whether it is statute barred, it could not presently be said that it is doomed to fail. There are real issues to be tried but the strength of the plaintiffs’ case is a neutral factor in the exercise of discretion – see Jazabas [2007] NSWCA per McClellan CJ at CL [84]. It has not been established that the plaintiffs’ impecuniosity has been caused by the defendants conduct.

10 Simpson J stated that the earlier proceedings before Rolfe J occupied eleven days of hearing time, and, at first instance, the Council incurred costs of $767,676.51. Added to that sum are the costs for the appeal and the application for special leave to appeal to the High Court. The total of Botany Council’s outstanding costs is in the sum of $969,305.51. Since then all defendants have incurred costs involved in the application before Simpson J and the appeal. Jazabas has not paid any of this amount. On 29 April 2008, Jazabas offered to pay the assessed costs by way of installments of $500 per month. There has been no response to this letter (Ex F).

Whether the stay of proceedings should be lifted

11 It is common ground between the parties that this Court, in its discretion, has jurisdiction to lift the stay of proceedings. It is my view the Court can lift the stay of proceedings where changed circumstances make it just and proper that the prior order for security for costs should be discharged.

12 I have carefully read the decisions of her Honour Justice Simpson dated 9 June 2006 and the Court of Appeal dated 25 October 2007. The appeal against Simpson J’s decision was dismissed.

13 I shall consider firstly, whether there have been changed circumstances, and secondly, whether in the exercise of my discretion, I ought to lift the stay of proceedings.

(i) The shareholders offer and the stultification of the proceedings

14 It is common ground between the parties that the plaintiffs are insolvent. When the application for security for costs was heard by Simpson J, Mrs Haigh had not given an undertaking as to costs, nor had Mr and Mrs Kikiras. At that time half of the ownership of Jazabas was held by Kikiras Real Estate Pty Ltd, the shareholders of which were Mr Dimitrios Kikiras and Mrs Zoe Kikiras. Since then the Kikiras’s shares have been transferred to Stephen Haigh (Nominees) Pty Ltd.

15 Stephen Haigh is the managing director of each of the plaintiffs. He and his wife Beverley are now the sole shareholders of Jazabas. He asserts that from the plaintiffs’ side it is only he and his wife who are interested in the outcome of these proceedings. Mr Haigh has sought financial support from litigation funders for these proceedings but such support has been declined.

16 Mr Haigh has given a personal undertaking to meet the costs of the defendants should they be successful in these proceedings and obtain an order for costs against the companies. His wife gave a similar undertaking in court.

17 Counsel for the plaintiffs submitted that this Court should follow Gentry Bros Pty Ltd v Wilson Brown & Associates Pty Ltd (1992) 8 ACSR 405 at 415. That means according to the plaintiffs’ counsel, that once Mr and Mrs Haigh offered their personal undertakings the stay ought to be automatically lifted. Counsel for the defendants submitted that on appeal in these proceedings the Court of Appeal preferred the approach the Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd [1999] 2 VR 191 at 197-8 and even though Mr and Mrs Haigh have given personal undertakings they have no chance of making them good.

18 The starting point on the examination of this issue is Buckley v Bennell Design & Constructions Pty Limited (1974) 1 ACLR 301 where Street CJ (with whom Moffitt P and Hutley JA agreed) stated (at 304):

“In cases of contract the other party to the dealing would be on notice of the limited liability of the company and, the transaction being voluntary, he could be presumed to be competent to look after his own interest in that regard. Where, however, a company commences litigation against another party, that party could find himself involuntarily prejudiced by the limited liability character of the plaintiff who had commenced proceedings against him. To protect the other party from this consequence of limited liability, there has always in companies legislation been a provision along the lines of s 363 of the New South Wales Act [a predecessor to s 1335 of the Corporations Act ].”
In administering the policy laid down by provisions of that nature, the courts have been concerned to achieve a balance between ensuring that adequate and fair protection is provided to the other party, and avoiding injustice to impecunious companies by unnecessarily shutting them out or prejudicing them in the conduct of litigation.”

