Pacific Enterprise Corporation Pty Ltd v Lord Mayor Aldermen and Citizens of the City of Hobart
[1990] TASSC 104
•15 June 1990
Serial No B27/1990
List "B"
COURT: SUPREME COURT OF TASMANIA
CITATION:Pacific Enterprise Corporation Pty Ltd v Lord Mayor Aldermen and Citizens of the City of Hobart [1990] TASSC 104; B27/1990
PARTIES: PACIFIC ENTERPRISE CORPORATION PTY LTD
v
LORD MAYOR ALDERMEN AND
CITIZENS OF THE CITY OF HOBART
FILE NO/S: 913/1984
DELIVERED ON: 15 June 1990
JUDGMENT OF: Cox J
Judgment Number: B27/1990
Number of paragraphs: 14
Serial No B27/1990
List "B"
File No 913/1984
PACIFIC ENTERPRISE CORPORATION PTY LTD v
LORD MAYOR ALDERMEN AND CITIZENS OF THE CITY OF HOBART
REASONS FOR JUDGMENT COX J
15 June 1990
The defendant corporation has made application to the court pursuant to s533(1) of the Companies (Tasmania) Code for an order that the plaintiff company give security for costs. I find that there is reason to believe that the plaintiff company will be unable to pay the costs of the defendant corporation if the latter is wholly successful in its defence. Other than the value of its interest in this cause of action, the plaintiff company has no assets and its managing director, who was cross–examined on his affidavit filed herein, conceded that no provision had been made to meet the costs of the defendant corporation if it loses the case and is ordered to pay the latter's costs. Furthermore, he said it was not intended to make any such provision.
The plaintiff company's claim is in two parts and the defendant, in addition to disputing the claim, has brought a counter–claim. The pleadings come down to this (the numbering follows the paragraphs of the Statement of Claim):
3By an agreement in writing made between the plaintiff and the defendant dated 12 December 1980 the defendant agreed to sell and the plaintiff agreed to buy for the price of $625,000.00 certain lands in Hobart free from encumbrances. This allegation is admitted by the defence.
4Pursuant to the agreement the plaintiff paid to the defendant a deposit of $30,000.00. The defendant admits this allegation.
5The agreement was subject to a number of conditions precedent including, inter alia, by clause 11(b) that the defendant advise the plaintiff in writing within twelve months of the date of the said agreement that it was in a position to close the highway (as defined in the said agreement) across the said certain lands and that there was no impediment preventing the plaintiff from doing so. These allegations are also admitted by the defence.
6This court by judgment in an action Arthur Lindsay Pearce v the defendant and others dated 16 March 1982 determined that the said highway (as defined in the said agreement) was not a highway but a private right of carriageway. This is admitted by the defence.
7Other persons and entities including Salamanca House Pty Ltd, Johnson and Wells Pty Ltd and Producer Supplies and Export Association Ltd were entitled to enjoy the benefit of the said private right of carriageway. These allegations are not admitted.
8(a) By reason of the said judgment and the aforesaid entitlements of enjoyment of the benefit of the said private right of carriageway, there were impediments preventing the defendant from closing the alleged highway (as defined in the agreement).
(b)In the premises the condition precedent of the said agreement provided by clause 11(b) thereof was not satisfied. These allegations are not admitted.
9(a) By reason of the said judgment and the aforesaid entitlements of enjoyment of the benefit of the said private right of carriageway, the defendant was unable to transfer the said certain lands free from encumbrances.
(b)In the premises the defendant was unable to complete the said agreement. These allegations are not admitted by the defence.
10The defendant has failed and refused and continues to fail and refuse to return the said deposit to the plaintiff. This allegation is formally denied.
11The plaintiff claims return of the said deposit and interest thereon. The particulars include a claim for the return of the deposit of $30,000.00 and interest at 16% thereon from December 1981 to date. To this allegation the defendant pleads:
"The defendant denies that the plaintiff is entitled to the return of the said deposit and interest thereon as sought by the plaintiff in paragraph 11 of the Statement of Claim."
There then follows the second part of the claim:
12The defendant by its servants and officers knew that the plaintiff wished to require (sic) the said certain lands for the development of a hotel of international standard. This is not admitted by the defence.
13Further, in or about the month of January 1981 the defendant by its officer Mr Lewis, Town Clerk of the City of Hobart, advised the plaintiff through its managing director, Mr R W Hosken:
(a)That the defendant had obtained permission from all the owners whose property adjoined or were near to the subject property whereby such permission would enable the defendant to make an unencumbered title in the said sale to the plaintiff.
(b)That there was no legal or other impediment to the defendant making such a clear title.
(c)That as a clear title could be given, the plaintiff should take possession of the said lands.
(d)That the defendant could give notices to persons parking motor vehicles on the said lands to terminate such parking upon the expiration of the notice. These allegations are denied.
