NRA Holdings Pty Ltd v National Mutual Funds Management Limited
[2003] VSC 421
•7 November 2003
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMERCIAL AND EQUITY DIVISION
BUILDING CASES LIST
No. 6825 of 2002
| NRA HOLDINGS PTY LTD | Plaintiff |
| v | |
| NATIONAL MUTUAL FUNDS MANAGEMENT LIMITED as responsible entity for WHOLESALE AUSTRALIAN PROPERTY FUND | Defendant |
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JUDGE: | Mandie J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 31 October 2003 | |
DATE OF JUDGMENT: | 7 November 2003 | |
CASE MAY BE CITED AS: | NRA Holdings Pty Ltd v National Mutual Funds Management Limited | |
MEDIUM NEUTRAL CITATION: | [2003] VSC 421 | |
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Practice and procedure – application for security for costs – application to strike out part of statement of claim
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. M. Forrest | Deacons |
| For the Defendant | Mr R. C. Macaw QC and Mr D. J. Cosgrave | Mallesons Stephen Jaques |
HIS HONOUR:
By summons dated 15 October 2003, the defendant seeks security for costs from the plaintiff. Other relief is sought in the summons, some of which has been agreed, but there is also a limited attack on the plaintiff’s Amended Statement of Claim.
Dealing first with the application for security for costs, the defendant relies on O. 62.02(1)(b) of the Supreme Court Rules and says that there is reason to believe that the plaintiff corporation has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so. The defendant also relies upon s.1335(1) of the Corporations Act 2001 (Cth) and says that it appears by credible testimony that there is reason to believe that the plaintiff corporation will be unable to pay the costs of the defendant if successful in its defence.
An affidavit of Mr Galic, a legal practitioner employed by the defendant’s solicitors, deposes that the plaintiff’s 2002 annual return, being the last return lodged by the plaintiff with ASIC, shows that the plaintiff’s paid up capital is $9 and discloses no other financial details. A Dun & Bradstreet report, exhibited and relied upon without objection, indicates that the plaintiff “currently employs nil employees as no developments are being undertaken by [it].” In addition, property searches indicate that no real property is held by the plaintiff in Victoria or in any other Australian state or territory.
The foregoing material of itself may be insufficient to prove that the plaintiff has no or inadequate financial resources, but paragraphs 55-56 of an answering affidavit, sworn by William Ashley Schneider on behalf of the plaintiff on 27 October 2003, say:
“I have calculated that the legal costs NRA has incurred since the proceeding has commenced are approximately $500,000. NRA has paid its legal fees to date from sources available to its directors. This has placed a considerable financial burden on the directors and if security of any significant amount was ordered, I believe that there is a real risk of NRA’s claim being stultified.”
I infer from Mr Schneider’s above statements that the plaintiff did not have the resources to pay the legal costs which it has so far incurred and which were therefore obtained from sources available to its directors. I also note that it is said that the proceeding may be stultified if an order for security is made, thus suggesting a lack of resources. I am therefore satisfied that there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so, and by the same token, that it appears by credible testimony that there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if the defendant is successful. Accordingly, not only is there jurisdiction to make an order for security for costs, but the apparent lack of resources of the plaintiff is in itself a strong ground for making such an order. Further, relevant to the Court’s discretion, there is no evidence that the directors would be unable to provide security for costs from the same sources which were available to them to finance the litigation to date.
On the other hand, there are some factors which operate in the plaintiff’s favour in its opposition to the making of such an order. It is unnecessary to canvas the issues in the proceeding as disclosed by the pleadings and by the affidavit material. It is sufficient to say that the plaintiff clearly has a bona fide and arguably substantial claim, the strength of which cannot be assessed on an interlocutory application such as this. That is one factor operating in the plaintiff’s favour. Another is the significant delay in the making of this application by the defendant, during which time the plaintiff has, as I have noted, incurred approximately $500,000 in legal costs.
