The Minister for Transport for Western Australia v Civcon Pty Ltd (in Liq)
[2000] WASC 158
•15 JUNE 2000
THE MINISTER FOR TRANSPORT FOR WESTERN AUSTRALIA -v- CIVCON PTY LTD (IN LIQ) [2000] WASC 158
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2000] WASC 158 | |
| 15/06/2000 | |||
| Case No: | COR:343/1999 | 29 MAY 2000 | |
| Coram: | MASTER BREDMEYER | 9/06/00 | |
| 6 | Judgment Part: | 1 of 1 | |
| Result: | Application dismissed | ||
| PDF Version |
| Parties: | THE MINISTER FOR TRANSPORT FOR WESTERN AUSTRALIA CIVCON PTY LTD (IN LIQ) (ACN 009 433 587) |
Catchwords: | Security for costs Adequacy of insurance arrangements to pay costs |
Legislation: | Commercial Arbitration Act 1985 (WA), s 47 Corporations Law, s 477(2B), s 1335 |
Case References: | FFE Minerals Aus Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69 Tipperary Developments Pty Ltd v State of Western Australia (1966) 22 ACSR 241 Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1 Ariss v Express Interiors Pty Ltd (1995) 122 FLR 343 Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1 BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857 Brundza v Robbie & Co (No 2) (1952) 88 CLR 171 Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311 Eastern Metropolitan Council v Four Seasons Construction Pty Ltd [1999] WASC 36 Interwest v Tricontinental Corporation Ltd (1991) 4 ACSR 621 Jeffcott Holdings Ltd v Paior (1994) 14 ACSR 239 Menhaden Pty Ltd v Citibank NA (1984) 1 FCR 542 Morrell v Mercantial Mutual Insurance (Australia) Ltd [1999] WASCA 250 Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1 Pearson v Naydler [1977] 1 WLR 899 Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420 Procon (GB) Ltd v Provincial Building Co Ltd [1984] 2 All ER 368 Re Harrington Motor Co [1928] Ch 105 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CHAMBERS
- Applicant
AND
CIVCON PTY LTD (IN LIQ) (ACN 009 433 587)
Respondent
Catchwords:
Security for costs - Adequacy of insurance arrangements to pay costs
Legislation:
Commercial Arbitration Act 1985 (WA), s 47
Corporations Law, s 477(2B), s 1335
(Page 2)
Result:
Application dismissed
Representation:
Counsel:
Applicant : Mr J A Thomson
Respondent : Ms C J McLure QC
Solicitors:
Applicant : State Crown Solicitor
Respondent : Corrs Chambers Westgarth
Case(s) referred to in judgment(s):
FFE Minerals Aus Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69
Tipperary Developments Pty Ltd v State of Western Australia (1966) 22 ACSR 241
Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1
Case(s) also cited:
Ariss v Express Interiors Pty Ltd (1995) 122 FLR 343
Bell Wholesale Co Ltd v Gates Export Corporation (1984) 2 FCR 1
BPM Pty Ltd v HPM Pty Ltd (1996) 14 ACLC 857
Brundza v Robbie & Co (No 2) (1952) 88 CLR 171
Caruso Australia Pty Ltd v Portec (Aust) Pty Ltd (1984) 1 FCR 311
Eastern Metropolitan Council v Four Seasons Construction Pty Ltd [1999] WASC 36
Interwest v Tricontinental Corporation Ltd (1991) 4 ACSR 621
Jeffcott Holdings Ltd v Paior (1994) 14 ACSR 239
Menhaden Pty Ltd v Citibank NA (1984) 1 FCR 542
Morrell v Mercantial Mutual Insurance (Australia) Ltd [1999] WASCA 250
Newtrend Pty Ltd v Oceanic Life Ltd [1990] WAR 1
Pearson v Naydler [1977] 1 WLR 899
Porzelack KG v Porzelack (UK) Ltd [1987] 1 WLR 420
Procon (GB) Ltd v Provincial Building Co Ltd [1984] 2 All ER 368
Re Harrington Motor Co [1928] Ch 105
(Page 3)
1 MASTER BREDMEYER: Civcon Pty Ltd (In Liq) ("Civcon") is the claimant against the Minister for Transport for Western Australia ("the Minister") in an arbitration. It involves millions of dollars. The Minister has applied for security for costs under s 1335 of the Corporations Law. The amount sought is $338,640. Security for costs can be awarded in an arbitration, see s 47 of the Commercial Arbitration Act 1985 (WA) and Seaman 25.0.2.
2 The first question is has the Minister shown by credible testimony that there is reason to believe that the company will be unable to pay his costs if he is successful in his defence? Civcon says it has an insurance policy in place which is adequate to pay the Minister's costs. The leading case on s 1335 is now FFE Minerals Aus Pty Ltd v Mining Australia Pty Ltd [2000] WASCA 69, which disapproved of Warren Mitchell Pty Ltd v Australian Maritime Officers Union (1993) 12 ACSR 1 and Tipperary Developments Pty Ltd v State of Western Australia (1966) 22 ACSR 241. The Minister says the policy is not adequate.
