Probuild Constructions (Aust) Pty Ltd v Lightpark Holdings Pty Ltd (Receivers and Managers Appointed)
[2009] WASC 109
•26 FEBRUARY 2009
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CHAMBERS
CITATION: PROBUILD CONSTRUCTIONS (AUST) PTY LTD -v- LIGHTPARK HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) [2009] WASC 109
CORAM: LE MIERE J
HEARD: 26 FEBRUARY 2009
DELIVERED : 26 FEBRUARY 2009
FILE NO/S: CIV 1377 of 2009
BETWEEN: PROBUILD CONSTRUCTIONS (AUST) PTY LTD (ACN 095 250 945)
Plaintiff
AND
LIGHTPARK HOLDINGS PTY LTD (RECEIVERS AND MANAGERS APPOINTED) (ACN 111 485 897)
First DefendantST GEORGE BANK LTD (ACN 055 513 070)
Second Defendant
Catchwords:
Practice and procedure - Costs - Who should pay costs of the application - Whether costs should be awarded on an indemnity basis - Turns on own facts
Legislation:
Nil
Result:
No order as to costs
Category: B
Representation:
Counsel:
Plaintiff: Mr M H Zilko SC
First Defendant : Mr I R Freeman
Second Defendant : Mr I R Freeman
Solicitors:
Plaintiff: Tottle Partners
First Defendant : Lavan Legal
Second Defendant : Lavan Legal
Case(s) referred to in judgment(s):
Nil
LE MIERE J: This matter was listed before me today for the plaintiff's application for the continuation of the injunction granted and undertakings given before Newnes J on 24 February 2009. The substantive matters have been resolved between the parties. The matter that remains outstanding is the question of costs.
The plaintiff seeks an order that the first defendant pay the plaintiff's costs of the application. The plaintiff does not seek an order in relation to the second defendant, St George Bank. The first and second defendants seek an order that the plaintiff pay their costs of the application and do so on an indemnity basis.
The matters giving rise to this application have occurred recently and in a rapidly unfolding sequence of events. On 20 February 2009, that is, last Friday, Lavan Legal, the solicitors for the first defendant, wrote to the plaintiff referring to the bank guarantee and the fact that it was about to expire. The solicitors wrote, amongst other things:
In light of the above my client requests that you provide a further Bank Guarantee in the amount of $1,037,500 in substitution for the Bank Guarantee by 27 February 2008. This bank guarantee should not have an expiry date.
…
If you do not do this, my client will have recourse to the Bank Guarantee and hold the monies in a separate account pending the expiry of the defects liability period and completion of the obligations under it.
On the morning of the following day, that is, Saturday, 21 February 2009, the plaintiff's solicitors replied by way of an email, in which they said, amongst other things, that it was not clear on whose behalf Lavan Legal acted and they sought clarification of who or which company had physical possession of the bank guarantee or would attempt to present it.
In a letter of that day which was sent by email the plaintiff's solicitors said, amongst other things, things to the effect that the defendants had no legal entitlement to present the bank guarantee for payment. The plaintiff's solicitors then said:
If your client intends to continue with its wrongful conduct, please provide us with details of the particular defaults and clauses of the Contract in which your client purports to rely for the assertion that it is entitled to present the Bank Guarantee and to make the demand in the last two paragraph of your letter.
Further details were then sought in relation to that matter and in the penultimate paragraph the plaintiff's solicitor said:
If by close of business on 24 February 2008 we do not have confirmation that your client will not attempt to present the bank guarantee (whether in their capacity as receivers and managers or purportedly acting on behalf of the principal) our client will commence proceedings for an injunction to prevent the wrongful conduct by your client.
Our client's position remains entirely reserved.
On the following Tuesday, 24 February 2009, after some unsuccessful attempts at telephone communication Lavan Legal sent an email to the plaintiff's solicitors which confirmed first that they acted for the receivers and managers of the company Lightpark Holdings Pty Ltd, and on behalf of St George Bank Ltd. They then requested an extension of time until 10 am the following day to respond to the plaintiff's solicitor's demand for an undertaking not to present the bank guarantee. They then said:
On behalf of the Receivers and St George, I undertake not to present the bank guarantee before that time. I further undertake to respond to you substantively by 10 am tomorrow morning. If I do not, or if your client is dissatisfied with my response, then your client will still have adequate time to apply for an injunction.
By that time the solicitors for the plaintiff had prepared and filed at the court the documents to initiate this application and to seek the hearing of an urgent ex parte application for an injunction that afternoon. At 1.10 pm the plaintiff's solicitors responded to Lavan Legal by email in which they noted the undertaking given by the defendants, and stated that they had been instructed to proceed with the application for an injunction on an ex parte basis that morning. They then said that the application had been filed and listed for hearing before Newnes J at 3.30 pm that day, and that in light of the defendants' undertaking they were informing the defendants' solicitors of that matter. The plaintiff's solicitors further stated their intention to seek an injunction that afternoon.