The proceeding was commenced on 15 August 2002 by a writ to which was attached a 31-page Statement of Claim settled by senior counsel. The defendant filed an appearance on 26 August 2002 and a summons for directions came before Harper J on 27 September 2002, when the proceeding was entered in the Building Cases List and directions were given as to pleadings and discovery. The defendant filed a 21-page defence and counterclaim on 11 October 2002 and a reply and defence to counterclaim was filed by the plaintiff on 15 November 2002. Various particulars were sought and given, and then, on 19 December 2002, Byrne J made further interlocutory orders and referred the proceeding to a mediator for a mediation not to commence before 1 March 2003 and to be completed not later than 11 April 2003. The date for completion of the mediation was subsequently extended by me to 8 May 2003. The mediation was held but was unsuccessful, and the summons for directions came before me on 9 May 2003, when orders were made by consent for an Amended Statement of Claim and consequential amended pleadings. It is unnecessary to consider the nature of the amendments, but they did not significantly alter the nature of the proceeding. Thereafter, discovery and inspection of documents proceeded and it was not until August 2003 that the defendant foreshadowed an application for security for costs.
In my opinion, given the substantial nature of the plaintiff’s claim, the heavy costs already incurred by it in the conduct of this proceeding and the lengthy delay by the defendant in making this application, there are arguments of some strength against the making of an order against the plaintiff for security for the costs of the defendant, or at least of an order in any substantial amount.
In all of the above circumstances, I think that an order for security for costs should nevertheless be made, but only in a limited amount. I will order that the plaintiff provide security for the costs of the defendant in respect of all costs to be incurred after this date (including the costs of the trial), to the intent that no further security shall be ordered, in the sum of $50,000 and that the proceeding be stayed until the security is provided.
The other matter in dispute was an application by the defendant to strike out a number of paragraphs of the Amended Statement of Claim which contained particulars of loss and damage stating “loss of use of money pursuant to Hungerfords v Walker…Full particulars will be provided prior to trial of the proceeding herein”.
In my opinion, the material facts necessary to found a claim for damages for loss of use of money are not pleaded and it is insufficient to leave this to the provision of particulars. In any event, full particulars should have been provided by now. I will order that the various paragraphs of the Amended Statement of Claim be struck out and that the plaintiff have leave to deliver a Further Amended Statement of Claim in relation to those paragraphs, together with full particulars of the material facts alleged in support of the Hungerfords v Walker damages claim.
Accordingly, the following orders will be made:
1.By 28 November 2003, the plaintiff provide security for the defendant’s costs of the whole of the proceeding (including the trial thereof) in the sum of $50,000, such security to be provided in a form satisfactory to the Prothonotary.
2.If such security is not so provided by 28 November 2003, the proceeding be stayed until further order.
3.Paragraphs 34, 45, 57 and 60 of the Amended Statement of Claim and paragraph 5 of the Prayer for Relief in the Amended Statement of Claim be struck out and the plaintiff have leave to file and serve a Further Amended Statement of Claim in relation to those paragraphs and the plaintiff shall at the same time provide full particulars thereof, such amendment and particulars to be provided not later than 14 days after the provision of security for costs or 28 November 2003, whichever is the later date.
4.The defendant have leave to file and serve any Amended Defence and Counterclaim within 14 days after receipt of the Further Amended Statement of Claim.
5.The plaintiff deliver any Amended Reply and Defence to Counterclaim within 7 days thereafter.
6.The defendant have leave to file and serve a Rejoinder and Reply to Defence and Counterclaim substantially in the form of GNG-14 to the affidavit of G N Galic sworn 15 October 2003 and the plaintiff have leave to file and serve a Surrejoinder as it may be advised within 14 days thereafter.
7.The plaintiff file and serve a Supplementary Affidavit of Documents by later date referred to in paragraph 3 hereof:
(a)providing a better description of each of the documents listed in the Second Schedule attached to the defendant’s Outline of Submissions dated 30 October 2003 and filed herein; and
(b)in relation to documents numbered 005.077, 005.108-005-130, 008.293. 008.299-008.321, 012.087, 012.096, 012.098-012.122, 015.009, 015.015, 0139, 019.022, 028.024-028.040 and 209.078-209.098.
I will hear the parties on the question of costs.
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