Kalx Capital Securities Pty Ltd v Richardson 1 Pty Ltd [No 3]
[2021] WASC 414
•25 NOVEMBER 2021
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: KALX CAPITAL SECURITIES PTY LTD -v- RICHARDSON 1 PTY LTD [No 3] [2021] WASC 414
CORAM: ARCHER J
HEARD: 18 NOVEMBER 2021
DELIVERED : 18 NOVEMBER 2021
PUBLISHED : 25 NOVEMBER 2021
FILE NO/S: CIV 1625 of 2021
BETWEEN: KALX CAPITAL SECURITIES PTY LTD
Plaintiff
AND
RICHARDSON 1 PTY LTD
First Defendant
ANTONY KAN HATT
Second Defendant
CHAD WILLIAM FERGUSON
Third Defendant
DAMON GEORGE FERGUSON
Fourth Defendant
Catchwords:
Springing orders - Failure to comply with security for costs orders
Legislation:
Nil
Result:
Springing orders made
Representation:
Counsel:
| Plaintiff | : | No Appearance |
| First Defendant | : | J A Robertson |
| Second Defendant | : | J A Robertson |
| Third Defendant | : | JA Robertson |
| Fourth Defendant | : | J A Robertson |
Solicitors:
| Plaintiff | : | In Person |
| First Defendant | : | Williams & Hughes |
| Second Defendant | : | Williams & Hughes |
| Third Defendant | : | Williams & Hughes |
| Fourth Defendant | : | Williams & Hughes |
Case(s) referred to in decision(s):
Dallas Development Corporation Pty Ltd v Western Australian Land Authority [2000] WASCA 49
Durolek -v- Pier (WA) Pty Ltd [No 2] [2019] WASCA 138
Firmware Technologies [2016] WASCA 179
Gas Sensing Technology Corporation v Prox Pty Ltd [2020] WASC 240
Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271
Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18
Trafalgar West Investments Pty Ltd (as Trustee for the Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 9] [2016] WASC 68
ARCHER J:
(This judgment was delivered extemporaneously on 18 November 2021 and has been edited to correct matters of grammar, include complete references and add some matters of detail)
Introduction
This is an application by the defendants for springing orders.
The relevant history is as follows.
The plaintiff (Kalx) lodged a caveat over land known as 3 Richardson Street, South Perth.
On 7 June 2021, the Registrar of Titles sent a notice to Kalx under s 138B of the Transfer of Land Act 1893 (WA). The effect of the notice was that the caveat would lapse on 24 June 2021 unless its operation was extended by order of the court.
The day before the caveat was to lapse, Kalx commenced an action (CIV 1565 of 2021) by originating summons for the extension of the caveat until determination of its claimed cause of action against the defendants.
Over a series of hearings, and disputes as to undertakings, the caveat was extended on a temporary basis. Orders were made requiring, among other things, Kalx to file its writ in relation to the substantive proceedings by 6 July 2021. The hearing as to whether the caveat should be extended until the determination of the substantive proceedings was listed for 16 August 2021.
The writ was duly filed, and the action was allocated the number CIV 1625 of 2021. It is in these proceedings that the springing orders are sought.
On 30 July 2021, before the caveat extension hearing occurred, consent orders were made in these proceedings requiring Kalx to pay security for costs in tranches, in the following terms.
1.Pursuant to O 25 r 1 of the Rules of the Supreme Court 1971 (WA), the Plaintiff do give security by way of:
(a)payment into Court; or
(b)by bank guarantee - issued by a trading bank with a banking licence - and with no expiry date on the bank guarantee,
in the sums and on the dates herein for the Defendants' costs of defending the action:
(c)$25,000.00 by 16 August 2021;
(d)$25,000.00 by 16 September 2021;
(e)$30,000.00 by the date six weeks before the commencement date of the trial; and
(f)$70,000.00 by the date 2 weeks before the commencement date of the trial.
2.In the event that the Plaintiff fails to comply with any part of order 1 of these orders, by the due dates, the proceedings be stayed.
At the time these orders were made, trial dates for the substantive proceedings had not (and still have not) been fixed.
On 10 August 2021, the defendants filed a request for further and better particulars of the statement of claim. Kalx has not filed a response.
The first tranche of security was not provided by the due date of 16 August 2021.
That same day as the first tranche of security was due, Allanson J heard the argument in relation to the caveat extension.
On 2 September 2021, Allanson J handed down his decision. His Honour dismissed the application to extend the operation of the caveat, but temporarily continued it in operation to give the parties a chance to consider if some other security ought to be provided.
On 6 September 2021, orders were made that Kalx's solicitors had ceased to act for it.
On 15 September 2021, the defendants filed a chambers summons in these proceedings for springing orders to the effect that, unless Kalx complied with the security for costs orders within 7 days, Kalx's pleadings be struck out and judgment be entered for the defendants together with costs. I listed the summons for 22 September for directions.