19 While Buckley v Bennell sets out the rationale of s 1335 of the Corporations Act 2001, it does not address the issue of shareholders giving personal undertakings.

20 In Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1, the full Federal Court stated that a court should not decline to order security on the ground that do to so would frustrate the litigation, unless the company “establishes that those who stand behind it and who will benefit from the litigation if it is successful are also without means.”

21 In Epping Plaza Fresh Fruit & Vegetables Pty Ltd v Bevendale Pty Ltd the Victoria Court of Appeal held that offers by impecunious promoters of corporate plaintiffs do not determine the exercise of a discretion against the grant of security for costs.

22 In Epping Plaza, Winneke P and Phillips JA said at 198 [24]:

“Furthermore, in our view the court should not readily accept an undertaking to pay costs from impecunious individuals who, at least at the time when such an undertaking is given, have no chance of making it good. Such an undertaking could not be an effective alternative security because it could only be enforced (at least for the time being) by proceedings for contempt.”

23 In Jazabas [2007] NSWCA, Mason P indicated a strong inclination to agree with the statement by Winneke P and Phillips JA, - see [2] per Mason P and [79] per McClellan CJ at CL. However, Basten JA, favoured the view of Cooper J in Gentry Bros Pty Ltd v Wilson Brown & Associate Pty Ltd (1992) 8 ACSR 405.

24 In Gentry Bros Pty Ltd v Wilson Brown, Cooper J at 415 stated:

“In the instant case once the shareholders of the applicant have agreed to accept personal liability for any judgment for costs against the applicant, the statutory purpose of s 1335 as explained in the authorities to which reference has been made is satisfied. The making of an order which secures the personal liability of the shareholders is in itself the provision of security: see for example Memutu Pty Ltd v Lissenden (1983) 8 ACLR 364 at 366; Yandil Holdings Pty Ltd v Insurance Co of North America (1985) 3 ACLC 542 at 546; Appleglen Pty Ltd v Mainzeal Corp Pty Ltd (1988) 79 ALR 634 at 635-6.

Once the shareholders have been exposed to personal liability for the applicant’s costs, the weight to be given to the statutory purpose is gone. Those who stand behind the applicant once they accept personal liability for the applicant’s costs are in no worse position than they would be as litigants in person in the court: Harpur at 533; Yandil Holdings Pty Ltd at 546.

The offer by the shareholders of the applicant to accept personal liability for the applicant’s costs is a factor weighing heavily against the making of an order against the applicant for provision of a cash or other security for costs notwithstanding that the worth of the shareholders may ultimately prove insufficient to satisfy any judgment in whole or in part.”

25 However, Basten JA did note at [27], that the full bench judgment in Epping Plaza disapproved the single judge dicta in Gentry Bros Pty Ltd v Wilson Brown.

26 When the application for security for costs was determined there were four shareholders who stood behind Jazabas, Mr and Mrs Haigh and Mr and Mrs Krikas. Aside from Mr Haigh, none of the other shareholders offered an undertaking to the Court. However, this situation has now changed.

27 On 16 November 2007, Stephen Haigh purchased the two shares in Jazabas belonging to Kikiras Real Estate Pty Ltd (“Kikiras”) for the consideration of $1 each. The chronology in relation to this transfer is as follows:

28 On 1 April 2007, Mr Haigh wrote to Kikiras Real Estate Pty Ltd and stated that the shares in Jazabas “be immediately transferred to S Haigh to allow consistency in that the plaintiffs have no funds for provision of any security cost application. This would take away from the courts a middle of the road decision in our appeal that could allow security for costs.” The shares were in fact transferred to Stephen Haigh (Nominees) Pty Ltd (Ex A).

29 Until 16 November 2007, Kikiras was a shareholder in Jazabas. Dimitrios (Jim) Kikiras became the sole director and shareholder of Kikiras some time in 2003. Prior to him selling his shares to Mr Haigh, Jim Kikiras and Kikiras were not prepared to meet any costs in these proceedings nor were they prepared to have any involvement in them.