The parties appeared before Newnes J that afternoon. The defendants gave an undertaking in effect not to present the bank guarantee or otherwise have recourse to, or converting the guarantee until further order. Newnes J further made an order granting an injunction restraining the first defendants, its directors, servants, officers, agents, authorised representatives or otherwise from having recourse to and converting to cash the bank guarantee.
This morning, 26 February 2009, the defendants' solicitors wrote to the plaintiff's solicitors stating:
My clients undertake to refrain from presenting the Bank Guarantee prior to 28 February 2009 and accordingly, agree to allow the Bank Guarantee to expire.
In those circumstances each side seeks costs from the other and the defendants seek their costs on an indemnity basis. The plaintiff, as I said earlier, seeks costs against the first defendant but not against the second defendant. The plaintiff seeks its costs on the basis that it was the conduct of the first defendant in threatening to take the action which it threatened to take which caused the plaintiff to commence the proceedings and seek the injunction that it did.
The conduct of the first defendant which is relied upon is its conduct in threatening in its letter of 20 February 2009 to have recourse to the bank guarantee. That threat was made as part of a request that the plaintiff provide a further bank guarantee in the amount of $1,037,500 in substitution for the bank guarantee by 27 February 2008.
In my view the ordinary and proper meaning of that communication was that if the plaintiff did not provide the substitute bank guarantee by 27 February 2008 then the defendants would have recourse to the bank guarantee. That is, the threat was in effect to have recourse to the bank guarantee on or after 27 February 2008.
On the following day, 21 February 2009, the plaintiff in effect sought an undertaking from the first defendant that it would not attempt to present the bank guarantee and sought that undertaking by close of business on 24 February 2008. The plaintiff's solicitors also stated that their client's position remained entirely reserved.
It was in that context that the plaintiff's solicitors commenced this action and sought the urgent hearing of the injunction hearing. In my view the conduct of the first defendant did not reasonably necessitate the plaintiff commencing the proceedings at the time when they did for the following reasons. First the threat which was the conduct of the defendant which gave rise to the need for the injunction was a threat to take some action if the plaintiff did not provide a substitute guarantee by 27 February. So it was a threat to take action on or after 27 February.
Second, the plaintiff's solicitors had sought an undertaking by close of business on 24 February 2008 that the defendants would not in effect present the bank guarantee for payment, and in those circumstances the defendants had in effect been given that time in which to respond. The plaintiff chose not to wait until either of those deadlines arrived but to take action earlier on the 24th. For those reasons, in my view the plaintiff is not entitled and should not have the costs of the application.
The defendants say that they should have the costs of the application. The defendants say that the application was premature, that it was made without adequate conferral and that it should not have been brought ex parte. In my view this matter must be looked at in the context of a commercial dispute between the parties in circumstances where a threat to present the bank guarantee was made by the first defendant, that there was but a short time before the bank guarantee was to expire, and the events which then took place unfolded very quickly.
It was the defendants in effect who initiated all of these matters by their letter of 20 February 2009, in threatening to present the bank guarantee if a substitute was not provided by the 27th. The plaintiff's solicitors wrote in effect saying there was no legal entitlement or proper basis for the defendants to take that action, that is, to present the bank guarantee for payment. The defendants did not in substance respond to that matter, and by undertaking not to present the bank guarantee and to allow it to expire the defendants have in effect conceded there was no proper basis for them to have done so.
It is true, as I have said, that their threat was in effect to do something on or after 27 February 2009. However, there was not prior to 24 February 2009 in express terms an undertaking that nothing would be done until or after 27 February 2009. Such an undertaking was given on 24 February 2009 at 12.44 pm, but by that time the application had already been filed. Furthermore, the undertaking was not to present the bank guarantee until 10 am the following morning. In its terms that undertaking would have left the defendants at liberty to present it at 10.01 am the following morning, and did not provide the plaintiff with an opportunity to see whether or not a further undertaking was given before 10 am and then bring an application at 10 am which would have provided protection against the defendants presenting the bank guarantee.
This is an illustration, in my view, of the fact that these communications were taking place rapidly and in circumstances where neither party had the luxury of being able to set out precisely and comprehensively what the position of each party was at their leisure. In the circumstances I do not consider the defendants should have the costs of the application either.
I have held it was not a matter of reasonable necessity for the plaintiff to bring the application, but as a matter of commercial prudence and extra care when a large sum of money was at issue, it was not an unreasonable thing for them to do. Having said that, it is a matter which is to be done at their own cost and not to be visited upon the defendants.
Similarly, so far as the defendants are concerned, in my view, their actions in making the unjustified threat on 20 February to present the bank guarantee and then failing to give in terms an unequivocal undertaking that nothing would be done prior to 27 February is such that they ought not to have the costs either. In saying that, I accept that the defendants had in effect made their threat in relation to the matters that would take place after 27 February.
The defendants were represented by solicitors and the defendants themselves, that is the receiver and manager, are professional liquidators, and it is not to be supposed that they would have engaged in any form of sharp practice or taken any action contrary to what they had said in their correspondence. Nonetheless, the way things unfolded and the terms of the undertaking given eventually on 24 February are such that they should not have the costs of the application either. Accordingly the order that I will make is that there be no order as to costs.
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