On 17 September 2021, Allanson J ordered that the caveat be removed, but required the defendants to give Kalx notice if they intended to deal with the property.
On 22 September 2021, the defendants' application for springing orders came on for directions. Mr Scott, the CEO of Kalx, sought leave to appear for Kalx. I refused leave, giving oral reasons.[1] I said:
The discretion to give leave is to be exercised sparingly, and I refer to Prow Proprietary Limited [2012] WASC 363. Mr Scott does not suggest the company cannot afford lawyers. He said in an email that they had terminated their retainer and they were finalising new representation.
My reasons for not being satisfied I should give leave are, firstly, the plaintiff consented to orders requiring it to pay security for costs in four tranches, failing which the proceedings would be stayed. The dates upon which the first two tranches were to be paid have passed and the security has not been paid. Second, the plaintiff's solicitors ceased to act for them on 6 September over two weeks ago, and the underlying action is very simple and confined.
[1] ts 125.
I made programming orders in relation to submissions and requiring the parties to advise of unavailable dates for the hearing of the defendants' application for springing orders.
Since that time, the court has not heard from Kalx. Kalx did not advise of its unavailable dates by the time required, or at all.
On 4 October 2021, the defendants' solicitors received an email from the principal director of a law firm advising that she expected to shortly receive instructions to act for Kalx in this action. The principal director said she had seen the orders made by the court on 22 September, which referred to Kalx filing submissions by 6 October, subject to new solicitors being appointed, and was inquiring whether the defendants would consent to a two-week extension of that deadline. The defendants' solicitors replied the next day that they would take instructions in relation to that question, and asking a question of the principal director. After that response was sent, nothing further has been heard from that law firm.[2]
[2] Affidavit of Cameron Joseph Sutton sworn 15 November 2021 Annexure CJS-1 page 5 (Sutton Affidavit).
Finally, on 29 October 2021, a costs order in the caveat action was extracted in the amount of approximately $34,000. Those orders have not been satisfied by Kalx.[3]
[3] Sutton Affidavit [5].
Legal principles
In Durolek v Pier (WA) Pty Ltd [No 2],[4] the Court of Appeal summarised the relevant principles to be applied in determining whether to make springing orders. The court explained the limited purpose of springing orders and referred to the undesirability of entering judgment without a hearing on the merits.
[4] Durolek v Pier (WA) Pty Ltd [No 2] [2019] WASCA 138 at [107]-[113].
The Court referred to the five reasons identified in Firmware Technologies Inc v Asia Platinum Group Ltd[5] as to why springing orders should not have been made in that case. The Court in Durolek noted this did not mean that those five matters establish when a springing order should be made, but said that they provide useful guidance in determining whether or not to make a springing order. The Court adapted the five matters as follows:[6]
(1)Where the basis for the springing order is non-compliance with an order of the court consideration should be given to whether the delay has been inordinate. A springing order should ordinarily only be made where a party has, by its conduct, shown a contumelious disregard to compliance with orders of the court.
(2)A springing order should only be made where there is no other available sanction which is appropriate and sufficient to enable the court to determine the matter consistently with the goal and objects in O 1 r 4A and r 4B of the Rules of the Supreme Court 1971 (WA) - in particular the fair and just determination of the litigation. The fair and just determination of the litigation encompasses the concern of procedural fairness expressed in Firmware. The concept acknowledges that a point will be reached where a litigant will have been accorded a sufficient opportunity and that no litigant has an absolute right to avail itself of procedural steps when it has failed to take advantage of its opportunity.
(3)A springing order sought by way of an enforcement order to secure compliance with a pre-trial case management direction should not be made if its execution would prevent the party from advancing an argument unrelated to the procedural step the subject of the intended springing order.
(4)A springing order should only be made if the criterion for compliance is clear and unequivocal.
(5)Springing orders should ordinarily only be made as a last resort when necessary to enable the court to fairly and justly determine the substantive matter in dispute. In that regard, before making a springing order, a case manager should take into account the fact that the self-executing nature of a springing order is such that, once made and absent an extension of time for compliance, the only question is whether the order has been complied with. There is no further assessment of the merits of the case or whether it is in the interests of justice for judgment to be entered.
[5] Firmware Technologies Inc v Asia Platinum Group Ltd [2016] WASCA 179 [44] – [48].
[6] Durolek [113].
The Court noted that the circumstances in which springing orders may be made are not limited to cases of contumacy, persistent dilatory behaviour and where it can be inferred that a litigant will not or is unlikely to take steps as required, citing Dallas DevelopmentCorporation Pty Ltd v Western Australian Land Authority[7] as an example. The Court in Durolek said that the court may, for example, act to support the integrity of its processes where otherwise the administration of justice would be brought into disrepute.[8]
Security for costs cases
[7] Dallas DevelopmentCorporation Pty Ltd v Western Australian Land Authority [2000] WASCA 49 [22].