30 During the financial years ending 2006 and 2007, Mr and Mrs Haigh had taxable earnings of $6000 nett each for both years [see Ex B]. During cross examination, Mr Haigh explained that this was because that sum fell below the tax threshold. The bank account statements for the Haigh Family Trust between 26 August 2002 and 25 April 2008 show a negligible balance [Ex C]. Neither Mr nor Mrs Haigh own any property in their own names either jointly or separately. They present to the Court as being impecunious.

31 Mr Haigh is a builder and developer. For many years Mr Haigh has been buying land in the Little Bay area using different corporate entities. Once the company purchases the land, the house is demolished, the land is sub divided and a dual occupancy dwelling is built. Mr Haigh draws the plans and obtains council approval to carry out the building work. BAS is usually the vehicle used to carry out the building work.

32 Once the dual occupancy is completed, the company is sold with each part of the dual occupancy and that company then becomes a shelf company. Each new site purchased for development requires a new company name. Mr Haigh on cross-examination told the Court “there are substantial profits in what we do” (t 24). By way of example Mr Haigh cited the current contract BAS has for building work on land owned by Venice Ice Pty Limited, a company which he owns with his wife and Alan and Sonia Kilchran, all of who are also the directors. In 2007 Venice Ice Pty Ltd purchased the property for somewhere between $855,000 and $900,000. While building costs are estimated to be around $500,000, Mr Haigh gave evidence the dual occupancy, on completion, will sell for around $2 million in total (t 24). That leaves a surplus of approximately $600,000.

33 According to counsel for Botany Council, the Court should not lend its seal of approval to parties who seek to overcome an order for security by replacing solvent shareholders with purportedly impecunious ones who then offer to stand behind the company, as such an offer is worthless.

34 Counsel for Botany Council submitted that in order for the security for costs order in this matter to be effectively lifted, an arrangement was concocted whereby the shareholder who was not willing to put its assets on the line and stand behind the company for the purposes of the litigation, transferred its shares to the admittedly impecunious Mr Haigh for a substantial consideration.

35 Counsel for Mr Haddad and the State of NSW submitted firstly, that the series of representations is sufficient to demonstrate that as a result of the sale of the two Kikiras shares in Jazabas to Mr Haigh for $1 each, Kikiras have an arrangement that the sum of $182,977.28 will be paid to Kikiras by November 2009; and secondly, that due to the impecuniosity of Jazabas and Mr Haigh, the only sensible conclusion is that the offer was based upon an expectation that Kikiras would share in the fruits of any success by Jazabas in these proceedings. At best Kikiras P/L has an interest in the proceedings as a potential beneficiary. Even if Mr Kikiras has an interest as a potential beneficiary, I regard this as being of little significance.

36 In the past Mr Haigh has made funds available to pay the Botany Council’s legal fees. In earlier Equity proceedings 2609/2000, Registrar Berecry were dismissed the proceedings between BAS and Botany Council and made an order for costs in favour of Botany Council. On 15 December 2006, a Certificate as to the Determination of Costs issued in the sum of $9,143.82. After service of a creditors statutory demand for payment of debt upon BAS, Botany Council’s solicitor was informed by Council’s finances officer, Bryan Bulock that Mr Haigh paid the sum of $9,143.82 to Council on or about 5 October 2007.

37 To date BAS has been able to pay the plaintiffs’ legal fees. Payments have been made for the plaintiffs’ legal representation for the hearing before Simpson J (2 days plus half day) and the subsequent appeal.

38 On the state of the evidence there are two alternate conclusions that are available. One is that the personal undertakings proffered by Mr and Mrs Haigh are of little worth. The evidence indicates they have no personal assets of any real value. I accept that Mrs Haigh defers to her husband in relation to financial matters and it is Mr Haigh who has control over funds in various corporate entities.

