LPH Developments Pty Ltd v Jameson Moore Pty Ltd - [2015] WASC 416

JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS

CITATION: LPH DEVELOPMENTS PTY LTD -v- JAMESON MOORE PTY LTD [2015] WASC 416

CORAM: BEECH J

HEARD: ON THE PAPERS

DELIVERED : 4 NOVEMBER 2015

FILE NO/S: CIV 2343 of 2015

BETWEEN: LPH DEVELOPMENTS PTY LTD (ACN 166 701 122)
Plaintiff
AND
JAMESON MOORE PTY LTD (ACN 008 705 379)
Defendant

Catchwords:

Practice and procedure - Security for costs - Factors relevant to discretion - Overlapping claim and counterclaim - Turns on own facts

Legislation:

Corporations Act 2001 (Cth), s 1335

Result:

Application dismissed

Category: B

Representation:

Counsel:

Plaintiff: No appearance (on the papers)
Defendant : No appearance (on the papers)

Solicitors:

Plaintiff: Norton Rose Fulbright Australia
Defendant : Mettam Legal

Case(s) referred to in judgment(s):

Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154
BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81
Concrete Constructions Pty Ltd v Dalma Formwork Pty Ltd (Administrator Appointed) [1999] NSWCA 16
Dalma Formwork Pty Ltd (Administrator Appointed) v Concrete Constructions Group Ltd [1998] NSWSC 472
Mila Properties Pty Ltd v Caldwell [2009] WASC 282
Momentum Mortgages Ltd & Equity Trustees v Elmowy [2010] NSWSC 950
Public Transport Ticketing Corporation v Integrated Transit Solutions Ltd [2009] NSWSC 54
Swansdale Pty Ltd v Whitecrest Pty Ltd [2010] WASCA 129
Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616
Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57