[8] Durolek [111].
Dallas DevelopmentCorporation was a case in which the plaintiff had failed to comply with an order for security for costs. The order was made on 11 May 1999, and required the security to be paid within 21 days. It was not paid. On 5 November 1999, the defendant applied for, in effect, springing orders. On 15 November 1999, the Master made springing orders, ordering that the security was to be provided within 28 days and, if the applicant failed to comply with that order, the action would be dismissed. The plaintiff's appeal against that order was dismissed.
Templeman J, with whom Wheeler J agreed, said, in effect, that the power to make springing orders was not confined to cases of intentional default or contumelious conduct or inordinate or inexcusable delay. His Honour noted that the springing order had not been sought because the action was not being pursued with due diligence. Rather, it was sought because the applicant had failed to comply with a court order made some six months earlier and had not, in the interim, sought any indulgence from the court or sought to explain the reasons for its inability to comply with the order when it was well in breach. Templeman J said he was not persuaded that it was necessary, in those circumstances, for the Master to consider questions of intentional default or contumelious delay.[9]
[9] Dallas DevelopmentCorporation [22]-[25].
In Gas Sensing Technology Corporation v Prox Pty Ltd [No 2],[10] Kenneth Martin J referred to his earlier decision of Trafalgar West Investments Pty Ltd (as Trustee for the Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 9],[11] in which he had addressed some of the factors which may be taken into account in the court's exercise of discretion to dismiss a proceeding in the face of a failure to comply with a security for costs order. His Honour noted that the principles he there discussed had been identified by Einstein J in Idoport Pty Ltd v National Australia Bank Ltd,[12] and then upheld on appeal in Idoport Pty Ltd v National Australia Bank Ltd.[13] His Honour said that the relevant factors included:[14]
1.The period that has elapsed since security was ordered;
2.The fact that the party against whom the security has been ordered has been on notice of an application for dismissal;
3.The apparent inability of the plaintiff to fund the proceedings;
4.The prejudice to the defendant; and
5.The position of the court.
[10] Gas Sensing Technology Corporation v Prox Pty Ltd [No 2] [2020] WASC 240 [17].
[11] Trafalgar West Investments Pty Ltd (as Trustee for the Trafalgar West Investments Trust) v Superior Lawns Australia Pty Ltd [No 9] [2016] WASC 68.
[12] Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWSC 18 [24].
[13] Idoport Pty Ltd v National Australia Bank Ltd [2002] NSWCA 271.
[14] Gas Sensing [17].
His Honour noted that the list of factors was not exhaustive. His Honour noted that the task requires all relevant factors to be weighed in balance, the ultimate decision reflecting the interests of justice.[15]
[15] Gas Sensing [18].
Analysis
Kalx was required to pay the first tranche of security on 16 August 2021, over three months ago.
Kalx has been on notice of the defendants' application for springing orders since at least 20 September 2021.
There is no probative evidence as to whether Kalx can fund the proceedings. As I have observed on other occasions, the evidence it filed in relation to its financial position was deficient for a number of reasons.[16] Mr Scott asserted in an email to the court on 21 September that Kalx's failure to have engaged new solicitors was not because it could not afford lawyers, but was just a matter of timing.
[16] See for example Kalx Capital Securities Pty Ltd v Richardson 1 Pty Ltd [2021] WASC 236 [9]-[15].
Kalx's failure to pay the security is delaying the progress of the proceedings. The defendants have adduced evidence to the effect that the proceedings are impeding the development, and that, therefore, any delay will aggravate the situation.[17] I accept that the delay is prejudicial to the defendants.
[17] See, for example, the affidavit of Chad William Ferguson sworn 14 July 2021 and the confidential documents. See also affidavit of Chad William Ferguson sworn 15 September 2021.
From the court's point of view, this litigation has already taken up a fair amount of judicial resources and court time. The interests of other litigants and the community in the efficient and proportionate disposition of proceedings cannot be disregarded.
Since 22 September 2021, Kalx has not taken any steps in these proceedings, or communicated with the court in any way. In relation to the application for springing orders, it did not engage new lawyers as Mr Scott had said he would (at least, not to the stage where a notice of acting was filed), did not file submissions in opposition, and did not advise of its unavailable dates.
It appears that Kalx has lost interest in these proceedings.
Kalx is in breach of the orders. There is no explanation or justification. The proceedings need to move on, one way or another. Given Kalx's disengagement from the process, it is appropriate that springing orders be made. They seem to be the only way to move the proceedings forward. Either Kalx will engage or the proceedings will end.
I am satisfied that it is appropriate to take the rare step of making a springing order.
Conclusion
The defendants seek orders giving Kalx seven days to comply with the orders for security. I consider it is appropriate to give Kalx 21 days. The defendants did not object to that.
I will otherwise make orders in terms of the defendants' chambers summons.
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
KJ
Associate to the Honourable Justice Archer
25 NOVEMBER 2021
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