39 Should the plaintiffs’ case be unsuccessful, Mr Haigh may choose to make some funds available to pay some or all of the defendants’ costs that are in the sum of $969,305.51. Jazabas has made an offer to pay the council’s costs in relation to the prior proceedings at the rate of $500.00 per month. Mr Haigh either may choose not to or may not be in a position to make good the undertakings his has given. In these circumstances, I do not view the undertakings as of any real worth. I accept that if the order for security is to remain in place these proceedings may be stultified. However, I do not view these undertakings as a factor of sufficient weight to count against the provision of security if it otherwise were appropriate.

40 If I am wrong, and these undertakings are of real pecuniary worth there is no reason why Mr and Mrs Haigh could not utilise their assets to enable Jazabas or the other plaintiffs to put up security for costs. If that were to occur these proceedings would not be stultified.

(ii) Public interest

41 Since the earlier decision by his Honour Justice Rolfe, there have been public admissions by the Mayor of Botany Council of negligence. These are referred to in the earlier judgment by Simpson J and are set out in the later judgement by McClellan CJ at CL at [55] – [59]. They are worth repeating:

“55 Evidence was accepted by her Honour going to the strength of the claimants’ case. This included a transcript of an interview with the Mayor of the Council, Mr Hoenig on ABC Radio National’s program “Background Briefing” in June 2002, when he was recorded as saying:

“Well the ’83 document [the 1983 Risk Assessment Study] was never a public document. The ’83 document was the first time, basically at the Council and community’s request, that they underwent proper hazard studies, and on completion of the ’83 document, they then wanted to know what to do with it in terms of how they released it to the public or whether it should be released to the public. There was some concern about whether or not the population would panic, would not understand the material they had collated, not understood the risk assessment numbers, and I advocated to the Department at the time, they needed to release the document, and the ’85 document was the document modified for public consumption, to avoid public panic.”

56 Later, Mr Hoenig was recorded as saying:

“We were stuck between the devil and the deep blue sea. Do we tell 4,000 or 5,000 residents in Hillsdale that your land’s worthless, or alternatively do we try and encourage the removal of this one plant that had been undertaken to be removed. And we decided on the latter.”

57 Later still, the compare of the program was recorded as saying the following:

“Surprisingly, Botany Mayor Ron Hoenig says he thinks the Council was negligent in all this. Here is a reading of comments by Councillor Hoenig in a closed Council meeting in 1998.
‘In reality, the fact is that this Council was aware and its planning officers were aware, and should have been aware at all times, that there is a risk assessment lying over the Hillsdale area.’
Councillor Hoenig went on to say that it was ‘nothing short of negligence’ that the Council didn’t consider the recommendations of the 1985 study.
In his office at Eastgardens, Mayor Hoenig said he hasn’t changed his mind.”

58 Immediately after Mr Hoenig was recorded as saying:

“That was my view. It still is. It still is. The Council was very poorly advised in respect of even allowing that Jazabas site. That was parkland, or it belonged to APM that the Council really didn’t want to give development approval, and was advised at the time there was no basis to prevent it. Now we accept responsibility, or I accept responsibility for that. As a result of that advice, certain things were put in train and the quality of the advice is now substantially improved because there is a change in personnel.”

59 Mr Hoenig was then asked:

“(Q) But if you concede that that decision was negligent, then why take the developer to court, put him through the wringer to their considerable personal and financial expense?
(A) Well firstly it was my view, not the view of Council, of the Council lawyers, and not conceded by Council officers, and not agreed to by the Council.””

42 The plaintiff submitted that public interest is a relevant additional consideration in the exercise of the discretion both to refuse and to lift a stay order in relation to security for costs. They relied upon the affidavit of Dr McCracken an expert on risk assessment dated 22 May 2008 to support their proposition that these proceedings are in the public interest and may benefit other members of the community.

