JL Holdings Pty Ltd v State of Queensland
[1996] FCA 1138
•16 DECEMBER 1996
CATCHWORDS
COSTS - Security for - whether prior order for security for costs was made by consent - relevance of consent of parties to orders to discretion of Court to vary an order for security for costs - whether it is appropriate to order further security for pre-trial costs when parties previously agreed on the security for costs to be provided up to day one of the trial
Federal Court of Australia Act 1976 s 56(3)
Siebe Gorman Ltd v Pneupac Ltd [1982] 1 WLR 185, 189 Cons
E I De Pont de Nemours & Co v Commissioner of Patents (1987) 16 FCR 423 Affd
Quad Consulting Pty Ltd v Bleakley & Associates Pty Ltd (unreported decision of Burchett J 28 June 1991) Refd
JL Holdings Pty Ltd v The State of Queensland and South Bank Corporation
No SG 1 of 1994
Kiefel J Brisbane 16 December 1996
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
No SG 1 of 1994
BETWEEN:
JL HOLDINGS PTY LTD
Applicant
AND:
THE STATE OF QUEENSLAND and SOUTH BANK CORPORATION
Respondents
JUDGE MAKING ORDER: Kiefel J
DATE OF ORDER: 16 December 1996 and 19 December 1996
WHERE MADE: Brisbane
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The Applicant provide further security for the Respondents’ costs in the sum of $250,000 with respect to the pre-trial costs and $350,000 with respect to trial costs.
In each case the form of security will be by way of first ranking mortgage over the four parcels of lands identified in the affidavits of Godfrey Norman Mantle filed on 18 December 1996 and Daniel Shane Mohr filed 18 December 1996, in a form to be settled by the District Registrar in the event of the parties disagreement.
The Applicants to furnish to the Respondents and the District Registrar the draft form of securities by 20 January 1996 and in the event of no agreement between the parties the Registrar to settle the form by 31 January 1996.
Liberty to the parties to apply to the District Registrar to refer any questions arising to the Court.
The costs of and incidental to the hearing of the application for security for costs be the parties’ costs in the proceedings.
Note:Settlement and Entry of Orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
No SG 1 of 1994
BETWEEN:
JL HOLDINGS PTY LTD
Applicant
AND:
THE STATE OF QUEENSLAND and SOUTH BANK CORPORATION
Respondents
CORAM:Kiefel J
DATE:16 December 1996
PLACE:Brisbane
REASONS FOR JUDGMENT
The respondents seek an order that the applicant provide security for costs to the extent of $1,121,890. To date the applicant has provided security for the sum of $150,000. The total sum is made up of $571,270 for costs calculated to the commencement of trial, 18 February 1997, and trial costs of $550,620.
There had been a prior order for security for costs made in the early stages of the proceedings by Burchett J. Because of the issues raised during submissions, it is necessary to refer to the facts surrounding the making of that order. On 28 April 1994 his Honour heard an application by the respondents which included an order that security be provided in the sum of $171,440. The motion also sought orders transferring the proceedings and striking out parts of the statement of claim. So far as concerns the question as to whether security ought be granted, the applicant opposed the making of it and submitted, amongst other things, that the strength of its case weighed sufficiently against the making of any such order. His Honour was not
persuaded and informed the parties that he proposed to make an order and went on to say:“¼however I think it is the kind of case where it is appropriate to order the provision of security in stages and the order at this stage should merely provide for security for costs that will necessarily be involved in the investigation of the claims made, the preparation of defences and the initial stages at least, of preparation of evidence.
I shall direct counsel to bring in - I think it might be more appropriate if I direct the bringing in of short minutes in the morning, so that you could think about and discuss with Mr Gray the appropriate figure for the purposes I have outlined. Is this satisfactory from your point of view?”
And after the parties, by their senior counsel, consented to this course his Honour went on:
“Very well. Resuming these reasons, I direct that short minutes be brought in the morning in respect of what is proposed by the Applicant for security or agreed if some agreement about this limited aspect is possible so far as regards quantum, to meet the purposes I have outlined.”