14Relying thereon, the plaintiff entered into possession of the said lands and continued to plan and develop by way of preparatory work for the construction of an international hotel upon the said land. To this, the defendant pleaded:
"The defendant admits that the plaintiff entered into possession of the said land but denies that the plaintiff did so in reliance of the advice claimed by the plaintiff to have been given to it as alleged in paragraph 14 of the Statement of Claim".
15In so advising the plaintiff as aforesaid, the defendant acted negligently by its servants and or agents. This allegation, together with the particulars thereunder, is denied.
16By reason of the negligence aforesaid, the plaintiff has sustained loss and damage. This too is denied.
The defendant's counter–claim reaffirms the agreement referred to in paragraph 3 of the Statement of Claim and refers to the three admitted conditions precedent namely:
(a)The plaintiff completing an agreement satisfactory to the plaintiff and the defendant for the purchase of certain land known as "the Kirksway Land".
(b)The defendant advising the purchaser in writing that it was in a position to close certain land referred to in the agreement as "the highway" and that there were no impediments preventing the defendant from doing so.
(c)The plaintiff obtaining certain specified consent for the development of the property to be purchased as an hotel of international standing within twelve months of the date of the agreement.
It then pleads other parts of the agreement, all of which are admitted by the plaintiff namely (the numbers follow the paragraphs of the counterclaim):
3By clause 3 of the said agreement the plaintiff and the defendant agreed that the agreement would be completed within thirty days of the satisfaction of the last of the conditions precedent abovementioned being satisfied (sic) and that at that time, subject as further provided in the said agreement, the plaintiff would be entitled to vacant possession.
4Clause 13 of the said agreement provided that notwithstanding clause 3 of the agreement but subject to clauses 11, 12, 14 and 15 thereof the plaintiff should on giving two months notice in writing to the defendant be entitled to vacant possession of the property referred to in the agreement.
5It was further provided by clause 13 of the agreement that in the event of the plaintiff being entitled to vacant possession of the property the plaintiff should pay interest to the defendant at the rate of $12.00 per centum per annum upon the unpaid purchase moneys on completion.
6By letter to the defendant from the plaintiff's solicitors dated 18 December 1980 the plaintiff gave notice to the defendant that it required possession of the property within two months of 18 December 1980.
7The plaintiff entered into vacant possession of the said property on 18 February 1981.
8As at 18 February 1981 the unpaid balance purchase price was $595,000.00.
9By agreement made between the plaintiff and the defendant the aforesaid agreement for the purchase by the plaintiff of the defendant's land came to an end on 8 June 1982.
Paragraph 10 pleads that on 19 July 1982 the plaintiff gave up possession of the land the subject of the aforesaid agreement for sale to the defendant. This is not admitted by the plaintiff. The following paragraphs of the counter–claim are denied by the plaintiff:
11The plaintiff is indebted to the defendant for interest at 12% per annum on the sum of $595,000.00 from 18 February 1981 to the 8 June 1982. The figure claimed is $92,917.10.
12The plaintiff is further indebted to the defendant for occupation rent of the said lands of the defendant from 8 June 1982 until the date that the plaintiff gave up possession to the defendant, that is 19 July 1982.
13The defendant further claims damages from the plaintiff for:
(a)The cost of reinstatement of the land to the condition that it was in prior to occupancy of the land by the plaintiff.
(b)The cost of repairs to fixtures erected thereon damaged or altered by the plaintiff during the occupancy of the land by the plaintiff, particulars of which relate to patching of bore holes and replacement of signs claim a cost of $1,128.00.
It is common ground between the parties that both claim and counter–claim have some substance. However although on a consideration of the pleadings the strength of the second aspect of the plaintiff's claim and of the defendant's counter–claim cannot be gauged and must await judicial evaluation of evidence in their support, the same is not true of the plaintiff's claim for a return of its deposit. It is conceded that the agreement for purchase was subject to a condition precedent that the defendant advise the plaintiff in writing that it was in a position to close certain land referred to in the agreement as "the highway" and that there were no impediments in preventing the defendant from doing so, that this court determined that the highway was not a highway but a private right of way, and that by agreement between the parties the purchase agreement came to an end on 8 June 1982. Prima facie in those circumstances the plaintiff as purchaser was entitled to a refund of the deposit paid, and while its entitlement to a refund is formally denied, no facts have been pleaded by way of justification for a failure to refund that deposit, although facts have been pleaded which, if proved, may produce a judgment debt on the counter–claim which may be set off against and possibly exceed the amount of deposit and interest thereon. Accordingly it seems to me that the plaintiff company has more than reasonable prospects of succeeding in its claim to the extent of at least $30,000.00 which if the balance of its claim fails and the defendant corporation is therefore successful in its defence to that extent should be adequate to pay the defendant's costs, assuming such an order is made. In a case such as the present, it is only if the defendant is wholly successful in its defence that the plaintiff would have no means of paying costs. In saying this, I am conscious that the judgment debt after set off may be in favour of the defendant leaving no surplus in fact to be put towards payment of costs. Nevertheless, as Street, CJ said of an identical provision to s.533 of the Companies Code in Buckley v Bennell Design and Constructions Pty Ltd (1974) 1 ACLR 301 at p303–304
"(The section) reflects the concern of the legislature that, in permitting the incorporation of a limited liability entity, it was necessary to ensure that persons who might have dealings, whether voluntary or involuntary, with such an entity should have a measure of protection against the consequences of limited liability. Where a company commences litigation against another party, that other 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 the consequences of limited liability, there has always in company's legislation been a provision along the lines of s363 of the New South Wales 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."
