Turner Road Project Pty Limited v SMEC Australia Pty Limited

[2021] NSWSC 1358

Supreme Court

New South Wales

Medium Neutral Citation:

Turner Road Project Pty Limited v SMEC Australia Pty Limited [2021] NSWSC 1358

Hearing dates:

21 October 2021

Decision date:

25 October 2021

Jurisdiction:

Equity - Commercial List

Before:

Ball J

Decision:

(1)   Within 28 days of the date of this order, the plaintiff provide security in the amount of $140,000 for the defendant’s costs of the proceedings up to the completion of a mediation by payment of that amount into Court or in such other form as is agreed between the parties;

(2)   The proceedings be stayed if order 1 is not complied with; and

(3)   The plaintiff pay the defendant’s costs of the defendant’s notice of motion filed on 6 August 2021.

Catchwords:

COSTS — Security for costs — Whether security should be ordered where there has been a delay in making the application

Legislation Cited:

Australian Consumer Law

Cases Cited:

Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301

Category:

Procedural rulings

Parties:

Turner Road Project Pty Limited (Plaintiff)
SMEC Australia Pty Limited (Defendant)

Representation:

Counsel:
J Adamopoulos (Plaintiff)
H Chiu (Defendant)

Solicitors:
Eakin McCaffery Cox (Plaintiff)
Clyde & Co (Defendant)

File Number(s):

2020/337729

Judgment

1. By a notice of motion filed on 6 August 2021, the defendant, SMEC Australia Pty Limited (SMEC), seeks security for its costs from the plaintiff, Turner Road Project Pty Limited (Turner Road), in the sum of $200,000.

2. The proceedings were commenced on 27 November 2020.

3. Turner Road was from 17 October 2014 to 17 October 2018 the owner of a parcel of land in Turner Road, Gregory Hills, New South Wales (the Property). In 2013, Landmark Partnerships Pty Ltd, later a shareholder of Turner Road, engaged SMEC to provide consultancy services in connection with the Property. At some stage, the owner of an adjoining property also engaged SMEC in connection with the development of that property. SMEC employed Mr Gregory Moore as a project manager who was involved in the preparation and lodgement of development applications in respect of both the Property and the adjoining property.

4. In these proceedings, Turner Road alleges that Mr Moore falsified consent letters in respect of the adjoining property and, in particular, consent letters purportedly signed on behalf of Turner Road which is said to have resulted in a boundary adjustment in favour of the adjacent property, thereby diminishing the value of the Property. Turner Road contends that by reason of Mr Moore’s conduct, SMEC engaged in misleading or deceptive conduct in contravention of s 18 of the Australian Consumer Law and it is therefore liable to compensate Turner Road for the loss it has suffered as a consequence of Mr Moore’s conduct. That loss is said to total $3,000,000.

5. SMEC’s primary defence to the claim is that Mr Moore’s conduct cannot be attributed to it. It also takes issue with Turner Road’s quantification of its loss.

6. SMEC requested particulars of the claim on 8 December 2020. Following somewhat protracted correspondence between the parties, on 12 February 2021 the Court made orders by consent that Turner Road provide particulars sought in a number of letters and that SMEC file its Commercial List Response by 26 February 2021. Following further correspondence on the question of particulars, SMEC filed its Commercial List Response on 4 March 2021.

7. On 12 March 2021, the Court made an order by consent requiring Turner Road to serve its lay evidence by 4 May 2021. An extension was granted on 7 May 2021 until 1 June 2021. The evidence was served on 3 June 2021.

8. By letter dated 21 July 2021, SMEC first raised the question of Turner Road’s ability to meet any adverse costs order. After further correspondence, SMEC filed its notice of motion seeking security. In a letter dated 5 August 2021 from its solicitors, Clyde & Co, SMEC gave the following explanation for seeking security at that stage:

a)   That the Plaintiff has not adequately responded to our requests for further and better particulars, despite the orders of Hammerschlag J made on 14 December 2020 and 12 February 2020 [sic]. The Plaintiff’s adequate responses would have assisted in understanding the claim against our client;

b)   The Plaintiff failed to serve its lay evidence in breach of orders made by His Honour Justice Hammerschlag on 12 March 2021 and 7 May 2021;

c)   Given the vague way in which the Plaintiff’s case on causation and loss was pleaded in the List Statement, we were in no position to assess the likely costs the Defendant might expend in meeting that case at trial; and

d)   Having now considered the Plaintiff’s lay evidence, the true nature of the Plaintiff’s damages claim still remains unclear. It is therefore evident now that considerable costs will be expended by the Defendant to try to anticipate and respond to the differing ways in which that damages case might ultimately be advanced.

9. The motion is supported by two affidavits of Mr James Rigney, the solicitor who has the day to day conduct of the matter on behalf of SMEC. In Mr Rigney’s first affidavit sworn on 6 August 2021, Mr Rigney gives a breakdown of the costs incurred by SMEC to date and an estimate of SMEC’s costs until the end of a hearing. In his second affidavit sworn on 13 October 2021, Mr Rigney provides an update of the costs incurred to date and a revised estimate of future costs. According to Mr Rigney, SMEC had incurred costs of approximately $98,000 up until 10 August 2021. It has incurred a further $49,000 since that date. In his revised estimate, Mr Rigney estimates that SMEC will incur costs up until the completion of a mediation of approximately $220,000, which includes the $49,000 that has been incurred since the date the motion was filed. He estimates that SMEC will incur a further $265,000 up until the completion of the hearing. Necessarily, there is a degree of guesswork in these estimates. SMEC only seeks security for the costs it has and will incur since the date it filed its motion.

