Rosebridge Nominees Pty Ltd v Commonwealth Bank of Australia

[2004] WASC 60 (S)

JURISDICTION	:	SUPREME COURT OF WESTERN AUSTRALIA IN CHAMBERS
CITATION	:	ROSEBRIDGE NOMINEES PTY LTD -v- COMMONWEALTH BANK OF AUSTRALIA & ORS [2004] WASC 60 (S)

CORAM	: MASTER SANDERSON
HEARD	:  6 FEBRUARY, 12 MARCH, 2 JUNE 2004
DELIVERED	: 6 APRIL 2004
SUPPLEMENTARY
DECISION	: 8 JULY 2004
FILE NO/S	:  CIV 1235 of 1999
BETWEEN	: ROSEBRIDGE NOMINEES PTY LTD

Plaintiff

AND

COMMONWEALTH BANK OF AUSTRALIA

First Defendant

CORRS CHAMBERS WESTGARTH (A FIRM)
Second Defendant

WFB PTY LTD Third Defendant

Catchwords:

Supplementary decision - Form of security after order for security for costs -
Turns on own facts

[2004] WASC 60 (S)

Legislation:

Nil

Result:

Form of security settled

Category: B

Representation:

Counsel:

Plaintiff	:	Mr R A S Rowick
First Defendant	:	Mr P A Sheiner (6 February), Mr G D Cobby

(12 March, 2 June 2004)

Second Defendant	:	Mr L M Wilk
Third Defendant	:	Mr P K Walton

Solicitors:

Plaintiff	:	Vincent Partners
First Defendant	:	Christensen Vaughan
Second Defendant	:	Blake Dawson Waldron
Third Defendant	:	Jackson McDonald

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

Nil

Case(s) also cited:

Swiss Bank Corporation v Lloyds Bank Ltd [1982] AC 604

[2004] WASC 60 (S)

MASTER SANDERSON

1. MASTER SANDERSON: On 6 April 2004 I delivered reasons dealing with the defendants' applications for security for costs. I determined that an order for security ought be made and that the security ought be in an amount of $100,000 in relation to each of the three defendants. As to the form of the security I said (at par 24):

   "… That security should be provided by way of a guarantee from Mr Grego in favour of each of the three defendants. That personal guarantee should be secured over Mr Grego's interest in the Mandurah property. I appreciate that the security may not be sufficient to meet the full $300,000. I also appreciate that difficulties may arise in realising the security. Nonetheless, Mr Grego has offered a personal guarantee and he has put himself at risk were a costs order to be made against the plaintiff."

2              In determining that this was an appropriate way for the security to be

provided, I was relying upon what was said by Mr Grego in his affidavit
of 26 February 2004. He said (par 14):

"I am willing to provide a personal guarantee for any security that might be ordered up to amount (sic) of $200,000.00 secured by my interests in the land. My position as director of the plaintiff is that there should not be an order for security for costs. However should the court decide that that is an appropriate order then I am prepared to offer my limited personal guarantee secured by my interest in the land. I am prepared to have that limit divided as to $100,000.00 for each of the First and Third defendants if necessary."

3              After handing down my reasons I directed that the parties should

confer in an effort to agree the form of the guarantee and the form of the security to be provided over the land. It must be said that the defendants were distinctly unenthusiastic about the form of security proposed. Their concerns related in particular to the difficulty they might have in moving against Mr Grego's interest in the land if he did not make payment under the guarantee. Nonetheless, negotiations have taken place and there is nothing to suggest that the defendants have not negotiated in good faith. However, the parties have not been able to agree either as to the form of the guarantee or the way in which the guarantee is to be secured over the land.

[2004] WASC 60 (S)

MASTER SANDERSON

4              The plaintiff's solicitors have produced a Deed of Guarantee. A draft

of this deed is to be found as annexure "RASR2" to the affidavit of Mr Richard Arthur Sutton Rowick, sworn 1 June 2004. There appear to be three principal objections taken by the defendants' solicitors to this form of guarantee. First, they say that there should be only one instrument of guarantee, rather than separate guarantees in relation to each defendant. Second, they say that there should be no conditions precedent to calling on the guarantee. The guarantee anticipates demand first being made on the plaintiff and the resolution of any appeal before the obligation to pay under the guarantee arises. Finally, there is an issue as to whether or not the security over the land ought be by way of charge or mortgage. At my direction, each of the plaintiff and the defendants has filed submissions dealing with these issues.

5              In my view there can be no objection to separate guarantees in

relation to each defendant. The solicitor for the plaintiff points out that drafting of a single guarantee could give rise to problems, particularly with respect to discharge. While I accept that the provision of three separate guarantees has its own difficulty I am satisfied that, on balance, it is the preferable option.

6              Before leaving this question of the guarantee I should make one

observation. It is not uncommon in cases where an application is made for security for costs for the Court to accept an undertaking from a director of the plaintiff company to be liable for any costs awarded against the company. If such an undertaking is given and at some future date called upon, there is no automatic right for the defendant to enter judgment for the amount of costs against the person giving the undertaking. The undertaking is given to the Court. Failure to make payment of the costs is a contempt and is actionable. The procedure is by no means simple and the security offered by an undertaking is, on one view, rather less than the security offered by way of written guarantee. That fact must, I think, be borne in mind in considering both the form of the guarantee and the way it is secured over the property.

7              I am not satisfied that the conditions precedent contained in the

guarantee are warranted. In my view, once an order for costs is made against the plaintiff and those costs are quantified, either by agreement or after taxation, the defendants should be entitled to call upon the guarantee. They certainly should not have to wait until after resolution of any appeal before calling upon the guarantee. On that basis, cl 4.1.3, 4.1.4 and cl 7 ought be removed.

[2004] WASC 60 (S)

MASTER SANDERSON

8              As to the form of security, I am satisfied that the charge over the land

set out in the guarantee is sufficient. It will allow the defendants to lodge a subject to claim caveat to protect their interests. In my view, to require the provision of a mortgage would be to unnecessarily complicate matters. It is open to question whether a mortgage, in the circumstances, would provide better security to the defendants than the charge. I also accept the submission made on behalf of Mr Grego that in the circumstances of this case, a mortgage is not the appropriate form of security. There has been no advance which would make security by way of mortgage unusual. A charge in the form found in the guarantee will suffice.

9              Subject then to amendments being made to the form of the guarantee

as I have outlined above and the guarantee being provided within seven
days to each of the defendants, I will make the necessary orders.

1. I will hear the parties as to the precise form of those orders.