BEECH J: The defendant applies for security for costs pursuant to s 1335 of the Corporations Act 2001 (Cth) and O 25 of the Rules of the Supreme Court 1971 (WA). For the reasons that follow, I would dismiss its application.
The threshold requirement in s 1335 is that it appears by credible testimony that there is reason to believe that the plaintiff will be unable to pay the costs of a successful defendant. I am satisfied that the threshold requirement is met. The evidence is that the plaintiff has no assets.[1] Further, the plaintiff is a trustee company.[2]
[1] Affidavit of Philip Allan Hirschberg affirmed 12 October 2015 [11].
[2] As to which, see BBC Nominees (WA) Pty Ltd v Yangebup Developments Pty Ltd [2008] WASC 81 [14] ‑ [17]; Mila Properties Pty Ltd v Caldwell [2009] WASC 282 (Sanderson M).
The question is whether the court should exercise its discretion. The court has a broad unfettered discretion under s 1335.
In Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd[3] Edelman J set out the following non‑exclusive list of factors relevant to the discretion to order security for costs.
[3] Westonia Earthmoving Pty Ltd v Cliffs Asia Pacific Iron Ore Pty Ltd [2013] WASC 57 [6].
(i)the strength and bona fides of the plaintiff's case;
(ii)the likelihood of the plaintiff being unable to pay the defendant's costs;
(iii)whether the plaintiff's impecuniosity was caused by the defendant's conduct which is the subject of the claim;
(iv)whether the application for security is oppressive;
(v)whether the award of security would deny an impecunious applicant a right to litigate;
(vi)whether there are persons standing behind the plaintiff who were likely to benefit from the litigation;
(vii)whether the persons standing behind the plaintiff have offered any security or personal undertaking to be liable for the costs, and if so, the form of such an undertaking;
(viii)whether the applicant was in substance a plaintiff or the proceedings were defensive in the sense of directly resisting proceedings already brought or seeking to halt the defendant's self‑help procedures;
(ix)whether the application for security had been brought promptly;
(x)whether the applicant has any rights which it can exercise against assets of the plaintiff to satisfy an order for costs in its favour; and
(xi)any factors relating to the public interest.
As to the first of these factors, there are practical limits on the extent to which an assessment can and should be made of the substantive merits of the plaintiff's claim. It would generally not be appropriate for the court to attempt to investigate in detail the likelihood of success in the action.[4] In this case, in written submissions, both parties made competing assertions about the strength of their respective cases. Neither party's case seems to me to be obviously lacking in merit. Beyond that, I have found it neither necessary nor appropriate to attempt to resolve those conflicting assertions in determining this application.
[4] Swansdale Pty Ltd v Whitecrest Pty Ltd [2010] WASCA 129 [72] ‑ [74] (Kenneth Martin J, Pullin JA agreeing).
In Westonia[5] Edelman J gave some examples of circumstances in which a defendant applicant for security for costs is in substance a plaintiff, or where a plaintiff has brought defensive proceedings. One example was where a cross‑claim arises out of the same facts, citing Public Transport Ticketing Corporation v Integrated Transit Solutions.[6] In that case, Einstein J said it was relevant to consider whether either party could just have easily been the plaintiff.
[5] Westonia [47].
[6] Public Transport Ticketing Corporation v Integrated Transit Solutions Ltd [2009] NSWSC 54.
There is other authority to the effect that where substantially the same issues are likely to arise on the counterclaim as in the claim, the court should be slow to order security.[7]
[7] Sydmar Pty Ltd v Statewise Developments Pty Ltd (1987) 11 ACLR 616, 626 ‑ 627 (Smart J); Dalma Formwork Pty Ltd (Administrator Appointed) v Concrete Constructions Group Ltd [1998] NSWSC 472 (Rolfe J); Concrete Constructions Pty Ltd v Dalma Formwork Pty Ltd (Administrator Appointed) [1999] NSWCA 16 (Sheppard AJA, Mason P & Handley JA agreeing); Momentum Mortgages Ltd & Equity Trustees v Elmowy [2010] NSWSC 950 [37] ‑ [38] (Studdert AJ).
In this case the very likely inability of the plaintiff to pay the defendant's costs weighs heavily in favour of an order for security for costs.
However, in my view, the substantial overlap between the subject matter and the issues under the counterclaim and the plaintiff's claim militates strongly against the grant of security for costs.
In the statement of claim the plaintiff pleads:
(a)a contract between the plaintiff and defendant by which the plaintiff agreed to buy and the defendant agreed to sell a property in O'Connor;
(b)the express terms of the contract;
(c)that the defendant served a notice of default on the plaintiff based on its failure to settle by 31 December 2014;
(d)that the defendant served a notice terminating the contract and giving notice of intention to re‑sell;
(e)that the defendant took steps to re‑sell; and
(f)that the defendant's conduct evinced an intention to no longer be bound by the terms of the contract and that it accepted that repudiation by letter of 29 May 2015 thereby terminating the contract.
The plaintiff claims damages.
In the defence and counterclaim the defendant pleads:
(a)that the parties entered into the contract;
(b)the different terms it says arise on a proper construction of the contract;
(c)that it gave the notices of default and termination;
(d)that in the events that have happened the plaintiff was in breach of the contract;
(e)that in the events that happened the defendant was entitled to give the notice of default and to terminate the contract; and
(f)that the defendant is entitled to damages, or to payment of sums under the express terms of the contract arising from the plaintiff's breach.
In short, the issue on both the plaintiff's claim and on the defendant's counterclaim is whether the defendant was entitled to terminate the contract.
Each party claims damages in the event that it succeeds on this primary issue.
The same construction arguments will be advanced by the plaintiff in response to the defendant's counterclaim as it will advance in pursuing its claim.[8] In those circumstances, I do not think it would be appropriate to order security for costs of the plaintiff's action, under the threat of a stay, while the defendant remains at liberty to pursue its counterclaim.
[8] See [5] ‑ [10] of the plaintiff's reply and defence to counterclaim dated 17 September 2015.
It is true, as the defendant's submissions emphasise, that the damages and other monetary relief claimed by each party are different, and so raise different issues. In my view, that does not detract from the point I have just made.
This is a case where either party could just have easily been the plaintiff. There is nothing in the pleadings, or in the material before me on this application, to suggest that the defendant's counterclaim is insubstantial in the context of the plaintiff's claim.
In these circumstances, it seems to me to be inappropriate to make an order for security for costs.
In some cases, a defendant with a counterclaim undertakes that, if security for costs is ordered against the plaintiff, and if a stay is granted of the plaintiff's action in the meantime, that the defendant will not prosecute its counterclaim. The giving of such undertaking removes the weight to be given, in the discretion to order security for costs, to the existence of the counterclaim and its overlap with the primary claim.[9] No such undertaking was proffered in this case.
[9] Momentum Mortgages Ltd [40]; Bakers Investment Group (Australia) Pty Ltd v Caason Investments Pty Ltd [2014] VSC 154 [48] (Elliott J).
The defendant also relies on O 25 of the rules. However, for corresponding reasons, it is inappropriate to order security for costs on that basis.
For these reasons, I would dismiss the application. Costs should follow the event, and should be fixed. I will hear from the parties in that respect.