43 Dr McCracken states that his research indicates the risk of fatality and injury at some areas adjacent to the Botany/Randwick industrial complex were for many years at unacceptable levels. He concludes that a major contributor to these risks arising from toxicity associated with the potential accidental release of chlorine into the atmosphere. While he states these risks were reduced following the replacement of Chlor-alkali ICI plant on the current Orica sight in 2002, unacceptable risk levels remain in some areas.

44 Dr McCracken referred to a Botany/Randwick Industrial Area Land Use Safety Study Overview Report published in 2001 by the Department of Urban Affairs and Planning (the 2001 Study) which identified regions where risk levels exceeded accepted land use safety guidelines and forecasted that one region would continue to be exposed to risk levels above the accepted land use safety guidelines for toxic injury and irritation. Further reference is made to an Environmental Impact Statement for the Replacement Chlor-alkali Plant (EIS) prepared for Orica Australia and published in 1998 which identified the use of nearby streets for the transportation of hazardous chemicals but failed to quantify the risk implications for residential areas such activities would have.

45 Dr McCracken also referred to an internal report prepared in February 1988 by the Department of Planning entitled “Report on the Implications and Risk from the Botany/Randwick and Port Botany Industrial Complex on the Proposed Public Housing Sites in Randwick” (the Report) which included risk estimates on toxic hazards and the transportation of hazardous materials. The Report surmised that the chlorine hazard proposed by the ICI plant was the major contributor to the overall risk in the area of the proposed housing development site and recommended that further assessment occur on the proposed site. Dr McCracken noted the contradiction between the internal departmental advice and the published advice regarding the proposed development site.

46 So far as these current proceedings are concerned, Dr McCracken (Aff, at [7]) acknowledged that he had seen a copy of the judgment of McClellan CJ at C. Dr McCracken’s research to date “indicates that there is a basis for the conclusion that, in breach of its duty, the third defendant (Council) played down the importance of fatality, injury and irritation risks posed from toxic hazards at the Botany/Randwick industrial complex, particularly those posed by the chlorine plant at the Orica (formerly ICI) site”. Dr McCracken stated that, in his opinion, whether or not this decision was influenced by political factors, the Botany Council ought to have taken steps to prevent loss and damage from such risks, and that sufficient measures are still needed.

47 Dr McCracken goes on to cite two approvals by Botany Council for intensification of residential development adjacent to the Botany/Randwick Industrial Complex and notes his surprise that these were given in light of the Development Control Plan (the Control Plan) and recommendations of the 2001 Study. The Control Plan was developed in 2003 to give the 2001 Study status under the Environmental Planning and Assessment Act 1979 and implement effective land use safety planning. Dr McCracken states that in reference to the two development approvals he would expect that certain land use controls outlined in the Control Plan would apply. These land use controls include development concurrence with Planning NSW and transport risk assessment reports prior to council approval.

48 Dr McCracken draws attention to some stated objectives of the Control Plan namely to identify and address hazard risks within the development assessment process, to ensure the community is informed about the cumulative risk associated with industrial activity and to require special assessment of certain development areas.

49 Public interest will be a factor when determining whether to order security for costs where there is a curial determination on an area of law which may affect matters of public importance. Public interest may arise where the outcome will potentially benefit more than just the plaintiff or will uphold some interest common to other members of the community (G E Dal Pont, Law of Costs, (2003) LexisNexis Butterworths at 1010).

50 A key consideration is that the litigation in question is of interest and value to more than just the plaintiff, or in other words the plaintiff can be seen as representing more than just its own interests. Kirby P declined to make an order for security on costs on the basis of public interest in Maritime Services Board of New South Wales v Citizens Airport Environment Association Inc (Court of Appeal, 23 December 1992, unreported). In coming to his decision he remarked:

“I am not convinced that the persons who stand behind the Association are acting simply on a matter which is of concern to them only. I would be prepared to infer that there would be a number of other persons - perhaps many - who have not troubled to bring proceedings but who have a keen interest in the ultimate subject matter of the litigation.”