Having regard to this dictum it seems to me that the existence prima facie of an entitlement to a return of the deposit of $30,000.00 should be adequate and fair protection to the defendant corporation against costs incurred in defending the plaintiff's other claim and that to require the plaintiff company to furnish security might well result in its claims being brought unfairly to a standstill.
In the event that I have placed too much emphasis on the apparent right of the plaintiff to the return of the deposit and that some basis other than the existence of a counter–claim is advanced to justify its forfeiture and retention, I am nevertheless of the view that in the exercise of my discretion this is not an appropriate case to make the order sought. The proceedings were commenced in May 1984 and the Statement of Claim delivered in July of that year. In November 1984 the defendant corporation sought an order that the plaintiff deliver further and better particulars of the claim and in December Nettlefold J made such an order. In default of compliance, the defendant sought a further order. On 4 February 1985 particulars were supplied by the plaintiff but on 5 February 1985, the return date of the summons, Cosgrove J ordered further particulars to be given by the plaintiff. An Affidavit of Discovery was filed by the plaintiff in October 1985. In July 1987 the plaintiff changed its solicitors and its new advisers sought an order from the Master that a time table be established for final pre–trial procedures and for a hearing date to be set. On 4 August 1987 that summons was adjourned sine die. In March 1988 the plaintiff again changed its solicitors and in May 1988 its managing director made a further affidavit concerning a supplementary list of documents. In June 1988 on the plaintiff's application Nettlefold J gave it leave to effect amendments to the Statement of Claim, the majority of which affected the second aspect of its claim rather than the return of the deposit. It was ordered that the amended Statement of Claim be delivered to the defendant's solicitors within fourteen days. An affidavit filed by the defendant's solicitor deposes to the fact that this has never been done. The next activity in the matter was the delivery in December 1989 of a letter by the plaintiff's solicitors to the defendant's solicitors foreshadowing further amendments to the Statement of Claim which again concerned the second aspect of the plaintiff's claim, advising that the plaintiff proposed to deliver interrogatories and indicating the plaintiff's solicitors' intention to shortly deliver further particulars of damage with supporting proofs where appropriate. On 17 January 1990 the defendant filed the present application which has been supported by affidavits dated 5 February and 13 March 1990.
Delay in the making of an application under s.533 has been recognised as a factor to be taken into account by the judge in whom the discretion resides. In Buckley v Bennell Design and Constructions Pty Ltd (supra) Moffitt p said at p309:
"The question of whether security for costs should be ordered is one which ought to be raised and determined promptly, in that the very nature of such an order is that it may result in the company being prevented from litigating its claim; and if, as sought by the applicant in this case, a connected claim against it is also to be stayed, in that the company may have stayed the determination of that claim against it to its possible disadvantage.
The right to seek security for costs and to stay proceedings, with the possible result that a claim for damages is frustrated, is a powerful weapon. Therefore, the litigant who seeks to use it against his opponent is at risk of not having it available, unless the application is made and persevered with in circumstances involving the least oppression of his opponent. The primary reason why the application should be brought promptly and pressed to determination promptly is that the company, which by assumption has financial problems, is entitled to know its position in relation to security at the outset, and before it embarks to any real extent on its litigation, and certainly before it is allowed to or commit substantial sums of money toward litigating its claim."
See also Loreva Pty Ltd v CEFA Associated Agencies Pty Ltd (1982) 7 ACLR 164 and Sydmar v Statewise Developments Pty Ltd (1987) 11 ACLR 616.
In the present case the plaintiff company has been permitted to incur considerable expense in the preparation of its case without, on the evidence, any suggestion from the defendant corporation that security for costs might be sought until nearly six years after the issue of the Writ of Summons. Even though the plaintiff allowed the matter to become dormant from about June 1988 to December 1989 and its resurrection in that month prompted the application, I am of the view in all the circumstances that it would be unjust to make the order sought.
The application is refused.
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