The parties’ legal representatives sought instructions and had discussions. It appears to have been agreed at a fairly early stage of those negotiations that $150,000 was an appropriate figure. The parties did not pursue his Honour’s suggestion that security might be provided in stages. The form the security would take was not finalised. The Minutes of Order which were handed up to his Honour the following day included the following, which came to be incorporated as paragraphs 2 and 3 of the sealed order:
“2. The Applicant do provide to the Respondents security for their costs in the sum of $150,000 being in respect of costs up to the first day of trial, such security to be in a form agreed between the parties, within 14 days, and failing agreement, to the satisfaction of the registrar within a further 14 days, the security to be provided within 5 days of the agreement or order of the Registrar.
3. The Respondents have liberty to apply on or after the first day of trial for further security for costs.”
The terms of that convey, clearly enough, the parties’ concurrence in the amount and manner in which security was to be provided and that the respondents’ right to apply for further security for costs was to be limited to trial costs on or after the first day of trial. The parties contemplated that the sum for which they had provided was then an appropriate figure for pre-trial costs. Although it seems unnecessary to have done so, senior counsel for the applicant advised his Honour, when the proposed minutes of order were handed up, that that was the agreement which had been struck and that paragraph 3 preserved a right in the respondents to apply again at trial.
The applicant in the proceedings submits that the respondents cannot or ought not now be heard with respect to costs incurred prior to or to be incurred prior to trial. Not only, in its submission, was there an agreement to which the respondents are bound, the applicant has acted in accordance with the agreement, in the first place, by not pursuing an appeal from the proposed order for security and subsequently in ordering its affairs on the basis that no further security was required up to trial. The first factor does not, in my view, take the matter very far. The latter proposition might be somewhat of an overstatement if it be suggested that the group of companies operated by Mr Mantle, undertook their not inconsiderable commercial dealings on a regular basis by reference to the fact that no further sum was required until the date of hearing. It may however be fair to say that they and Mr Mantle put the matter from their minds.
The respondents however submit that the order is to be seen simply as an
interlocutory one, to which the parties acceded, but did not consent. Further, in their submission there is power to vary the order under O 35 r 7, and in this connection they rely upon what has occurred since then, which is to say that the litigation turned out to be more complex and costly than was earlier predicted. Having observed the expansion of issues and the number of interlocutory points taken, I have no difficulty in accepting that submission.
Reliance was placed by the applicant upon the characterisation of the agreement as being in the nature of a binding contract, and, therefore one with which the Court would not interfere except on ordinary principles relating to contract: Siebe Gorman Ltd v Pneupac Ltd [1982] 1 WLR 185, 189. For the respondents it was submitted that it was the order which ought to be considered. It was interlocutory in nature and the courts always maintained a discretion to vary or alter such an order, as that case also held (190).
The order Lord Denning was there concerned with was one expressed to be “by consent”. In that connection his Lordship pointed out the difference between an order expressed to be by consent and which does in fact evidence a real contract, and an order which conveys merely the absence of objection to a proposal. In the context of orders made during the course of proceedings and concerning their conduct, it seems to me that they will more commonly fall into the latter category and that it will be difficult to find a truly binding contract. And, in this connection, it might also be observed that the applicant made concessions with respect to the respondents’ application for security for costs only when faced with prospect of an order being made on terms to be determined by the Court. What gives it more of the flavour of a contract is the concession that the respondents would not apply for further security until the commencement of the trial. It suggests some “give and take” on each side. That is not, in my view, to say that a binding and enforceable agreement was entered into. Rather the matter here, it seems to me, falls to be determined by having regard to what has occurred since the parties agreed upon that course of action, what they have done upon the faith of it and whether any prejudice would now result if an order were made. They are matters which will affect the exercise of the discretion to vary an order. The power to do so, with respect to orders for security, however remains with the Court: see s 56(3) Federal Court of Australia Act 1976.
That is not to say that the parties’ consent is irrelevant. The fact of consent is material to the exercise of the Court’s discretion is clear from the decision in E.I. Du Pont de Nemours & Co v Commissioner of Patents (1987) 16 FCR 423 (and see also the discussion of it by Burchett J in Quad Consulting Pty Ltd v Bleakley & Associates Pty Ltd unreported decision of 28 June 1991). In EI Du Pont Burchett J was concerned to point out that the Court retained control over its procedures. But, once it is understood that the parties have invoked the jurisdiction of the Court, their actions fall to be considered in light of that and not by reference to principles relating to private contract (see p. 435). I respectfully agree. And it needs to be recalled that, whilst an order for security for costs requires something of a party and provides a potential benefit for the other, it is made with a view to rendering efficacious orders for costs made by the Court in the proceedings.