51 His Honour continued:

“I do not believe that it is ,appropriate to consider this case as just another suit between ordinary litigants disputing claims of private interest only to themselves. When considering whether "special circumstances" have been made out, and whether an order for security for the costs of the appeal should be made, it is appropriate to keep in mind the nature of the case and the public interest reasons which may lie behind the bringing of it.”

52 One of the considerations in exercising discretion to make an order for security of costs is the likelihood of a costs order being made at the conclusion of proceedings and the public interest nature of the litigation - see Jazabas [2006] NSWSC (at [47]). An order for the payment of costs is principally a matter of compensation to the successful party. Accordingly, the circumstances in which public interest considerations can properly be regarded as significantly influencing the costs discretion must be regarded as special. It must be more than the fact that the unsuccessful party had an arguable case, or that it participated in the litigation as a matter of public interest although these are important considerations in the exercise of the discretion to award costs - see Latoudis v Casey (1990) 170 CLR 534. Of further significance are the words of Kirby J in Oshlack v Richmond River Council (1998) 193 CLR 72 at 124:

“a discrete approach has been taken to costs in circumstances where courts have concluded that a litigant has properly brought proceedings to advance a legitimate public interest, has contributed to the proper understanding of the law in question and has involved no private gain. In such cases the costs incurred have occasionally been described as incidental to the proper exercise of public administration. Upon that basis it has been considered that they ought not to be wholly a burden on the particular litigant.”

53 The evidence of Dr McCracken and the comments by Mr Hoenig support the view that the levels of contamination in the Botany/Randwick industrial site and surrounding areas were unacceptable and recommendations to address this and disclose it to the public had not been acted upon by the council. Accordingly a finding against the defendants regarding misfeasance in public office, negligent advice, breach of s 42 of the Fair Trading Act 1987 and misrepresentation may be viewed as upholding an interest common to other members of the community. Similarly it may be found that there are persons other than the plaintiff that have an interest in the ultimate subject matter of the litigation. This being so, the Court needs to consider whether the circumstances of this case are special and whether the plaintiff brought proceedings to advance a legitimate public interest.

54 In these proceedings, if the plaintiffs are successful, they seek to be awarded damages which include loss of revenue for their core business activities since 1993. They also seek exemplary damages. While the plaintiffs are essentially representing their own interest in seeking to be compensated, there is some public interest particularly to the residents of Hillsdale. I have taken the public interest into account.

55 While I have considered the changes in circumstances, in the exercise of my discretion I consider that the order for security should remain in place. The stay of proceedings should not be lifted.

56 Botany Council submitted that there was an additional reason why so far as it is concerned the order for security for costs should remain in place. It is Rule 12.10 of the Uniform Civil Procedure Rules which reads:

“Stay of further proceedings to secure costs of proceedings dismissed

If:

(a) as a consequence of the dismissal of proceedings, a party is liable to pay the costs of another party in relation to those proceedings, and
(b) before payment of the costs, the party commences further proceedings against that other party on the same or substantially the same cause of action, or for the same or substantially the same relief, as that on or for which the former proceedings were commenced,

the court may stay the further proceedings until those costs are paid and make such consequential orders as it thinks fit.”

57 Botany Council submitted that as its costs in prior proceedings have not been paid, this is a further basis that the stay should remain in place. As previously mentioned these outstanding costs are substantial and the only attempt at repayment is a recent offer by Jazabas of $500 per month, that is, $6000 per year. The amount outstanding is $969,309.91. Realistically this offer can in no way meet Botany Council’s costs that have been incurred in the prior proceedings. It is my view Jazabas, as a common plaintiff to both proceedings, has commenced these proceedings for substantially the same cause of action and for substantially the same relief. I accept that this is another reason why a stay should remain in place so far as Botany Council is concerned.

58 The notice of motion filed on 7 January 2008 is dismissed. Costs are discretionary. Costs normally follow the event. The plaintiffs are to pay the defendants’ costs.

The Court orders:

(1) The plaintiffs’ notice of motion filed 7 January 2008 is dismissed.

(2) The plaintiffs are to pay the defendants’ costs as agreed or assessed.
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