3 There is a funding agreement between the ANZ Bank which is funding Civcon's arbitration claim and HIH Casualty and General Insurance Ltd ("HIH"), which is insuring the bank against loss. It is dated 25 February 1998. I quote from cl 19.2 of that agreement:
"19.2 Insurance Indemnity
In consideration of the payment of the premium specified in Schedule A the Insurer agrees to indemnify the Borrower until the Expiry Date specified in Schedule A in respect of the amount by which its liabilities to the Bank pursuant to this Agreement shall exceed the amount which the Borrower recovers from the Defendants in the Legal Proceedings net of any Legal Expenses and Other Expenses incurred by the Borrower.
19.2.1 The Insurer will indemnify the Borrower and the Insolvency Practitioner in relation to any Order for Costs made against them in the Legal Proceedings."
5 The Minister's lawyers raised objections to the funding agreement which is more correctly called the Insured Litigation Finance Agreement.
(Page 4)
- Those objections were set out in the Minister's outline of submissions to this Court of 3 March 2000. Those objections resulted in a Side Agreement which is in the process of being signed. It is between the same parties except the bank is not a party. It provides in cl 2:
"2. CLAUSE 19 OF CONTRACT
The Insurer agrees with the Liquidator and the Company that:
(a) if at any time the Policy is terminated pursuant to clause 19.9 of the Contract, the Insurer will, notwithstanding the terms of that clause, remain liable under clause 19.2.1 of the Contract in respect of any order for costs so far as it relates to the period up to the date of termination;
(b) the Liquidator and/or the Company must claim against the Insurer under clause 19.2.1 of the Contract and sub-clause (a) of this clause within 30 days of the relevant order for costs being served on the Liquidator or the Company;
(c) clause 19.2.1 of the Contract applies only:
(i) to the liability of the Liquidator and/or the Company to satisfy that portion of any Order for Costs which relates to costs incurred up to and including the date upon which the policy terminated pursuant to clause 19.9, if so terminated; and
(ii) if the Liquidator and/or the Company complies with the requirements of clause 2(b) of this Agreement.
(d) the Insurer consents to the Liquidator and the Company granting a charge in favour of the opponent in the Legal Proceedings over the proceeds of any claim payable under clause 19.2.1 of the Contract."
(Page 5)
- (d) refers to a charge in favour of the Minister. That document has beendrafted but may not yet have been signed by all parties. It is called the Mortgage of Contract (Insurance Policy). The effect of it is to charge the company's assets with any money owing to the Minister under a costs order.
7 Clause 5.1(c) of that document reads:
"The Mortgagor shall take all action that a prudent, diligent and reasonable person would take to cause the Contractor to observe its obligations in connection with the mortgaged contract."
- The mortgagor refers there to Civcon and the contractor refers to HIH.
8 I consider that, subject to the side agreement and the charge being executed, these documents afford reasonable security to the Minister for his costs of the arbitration if he is successful. But before giving a final view on that, what are the Minister's objections to these arrangements?
9 The first can be expressed in this way: what if the funding agreement which expires on 18 November 2000 is not renewed? I consider the liquidator is likely to renew it. He has funds available from the ANZ Bank to pay the next insurance premium. The litigation is the major asset of the company. The liquidator has every incentive to go on with it. He has sought legal advice and advice from a geotechnical engineer and both say that he has good prospects of success. If the funding agreement is not renewed, clearly the financial circumstances of the company have changed and the Minister can then bring a new application for security for costs.
10 The second objection is this: what if the policy is terminated? If the insurer terminates under cl 19.9 of the funding agreement, for example, because the company and the insurer disagree on the prospects of success and an independent counsel's view is obtained under cl 19.8 and he concludes that the company's chances of success are not good, then the Minister is still covered. The insurer in that circumstance can terminate the policy but, by cl 2 of the side agreement, the insurer is still liable to pay any order for costs in favour of the Minister made up to that time. If so, what about later costs incurred by the Minister? If the funding agreement is terminated in that circumstance, and the Minister knows of it, clearly circumstances have changed and he could bring a fresh application for security for costs.
(Page 6)
11 The third concern is: what if the insurer cancels the policy for other reasons - eg for non-disclosure by the company when the proposal was being put? Does that not leave the Minister unprotected? Yes, but in that event, the Minister could bring a fresh application.
12 Provided the side agreement and the charge are signed and leave is given to the liquidator under s 477(2B) of the Corporations Law, which I propose to do, to enter into the charge which is likely to continue for more than three months, I consider the insurance arrangements are reasonably adequate to protect the Minister for his costs should he win an order for costs against the company in the arbitration. It is not foolproof. It is not as secure as $338,640 sitting in the court's trust account but, on the balance of probabilities, which is the appropriate standard, I consider the insurance arrangements in hand are reasonably adequate to provide security for the Minister's costs. I am going to make an order that the company notify the State Crown Solicitor within 48 hours of any cancellation of the insurance policy, non-renewal of the policy, or any other change in the arrangements between the company and the insurer. If a change occurs, and it is likely to affect the Minister adversely, he can apply promptly for a security for costs order. A party can always do that based on different facts.
13 Subject to all that I am not persuaded that the company is unable to pay the Minister's costs and this application will be dismissed.
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