But, as I have said, that leaves open the question as to whether a variation of the order made in 1994 is warranted, particularly given the time when it is brought. The solicitor having the conduct of the matter for the respondents deposes to the fact that the question of costs was revisited towards the end of 1995, but that it was not then thought that they had exceeded the amount for which security had been provided. However, when the matter was again reviewed in August 1996 a different view was taken. What seems to have led to this change of opinion was the finalisation of expert reports at the end of July 1996 when, it is said, an accurate estimation of the costs associated with respect to them was possible. As I mentioned during the hearing of this matter, I have some difficulty in understanding why the prospect, that the costs were to exceed $150,000 to the time of trial, was not apparent earlier. I do not, on the other hand, have difficulty in accepting that they will, to the first day of trial, exceed $500,000.
Mr Mantle says that one of the companies which he controls, and which is funding this litigation, entered into a contract to purchase substantial property for $4.8M in June 1996. The contract settled in early September. This was, of course, prior to the question of further security being raised. That company entered into a further, conditional, contract to purchase adjoining land. The point here made is that if the respondents had been granted security for the sum mentioned, over $1M, then the company in question may have had to resort to a different method of finance. It is however nowhere suggested that what has been undertaken is now jeopardised by the application for security for costs. It is of some significance on this application that it is not suggested that the applicant will not be able to meet an order for security, and
the likelihood is that it will be provided by one of the other companies connected with Mr Mantle.
Another point made by the applicant is that, had the respondents acted in accordance with their alleged obligations, as referred to in the proceedings, it would not be in its present state, which is to say absent cash flow and assets. I am however unable to determine such a question on this application. It is not suggested by the respondents, at least for the purpose of this application, that the applicant’s case is not brought bona fide. Beyond that counsel for the applicant did not press for a finding that prospects were particularly good and that they ought to be taken into account in the exercise of my discretion.
The applicant has been frank in its concession that it is impecunious. And it has not sought to disguise the fact that other companies, effectively under Mr Mantle’s control, have been funding the litigation and, in that sense, have an interest in its outcome. Moreover one of them may have a further interest in a portion of the damages award. It is not proposed that those companies create a fund for the applicant to meet any costs of the respondents in addition to those for which security has already been ordered. A finding that the applicant will be unable to pay the costs of the respondents beyond that sum, if they are successful in their defence, is inevitable. This may, subject to certain other arguments, dispose of the question as to security for costs of the trial itself but it remains to determine whether it is appropriate with respect to costs incurred, and to be incurred, up to the commencement of that trial.
If I had been of the view that an order for security for costs made so close to trial would cause the applicants any significant prejudice, I would be disinclined to make one at least so far as concerned pre-trial costs. That would, however, inevitably involve a finding that the trial itself would be jeopardised and, understandably, the applicant is anxious to avoid that.
The applicant’s remaining argument, with respect to the costs of trial, was that the respondents ought not to have applied until the first day of trial, as the arrangement reflected in the order contemplated, although the obvious practical advantage in having the matter determined prior to the hearing was accepted. It seems to me to do no injustice to the applicant to determine, now, the amount of security for trial costs which is required but to postpone the date when it has to be provided.
With respect to the amount of security, I do not propose to order a full indemnity. It seems to me that it is proper in a case of this kind and with a hearing of some four months ahead, to take into account contingencies relating to costs orders which may be made up to and at the conclusion of the hearing. I also take into account the amount already secured with respect to pre-trial costs. With respect to costs up to trial I therefore propose to order that the applicant provide security for the further sum of $250,000 and with respect to trial costs for the sum of $350,000.
The applicant, during the course of argument, also indicated that the timing of the order for security for costs might result in a request for a form of security different from that previously provided. It is regrettable that this matter was not addressed during the hearing of the application. Nevertheless I propose to allow the applicant the opportunity to formulate proposals. I will also hear counsel as to the question of costs.
I certify that this and the preceding eight pages are a true copy of the reasons for judgment herein of the Honourable Justice Kiefel.
Associate
Date: 16 December 1996
Counsel for the applicant: Mr T Matthews
Solicitors for the applicant: Minter Ellison
Counsel for the respondent: Mr RV Hanson QC and Mr RM Derrington
Solicitors for the respondent: Crown Solicitor
Date of Hearing: 4 December 1996
Place of Hearing: Brisbane
Place of Judgment: Brisbane
Date of Judgment: 16 December 1996
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