10. It is apparent on the evidence that the plaintiff does not have the resources to meet any adverse costs order. It has paid up capital of $3.00. It was established specifically to develop the Property, which has now been sold. It owns no other real property. It has not led any evidence on this application that it has any other assets or any sources of income.

11. It is not suggested that an order for security would stifle the proceedings. Rather, the motion is resisted solely on the basis that the application has been brought too late in the proceedings. Turner Road does not say that if the application had been brought earlier it would have reconsidered whether to pursue the litigation. However, it says that it has lost the opportunity to do so. It does not say how much it has spent on the proceedings to date. However, its solicitor gives evidence that as at 27 September 2021 he had spent 49.4 hours on the matter and a paralegal assisting him had spent 64.8 hours.

12. The general principle is that applications for security for costs should be brought promptly. As Moffitt P explained in Buckley v Bennell Design & Constructions Pty Ltd (1974) 1 ACLR 301 at 309:

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 commits substantial sums of money toward litigating its claim.

13. Although delay may be an important factor in considering whether to grant security, it is not determinative. It must be weighed with other factors. It is also necessary to consider the length of the delay, the reasons for it and the consequences the delay may have for the plaintiff. Other cases may provide a guide on the approach the Court should take in considering these matters. Ultimately, however, each case must be considered on its own facts.

14. Although I think the position in this case is finely balanced, I have concluded that it is appropriate to order security. I have reached that conclusion for three principal reasons.

15. First, apart from the question of delay, there are strong reasons for ordering security in this case. It is apparent that the plaintiff will be unable to meet any costs order against it. It can be inferred that any benefits Turner Road obtained from the development of the Property have been distributed to its shareholders, who will be the beneficiaries of a successful claim against SMEC. There is no suggestion that those who stand behind Turner Road will not be able to provide security if required to do so. Consequently, there is no reason to think that an order for security will stifle the litigation. There is no suggestion that Turner Road’s impecuniosity arises from the conduct in respect of which it sues.

16. Second, although there has been delay, it has not been inordinate in the context of the proceedings. Turner Road has dealt with requests for particulars and served its lay evidence, which consists of an affidavit from its sole director. However, it is apparent that a substantial issue in the case is the quantification of the Turner Road’s claim, which will depend largely on expert planning and valuation evidence. No order has yet been made for the filing of expert evidence and there is no suggestion that Turner Road has already incurred substantial costs in preparing that evidence. The case has not been set down for hearing and it is apparent that a hearing is still some distance off. No mediation has been arranged and given the importance of the expert evidence, it does not seem appropriate for the mediation to occur until that evidence has been served.

17. Third, SMEC has given some explanation for the delay. The explanation is not compelling. However, having regard to that explanation I am satisfied that the application for security in this case should be understood as being based on a genuine concern that the costs of the case will be significant and that SMEC will not be able to recover those costs if it is successful, rather than a tactical manoeuvre taken at a critical time in the proceedings.

18. Turner Road takes issue with a number of items in Mr Rigney’s estimate of costs.

19. First, Mr Rigney includes the sum of $11,290 to allow for an amendment to its List Response. Turner Road disputes that amount, particularly in circumstances where no application to amend has been made. Second, Mr Rigney allows an amount of $7,625 for further directions hearings. Turner Road submits that some of those directions hearing are likely to occur after the mediation. Third, Mr Rigney allows $87,000 for the preparation of SMEC’s lay and expert evidence on quantum. Turner Road submits that that estimate is insufficiently particularised. Lastly, Mr Rigney allows an amount of $49,650 for pre-mediation correspondence. Turner Road submits that that estimate appears to be somewhat high.

20. More significantly, the amount claimed by SMEC is calculated on a solicitor/client basis. It is clear that SMEC should only be entitled to security calculated on a party/party basis.

21. I accept that the costs of an amendment should not be included and that it is possible that the amount allowed for further directions hearings includes directions hearings after the mediation. Those items are relatively small. Mr Rigney provides some breakdown of the amount allowed for the preparation of the defendant’s lay and expert evidence on quantum. The amount allowed includes the cost of two expert reports. In my opinion, the estimate of $87,000 does not seem unreasonable. Similarly, I do not think the estimate for pre‑mediation correspondence is excessive. It is apparent from the way that Mr Rigney has divided up the tasks that the item for pre‑mediation correspondence includes general preparation, such as the preparation of briefs to counsel. Accordingly, in my opinion, Mr Rigney’s original estimate of $200,000 for SMEC’s costs up to and including the mediation seems reasonable. However, in my opinion, that estimate should be discounted by 30 percent to allow for the fact that SMEC is only entitled to security for its costs calculated on a party/party basis. Accordingly, in my opinion, an appropriate amount of security is $140,000.

22. SMEC has been successful on the application for security. There is no reason why costs should not follow the event in this case. Consequently, Turner Road should pay SMEC’s costs of the motion.

23. The orders of the Court, therefore, are:

1. Within 28 days of the date of this order, the plaintiff provide security in the amount of $140,000 for the defendant’s costs of the proceedings up to the completion of a mediation by payment of that amount into Court or in such other form as is agreed between the parties;

2. The proceedings be stayed if order 1 is not complied with; and

3. The plaintiff pay the defendant’s costs of the defendant’s notice of motion filed on 6 August 2021.

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Decision last updated: 25 October 2021